Sun Communities, Inc. Aktie

Good morning, ladies and [ gentlemen ], and thank you for standing by. Welcome to the Sun Communities First Quarter 2026 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 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 today's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.

Having said that, I'd like to introduce management with us today: Charles Young, Chief Executive Officer; John McLaren, President and Chief Operating Officer; Fernando Castro-Caratini, Chief Financial Officer; and Aaron Weiss, Executive Vice President and Chief Investment Officer. [Operator Instructions] As a reminder, this call is being recorded.

I'll now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may begin.

Good morning, and thank you for joining us to discuss our first quarter 2026 earnings and updated guidance. We are pleased with our performance this quarter, building on the strong momentum established in 2025. Our simplified platform, strengthened balance sheet, and clear positioning as a leading MH and RV operator continues to support our progress.

Across manufactured housing and RV, our communities benefit from their affordability and limited supply dynamics, which continue to support strong demand, high occupancy and stable recurring income. We entered the year from a position of strength and remain confident in the long-term opportunity ahead as Sun plays an important role in addressing broader affordability needs, with manufactured housing serving as a critical housing solution and RV offering flexible value-oriented options, which together reinforces the durability of our business.

Our momentum is clearly reflected in our first quarter performance, where we delivered core FFO per share of $1.40, exceeding the high end of our expectations and by raising our full year guidance range. By driving MH and RV outperformance, maximizing our core portfolio and leveraging our strong financial position, this quarter highlights the durability, consistency and underlying value proposition our platform delivers, while also reflecting execution on our 3 core pillar strategy.

First, disciplined capital allocation, where we continue to maintain a strong and flexible balance sheet while pursuing selective value-enhancing growth opportunities. We continue to execute our investment strategy, acquiring select assets that align with our portfolio and operating footprint. Over the past several quarters, we actively deployed capital into our core MH and RV platform, including the integration of over $450 million of acquisitions completed in late 2025, along with additional investments in the first quarter.

At the same time, we have remained committed to returning capital to shareholders, demonstrating both confidence in the business and a disciplined approach to capital allocation with over $1.5 billion returned to shareholders since the beginning of 2025, including continued share repurchases in the first quarter of 2026.

The second pillar, optimizing our operating platform was evident in the outperformance of our North American portfolio, where same-property MH and RV NOI increased 6.3%, well ahead of our expectations and performance in our U.K. segment was in line with plan. These results reflect continued progress in driving consistency, accountability and execution across the organization, building on our strong foundation. We are laser-focused on maximizing the performance of our core platform, where we see the most attractive long-term growth, margin expansion and capital allocation opportunities.

And third, targeted investment in our communities, infrastructure and digital capabilities, which continues to enhance the resident guest and team member experience while supporting more efficient data-driven decision-making across the platform. Importantly, these investments are focused on directly enhancing the resident value proposition, including the quality of our communities and the overall resident and guest experience.

Our greatest strength remains our culture and our people. I want to thank the team members for their continued dedication and for the role they play in driving our results.

I'll now turn the call over to John and Fernando to discuss our results in more detail. John?

Thank you, Charles. In the first quarter, our North American same-property MH and RV NOI increased 6.3% compared to the prior year, driven by a 5.9% increase in revenue, partially offset by a 5.2% increase in expenses. Same-property occupancy remained strong at over 98%, reflecting continued demand across our communities.

Within manufactured housing, same-property NOI increased 6.3% with revenues up 6.6%, primarily driven by site rent growth. Expense growth was consistent with our expectations, reflecting ongoing progress on payroll efficiencies and procurement initiatives. This outperformance demonstrates the continued execution of our operating strategy with a strong focus on disciplined expense management while driving sustainable top line growth. Building on the foundation we established last year, we are seeing the benefits of our operating discipline, accountability across the organization, and continued focus on service and execution at the property level.

Turning to our RV segment. Same property NOI also increased 6.3% for the quarter with revenues up 4.2% and expenses increasing by 2.3%. We entered the year with a strong focus on securing RV annual renewals earlier in the cycle, and the team has done an excellent job accelerating that pacing in the first quarter. This positions us well to enhance the annual and transient revenue mix as we move into peak season.

On the transient side, we are encouraged by what we're seeing. Demand trends are stable and pacing is ahead of where we were at this point last year. That said, it is early in the season, and the first quarter represents relatively small portion of transient's contribution to our full-year results. So while we are pleased to with transient's early 2026 performance and outlook, we remain appropriately measured in our expectations and we'll provide additional color as we progress through the second and third quarters. Consistent with our strategic pillar to optimize our operating platform, one key area of focus is to enhance data analytics and asset management to make better, more proactive decisions and optimize our portfolio and maximize performance across all segments of the business.

Turning to the U.K. We are very pleased with our team's performance this quarter and appreciate their continued focus on execution and operational excellence. Same-property NOI increased 1.6% with revenues up 5.3% and expenses in line with guidance. We are incredibly proud of the unmatched team we have across the organization whose continued dedication and execution drove strong performance throughout 2025 and the first quarter of 2026, and I want to thank everyone for their ongoing service, hard work and commitment to delivering for all of our stakeholders.

I'll now turn the call over to Fernando to walk through our financial results and 2026 guidance update. Fernando?

Thank you, John. As Charles highlighted, our FFO per share for the quarter came in at $1.40, exceeding the high end of our guidance range. The outperformance was primarily driven by the continued strength in our manufactured housing fundamentals complemented by better-than-expected performance in RV transient within our North America MH and RV segments. The first quarter represents a seasonally smaller portion of our full year earnings, primarily due to R&D contribution, and we remain thoughtful in how we translate this outperformance into our full year outlook.

From a capital allocation perspective, we continue to remain disciplined. During the quarter, we bought back approximately 0.5 million shares at an average price of $126 per share for a total of $60 million repurchased.

As of March 31, Sun's debt balance stood at $4.3 billion with a weighted average interest rate of 3.4% and a weighted average maturity of 6.8 years. Our net debt to trailing 12-month recurring EBITDA ratio was 3.7x, and we continue to maintain a strong and flexible balance sheet with $492 million of debt maturing in 2026.

Turning to guidance. As detailed in yesterday's release, we are raising our full year 2026 core FFO per share guidance range of $6.87 to $7.07 with the midpoint of $6.97, a $0.04 increase above the prior range, reflecting a strong start to the year and continued outperformance in our core manufactured housing business.

At the midpoint, within North America, we now expect full year same-property NOI growth of approximately 4.7%, with manufactured housing increasing to 6.2%, up from prior guidance while RV remains unchanged at 0.9% growth. Beyond MH, the incremental uplift to guidance is driven by modest improvements in interest income, lower expected interest expense and contributions from brokerage and other income streams. All other guidance assumptions and ranges remain unchanged. For additional details on our outlook and key assumptions, please refer to our supplemental disclosures.

Our guidance reflects completed acquisitions, dispositions and capital markets activity through April 27. It does not assume future acquisitions, additional share repurchases or other capital markets activity, which is often reflected in analyst estimates for the year.

With that, I'll turn the call back to Charles for closing remarks.

Thank you, Fernando. Before opening the line for questions, I want to highlight how encouraged we are by the momentum we are seeing across the business. This follows our solid 2025 results, and we are well positioned to sustain our strong performance moving through 2026.

We are very excited about the opportunity in front of us, supported by the strength of our platform, the quality of our team, the flexibility of our balance sheet and the favorable fundamentals across our business. We remain focused on our 3 core pillars of: disciplined capital allocation; optimization of our operating platform; and strategic investment, which together position us to deliver consistent, durable growth and long-term value for our stakeholders.

With that, we'll open the line for questions.

[Operator Instructions] Our first question today is coming from Eric Wolfe from Citi.

There were some news articles recently that suggested you might sell Park Holidays, including the $400 million of ground leases. You recently purchased at a pretty big discounts. Can you just comment on this at all? Were there any of those sort of numbers in that article were accurate at all? And just the go-forward strategy on the U.K?

Eric, this is Charles. Thanks for the question. We regularly review all parts of our business to ensure they're optimally positioned. We see that as just good capital discipline. And what I can tell you is U.K. business, high-quality business. I've talked about that before with a strong team, solid asset base, and it continues to perform in line with expectation.

Our near-term focus is to maximize value through execution, strengthening performance, driving growth where we can and maintaining cost control and flexibility. Park Holiday team is strong and performing well given the U.K. backdrop. So I'll leave it there.

Okay. And then if I look at your 10-K, it looks like there's about $2.4 billion in gross assets. I'm just trying to get a better sense for sort of what's included in that? Is there all of those properties that are listed there, managed by Park Holidays? Are some of them still under development and not generating much NOI, you have a sort of a miscellaneous category, which I think includes sort of the headquarters. Could you just talk through sort of what's in that $2.4 billion, how much of it isn't really generating much NOI? And then I guess just one last question I'll lay on there is if you were to try to borrow against these assets, do you have a sense for sort of how much you could borrow? And what rate you could get?

Eric, this is Fernando. The majority of that amount is the operating assets for Park Holidays. We do have some development land that came to us from a loan that we have made. But again, about $1.9 billion of that value is the operating assets.

And it's Aaron, regarding the financing opportunities and options as we talked about, part with your earlier question, we did acquire the ground leases at attractive yields, which gives us incremental strategic and financial flexibility. As of now, Park Holidays is financed against our corporate credit facility. And so to the extent we wanted to pursue additional financing options, we could, but we haven't focused on the financing alternatives for the business. We just wanted to maintain full strategic and financial flexibility.

Our next question is coming from Jamie Feldman from Wells Fargo.

I guess just a follow-up on Park Holidays. So it looks like you bought an asset in the U.K. during the quarter. I think a lot of people reacted to that thinking, that means, hey, why would you be buying something if you're eventually going to sell the platform. So how should we think about how that asset fits into the broader Park Holiday portfolio? And then just how should people be reacting to the view -- how people are reacting to that activity of buying even though a lot of people are expecting a sale here?

Great question. It's Aaron speaking. As we alluded to, we did acquire Kingfisher, which is an attractive park in the U.K. It's consistent with our strategy here, which is it's complementary to existing operating assets and efficient from an operational perspective and has some growth opportunities to the extent we want to invest. I think when you think about the aggregate investment we have overall in the U.K., it's pretty de minimis from an overall investment perspective, but it does enhance the growth opportunity there.

And we believe longer term, we'll continue to drive incremental value in the platform, which, as Charles alluded to earlier, it's the long-term focus. But I don't believe it affects any overall strategic planning or impact that in any way. To the extent we see other value-optimizing opportunities, we'll assess them and execute on them. We have, over the past couple of years, sold a couple single assets in the U.K. as well that did not meet our return on investment objective. So you'll continue to see us look to maximize the overall value of the business.

Okay. And then maybe a question for John. Just where are you on the expense savings focus? It seems like you had some success in the quarter, but how far are you through the process? I know it's continuous, but any kind of major leaps and bounds so far? Or do you think there's still a lot of wood to chop ahead?

Yes. It's a good question, Jamie. I appreciate it. It's just -- I mean, you kind of covered it. I mean, to put it bluntly, it's just part of the core of what we do. I mean expense discipline is a big piece of it. We are always and always will be looking for efficiencies that we can pick up in all the various expense categories, ways that we can do things better, more that we can move into our procurement platform, which continues to grow, okay? And those sorts of things. It just -- it's a fundamental thing, both on the expense discipline side as well as the focus as I've shared many times on top line and growing the company.

Next question today is coming from Brad Heffern from RBC Capital Markets.

On the FFO guidance, you beat more during the quarter than the overall guidance went up. So I was just wondering, was some of the beat timing related? Or why was the outperformance not read forward more?

Brad, as disclosed, we did increase our guidance by $0.04, a nearly 60 basis point increase at the midpoint for full year. As detailed on the call, from a contribution perspective, the first quarter is -- has a lower contribution related to the rest of the year. And so we want to remain thoughtful as it relates to the rest -- to the second and third quarters. As you know, relative contribution on the RV side is higher during the summer months. So we're being prudent with our guidance increase.

Okay. Got it. And then on G&A, it was a relatively high number on the income statement this quarter. I'm sure there was some noise in there from the CFO changes. But can you give what the comparable 1Q number is to guidance? And just talk about your overall comfort hitting that guide with the 1Q number in context.

Yes, happy to provide some color there. And as you mentioned, the majority of the add back activity in the quarter is related to executive leadership transitions that have been publicly disclosed and discussed. Specifically, this primarily reflects, Gary's transition after 40 years with the organization, which constitutes the majority of the amount in addition to costs associated with recent CFO and COO changes.

As you'd expect, these costs are largely concentrated in the first quarter, given the timing of those transitions. And importantly, these are nonrecurring in nature and not reflective of the ongoing cost structure to address your question as far as the 1Q comparable. That would be -- our 1Q G&A was about $61 million in the first quarter. That did include some Marina and the comparable would be $51 million for the first quarter of this year.

Our next question today is coming from Haendel St. Juste from Mizuho Securities.

My question is on the buybacks -- stock buybacks during the quarter. I guess I'm curious why not buy back more? You seem to buy back less than [ $5 million ] of the $60 million during the quarter, during the month of March. So was there any reason you paused in March? Anything holding you back? You have a lot of cash on the balance sheet, obviously. So curious kind of on the thought process. And then perhaps what does stock buybacks rank today in terms of capital allocation priorities?

Thanks, Haendel. It's Charles. Appreciate the question. From a broader, if you kind of zoom out, our objective on capital allocation is pretty straightforward. We want to allocate capital where it generates the best long-term risk-adjusted returns for stakeholders. And as you point out, we're in a very strong position here in '26 with a strengthened balance sheet, reduced leverage and real flexibility in terms of maturities and liquidity.

So as we think about our kind of tools in the tool kit, if you will, it's a kind of a balance of options of investing in our communities and our operating platform, which we're doing. It's pursuing thoughtful, disciplined, accretive, external growth opportunities that align with our strategy, which we've also done that in the first quarter, and we'll continue to look at that and as well as return capital to shareholders either through dividends or share buybacks, which we also did this quarter.

So I think going forward, to your question, we're going to be balanced. We're going to expect us to use our flexibility to stay balanced and use all those tools and be thoughtful about when and how, with the idea that we're going to evaluate and make the decision that is going to be best for shareholder value.

Much appreciated. Maybe some color incrementally on just the capital deployment opportunity beyond the buybacks, maybe on the transaction market, what you're seeing in terms of maybe availability, pricing ranges in the different size segments, MH, RV. Just curious what the market is looking like out there if you're sensing any incremental change in opportunity or pricing or just color more broadly on that side of the business?

It's Aaron. Great question. I think what you'll hear is consistent with what we've talked about over the last few quarters and the last couple of years. It remains challenging to acquire high-quality, attractive MH and annual RV communities. We felt really good about what we were able to achieve through the latter part of 2025 with about $450 million of acquisitions across 14 communities. We did acquire one more in the first quarter in our disclosure in Michigan.

I think we want to highlight we're very focused on assets that overlay nicely with our operational platform, with synergies, have nice geographic overlay with what we're looking to do. Our pipeline remains reasonably strong and consistent. It does appear that there probably will be a little more activity. It's been pretty muted over the last few years, but I don't think we're looking for a massive change in the outlook. I think we've talked before that MH opportunities tend to be found in the sort of low to mid-4% cap rate range and we want to underwrite those for, as Charles alluded to, attractive long-term risk-adjusted growth.

So we're seeing these more in one-off and small portfolio transactions. We remain very active in underwriting, and we do believe there will be opportunities to continue to add to our portfolio thoughtfully, and we remain very active in the market and we'll continue to provide that color and hopefully continue to add to the portfolio in a meaningful way over the course of '26.

Next question is coming from Jana Galan from Bank of America.

Congrats on the strong start to the year. Curious on your focus to enhance data analytics. Can you kind of share some early wins in the process and other areas where you are? And is there kind of more opportunity in the MH and RV annuals? Or is this really to kind of help kind of add visibility for booking windows and transient?

Yes, this is Charles. I'll start, and then if John wants to jump in, he can add some color. As we talked about, this is a focus in our 3 kind of core pillars around optimizing the portfolio and investing in our infrastructure and specifically around building a unified digital backbone. And as we look at that, and it's exciting to see how it's starting to show up in the first quarter. Again, it's early. A lot more to be done, a lot of year left. But I talked about this on the last call, with our ERP implementation a couple of years ago, we have more real-time access to data than we've ever had. And those benefits are starting to show. Like I said, it's early.

We're focused in on the customer journey where we're enhancing the system and centralizing some of the services that eventually will allow for better data and AI to help out. And taking all of this and building off that solid foundation is the investment and focus that we're making this year.

Long term, what we're really trying to get to is we have this kind of special position as being in the business for decades. And as we unlock that data and really focused in on the data architecture and infrastructure will allow us to continuously improve how we make capital allocation decisions in terms of dispositions and acquisitions, and it's a real opportunity to kind of build off the execution and the resident experience.

John, if you want to add anything specifically, but that's our focus for this year, and it's still early, a lot more to build off of that as we go.

Yes, Jana. Appreciate the question. It's -- and to give you sort of the operational perspective on it, a little bit more is that, I would say, as I've shared before, we have data like we've never had before, okay? And in what we're seeing actually start to take place here is I'd like to call it the intersection of data, discipline, accountability and performance transparency that ultimately is leading us to better conversion of our long and short-term prospect funnels across the board, okay? Those are the things that are happening. And we can unlock things in the customer journey, whether it's the visibility from prospects, ease in the booking process, the conversion of that funnel, those sorts of things.

I mean, specific to the RV side, if you look at our booking platform that we have, we literally have heat maps. I mean they're actually heat maps when you look at a property itself on the screen, and you can tell, an individual property show the individual site revenue and occupancy at any point in time. And that, actually, it will inform our revenue management practices, our focused marketing investments and our guest conversion strategy to maximize mix, margin and long-term value.

And then just a quick accounting question. The long-term lease termination losses that are an adjustment to core FFO, I know those are U.K. related, but can you kind of help explain what those are? And they were helping last year but hurting this year?

The lease termination charge relates to us acquiring long-term lease in the U.K. This is a noncash when acquired. Noncash accounting charge as it relates to the transaction itself. It has nothing to do with the operations of that asset or the portfolio.

The next question is coming from Michael Goldsmith from UBS.

I'm here with Ami Probandt. Can you talk about the acquisition opportunities in the U.K.? You stepped into the market this quarter. Is there competition from other buyers on individual properties or portfolios? And do you have a cap rate or EBITDA multiple on the property that you purchased?

Thanks. It's Aaron. Good question. I think we remain active in observation and underwriting of opportunities in the U.K. and the U.S. I think we're going to remain highly selective. As alluded to earlier, we did sell a couple of single assets over the last couple of years. This was a pretty unique opportunity to acquire an asset, as we mentioned earlier, by GBP 8 million, a little over $10 million. We view this as pretty one-off in terms of what we're looking to do.

There might be one or two other opportunities. We'll look at it underwrite. And the opportunity set exists, but we're going to be highly selective about what we're looking to do. We would suggest that the cap rates and yields we see in the U.K. are higher than what we talked about earlier related to U.S. MH and our underwriting targets in terms of returns are also higher. So we'll remain highly selective, and I would suggest that this opportunity was more one-off or -- in terms of our long-term strategy in the U.K.

And just as a follow-up, there's been some macro challenges in the U.K. as a no secret. Does that mean people are doing more domestic vacations or -- and so that should drive more transient demand there? Or is that kind of offset by the slower home sales? Just trying to kind of piece together those 2 moving pieces which may offset each other?

Yes, Michael, this is John. I mean, obviously, I mean, you said the macro has been challenging. That has had some effects in terms of home sale volumes. But what we've seen is that people are, to your point, vacationing locally and things like that. So we have seen positive trends on some of the short-term stays, which can ultimately lead to more home sales down the road. But I think the macro does continue to be a little bit challenging from that perspective. But once again, I think our team is doing extraordinarily well against that backdrop, as you've seen in the results as we put within our plan.

Our next question today is coming from Adam Kramer from Morgan Stanley.

I just wanted to ask about the revenue from real property for North America sort of guidance for the full year. It looks like that was raised. It looks like that stems from core MH. Just wanted to talk about sort of the drivers of that raise. And if you can maybe break down occupancy versus rates, sort of the assumptions today and if they differ from, I guess, from the prior assumption? And just overall, what changed in the guidance there?

Sure. Rate expectations remain unchanged with the guidance we provided back in October with MH guidance increase of about 5%. And RV at 4%. We were slightly higher than that for MH for the first quarter at 5.2%. And just below that on the RV side for 3.6%, but over the course of the year, that will -- that is expected to catch up given the cadence of the rental increases.

From an occupancy gain perspective, we are also modeling about a 1,200 site or occupancy gain from a site perspective. And that is split pretty evenly between manufactured housing and RV and other -- I mean other strengths that we saw in the first quarter from a revenue perspective would be fees related to the rental income, lower discounts that have been provided that for move-ins or for -- from an occupancy perspective.

Great. That's helpful. And then maybe just a similar question on the expense side, a little bit higher there, sort of guidance midpoint change. Maybe just break that down in terms of some of the different line items there? How they compare to the prior guidance? And I think your peers sort of talked about their insurance sort of renewal and the result there. So would love to hear sort of latest thoughts on the insurance market and what you guys are seeing there as well.

Sure. So expense growth was in line with our expectations for the first quarter. Higher growth items included supplies and repair given a colder, snowier winter in our portfolio as well as real estate taxes. We did have some offsets on the utilities front. Importantly, year-over-year expense growth expectations for our MH and RV portfolio, is expected to moderate for the rest of the year as we do guide to a mid-3% full year expense growth at the midpoint.

And this is Aaron. As it relates to the insurance question, we do have a full year renewals. So we renew at the end of December for the full year. So our insurance expectations were embedded in our full year guidance. So we don't have much new insight into the insurance market because we've had the same program in place since December. So our insurance expectations were embedded, and I think are consistent moving forward from a guidance perspective.

Next question today is coming from Steve Sakwa from Evercore ISI.

I just wanted to circle back on the home sales, in particular, maybe the U.K. and just see if you guys have tweaked the program? Are you changing the prospects of trying to drive sales. It was interesting to see the volume was actually up modestly while it was down in North America, pricing was actually up 6%. So have you guys made any major tweaks to that in order to drive occupancy in that market?

Yes. Steve, it's John. I appreciate the question. I mean I think it really just sort of falls in line with what we've talked about for a number of years in the U.K., which is we want to see more volume, okay, as opposed to the margin side, so we can drive more real property income and that shift of the revenue mix that has taken place over the course of the last several years in the U.K. So what you're seeing there is really illustrative of that strategy just continuing.

Okay. And maybe one for Charles. I just didn't know if you could provide an update on the CFO search. It's been a few months since Mark departed, I just wasn't sure kind of where you and the Board were in that process.

Yes. Thanks, Steve. Look, we're conducting a thorough but expedient process. It's a broad search. We've engaged a third party. We're going to be thoughtful about this. This is a critical leadership role for Sun, and I'm focused on ensuring we have the right long-term partner to support both the strategy and execution of the business going forward. And it's important we get it right. So we're moving with urgency, but we're not going to rush. To be clear, we have strong continuity within the finance organization, and we remain fully focused on execution. So the goal is to identify the right person expeditiously as possible, and we'll provide updates as the process evolves.

Next question is coming from Anthony Hau from Truist Securities.

I noticed that RV revenue-producing site net gain was down this quarter. Can you help us understand what's driving that? Whether it's demand driven or pricing related? And how are you thinking about offsetting that pressure going forward?

Yes. Anthony, it's John. Great question. It's timing, is what it is. This has been more due to our timing strategy for new RV annuals in 2026. Our performance for the quarter is in line with plan as a result of our focus on retention, which you've heard me talk about before and our pace on renewals is actually ahead of our Q1 expectations. It's sort of like we use our data, I think our team approached 2026 smartly with respect to the timing of conversions during peak season. Leading to higher revenue transient stays resulting in a better revenue mix between annual and transient in the quarter.

So we walked in the year really thoughtful in terms of the rent increases, our competitive positioning, targeted retention efforts. I think what you're seeing here is just these are the things that when you're looking at like a winter season for January through March, there's a right time to make these conversions. And so we've taken the data that we have to make that shift and expect to continue to expect to deliver what we said within guidance for RV conversions for 2026.

Next question is coming from Wes Golladay from Baird.

I want to stick with the annual RV. The rate is moderating, occupancy was up a little bit. But you're still producing pretty solid same-store revenue growth around 6.5% this quarter. What is driving that?

As detailed earlier, some of that additional income driving growth has been less -- fewer discounts provided and there are some additional fee income included in those numbers.

Okay. And just a quick follow-up on that. Will that be a similar tailwind for the rest of the year? Should we expect that to moderate?

There's potential, but we're being thoughtful around what we are expecting from the annual side of our portfolio for the remainder of the year.

The next question is coming from David Segall from Green Street.

Curious if you can you help us walk through the expected deceleration in North American NOI growth from 1Q to 2Q. Is that related to bringing back more discounts that you took away in the first quarter?

No, David. Actually, this is from a comp perspective. I think you'll recall for our RV portfolio, we had a 21% decline in transient RV revenue in the first quarter. So that was a better comp for us on a year-over-year basis for 1Q. As it relates to our guide for the second quarter, we're expecting just about 4% growth at the midpoint for MH and RV. It really is the components of that are about 6.5% growth for manufactured housing and about a 2% decline on the RV side. So again, it's more so comp on a year-over-year basis than a decel of discounts, for example.

Great. And then I'm curious what share of your annual G&A load is attributable to Park Holidays?

Our -- we estimate for Park Holidays, our G&A load is in the high $30 million contribution from a full year perspective.

The next question is coming from Peter Abramowitz from Deutsche Bank.

Yes. And I appreciate the comments there about the comps becoming more difficult into the second quarter and the rest of the year. I guess, just digging into the RV guide a little bit more. So in addition to the comps, could you talk about kind of the expected ramp in revenue growth in transient throughout the year? I think last quarter, you mentioned that you had embedded in the guide around negative 1.5% top line growth in transient revenues for the year. So has that changed at all? Or is that kind of still what you're expecting?

So our expectations are unchanged as it relates to our expected growth on the transient RV side. For the first quarter, we did a 1.7% decline year-over-year. Over the course of -- for the full year, our guidance at the midpoint is a 1.9% decline. We are for the second quarter, we're expecting about 3.7%. So a moderation in the second half is expected to hit that midpoint of 1.9% decline for the full year.

Okay. That's helpful. I appreciate that. And if I could ask one more. Just curious about your view in the housing bill that passed in the Senate in March and the proposed removal of the permanent chassis requirement for manufactured homes. I guess, can you help us think through how that could impact your communities in terms of the look and feel and then also potentially your capital allocation plans if the bill is passed as it's been proposed?

Yes, this is Charles. I'll start on the broader kind of, affordable housing bill, then I'll give it to John to speak specifically to the chassis provision. Broadly or kind of stepping back, hugely supportive of anything that supports attainable housing that's going to be constructive for housing policy.

So we're watching the situation closely, taking it seriously, working with our industry groups to watch these proposals. It seems like there's been a little bit of slowing on the momentum there. But if you step back before I give it to John, really what this is about is around housing affordability. And that said, the industry that we're in, manufactured housing is a part of the solution for housing affordability. When you look at that, our industry relative to other housing options, there's real value there. The last thing I'll note is that from a federal perspective, we get the intent, but much of this is local. And when you think about production of new housing, local dynamics are what matter most. And so we're paying attention to kind of how that plays out.

With that, I'll turn it over to John to get specifically into the chassis provision.

Yes. No. Thanks, Charles. I think that the chassis -- the removal, the chassis requirement creates some really interesting opportunities potentially, okay, both in the form of what cost, cost savings to Charles' point, about affordability and making the product be more affordable. But at the same time, being able to build houses that have a different spec level, okay, and those sorts of things that are more appealing to not just the consumers, but to the powers that be at the local level, okay, that ultimately provide the approvals for development that we may do someday. So we're obviously -- we think all of this is positive. We remain optimistic and encouraged by the progress with it. We'll have to see how it plays out though.

Your next question today is coming from John Kim from BMO Capital Markets.

I know there's been a couple of questions on this, but it's not really clear to me what you're doing with the U.K. I know you've been saying it's a high-quality business. It performs well, but you did market it for sale, and you bought an asset recently. Is the takeaway that all options are on the table and you're going to keep those options open? Or would you prefer to exit and focus in North America?

Yes. Look, I appreciate the question, John. Look, we are -- as I said at the beginning, we continually evaluate our portfolio to determine how best to create long-term shareholder value, as disciplined capital allocators, that's kind of what we do in all parts of our business, and the U.K. is no different. I'm not going to repeat it. It's a high-quality business, great team, executing well, and we're focused in on making sure that we're maximizing value by execution and strengthening performance and supporting the team the best we can.

Okay. And then just sticking to the U.K., you maintained guidance, both on same-store NOI and home sales, but occupancy on annuals did slip a bit this quarter. So I'm just, wondering how much visibility do you have on the seasonally more important second and third quarters at this point?

John, you were breaking up at the beginning. Can you just repeat that first part?

Sure. You just maintained your U.K. guidance, but you alluded to the kind of weak economy and the annual occupancy did slip in the U.K. this quarter. So I'm just wondering how much visibility do you have on the second and third quarters at this point?

The occupancy that comes from the contribution of new expansion sites that we build when the parks are closed over the course of the fourth quarter last year. So that really is the driver as far as a quarter-on-quarter occupancy decline.

Your next question is coming from Jason Wayne from Barclays.

Just in the Northeast, some sites shifted from annual to transient there. Just curious if that relates to the strategy of pulling forward RV renewals? And could you give any color on forward booking trends for the summer?

Yes. I can give you -- absolutely, Jason. Appreciate the question. I think what we're seeing and as I shared in my prepared remarks is, we're encouraged by current pacing and trends, okay? But to reiterate, it's still early in the year. As you know, the first quarter is relatively small compared to the other quarters. And so as a result, we remain measured in our outlook and we're not changing any expectations at this point. But RV is an affordable vacationing option. We'll continue to focus on our performance, optimize revenue and bottom line contribution, but we will provide more color as things progress.

Next question is from Jesse Lederman from Zelman & Associates.

I know obviously, municipality approval has been probably the largest headwind in terms of new community development. So there's bills in Texas and Kentucky slated to go into effect this year to kind of level the playing field a bit from a municipality approval perspective. So are you seeing or expecting anything or hearing anything from local municipalities in those states that may provide you with more potential expansion or development opportunities in Texas and Kentucky.

Yes. Jesse, I would probably -- that would pertain to us from the Texas perspective. But -- it's one of those things where there really does need to be meaningful work in the linkage between federal and local. We'll be optimistic about it, but we were pretty refined, okay, when we were doing a lot of development in the past with our process. I was at a lot of those meetings. I shared a lot of things with municipalities that frankly, to some degree, we had to educate them on what affordable housing means and help them with that.

But as I've often maybe even sort of joked before, the impact that they had was instead of taking 24 months to get entitlements, it might take 23 months. So it's like marginal improvement. This is why we are so interested in seeing what progresses in terms of how homes are built with the chassis removal requirement and what kind of impact that has on designs that locals might find more attractive and further unlock what you're talking about.

Awesome. Appreciate that. And one quick follow-up on the kind of guidance increase question from earlier. It does imply that 2Q to 4Q outlook was lowered by $0.08. And you did note a higher contribution from RV in the summer months. It sounds like also your expectations were maintained for kind of RV moving forward. So just trying to understand the conservatism, I suppose, in the guidance for the rest of the year.

We're remaining thoughtful about the relative contribution, as you can see in our guidance tables. RV specifically during the first quarter is only about 16% of the contribution for the full year. So we are working through that. John has shared his thoughts and what we're seeing from a pacing perspective for the remainder of the year, where we are pleased with the trends that we are seeing. But, yes, inherently, given that we raised guidance by less than the beat in the first quarter, there is some additional expenses or performance changes for the remainder of the year.

Our next question is coming from Eric Wolfe from Citi.

I actually was going to ask that same exact question. But maybe I'll follow up. You just said that there's going to be some performance changes for the rest of the year. Could you just talk about what that is and maybe why -- where you beat so much in the first quarter? Because there was obviously a large $0.12 beat and you are just raising by $0.04. So just trying to understand exactly what the offset is?

Yes. We'd be at the high end of our range by $0.08. So we increased our range by $0.04. So the remainder of the performance, we did outperform in manufactured housing. We had some small outperformance in RV. You saw the guidance increase for MH for the full year and RV guidance is remaining the same. So some of that outperformance is in the more seasonally higher contribution quarter.

Just to reiterate. Eric, this is John. I mean, from the RV perspective, I'll say it again, we're encouraged by what we're seeing on pacing and trends, okay? It is prudent for us to be measured in our outlook. As we come into the bigger months ahead of us, so that's a big contributor to what we're talking about.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to Mr. Young for any further closing comments.

Yes. Thank you for joining us. I want to give a quick shout out to the Sun team for strong execution in the quarter. For all of you joining the call today, thank you. And look forward to talking to you again on the Q2 call.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Nick Joseph here with Eric Wolfe with Citi Research. I'm pleased to have with us Sun Communities and CEO, Charles Young. [Operator Instructions]

Charles, we'll turn it over to you to introduce the team and company, provide any opening remarks, tell the audience the top reasons that investors should buy your stock today, and then we'll get into Q&A.

[Technical Difficulty]

Can you just press -- yes, it needs to be red.

Red is talk, alright...

Surprised me.

Threw me off on that one. All right. I'll start back over. Thank you, Eric and Nick. To my right, we have John McLaren, our President. Directly to my left is Aaron Weiss, our Head of Strategy and Business Development; and Fernando, who is our Chief Financial Officer.

I'll do our comments, and we'll jump into kind of overall, if that's okay. So good afternoon, and welcome, everyone. It's great to be here. I'm pleased to be at the conference, new in the seat. If those of you who listened to our last earnings call, 2025 was a transformational year for Sun. The sale of the Marinas marked an important milestone for the company. Frankly, it simplified our business. We had a chance to strengthen our balance sheet as seen by our net debt to current EBITDA, repositioned Sun, frankly, as a pure-play MH RV company.

Over the past year, with all of that, we've had a chance to reduce leverage, which resulted in credit upgrades from both Moody's and S&P, enhanced our financial and strategic flexibility and returned more than $1.5 billion of capital to our shareholders. And so I'm excited as we come into the year with that foundation, we're operating from a position of strength and couldn't be more excited about what's in front of us.

Our core manufactured housing and annual RV businesses continue to demonstrate durable fundamentals. We operate in sectors supported by strong demand, limited new supply and compelling affordable advantage relative to other -- housing sectors, if you will. Manufactured housing provides a high-quality living experience at a cost meaningfully below alternatives. And our RV communities, frankly, offer accessible short-term and long-term vacation options that resonate with today's consumer.

These segments generate recurring predictable rental income streams. Our MH and annual RV is highly occupied. We can get into those details if you want it. And we continue to see the benefit of the long-term resident engagement and retention across our asset class coming from where I came from, it's kind of great to see that low turnover that's in our portfolio.

To that point, I've had a chance over the last several months, opportunity to spend time with our communities in multiple states, meeting with team members, meeting with residents, and guests. And what stands out and strength of our portfolio and operations is the sense of community that you feel when you're in one of our communities.

So I encourage everybody to try to visit if you can. This is a compelling value proposition for our residents and guests. And as we look ahead, our strategy is focused and practical. It builds on what's worked, what this team has built before I showed up, and we're really focusing on sharpening our execution to drive long-term value.

As I talked about on the call, I see 3 core pillars that's guiding this approach. First is disciplined capital allocation that includes maintaining a strong flexible balance sheet while pursuing value-enhancing growth opportunities. Number two is continued optimization of our operating platform to drive greater consistency, accountability and efficiency across the organization. There's a great foundation laid as to how do we build upon that. And third is strategic investment in our communities, in our infrastructure and in our digital capabilities to enhance the resident and guest experience and enable faster, better data-driven decision-making going forward.

We believe this focused approach positions Sun to deliver steady earnings growth, margin expansion over time, supported by durable cash flow characteristics of our core business. We're pleased to be here today with you. As I said, we got the whole team here. I'll pause there and open it up for questions.

Perfect. Well, you touched on the 3 pillars that you're focused on. If you think about the company over the past few years, there's been a lot of change. So I guess how do you think about implementing more change from here? Obviously, there's -- you're seeing opportunities to do so, but how do you make sure that it is actually implemented in the right way so that there's not either missteps or kind of challenges that aren't foreseen right now, just given what we have seen with the rollout of the new ERP system or others. How do you think about the pace of change versus making sure it's done correctly?

No, it's a great question. The strength that I've seen spending my time here is the culture. And I want to make sure that we are preserving and building off that strength of the culture. There has been a lot of change. Much of it has been for the better in the last 1.5 years in terms of the simplification that I referred to.

In terms of ERP specifically, there were some challenges along the way, but ultimately, we have more access to data now than we've ever had. So with that, all that I said, the culture, the team, the systems, we want to build off of that and be thoughtful in terms of how we implement, how we build off of it.

When John gets a chance to speak, there's been a lot of focus since he came back to the company around fundamentals and execution. We're going to build off of that and continue to add elements and information that allows us to be thoughtful in our decision-making.

And part of what I -- why I didn't rush in here making a lot of different changes, doing my listening, learning, engaging is that so the organization can understand who I am, what my approach is, what my background is, how I think about it. They understand that I'm here to just win as a team. It's not about me, it's about all of us. It's about the we. And with that attitude in place, we got a lot of great things to do.

And the plan, the core pillars and the strategic priorities that I've rolled out to the organization so far this year have ultimately been putting a mirror back to the company. They've told me what we want to do, and they're looking for these things that we're implementing, and we'll be thoughtful about how we do that and conscious of the risks that come with it.

So maybe -- I apologize, I'm losing my voice a little bit, so bear with me. But you talked about rebuilding, I think, the sort of data architecture of the company. Can you just describe what that means in sort of more detail and sort of what the opportunity would be like? So what are you looking to accomplish on that? Because I think we hear these things and we kind of want to try to measure sort of tangible goals. What sort of tangible goals should we be looking toward over the next couple of years when you say things like, oh, we're going to rebuild the architecture. What is that going to do for the organization?

Yes. I think as we think about it -- this is not an overnight change, right? So I would say, hey, be patient as we think through building this infrastructure in this unified digital backbone, as I'm calling it. There are some things that we're doing this year, and I'll let John speak to that specifically that we think are going to have an impact specifically in our RV portfolio.

But the long-term approach is building off the foundation, as I spoke about with our ERP, what systems are we connecting to it, the data that we have, where does that data go? Is it clean data? Are we able to put some data scientists on top of it to look at it and make sure that we're running it through with the proper either finance look, asset management look, our operational look, marketing look to make sure that we are driving the right decision, being more effective and efficient with our decisions.

Again, it doesn't happen overnight. There are a couple of things that we're doing this year in terms of booking channels, in terms of our customer journey, in terms of the centralizing some of our contact center opportunity and putting new data on top of that, that, again, new systems on top of that, that, that data then gets put into a data lake and a database that ultimately gets to be mined and that we can look at it kind of cross-functionally to come up with the answers.

So not able today to put numbers on it. We'd look to try to do an investor presentation in the future. We can start to quantify some of that. But in the meantime, for the short term, there are some things that we're doing that I think are going to help enhance our guidance and where we're trying to go this year in terms of how effective we are. Do you want to jump in with any of this, John?

Sure. Yes, Eric, I think if you recall, last year, I spent when we were here, we talked about just getting back to our execution, something that everybody was very familiar with in terms of how Sun operated. And obviously, the ERP implementation that happened in 2024.

I think everybody probably know that after being on a different ERP system for 20 years, that's a heavy lift, to go through that process. And so really unlocking that 2025 sort of represented the first step of that. I talked a lot about transparency and ranking. All that came from data. Data and a look that we had that we hadn't had before, and making it visible to our team, so that we could focus on the things for 2025 that we felt like were most important and could move the needle the farthest, not just on the expense side, but on the top line side.

And so when we walk into 2026, we've talked about 2025 being really a setup for that. And so when you ask like what are some of the things you can do to make sure that you are successful in the movement forward that we have, some of the things that we're doing today, for example, Charles alluded to opening up to new booking channels that are specific to RV. This is something that happened later in 2025 that we haven't even realized the benefit from, in 2026. So we look to that to be something that's going to be meaningful, in so far as a step forward.

Additionally, we talked about digital booking enhancement. And that's really leveraging the tech, that we have in place with the ERP, the unified data lake that Charles is talking about and applying the nimble booking window that we have and aligning that with the revenue management capabilities that are well built at Sun. And so when you sort of bring those 2 things together and then on top of that, on the RV side specifically and you think about just the guest journey, if you will, okay, which is how does a guest -- a potential guest find us?

How is the process for them in their booking? What is the ease of that process? What is the experience on the ground, the things that I've shared with you before. And more importantly, how do you capitalize that in the form of a rebooking? How do you capitalize that in the form of an extension of an existing stay? How do you capitalize on that in terms of referral, and bringing people to the community.

And so the data is central to all of it. And one of the things that we have now, just like I was saying last year about things I had then that I hadn't had before, what I -- what we have now with the data is marketing folks like to talk in terms of clicks and likes and impressions and those sorts of things. And really, what matters is the transaction. And does it ultimately get from A to Z, with the result that you wanted.

And so we now can track all the different channels that we have and be able to align those in a more targeted approach rather than like the broad-based approach that we might have taken in the past in terms of the marketing spend. So we're more efficient with the spend that is delivering a better return on those dollars because we're being targeted in terms of our approach. So that's just some of the examples.

Yes. Short term, the revenue management optimization, just it's already a great system, but what more data can we add, especially on the RV side. I'd also say over time, as we build this, where are there efficiencies in the organization to be thoughtful based on what we're doing in terms of how we run the business, whether it's on the procurement side, utilities and otherwise, that can flow through to how we operate and efficiencies and the experience that we're creating for our residents. So this is an ongoing effort, and we're building a good foundation now. But each year, we're trying to build on that because that's the long-term benefit of focusing on this side of the business.

Got it. And then on the annual RV side, you mentioned on the call that what you're doing is working. You put out lower rates this year. I think you said that you were ahead in terms of acceptance of those renewals. Can you just talk about that? If possible, could you quantify it to say this is how far we are ahead of last year? Just trying to understand to what degree we might actually see occupancy build or some beneficial impact from being ahead of...

Yes. I think the way that I frame that, Eric, is, yes, like I said on the call, we focused our attention in much of 2025 on retention because it's obviously a lot simpler for us to have a customer or a guest stay at the property rather than having them leave and ultimately have to go through the bandwidth to refill that site with a new guest. So we are focused on that, which is why we had a tempered approach to our 4% rent increase on the annual RV side. We're very open about that. I think it was the right approach.

And it has led to being ahead of our renewal pace this time versus actually ever since we launched the process, we've been ahead. And what that really translates into is if you look sort of broader, we had good success in 2025 in terms of our net leasing of annual sites, which adding another 600 coming off of 3 straight record years that we had.

I think it's also led to -- I think what we've shared with everybody has been that we would guide to a similar sort of 600-ish range in net conversions for 2026. So all that makes me feel good in terms of where we sit today to achieving that. But I will add that I think one of the things that has sort of emerged in this process and thought about retention has been optimization across RV, which is to say, if you look at certain individual communities and you really look at the business from the ground up, there's a good question to ask of what sites should actually be converted versus not?

And so we've sort of graduated to that point now where because of our success, because of continued success, we can actually do that, differently than we could before. And so I've put out a number around 600. It could be plus or minus that, but it would be a result of optimization that might affect that outcome is what we believe.

On the transient side, it looks like you're calling for a little bit more stability this year. We've seen a number of sort of down years over the last couple of years. I guess what gives you the confidence that this year will be a little bit more stable? I know it's, I think, still down a little bit for your guidance, but I think that's sort of after conversions, correct me if I'm wrong. So either way, it's calling for a more stable year. So what gives you the confidence in that?

I can start. I think the main thing is just when you look out into our booking window and what we see, Eric, I mean, that's the straight answer in terms of what we see in the form of reservations going out into 2026. Obviously, you know the meat of the year usually is in the second and third quarters, and that will become clearer in the focus as we get closer to those quarters as well.

But I will share that you sort of characterize that it's been challenging on the RV transient side the last couple of years, it's true. 50-plus percent of that is a result of the great success that we had with the conversion program. So that's a big piece of that. And I also think that, frankly, COVID had a pretty big effect as you saw us spike in terms of transient revenue during the couple of year period of time.

If you really looked at that over a longer stretch of time, you would see a more steady growth curve. And that would be something you would expect. And so this is why I feel like besides what we're seeing in our data at this point in time and sort of like stretching out that curve with COVID, why I feel like that -- and the fact that we were 9% down on transient revenue last year, we're guiding to down 1.5%. I mean that's a clear signal in our guidance how we feel in terms of how things are stabilizing.

I'll just come over to top as I've had an opportunity to go visit many of our RV sites, more to see, again, just 5 months in. But if you step back and you look at the -- in the medium to short term, what I've seen is many of the strategic changes that the team has made, whether it's strategic dispositions of some of those assets, whether it's the conversion from transient to annual, we've gotten to a place where it feels pretty balanced and pretty healthy. And to John's point, it's more of an optimization effort going forward.

But as I look at it and have seen these assets, this is an unrivaled portfolio on the RV side. And this was -- if I'm going to anticipate a question what's been a surprise for me. I'm surprised to the upside of the quality and the energy that we have on many of these communities and the opportunity in front of us long term to really unlock the value that's here.

Yes, there was kind of a steady growth and a little bit of a pop during COVID and things have normalized. But I think we're -- the work that's been done is kind of set up this portfolio to have an opportunity to continue to have steady growth and ultimately, an opportunity with all that we're doing around asset management and data and the rest of it to kind of unlock it and create some value on that side of the business. So I'm excited about what's ahead. A lot of work to be done, more that I need to do, but there's a real opportunity in my mind.

Makes sense. Maybe if we turn to the U.K., I think on the call, you mentioned that you'd evaluate it like all other capital allocation decisions. Is there an active market to sell it today? Are you seeing a lot of assets trade in the U.K.? How about kind of from a portfolio perspective, what would you -- how would you characterize the acquisition market there?

Let me go high level, then I'm going to ask Aaron to weigh in on the market. Overall, again, I've had a chance to spend time with that team, get over and make sure I understand the business. Great asset, great operating platform, best-in-class team. It's a challenging macro. But ultimately, the best thing we can do is execute and support the team.

We've done some work with the ground leases that create operational flexibility and optionality as we evaluate the broader market. And so just so everybody hears from me, I'm always as a capital allocator looking at all sides of our business. RV, as we just talked about, U.K. being no different. We're spending time making sure that we are understanding what the options are. In the meantime, we're going to execute best we can. With that, to answer your question specifically on the market.

Good question to speak about the U.K. generally. We do have the best team in the market. They've been operating incredibly well through a very difficult backdrop. So hugely supportive of what they've been doing and again, continue to deliver results despite the backdrop that has been challenging from a transactional perspective, not dissimilar from the U.S. market. Things have been muted since we announced our acquisition in late '21 and closed in '22. So there haven't been a lot of large-scale institutional transactions broadly in this asset class in the U.K.

We've seen incremental transactional activity more on the single assets, more portfolio side. But there is institutional investment in the space broadly among sort of the large global private equity firms. So we would expect they'll continue to look at the space. But in the last few years, there just hasn't been that level of transactional activity. We think with a more benign market backdrop, we have seen, as I said, some more of the single assets, small portfolio deals transact.

We've been a seller of a few of those assets to that market, but we can't point to sort of broader institutional transactions, again, not dissimilar from the U.S. where it's been pretty muted over the last few years. But again, we're a public company. So we certainly hear from folks, and we'll engage in constructive dialogue alongside what Charles indicated vis-a-vis our bigger picture strategic capital allocation strategy.

I was going to say when you -- sorry go ahead, you...

No, no, I was trying to save your voice.

No, it's going to go in one of these sessions. I was just going to say, when you say that the ground lease is enhancing your flexibility, I mean, does that just effectively mean that there's just certain buyers out there that if you were to ever sell at some point, just wouldn't consider owning it if they didn't have control of the ground lease? Like what does it mean?

Good question regarding the ground leases. When we acquired the business, it came with in-place ground leases. They've been in our numbers since we acquired the business. We had a unique opportunity to acquire them. I think, frankly, as a real estate owner globally, you want to own freehold underneath your real estate.

And so we had a unique opportunity to do that. The team there was hugely supportive of it. There are some dynamics day-to-day in terms of having a landlord, information sharing, single asset sales, if you want to sell single assets, you need to work through substitution rights. So I think, first and foremost, it was an attractive use of capital. We had the financial flexibility, thanks to the safe harbor sale to effectuate that over the course of 2025.

Additionally, certainly having freehold investment in real estate could provide more flexibility from a bigger picture financing perspective where we had to finance something directly in the U.K. to the extent we wanted security or from a strategic perspective, for ourselves or however the business plays out in the future. So it was a pretty compelling opportunity set regardless of the larger strategic opportunities that may avail themselves, but we're really happy to be a primarily freehold owner. Post those deals, 90% to 95% of our NOI in the U.K. comes from assets we own freehold. So very compelling from a strategic and financial flexibility perspective.

And remind me, do you have any U.K. debt?

And remind me, do you have any U.K. debt or no?

Even U.K. debt, it's all at the corporate parent.

Just on the operating side in the U.K., when do you lap the tougher expense comps on the minimum wage increase?

I mean I can answer that from the operating expense perspective, the national minimum wage, the U.K. operates on an April fiscal year. There was a raise in April '25, which was incorporated. There is another one coming up in April 2026 for that fiscal year from April through the first quarter of 2027 that is incorporated into our OpEx guidance for 2026.

What was the '25 and '26 -- what are the '25 and '26 raises?

They depend on where you sit from a national minimum wage. They're pretty public, but there's an increase for full-time employees. There's also raises based on ages and what would primarily impact our U.K. business are the seasonal employees you'd see in the summer. So it varies depending on the employee and type of FTE or part-time employee.

Looks like we're getting a couple of questions here on the MH side. I'll try to ask them. I guess maybe just stepping back, I get a lot of questions on your all-age versus age-restricted portfolio. Would you say that 2 of them operate any differently from one another? I mean, is your all-age portfolio more exposed to like lower job growth and other things that are impacting the apartment market right now?

Or would you say that the fundamentals are very similar? And then we had a question from an investor sort of along the same lines, which is like your growth here has been great. But at what point is there going to be increased regulation if you're growing at 5% every single year?

Yes. I think to answer the first part of your question, I think that -- what we typically see in an all-age community is going to be the growth that we've had and typically as far as like rate increases as one of the pieces to it, we have seen typically between 100 and 150 bps ahead of inflation for a very, very long time. And I think that, that -- what it boils down to, Eric, is really the community itself, okay? Is it being cared for? Do we have the continual reinvestment? Do we have -- is the sort of equity, if you will, spread across everybody, okay? That's what makes it go because we've always described our business as a marathon versus a sprint.

And then when you think about it from an affordability standpoint, and we've shared this before, in tougher times, the way that we've described Sun overall is if this is a more -- my hands up here for anybody watching, if this is a more robust economy and below that is a more challenging economy, Sun sits in the middle of that and that band moves around us. So we may very well lose some people at the margin that move in with parents or family or something else.

But it's -- what we've seen, at least over the course of my 24 years with Sun has been in those tougher times, many more come in at the top of the funnel, okay? And they're getting pushed into our asset class. And so -- and I think because of the long-term approach, the reinvestment in everything we do, this is why we're so good at capturing those residents live in our communities. This is one of the reasons why you see the very high tenure that we have in our communities that we've had for years as well.

I'll just add and going back to -- I'll give it to you in a second, Fernando. Just going back to the regulatory question. I just want to highlight that as we think about that discussion, it's mostly around affordability and affordability for housing for Americans. And from Sun's perspective, we think we're part of the solution in support of affordable housing relative to other housing alternatives.

The other thing I'd keep in mind -- so to that point, we're making sure that we're keeping an eye on all regulations that are out there and making sure that people understand exactly what we do. And one of the things to highlight, as you talked about the rent growth number, that's just on our site rent. We have a unique model here relative to other housing classes where we ultimately -- the resident ultimately owns the home and they're paying rent in our community on that individual site. So it's a small part of their overall number.

And part of why we've always been thoughtful, if you go back over the 40 years that we've operated, it's been kind of a steady growth. There hasn't been a lot of up and down because there's a shared model of making sure that we are being thoughtful about what that number is. People stay with us for decades. They stay a long time. And that turnover is low because there's this kind of shared perspective.

I'm going to turn it to Fernando, who can talk a little bit around the equity value creation that happens.

And I think it's important to note, our residents have created significant value in the ownership of their homes in our communities. Over the course of the last 6 or 7 years, the home prices or the equity value has increased at a high single-digit CAGR for residents in our communities that own their homes. So that's a significant and very compelling reason for that home being and them owning a home in a Sun community versus a competitor.

Another question come in, just on the regulatory side and changes to the HUD code and what that ultimately could mean for manufactured housing broadly and if there's greater flexibility in home design and configuration potentially drive obsolescence for some of the older MH stock.

It's a great question. It's come up a few times. I think the chassis piece is really interesting. I think the manufacturers stand to benefit from that. And I think from our standpoint, we're watching it closely. We think that it's a net positive, Nick. In terms of like home design, we'll just say home design and affordability, at the same time, potentially because of how a house can be built, how it can be set up.

It will be -- it will be interesting to see what it means because we don't know yet in terms of transport and setup of the homes in the communities, whatever is required from a foundation perspective. But as we've shared before, from the regulatory front, sometimes there'll be talk or federal mandates that happen. The real linkage needs to happen between that and what actually happens locally.

And so our hope this could be positive from that standpoint because Sun for One has worked very closely with the manufacturers in our space for many years to develop the types of homes that we have today. We have literally designed some of those ourselves with some of the manufacturers. And I think that the chassis piece maybe just helps that whole discussion at the local level because you can provide a product that is, we'll just say, more like what they're used to seeing from a residential perspective.

Maybe with the last 4 minutes here, talk about capital allocation. You're sitting on, I think, around $550 million of cash. That's after some uses. Like what would be ideal to be able to do with that? I think your stock -- let's just say your stock doesn't come back to the $125 range where you've typically been a buyer. What are you going to do with the cash? And then I guess, in a situation where you can't find good acquisitions or other opportunities, are you just going to pay off your mortgage debt that's maturing in the middle of the year?

Yes. We talked about it a bit on the earnings call. We're in a really flexible and a lot of options in front of us given the cash that we have on our balance sheet and our current debt levels. There's kind of 3 tools in the toolkit. One, we talked about in the 3 pillars that I discussed that we're going to first invest in our communities and a bit in our infrastructure to make sure that we're building an opportunity to hit this kind of perpetual long-term durable growth for our shareholders. So we're going to be thoughtful on that spend.

And there are opportunities in front of us, and we spent some time looking at those. The data piece that we talked about will help us drive like where we put that. So that's some of the benefit long term that we're talking about. The other piece is we are looking. We showed that last year, we bought almost $0.5 billion of core assets in our MH and annual RV communities. We bought 14 of these. We're going to continue to look. The team historically has done an amazing job of being able to source these. So we're continuing to look for accretive growth opportunities in the markets that make sense that are kind of tucked into our markets to create efficiencies.

And so that's definitely a big part of our toolkit. And as you mentioned, we'll be thoughtful around shareholder return, whether that's buying back shares at a compelling price that makes sense. And that's another tool that we use as we watch what's out there. And so we're in this, what I call, enviable position to be able to have some tools and some capital to be thoughtful about. And we will, long term, think about what we're trying to do on the debt side. I don't know if there's anything to add there, Fernando. But these are all the things that we're paying attention to as our capital allocation or use of cash that we have on the balance sheet.

And we do have a rapid fire in a minute, but I just want to quickly touch on how Sun is using or implementing AI, kind of where you're seeing the opportunity, where you're seeing the efficiencies and then how you're actually doing it? Is it buying? Is it building and partnering? How you're thinking about that?

Yes. So again, within Sun, I'm still getting my head around kind of where we are. I think there's more of a buy and partner at this stage, not as much of the build, although the tools, as you all know, are getting much more sophisticated and all of that is moving very fast. So some of the basics that most companies have are in our systems, and we're going to use that, whether it's in the marketing side and other parts of the business to make sure that we're pulling data out and being smart and being efficient with it.

Longer term, as we talk about this data architecture, I think that's where you start to use this more and more. That's where there could be some build. But at this point, it's more of a partner make sure that we have the infrastructure in place. And from there, we'll figure out what part do we buy on top of it, do ourselves, bring in data folks with data scientists to get on top. So it's going to be a balance. I can't give you percentages. But right now, it's about getting the data right and then utilizing the core opportunities that are out there that we can get off the shelf.

And then just on the rapid fire, same-store NOI growth for MH overall next year sector-wide in 2027?

There's only 2 of us.

Including the private sector.

Yes. For 2027, I say between 4% and 5%, NOI growth.

I guess this one there is only the 2 of you, but will there be more fewer of the same number of public companies next year?

Same.

Terrific. Thank you very much.

Thank you.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities Fourth Quarter and Year-End 2025 Earnings Conference Call. At this time, management would like for 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 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 today's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligations to advise or update any forward-looking statements to reflect events or circumstances after the date of this release. Having said that, I would like to introduce management with us today: Charles Young, Chief Executive Officer; John McLaren, President; Fernando Castro-Caratini, Chief Financial Officer; and Aaron Weiss, Executive Vice President of Corporate Strategy and Business Development. [Operator Instructions] As a reminder, this call is being recorded.

I'll now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may begin.

Good morning, and thank you for joining us today. I'm pleased to report our fourth quarter and full year 2025 results. We concluded the year with strong operational momentum, delivering Core FFO per share of $1.40 for the quarter and $6.68 for the full year, both above the high end of our guidance ranges. The strength of our performance and optimism in our outlook is grounded in the durable fundamentals of our sectors in which we operate. We provide attainable housing and affordable vacationing to our residents and guests in our manufactured housing and recreational vehicle communities.

Our operational model is anchored in high resident and guest engagement, which facilitates the recurring and predictable rental streams our properties generate. That stability reflects strong demand, limited new supply and the value proposition our communities provide as demonstrated by our same-property MH portfolio's 98.1% occupancy. Affordability is a core attribute of our business model. Manufactured housing offers a high-quality living environment at a cost significantly below traditional housing alternatives, while our RV communities provide accessible short- and long-term vacation stays that resonate with today's consumer.

After spending time at our MH and RV communities over the past few months, what stands out to me is the sense of community that we create, which I believe is a meaningful competitive advantage for our platform. In MH, our residents are members of active connected environments that foster long-term relationships and loyalty. In RV, our long-stay guests value the flexibility and lifestyle our properties offer using them as seasonal homes or year-round destinations. Our results this past year demonstrate these favorable dynamics. North American same-property NOI growth was 7.9% for the quarter and 5.7% for the full year, reflecting strong revenue growth and disciplined expense management.

From a capital allocation standpoint, 2025 was a year of meaningful positive change. Following the Safe Harbor sale, we significantly reduced leverage and enhanced our financial flexibility. We ended the year at 3.4x net debt to EBITDA, which provides substantial financial stability and a foundation for pursuing attractive accretive growth opportunities. Importantly, we returned over $1.5 billion of capital to shareholders in 2025. Building on that, as detailed in our recent press release, our Board approved an approximate 8% or $0.08 per share increase to our quarterly distribution rate.

This reflects our confidence in the consistency of cash flow our portfolio generates, our strong operating performance and the strength of our balance sheet. As we enter 2026, we are building on our strong foundation and taking a focused practical approach to long-term value creation. This is not a departure from what has worked, rather it builds upon and further refines Sun's strong in-place platform with an emphasis on sharpening execution, enhancing performance and strategically targeting capital investment. We remain confident in the strength and durability of our core manufactured housing and annual RV businesses.

These segments provide recurring, predictable cash flows, which we believe will continue to generate steady earnings growth and margin improvement over time. At the same time, we are focused on maximizing the performance of our RV platform to enhance growth and reduce volatility both within the segment and as an important feeder to growing annual RV. That work is centered on improving operational execution, leveraging better data and technology and driving greater discipline across the portfolio.

Our strategy embodies thoughtful and strategic evolution and involves continued focus on what has positioned Sun well while sharpening our focus on enhancing execution and driving sustainable long-term growth. There are 3 core pillars that support our strategy to drive long-term outperformance. First, thoughtful capital allocation, maintaining a strong and flexible balance sheet while delivering growth. With our best-in-class balance sheet, we will manage capital prudently while seeking to enhance growth. Second, continued optimization of our operating platform, driving greater consistency, accountability and efficiency across the organization.

And third, strategic investment in our communities. Our infrastructure and a unified digital backbone will enhance our resident and guest experience and enable better, faster and data-driven decision-making across the business. We have made meaningful progress over the past year, simplifying the business and strengthening the balance sheet, and we believe our strategy positions us to capitalize on the opportunities ahead in our core platform. We look forward to sharing more details and updates as we advance our strategic priorities and actions. I want to thank the entire Sun team for the warm welcome over the past few months. I'm proud to be a part of this organization and grateful for our team members' commitment to serving our residents and guests every day.

With that, I'll turn the call over to John and Fernando to discuss results in more detail. John?

Thank you, Charles. For our fourth quarter results, our team executed exceptionally well and our performance reflects that. Total North American same-property NOI increased 7.9% year-over-year, driven by a 5.9% revenue growth and 2% expense growth with blended occupancy over 99%. Within manufactured housing, same-property NOI increased 8.8%, driven primarily by exceptional MH performance and disciplined expense management. Revenue grew 7.3%, while operating expenses increased 3.2%, reflecting continued focus on balance, efficiency and cost control.

In RV, same-property NOI increased 5%, driven by 2.7% revenue growth and strong expense discipline with operating expenses up only 60 basis points. Revenue growth reflected higher RV contract rates with transient performance in line with our expectations. For the full year, North American same-property NOI increased 5.7%, driven by 4.5% revenue growth and partially offset by 2.2% increase in expenses. We exceeded our guidance in manufactured housing, delivering 8.9% same-property NOI growth for the year. In RV, same-property NOI declined 1.4%, which was within our guidance range.

Turning to the U.K. Fourth quarter same-property NOI declined approximately $500,000, reflecting ongoing macroeconomic pressures, including the national minimum wage increase. For the full year, U.K. same-property NOI increased 3.5%, supported by 5% revenue growth, driven by higher MH and transient income, partially offset by a 6.6% increase in operating expenses.

U.K. home sales volumes were down 4.9% compared to 2024's record levels. Across the organization, we remain focused on operational excellence, disciplined cost management and leveraging technology and data to enhance efficiency and the resident guest experience. Having been a part of Sun for nearly 24 years, I can tell you now is truly one of the most exciting times I've experienced as we carry the strong momentum we built in 2025 into 2026. Our 2025 performance reflects the dedication, skill and focus of our team throughout the portfolio. It is a privilege to be part of it, and I want to thank our team members for their continued commitment to service and operational excellence. As we enter 2026, we remain focused on consistent execution, driving steady revenue growth and maintaining expense discipline.

With that, I'll turn the call over to Fernando to walk through our financial results and 2026 guidance. Fernando?

Thank you, John. In the fourth quarter, Core FFO per share was $1.40, beating the high end of our guidance range by $0.01. For the full year, Core FFO per share was $6.68, also $0.01 above the high end of our guidance range. During 2025, we continued executing on our simplification strategy, selling over $200 million of nonstrategic assets and land parcels. We also deployed 1031 Exchange proceeds to acquire 14 manufactured housing and annual RV communities totaling $457 million, further enhancing the quality and growth profile of our portfolio.

We purchased the titles to 32 U.K. properties that were previously controlled through ground leases for approximately $387 million. As a result of the ground lease purchases, Sun now holds a freehold interest in nearly all our U.K. properties, further strengthening our long-term financial position and strategic flexibility. 2025 was a transformational year for our balance sheet. During the year, we repaid more than $3.3 billion of total debt. We ended 2025 with net debt to trailing 12-month recurring EBITDA of 3.4x, no floating rate exposure and a weighted average interest rate of 3.4% with a 7.1-year weighted average maturity.

Following these transactions, we now have a well-laddered debt maturity profile with $492 million maturing in 2026 and no maturities until 2028. As of December 31, 2025, we had $636 million of total cash on the balance sheet. In September, we closed on a new $2 billion 5-year credit facility undrawn at year-end, further enhancing our liquidity and overall financial flexibility. Importantly, we received 2 credit rating upgrades in 2025. S&P raised Sun to BBB+ and Moody's upgraded us to Baa2, reflecting the strength of our balance sheet and credit profile.

Turning to capital return. For the full year, we repurchased 4.3 million shares at an average price of $125.62 per share, representing approximately $539 million of repurchase activity. After year-end and through February 24, we repurchased an additional 456,000 shares totaling $57.3 million. These actions reflect a disciplined and balanced capital allocation framework, showcasing our strong financial position while returning capital to shareholders.

Turning to 2026 guidance. We are establishing full year Core FFO per share guidance at a midpoint of $6.93 with a range of $6.83 to $7.03. For the first quarter of 2026, we are guiding to $1.28 at the midpoint. At the midpoint, within North America, we expect full year same-property NOI growth of approximately 4.5%. Breaking that down further, Manufactured housing is expected to grow by 5.9% and RV is expected to grow by 0.9%. In the U.K., we expect approximately 2.2% same-property NOI growth for 2026. FFO from U.K. home sales is anticipated to be approximately $50 million at the midpoint for the year.

For additional details regarding our assumptions and the components of guidance, please refer to our supplemental disclosures. Our guidance reflects completed acquisitions, dispositions and capital markets activity through February 24. Of note, it does not assume future acquisitions, additional share repurchases or other capital markets activity, which is often reflected in analyst estimates for the year.

With that, I'll turn the call back to Charles for closing remarks.

I'd like to take a moment to reflect on what I've learned and where we are headed. These first few months, I have been focused on listening, learning and engaging deeply with our team members and our business. I have spent time across Michigan, Texas, Florida and South Carolina visiting our communities and meeting with team members on the ground. Those conversations have reinforced both the strength of Sun's culture and the opportunity ahead to further sharpen focus, strengthen execution and build for long-term growth.

I'm energized by what I've seen so far and excited about the next chapter as we turn insights into action and build on Sun's strong foundation together. For 2026, we are focused on 3 core pillars: disciplined capital allocation, executing consistently across our operations and investing in our core MH and RV platform. We look forward to keeping you updated on our progress. We will now open the line to questions.

[Operator Instructions] The first question comes from Steve Sakwa with Evercore ISI.

Charles or maybe John, could you maybe just talk a little bit about the data? And Charles, in your opening remarks, you talked a lot about how you're using data, you want to make better decisions. Are there concrete things that you can discuss with us that you've implemented? Or are there things that you're sort of currently working on that you expect to implement in '27?

Steve, it's Charles. I'll take it and maybe I'll throw it to John if he wants to add in a little bit more. As I said, I've had a chance to go deep within the organization out in the field and just want to take a moment and thank the organization for the warm welcome. Specifically to your question, I refer to it as our unified digital backbone. What I will be able to tell you is it's building off of the foundation that was put in place a couple of years ago with the NetSuite implementation. And as I watch that, that really became the beginning of our digital journey, if you will, which is a big piece of what I want to try to build on and encourage us to build on.

Today, if I talk to the team, members around the table here with me, we have more real-time data access to data than we've ever had. But there's more there as we really start to build out the platform, which is solid, but there's more from beginning to end that we can do. And so one of the things I will share that is a focus in my core pillars for this year is starting with the customer journey by enhancing the systems and centralizing some of the contact center work in terms of how we engage with the consumer.

And our guests, specifically, I think it will be a help on the RV site and eventually on the MH site. So that's one piece that I'll give you, but there's a lot more to be done. The bigger picture, as you think forward around where the world is going today with AI and otherwise, is to continue to build on this foundation, and it needs to be around the data architecture and infrastructure that allows us then to unlock that in the future.

Steve, I'll just add to that. One of the things I shared with everybody last year was just really the focus on the transparency within our sales and leasing funnels and applying that transparency because of the data that we have across -- with the implementation of our new ERP that we put in 2024, we can take that data and apply it across all different kinds of transactions now, okay, and have that transparency, be able to deliver to the team, be able to rank it with the team, okay? So we know better what we're doing at any moment in time. That's one application. Another one is going deeper into where the traffic comes from, okay, whereas the data, okay, and being able to link where it's coming from all the way to who actually converts to a transaction, okay? And being more targeted. It's like being more targeted versus broad in terms of the campaigns that we can develop around that. That's what's taking place right now.

The next question comes from Eric Wolfe with Citibank.

At December NA, Charles, you talked about slowing down buybacks, but then, of course, all the $57 million of buybacks year-to-date. Could you just talk about the approach to repurchases and capital allocation this year? What you're assuming in guidance as far as the use of that $630 million of cash as well?

Great. I'll start. Thanks for the question. I'll let Fernando comment on what's in our guidance. When it comes to capital allocation, our objective is straightforward. We want to allocate capital where it generates the best long-term risk-adjusted returns for shareholders. Where we are today as we enter 2026, and I joined at a really kind of special time in the company's history, the strength of our balance sheet, the reduced leverage that we have, we position ourselves with manageable maturities and significant liquidity. So there's a lot of flexibility. And so as I think about capital allocation for the year, we have a balanced toolkit as our approach.

One is, as I talked about in our core pillars, is investing in our communities and our operating platform. The ability to invest in our strength, as I just said, the core portfolio, the people and the systems is one kind of those toolkits. The other is pursuing thoughtful and disciplined accretive external growth opportunities that align with our strategy of MH and RV. And so we'll continue to look for opportunities there. And then as you're talking about with the share repurchases, there's returning capital to shareholders and using share repurchases thoughtfully when they represent compelling value. These are all parts of our toolkit. We're going to be balanced as we go through the year, use our flexibility to be prudent with that use, and we'll continuously evaluate what's going to add shareholder value. Fernando, you just want to give forward guidance in terms of what we have in there?

And so Eric, consistent with prior years, we don't -- we're not assuming capital markets deployment of the cash on hand or our operational cash flow that we generate over the course of this year. So you can assume that the over $600 million of cash on the balance sheet today is generating interest income as it is used for the business. Any acquisitions that we were -- that we would find and transact on or any share repurchases would be incremental to the baseline guidance we've provided.

And then just a follow-up, a quick follow-up. The $57 million of acquisitions that are in escrow, can you just talk about what those are, the initial yields on them and then the unlevered returns that you're targeting?

Yes. It's Aaron Weiss. Thanks for the question. In terms of what we have on the balance sheet as of year-end, we did talk about closing one acquisition in the January period at sort of the consistent yield range we've talked about previously in the mid-4% yield range. In terms of the remaining acquisitions, those are simply held on the balance sheet as 1031s, but have not yet been closed. So we'll continue to look to identify those and update the market as we see them, as Fernando indicated, to the extent that we don't ultimately close on those 1031 proceeds as occurred in 2025, that would simply move into our unrestricted cash balance.

Our next question comes from Brad Heffern from RBC Capital.

Charles, can you give any updated thoughts on the U.K. and how it fits into the portfolio?

Absolutely. I appreciate the question. Look, I've had a chance to spend some time with the U.K. team, get over there. And what I've observed is high-quality operation, best-in-class portfolio, strong assets and very talented and capable team. I'm impressed with our operational execution. That being said, they're performing well in a challenging U.K. macro. We all see that, and John can spend a little bit of time around some of the details and what the expense numbers have been in Q4.

And as I look at the business and as we just talked about as being disciplined capital allocators, we continue to evaluate our entire portfolio to determine how best to create long-term shareholder value, and U.K. is no different. We're going to continuously kind of evaluate. But right now, our near-term focus is on maximizing value through disciplined execution, strengthening performance and driving growth where we can and maintaining cost control and flexibility. So we'll continuously assess the U.K. in the context of our overall strategy and capital allocation priorities.

John, if you want to add anything?

I mean the only thing that I would add, Brad, is that I think we put out in our guidance that we put out a 4.1% rent increase in the U.K. That's running ahead of inflation in the U.K. I think 2025 represents a really good year of home sales that we had close to 95% of the prior record, okay, that we had the year before that. And when you look at sort of from a market share perspective, we got a team of people in the communities that we have and the locations that we have that are executing brilliantly, okay, in the face of it all. And so the only thing that sort of offsets that a little bit is like what Charles said with -- on the expense side, a lot of that is attributed to the national minimum wage, okay? And there's -- everybody is in that boat. And so it's really pleasing to us to see them execute through that despite it all.

Our next question comes from Wes Golladay with Baird.

How do you see the annual RV conversions this year? I think last year was just around 600. Can you give your view on 2026?

Wes, I appreciate the question. I think we're kind of looking at something similar to what we saw last year is what we track. Really pleased with how last year played out, and I'm really pleased, especially as I've shared before that I think the strategy that we took with respect to retention within our RV annual business really took hold. We're seeing that emerge in the form of the renewal rates that we have now in comparison to this time last year, where we're running ahead. So that's kind of how we look at it. It's going to be sort of similar to what we experienced last year.

And then can you give your view on the transient RV? How does the pace look?

It's good. It's pacing well. I think a little bit about 2025. As you know, our RV same-property NOI performance in the year finished within the guidance range. I do want to emphasize, as I always do, that we like to work on the entire business. So we're really focused on bottom line results. Specific to transient RV, I'll reiterate that some of what we experienced in 2025 is a direct result of the success we've had in the strategy of reducing the number of transient sites and converting them to annual guests.

And that really formed in the way what we did last year was demonstrated by a 9.8% annual RV growth number and the 600 network conversions you referenced. I think for 2026, we continue to see better signs of stability with improved booking trends in RV. We remain thoughtful and disciplined in our approach as demonstrated by our guidance, which I will tell you reflects what we're seeing in our pace at this point in time.

But to emphasize further, okay, some of the things that we're doing, which are really sort of seamless to what Charles has talked about with our core pillars. We have several target initiatives in RV, which include OTA expansions or, I should say, differently booking channel expansions, digital booking enhancements, data leveraging opportunities. Again, there's a lot to unpack there, and I look forward to having those conversations as the year progresses. But we think a lot of this really lines up for what we're seeing. And if you look at sort of how we track on RV in '24 versus '25 versus what we're putting out there in '26, you're starting to see that stabilization take hold.

The next question comes from Jamie Feldman with Wells Fargo.

Charles, I appreciate your comments to close the call about kind of where you are thinking through the company. Can you just -- maybe to give an update on just where you are in the process of settling in, just in terms of -- I think people expected maybe a noisier print for 4Q, but you pretty much took one impairment in the U.K. and everything else seems to be kind of humming along. So -- and then, of course, you had some management changes to start the year.

But would you say at this point, you're kind of settled in and this is the story going forward? I know the U.K., as you guys commented before, still watching it and seeing where the opportunity is long term. But would you say you're pretty much settled in at this point and not a lot to still review big picture? Or there's still a lot to work through as you're thinking about the future of the company?

Thanks for the question. It is a good question. I can't say that my work is done. It's continuing. I'm past my listening and learning tour, if you will. I can't -- I used to be accounted in days and then months, and I'm in now. And so I am settled. The team knows who I am. I can't say enough how special the culture here is at Sun and how welcoming and how I felt like I've just kind of slid right in. And you can see it from our results that we are working well together, but there is work to be done. And the core pillars, as I laid out, is where the opportunity is ahead.

So that's why I can't say I've set in, but we have work to do in terms of investing in our communities and our infrastructure in terms of optimizing the platform. That's where the work will be done and will continue to be done. So I'm busy, but I'm loving it. And I'm definitely kind of getting in the flow at this point and enjoying every minute of it. Again, I can go into more details. But at this point, what you're seeing right now, the team put up great numbers for the quarter. We have good guidance, and we're just going to execute for the rest of the year.

The simplification strategy that the team put in last year, I'm building off of that with this kind of core focus and laser focus in on the core. And that's what it's about, and that's what's going to get us to get into this -- the rhythm that everybody expects us to do given the nature of this business and the affordability and attainable experiences that we provide for our residents and guests.

The next question comes from Michael Goldsmith with UBS.

Questions on the RV guidance. Can you just kind of break down what the underlying expectations are for annual and transient? And then also maybe break down what needs to happen to get to the upper end or lower end of that range and also a little color about what's been going on -- what you've been noticing with the Canadian customer.

Thank you, Michael. I think John and I will tag team that question. But at the midpoint of our range, we do have a rental increase for our annual guests of 4%. As John mentioned earlier, we are expecting transient conversions to annual contracts agreements of about 600 over the course of the year. From a transient revenue growth perspective, at the midpoint of the range, we are expecting about a 1.5% decline in transient revenue year-over-year. This would compare to a 9% decline in '25 year-over-year over '24. So that points to, as John was mentioning, some stabilization as it relates to the transient side of the business.

But John, if you want to go into.

Yes. I'll start, Michael, with on the Canadian side, which as we shared before, we did experience that softness in Q1 and Q3 of last year with Canadian guests. The interesting thing about that is, I think last year, we shared that Canada represented about 5% of the RV business. That represents about 3.5% of our total RV transient annual business today. In other words, what we experienced last year with Canadian guests combined with some of the offsetting that we did with domestic guests, I think, frankly, has been mitigated to some degree versus what we had in 2025.

So it's really more about what I said a little bit earlier. So -- and you sort of alluded to it with the question like what are the strategies we can push, okay, on the RV site, which I talked about the work that we're doing on booking channels. We recently added 2 additional booking channels on the RV site literally towards the end of 2025, which should bear some fruit in 2026 and that strategies to push perspective. On the digital booking side, it's about contact or guest routing enhancements, ease in the booking process enhancements, which frankly dovetails into leveraging the tech like Charles is talking about to capitalize on a nimble booking window that aligns more seamlessly with our revenue management capabilities that we have today.

And then if you take a step further in the things that we do enhancing just the guest journey overall, enhanced and targeted placement, this is not about the old days, RV days of just broadly throwing things out there, but it's about being targeted and thoughtful in the approach and listening to the data and what it's telling us to do, okay, to pick where we want to place it. To help us find those guests, help in the easing of the booking process, the on-the-ground experience, the rebooking that happens because of a great on-the-ground experience and ultimately, the referrals that you get from that, similar to what I've said on the MH site, building the sales force on the RV site for Sun.

Our next question comes from Jana Galan with Bank of America.

Following up on the transaction market, given Sun has been very active in the past year. Can you provide some details just on product in the market, even if it's not in your buy box? And is there more or less volume today than last year in MH or RV and any significant differences in cap rates across regions or between age-restricted and all age?

Great question. It's Aaron talking. We did -- we were really fortunate to move through 2025 and execute on primarily MH and also some annual RV acquisitions. As we've long said, the cap rate ranges are kind of in that 4% to 5% range. We haven't seen a massive change across the years. This is a high-quality asset class. And so the higher-quality MH communities that are probably not transacting are still being asked at sort of sub-4 cap rates, their quality, the quality of the cash flows, the current sellers believe that, that's appropriately valued. We're targeting assets, again, in markets in which we operate.

So strategically for us, we want to buy portfolios or assets in markets where we have operating leverage, where we have an understanding of the market over the long term, and that's really where we have been focused to date. So what we're seeing is generally consistent with past. We do believe the transaction market is picking up. There is a little more constructive backdrop in the financing markets. Certainly, the lower rate environment today versus 12, 18 months ago is more conducive to transactional activity. But I would say generally consistent high-quality assets.

And most of what we're seeing continues to be in the single asset, small portfolio, local owner-operator type environment. And so we don't expect that to change. There are very few large portfolio owners to begin with. And while those happen episodically, we would say the market backdrop is constructive. And we're generally pleased with what we're seeing in our pipeline, but it is very consistent with what we executed in 2025.

The next question comes from Jason Wayne with Barclays.

Just looking at home sales volumes, they were down year-over-year in '25. Can you just walk through your home sales assumptions for this year and how that gets baked in the G&A?

Yes. I think -- Jason, thanks for the question. I think what you're seeing when you talk about the home sales for 2025 is, frankly, our focus is on real property income and home sales expectations is really a product of enjoying nearly 98% occupancy in the portfolio as well as very low resident turnover, which ultimately leads to stability of long-term cash flow from rent. So I think the contribution of home sales is not really as material to FFO as the other things that we are working on and the things that we're doing and I think volumes and margins for this year will be similar to what we experienced in 2025.

And then it looks like the ancillary NOI guidance changed a bit as well. Just wondering how much of that is due to Marinas coming out of the portfolio?

The guidance provided is ex-Marina as it relates to the contribution. So it would be contributions from our RV portfolio primarily and then also contributions from the U.K. platform.

The next question comes from John Kim with BMO Capital Markets.

I wanted to ask if you could provide some of the building blocks for the 7.2% same-store revenue growth that you achieved in MH in 2025. It looks like you had 5.2% rental growth. You had a little bit of an uplift from occupancy, but what really made the difference to get from there to 7.2%? And if you could provide the same building blocks for 2026 as far as MH same-store revenue?

John, they'll be pretty similar as our rental increase in 2025 was just above 5%. We had occupancy gains of about 600 on the MH site last year. And then as you can see in our supplemental, we did have some strong performance from the 10% of the business. Our rental program did drive additional growth to build to that 7%. As John has alluded to earlier, as we look into 2026, we have a rental increase backdrop of 5%, enjoying 98% occupancy in manufactured housing. We do still expect gains from an occupancy perspective in that 500 to 600 site range. And then there could be some additional revenue opportunity there. But the building blocks are very much similar over the course of both years.

The next call comes from David Segall with Green Street.

It looks like the rate of move-outs has been increasing over the last couple of years. I'm curious if you can provide some color on what's driving that and if you can bifurcate it between the MH portfolio and the annual RV portfolio.

Yes. Good question, David. Appreciate it. I think for 2025, the rate of move-out was mainly attributed to RV. But that was -- and a lot of that had to do with some of the Canadian impact that we've experienced in 2025. But again, this is precisely why we focused so much of our attention towards retention over the course of this year and replacing those move-outs with more domestic move-ins.

But -- and as I said earlier, I think it's paying off because we're seeing it in the form of the renewal rates that we're having now as well. One thing of note, typically in an MH property when we have a move-out, it's going to be a resident moving out versus a home that is moving out of the community. And so oftentimes, we have a part in that transaction in the form of being able to generate a commission from a brokered home sale, which would be a part of that process for that transaction as well.

And then can you just briefly talk about what is driving the higher expenses in the U.K. recently?

I think much of it's just been attributed to what's taken place nationally, especially the national minimum wage and really falling in more of the payroll line of things than anything else as a result of that, David. And that's consistent with expectations for 2026 as well. We do have elevated expense growth in our guidance range with the midpoint of 2.2% for NOI growth, but leading the way as it relates to that increase is the national minimum wage increase that will go into effect in April of this year.

The next question comes from Linda Tsai with Jefferies.

With year-end net debt to EBITDA at 3.4x, do you have a targeted range for leverage going forward?

Sure. We have -- we stated with the closing of the Safe Harbor transaction and all of the activity we had from a debt paydown perspective that our long-term leverage target will sit between 3.5 and 4.5x net debt to EBITDA. So to get to that midpoint, there's some releveraging to do.

Do you have a view on what it would look like by year-end?

From a guidance perspective, certainly, we don't include share buybacks or any additional acquisition activity. So we -- in the guide today, we would be ending the year pretty similar to how we've started.

Sorry, I'm just going to jump in. It goes back to my answer earlier on capital allocation and really being balanced in terms of our approach and the tools that we have in our toolkit in terms of external growth being -- finding accretive opportunities there and having the flexibility with share buybacks on top of the core pillars we talked about in terms of investing in our infrastructure, in our communities and in our internal systems.

Thank you. At this time, I would like to turn the call back to Mr. Young for closing comments.

Great. Thank you for the conversation. We appreciate everyone's interest, and we look forward to seeing everyone at the upcoming conferences.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities Third Quarter 2025 Earnings Conference Call.

At this time, management would like me to inform you that certain statements made during the 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 today's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligations to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.

Having said that, I would like to introduce management with us today: Charles Young, Chief Executive Officer; John McLaren, President; Fernando Castro-Caratini, Chief Financial Officer; and Aaron Weiss, Executive Vice President of Corporate Strategy and Business Development. [Operator Instructions] As a reminder, this call is being recorded.

I'll now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may now begin.

Good afternoon, and thank you for joining us on today's third quarter earnings call. This is my first earnings call as Chief Executive Officer of Sun, and I want to start by saying how excited I am to be a part of this exceptional team. Since stepping into the role on October 1, I spent my first month listening, learning and engaging across the company. I have already visited a large number of our communities, and I look forward to continuing my tours.

My first few weeks reaffirmed what drove me to Sun, the strength of our teams, the scale of the platform, the quality of our communities and the opportunity in front of us. It is clear that Sun's success has been built on a strong foundation, underpinned by a deep commitment and dedication to our residents and guests. I'm thrilled to be joining at this pivotal moment in the company's journey, and I look forward to building on Sun's strong legacy. My near-term focus includes 3 key areas: one, deepening my understanding of the MH and RV business, ensuring I'm grounded in every aspect of our company's operations and culture; two, supporting our team as we deliver on our strategy and commitments; and three, assessing opportunities for disciplined long-term growth.

I am grateful for the warm welcome I have received from the Sun team. I look forward to working together to continue to drive excellence in all that we do for the benefit of our team members, residents, guests and our stakeholders.

With that, I'll turn the call over to John and Fernando to review our third quarter results and outlook in more detail. John?

Thank you, Charles. On behalf of the entire team, we are thrilled to welcome you to Sun Communities. Your deep understanding of and experience in the real estate industry and fresh perspectives have already been additive, which will help guide Sun through this next exciting chapter of growth and value creation.

Turning to our performance. I'm very pleased with our third quarter results. Sun reported core FFO per share of $2.28, exceeding the high end of our guidance range, driven by strong same-property performance in North America and the U.K. For the third quarter, within our North American same-property portfolio, NOI increased 5.4%, led by manufactured housing, which delivered 10.1% NOI growth and maintained a solid 98% occupancy. Through the end of September, 50% of our MH residents have received their 2026 rent increase notices, averaging approximately 5%, reflecting the continued strength and stability of our portfolio.

In our RV business, same-property annual RV revenue was up 8.1%. Transient RV revenue performed in line with expectations, declining by 7.8%, with roughly half of this decline due to our strategy of reducing transient sites as we continue to successfully convert transient guests into RV annuals. As I've shared before, the volume of RV transient annual conversions has returned to a more normalized growth pace following several record conversion years. RV same-property NOI declined 1.1%, and we remain focused on cost controls with same-property RV expenses down year-over-year.

For 2026, annual RV rental rates are being set with an estimated average annual increases of approximately 4%. In the U.K., same-property NOI grew 5.4%, supported by 4.8% revenue growth and 4% expense growth. While home sale volumes are lighter given broader macro challenges and when compared against recent record volumes, our team continues to maintain elevated market share by providing differentiated services and amenities at Park Holidays' high-quality communities. Our Park Holidays homeowners have received 2026 rent increase notices averaging approximately 4.1%. Our U.K. team continues to execute exceptionally well as they strategically shift the earnings mix toward recurring real property income while driving operational excellence.

I want to take a moment to thank our entire team for the discipline and dedication towards achieving our goals and continuing to position us for a strong future. Their commitment to operational excellence, including expense discipline and top line growth, resident and guest relations and accountability is what enabled us to deliver these great results.

With that, I will turn the call over to Fernando to review our financial results and updated 2025 guidance in more detail. Fernando?

Thank you, John. I will start with an update on capital deployment and our balance sheet. Following the initial safe harbor closing on April 30, we completed the disposition of the remaining 9 delayed consent properties for total proceeds of approximately $118 million, with the final closing taking place on August 29. In addition, during the third quarter, we sold a land parcel for $18 million. In October, we acquired 14 communities for approximately $457 million using 1031 exchange proceeds. These properties include 11 manufactured housing and 3 annual RV communities, all located in existing Sun markets, allowing us to leverage our teams, scale and infrastructure.

In the U.K., during and subsequent to the quarter, we purchased the titles to 7 properties previously held under long-term ground leases for approximately $124 million. Year-to-date, we have purchased 28 ground leases for approximately $324 million and agreed to purchase 5 additional ground leases for approximately $63 million with closing expected by the end of the first quarter of 2026. These transactions create meaningful financial and strategic flexibility and eliminate significant lease complexity. As of September 30, total debt stood at $4.3 billion with a weighted average interest rate of 3.4% and a weighted average maturity of 7.4 years.

Pro forma for the closed transactions and our common distribution in October, our net debt is approximately $3.7 billion, and our net debt to recurring EBITDA on a trailing 12-month basis is approximately 3.6x. Under our $1 billion authorized share repurchase program, we have repurchased approximately 4 million shares for $500 million year-to-date at an average price of $125.74 per share. We continue to view buybacks as a way to enhance long-term shareholder value while maintaining balance sheet flexibility.

Turning to our full year 2025 guidance. Based on our strong third quarter results and recent capital actions, we are raising our core FFO per share expectations by $0.04 at the midpoint to a range of $6.59 to $6.67, reflecting continued operational strength and disciplined execution of our strategic priorities. North American same-property NOI growth guidance has been increased to 5.1% at the midpoint, up 40 basis points from the prior quarter, driven by solid performance across both manufactured housing and RV segments.

Manufactured housing same-property NOI is now expected to grow by 7.8% at the midpoint, reflecting continued outperformance through the third quarter and steady demand across the portfolio. RV same-property NOI guidance has been raised to a 1% decline at the midpoint, supported by stable third quarter results and improving transient trends relative to prior expectations. U.K. same-property NOI guidance has been increased to approximately 4% at the midpoint, reflecting better-than-expected third quarter performance and continued real property strength in the Park Holidays platform.

For additional details regarding our full year guidance, please see our supplemental disclosures. Our guidance reflects all completed acquisitions, dispositions and capital markets activity through October 30. It does not include the impact of potential future transactions or capital markets activity, which may be reflected in research analyst estimates.

I will now turn the call back over to Charles for concluding thoughts. Charles?

Thank you, Fernando. The team delivered a strong performance in the third quarter, and we are encouraged by the positive momentum. I am incredibly excited to be at Sun, and I look forward to providing updates as we work together to drive consistent growth for years to come. We have concluded our prepared remarks, and we will now open the call for questions. Operator?

[Operator Instructions] Our first question is from Steve Sakwa with Evercore ISI.

Charles, I realize you've only been on the job 30 days, but I'm just curious kind of your initial observations and some of the positives and maybe challenges that you've seen? And are there some kind of low-hanging fruit items that maybe you've uncovered given your background at Invitation that you think you can implement at Sun over the next 6 to 12 months?

Great. Steve, thanks for the question. Hello to everyone. Let me start with how excited I am to join Sun's outstanding team. And Steve, I appreciate the question as I'm sure many have been thinking it or wanted to ask it. So congrats on getting it out there. As you mentioned, I've been here for all of a month. So please allow me to level set and give you a few of my early thoughts, clarify what I've done and where I want to focus in the near term.

Let me start with the quarter. As you can see from this quarter's performance, the team is executing at a high level. So well done to the leaders on the call with me here today and to the entire Sun team. It's great to join such a high-performing team. So my first priority really has been around how do I support the team to finish our commitments and finish the strong -- the year strong 2025. As I mentioned in my earlier remarks, my first 30 days have been on focusing and on engaging with the team and getting up to speed on all aspects of Sun's businesses.

Over the past several weeks, I've been on the road visiting our properties. I met with apartment leaders, spending time in the field with our team members. It's incredibly valuable for me to know our business up close and from the ground up. And I've been impressed by the strength of the team at all levels as you ask about what I'm seeing. The scale of the platform feels familiar, which is great to see and the quality and location of our communities really stands out to me, and I plan to build on all of these strengths. So it's been exciting to validate what originally drew me to Sun.

Looking forward, so as we look beyond my first 30 days and next 30 and beyond that, my long-term focus is on driving consistent and profitable growth that creates long-term value. And Steve, as you know me and others know me, my background is in residential housing. So operational excellence and resident and guest satisfaction will remain at the heart of everything we do. Internally, I'm a big believer in the value of culture, one that continues to reflect Sun's values while empowering our teams to deliver their best for our residents and guests.

And from a financial perspective, I plan to stay disciplined in how we allocate capital. Any future enhancements will be thoughtful, data-driven and focused on creating long-term value for our stakeholders. But as I think about it all, and let me end with this because I know it's kind of early in my time, what really stands out from my experience is that in today's world, affordable living and attainable experiences that Sun provides is needed now more than ever. The value proposition offered by our high-quality communities and team members is unparalleled. And what this quarter performance shows you with our 98% occupancy is that the demand for affordable housing has never been greater. So I'll end here. I'm generally excited to join Sun at such a pivotal time in the company's history and truly believe in the exceptional opportunity ahead of us.

Our next question is from Jamie Feldman with Wells Fargo.

Great. I appreciate the thoughtful response there, and congratulations on the new role. I guess as you're thinking about the strategy of the company, what are your thoughts on the U.K. or maybe for the broader group there, what are the latest thoughts on the U.K.? I know you've been buying up some of the ground leases. But is this still a long-term hold for the company? And I know the growth looks pretty good actually, but maybe just share your latest thoughts.

This is Charles. Why don't I jump in and just give you my initial kind of what I've done to date on that, and then I'll turn it over to Aaron to get into the ground leases. In my first 30 days, I've had a chance to engage with the Park Holidays team. And as I mentioned, I'm evaluating all aspects of our business, including the U.K. And I'm encouraged from what I've seen. The team's discipline, execution and focus stands out. Performance has been solid, and the team has executed on our strategy to grow recurring real property-based revenue. Again, I'm going to stay high level. I'll spend more time digging in.

Aaron, you can fill in a little bit on the ground lease approach.

Yes. Thanks, Charles. Year-to-date through October, we've now acquired 28 ground lease properties and have another 5 under contract, which will bring the total purchases to 33. All these transactions are accretive to our earnings, were completed at attractive yields. And as Charles, I think, alluded to, meaningful flexibility to manage the portfolio strategically over time. Most importantly, from a strategic and flexibility perspective, following all of these closings, 49 of our 53 U.K. communities will be owned on a freehold basis. To comment in a way that John and I have commented previously, consistent with what we have said in the past and in light of our continuing strong performance despite those headwinds, we have the best team in the business in the U.K. They are managing the best assets in the market and are focused on executing an operational plan to ensure as with our entire portfolio that we are optimizing our properties and maximizing value for our stakeholders.

Our next question is from Jana Galan with Bank of America.

Congrats and welcome, Charles. A question on the transaction market, given you've been very active this year in both the dispositions and acquisitions. If you can maybe talk to kind of pricing, what's out there and any kind of additional opportunities?

Appreciate the question. Thank you. We just want to highlight that the most important part of what we've announced from a transactional perspective is that we've been very disciplined and selective in deploying the capital. These are all high-quality assets. They definitely fit our long-term strategy. Leveraging the long-term industry relationships that we've had. We are seeing an increase in the transactional activity in the market, but the overall opportunity set of properties that meet that acquisition criteria is consistent with what we have seen historically. The transactions we've announced and the transactions we are seeing that meet our criteria are much more likely to be in the single asset or small portfolio opportunities.

We are looking thoughtfully and prudently at adding communities in our portfolio to the extent they meet those criteria. What we did see from the transactions we executed on was cap rates in the low 4% area. We would expect that to continue to be the area in which we would continue to transact. And as we noted in our release, we do have another $50 million of potential 1031 transactions in the pipeline. But beyond that, I would suggest that the overall environment is very consistent with what we've been seeing, though we are able to acquire these single assets or small portfolios, we will remain selective, and we aren't seeing significant large portfolios of assets that meet our underwriting criteria, but we'll continue to underwrite and look thoughtfully at these opportunities.

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

I wanted to ask about your transient RV performance, which was better than expected. Have you had an impact from the Canadian customer base this quarter? What is your engagement like with your customers there? And what are you seeing? And can you remind us about the seasonality of the Canadian transient RV customers? Do you have more in the summer or winter months?

Yes. Thanks, John. This is John. I'll respond to that. First, I appreciate what you said. I'd like to say again how pleased I am with -- when we talk about RV -- annual RV revenue being up 8% in the quarter. Our RV NOI overall is performing towards the higher end of the guidance range we provided. As you know, I think most people know that our Canadian guests represent less than 5% of total transient and 4% of our RV annual business. And as I've shared, we have experienced softness with Canadian customers coming down to Florida.

So back to your question about sort of seasonality. We addressed some of that back last winter as well as some of that slowness in the Northeast this summer. But I will tell you, we are -- we've been sort of hyper focused on the annual RV side on retention in 2025. I think you all have heard me talk about that before. And that has led to overall good net conversion results with converting a net almost 700, okay, so far this year as well as we've been focused on with some of the short-term Canadian softness that we've dealt with just more -- getting more domestic RVs to help fill that Canadian guest gap.

And then what we're seeing going out forward is a little bit stronger booking trends on the transient RV side, okay, over recent weeks as well as some really encouraging activity in terms of renewals of RV annuals coming into the next season. So it feels like the work that we're doing where we focused our attention over the course of 2025, and I can't emphasize enough, you can't just flip the switch and do well retention. It takes a year to build that up, okay, which is what we've done. So we've put in that work, which is why we're seeing the trends that we're seeing now. And so I'd like to say that we're a little more positive than we were at this point last year.

Given your exposure in Michigan and some of the Northeast states, do you have a pretty even seasonality pattern with your Canadian RV customers?

I mean it's going to be mostly like -- it's going to be mostly in the first quarter, and it's going to be -- and then some in the third quarter up in the Northeast, but it's not really Michigan. It's more like Maine and places like that.

Our next question is from Eric Wolfe with Citigroup.

I was just wondering if you could talk about how you came up with 4% annual RV increase for next year. If there's any reason why it's down from, say, 5.1% the previous year, if you're trying to prioritize occupancy or -- just trying to understand the strategy around that increase. And then also, at what point you have good sort of data on the acceptance of that? So meaning like by the time we get to the end of the fourth quarter or first quarter, do you generally know sort of what your annual RV revenue will be for the year?

Yes. Great question, Eric. Thanks for -- this is John again. Specific to RV, our rent increases are intentionally set to continue reinforcing what I was mentioning earlier on retention, okay? Excellent operational execution remains key in retention, ultimately net RV annual conversion, which means the experience that our guests have at the properties, frankly, is far more valuable than anything we can do from an external marketing perspective. This is why I'm so focused on retention.

You have heard me say before that the best revenue-producing site that we can gain is the one we never lose, okay? And as I shared, we believe the strategy is paying off, and we are, in fact, running ahead of last year's renewal pace for RV annuals. And this all kind of culminates, which is why we've been prudently tempered, as I would say it, with a 4% RV annual increase for 2026. I mean it is retention really remains one of the most valuable drivers for consistent long-term growth for us, particularly in the RV space.

Our next question is from Adam Kramer with Morgan Stanley.

Congrats, Charles, on the new role and looking forward to working together. I wanted to ask about just the drivers of the guidance raise for the U.K. business. And I recognize there's some moving parts there with the ground leases, but just maybe fundamentally, like what's happening with that business currently and sort of what's embedded in the new outlook versus the prior?

Sure, Adam. The increase in same-property growth for the U.K. portfolio on the real property side is really a reflection of outperformance coming in the third quarter, and that's leading to the almost 180 basis point increase at the midpoint for NOI growth for the year. We saw stronger transient growth in the quarter as well as success from an expense containment perspective across utilities and supplies and repair.

Great. And maybe if I could just sneak in a quick follow-up here. Just wondering about tax implications. I think you guys have bought about $580 million or so, and I think the gains from the safe harbor sale were to be in the $1.4 billion range. So just wondering maybe high level, is there a tax asset that can offset some of the liability here that you have from those gains?

[indiscernible] Thanks for the question. I think that was referring to the safe harbor potential tax liability. To follow on what we've talked about in the past when we announced the transaction and even prior to that, we started implementing a broad tax mitigation strategy. Some of those efforts were the 1031 exchange programs we've talked about. There was the May special distribution. And then throughout the year, beginning in early 2025 as well as through to now, we have been selling nonstrategic assets that have generated losses.

We also have the ability to use NOLs. We're continuing to use those strategies. We're continuing to follow through. And as we've talked about before, the tax implications are generally in the year for the year. So we will continue to work through those as we move towards year-end and provide an update as appropriate. We would suggest we are very happy with how we've proceeded over the course of the year, particularly since the initial closing at the end of April this year.

Our next question is from Michael Goldsmith with UBS.

Welcome, Charles. Sticking with the U.K., can we just talk a little bit about the U.K. home sales environment? I noticed NOI from U.K. home sales were down pretty materially in the third quarter, so year-over-year. So is there -- is that a reflection of the environment overall? Or is there some kind of individual events that are weighing on that?

Michael, it's John. Appreciate the question. Yes, I mean, as I've said in my prepared remarks, home sales in the U.K. are a little lighter than they were last year. But I have to emphasize, we are really pleased with the overall performance of the U.K. business. U.K. same-property NOI grew by 5.4% in the quarter. We raised our U.K. same-property NOI guidance for the balance of the year. Our team in the U.K. continues to execute exceptionally well. They've done a great job of strategically shifting the earnings mix towards stable recurring real property income while maintaining strong market share and pricing power despite what you're talking about is the challenging macro backdrop.

But I do think this is really a tribute to the high quality of the portfolio, the exceptional service that happens on the ground by the team and the skill, performance, mindset inherent in that group of people that are led by Jeff, Richard and Chris. I mean, as you know, 2024 was the highest volume year of home sales for Park Holidays. And while 2025 volumes will be lighter, okay, than they were, I think they remain solid in line with our overall operational strategy in the U.K. One of the things kind of looking forward, we did have, as I think Fernando kind of alluded to, a strong 2025 vacation season in the U.K., and that may ultimately contribute to the pipeline for future home sales going out.

Our next question is from Jason Wayne with Barclays.

Just you reported $630 million in 1031 escrow at the end of the third quarter, netting this month's deals against that would suggest around $175 million of remaining funds. So just wondering if you turned down any deals this month or what's causing the delta between that and the $50 million remaining today?

Yes. So originally, thanks for the question. When we announced it, we originally put $1 billion into 1031 exchange accounts. And then we ultimately, as part of second quarter earnings, reallocated approximately $430 million into unrestricted cash, which left about $565 million earmarked for acquisitions. As part of this closing, it was about $457 million, and we do have some residual capital allocated to 1031s. As naturally part of these transactions, you do tend to over allocate 1031 funds for maximum flexibility. So we did expect a slightly less amount of actual transactions, but we ultimately executed on about 80% of those proceeds.

In terms of our approach, I just want to reiterate, we're being incredibly disciplined and selective. The funnel we looked at over the course of 2025 was much larger than what we ultimately executed on, and we did not feel any pressure to move forward with any transactions that did not meet our long-term objectives. We have a lot of long-standing deep relationships across the industry throughout the organization, and we're able to leverage those, and we'll continue to leverage those to find these attractive communities on a one-off or small portfolio basis. So we're very happy with what we've landed on. And you can assume that for every deal we do announce and close, there were many transactions and communities we passed on because they did not meet our quality and underwriting criteria.

Our next question is from Wes Golladay with Baird.

I just have a quick question on your land parcel sales. I know in the past, you were looking to be more of a developer and you may have some more inventory. Just wonder if you can quantify how much land you have left to sell -- for potential sale.

Thank you for the question. I think overall, we will continue to look to maximize value of unproductive assets. We've been very aggressive in exiting nonstrategic assets over the past 18 months in excess of $600 million of operating assets as well as land parcels. We wanted to highlight that we will continue to do that even as we look to grow the portfolio with high-quality communities and assets that we may acquire in due course. There may be smaller transactions like the one Fernando alluded to in his opening remarks, about $18 million, but we do not have substantial land assets you should be looking for, for sale. To the extent we do have some additional land, it will likely be adjacent to existing assets and may provide some incremental growth through expansion in the future.

Our next question is from Brad Heffern with RBC Capital Markets.

Welcome, Charles. On the regulatory side, there's clearly been an increased emphasis from this administration on housing affordability. Obviously, that's the main selling point of manufactured housing. I know the main impediment historically to supply has been at the local level, but I'm wondering if there's anything you're tracking at the national level or that could potentially be helpful that might come out of this.

Brad, it's John. I appreciate the question. I mean to answer your question directly, the answer is no. I mean there isn't a lot that's really changed. I mean I think you know that we've been an active participant in anything related to affordable housing as it relates to government support. We'll continue to be an active part of that. But in the meantime, we are obviously very skilled, experienced in being able to work at the local level, and we have shared a lot at the local level through some of the things that we've done in the past that we can be -- well, I would just say we're always ready, okay, because we possess the skills, the experience and the know-how if something does get turned up, if you will, to help boost that and accelerate that process. But for right now, we'll just be prepared.

Our next question is from David Segall with Green Street.

You still have room to run on the buyback authorization, but it seems like you paused the buybacks in October. So I'm just curious how you're weighing -- utilizing the remaining runway on the authorization versus additional acquisitions.

Thank you, David. You can expect us to continue being prudent with -- from a capital allocation perspective. I'd love to remind everyone that since the Safe Harbor sale, we have paid down over $3 billion of debt, meaningfully reducing leverage and removing our floating rate debt exposure, returned over $1 billion of capital to shareholders via special distribution and share buybacks and an over 10% increase to Sun's common distribution, acquired over $450 million of high-quality assets, acquired ground leases in the U.K., significantly improving financial and strategic flexibility for that portfolio. So we'll continue weighing right, all options in front of us from a capital allocation perspective and be thoughtful as it relates to how that next dollar is allocated.

Great. And just with regard to expenses, can you talk about what's driving the cost savings? You talked about it for the U.K. business in particular, but I'm curious for more broadly.

Yes. Thanks, David. This is John. I think more broadly, speaking specifically to like COM expenses within the operations side, we have expanded what we said we're going to do. We're sort of towards the top end of that range and much of that has lie in payroll-related line items, various supply and repair categories, tech-related costs. But one of the bigger pieces is meaningful standardization, expansion and adoption of our procurement platform, which encompasses many different expense-related items centered on property operations.

And additionally, I would share that we continue to harness transparency and the power of our technology to drive additional operational efficiencies. So I'm really pleased with how it's going. We will continue to focus on additional expense savings, but we're also very focused on additional revenue growth opportunities, okay? And the results of which are reflected in what you're seeing today in terms of our results, not just for the quarter, but for the whole year and the performance we've had in 2025.

And some of that on the top line has come in the form of retention, occupancy gains, rate gains, revenue growth as well as the great job the team has been doing from a collections perspective, which has turned into overall savings within bad debt. So I mean, to really sum it up for you, David, it's fundamentals and execution. They are the focus and what you're seeing happen in real time. You're seeing this happen in real time to our overall bottom line results.

Our next question is from Tayo Okusanya with Deutsche Bank.

Charles, welcome aboard. The transient RV business, could you just talk a little bit about what trends you're seeing at this point, again, whether you're kind of at the point where we're kind of getting towards the demand normalization everyone is looking for or whether for whatever reason that hasn't come back and kind of what may be delaying the eventual demand normalization of that business?

Yes. This is John. I'll start. Great question. It's actually a question we've been asked pretty much all year long. And I think that the best way that I would answer that is, again, we're really happy with our RV same-property NOI performance being at the top end of that range, okay? We've done really well coming off of 3 record years of transient RV conversions and still growing them. On top of that, we've got 23,000 transient sites we can convert in the coming years if we want to, okay? And so when we think about -- I would tell you, what is normalization, what is stabilization, I would just say, well, what is it, okay? Because it's a balance between what we do from both an annual side and the transient RV side. And the goal is to maximize what we can do from an overall RV NOI. And I think what you're seeing happen and what I've shared earlier in the call has been, we are seeing improved trends, not just on the annual RV renewal side, but as well as our current pacing that we're seeing on the transient side. So it's a difficult question to answer. But I think what we're seeing right now is actually pretty positive.

And Tayo, if I could add, we are actually seeing an improvement from a forecast perspective for the full year for just transient RV revenue performance. When we last spoke in July, we were forecasting about a 9.25% decline in revenue. That has improved over the last 3, 4 months by about 30 basis points for full year performance. So we're actually seeing slight improving trends from that standpoint.

Our next question is from Steve Sakwa with Evercore ISI.

Just -- and I'm sorry to ask this on kind of the RV business. So I believe the RV business is down 2.8% year-to-date, but the forecast for the full year calls for down 1%, which was a 50 basis point improvement. So that implies a pretty big, I think, acceleration or improvement 4Q to 4Q. Can you just maybe speak to what's driving that, number one? And then secondly, I know you guys have a lot of cash sitting on the balance sheet that's not restricted. How do we just think about that use of cash kind of moving into '26?

So Steve, you're right as it relates to expectations for fourth quarter NOI growth for our same-property RV portfolio. The main driver of that will be -- or one of the drivers for that will be transient growth where we're expecting a smaller decline than what we have seen on a year-to-date basis. That would be the largest driver.

And Steve, on the second question on the capital allocation. Again, I'm going to stay high level because of the time that I've been here, but I've been digging in with the teams and my perspective has always been to take a disciplined approach that balances growth, operational needs and shareholder value. And what I've seen so far is the team has executed very effectively across all of those areas. It's been very disciplined. And I expect that balanced and disciplined approach to continue as I dig in and get a deeper understanding with the teams. And we'll continue to review that framework, work closely with the Board and evaluate all options for long-term shareholder value.

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

It's a followup. Charles, I wanted to know what you thought of the rental home business within the MH communities. Is that's something that could be built up within Sun?

Yes. Again, this is part of my deep dive into the business. I've obviously, with my background, I have been spending a lot of time with John and Bruce understanding that business and how it works. Obviously, I have history and perspective. It seems to be executing really well, and I'm asking some questions as to kind of where we go from there. I don't have much more to add at this point, but it is something that I am particularly interested in given my background. John, do you want to add anything or?

Yes. I would just -- I think you know this, John. I mean, I've been around that program since its inception here at Sun. And one of the things I think is super important, one of the biggest benefits that it brings to the company is a key traffic driver to our communities, okay? Because we have lots of prospects that come to the property, thinking they might want to rent it, ultimately end up purchasing a home and become a homeowner. So that in itself is an important part of that program. And like I said, it drives a lot of traffic to us. So it's something that we will continue to have as one of the tools that's going to drive growth across the portfolio.

And if I could just follow up on the U.K. ground lease acquisitions. It provides you with some earnings accretion and flexibility. Can you just comment on what that flexibility means? Is that on the financing of the asset? Is it flexibility in how you may spend capital to develop on the asset? Or just does it give you just more value when -- if and when you decide to sell some of these communities?

Thanks for the question. It's Aaron again. Yes, to all of those questions. I think fundamentally, we acquired the business with these in place. They were part of our original underwriting. And due to our capital position and the opportunity presented by the current landlords, we're able to acquire them, incredibly helpful for the team on the ground in terms of managing the portfolio and owning them on a freehold basis. And certainly, to the extent we continue to assess the portfolio, just as we've done in the U.S., we've considered certain single asset, noncore asset sales and things like that. We will continue to do that. It provides that flexibility and ultimately, just increases it strategically and certainly remove some incremental lease payments we were making overall. So it does check a lot of boxes, both for the team here as well as for the team in the U.K., simplifying and improving flexibility and strategic optionality.

Our next question is from Brad Heffern with RBC Capital Markets.

I may have missed this, but did you give the cap rate on the recent acquisitions? And also, can you give a rough yield, I guess, on the ground lease purchases?

Aaron, again, thanks for the question. We did comment and said we were acquiring in the low 4% cap rate area, which is consistent with what we've shared with the market over the last few months from an expectations perspective. And in terms of the ground leases in aggregate, roughly in the same range, slightly higher from a yield perspective, low to mid-4%.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Charles Young for any closing comments.

Thank you for joining our call today, and I appreciate the welcome messages from each of you. I look forward to seeing many of you in person at the upcoming conferences over the next few weeks. Thank you.

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

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Sun Communities Second Quarter 2025 Earnings Conference Call. At this time, management would like 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 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 today's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligations to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.

Having said that, I'd like to introduce management with us today: Gary Shiffman, Chairman and Chief Executive Officer; John McLaren, President; Fernando Castro-Caratini, Chief Financial Officer; and Aaron Weiss, Executive Vice President of Corporate Strategy and Business Development. [Operator Instructions] As a reminder, this conference is being recorded.

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

Good afternoon, and thank you for joining us to review Sun Communities' second quarter 2025 results and updated full year outlook. This was a pivotal quarter for Sun as we completed the previously announced sale of Safe Harbor Marinas and repositioned Sun as a pure-play owner and operator of manufactured housing and RV communities. I am pleased with our financial results and operational performance as we execute on our strategy to deliver consistent, reliable earnings growth. We have taken deliberate steps to streamline operations, unlock meaningful financial flexibility and enhance shareholder value. During the quarter, we paid down approximately $3.3 billion of debt, inclusive of prepayment costs, materially improving our balance sheet position. And since closing on the Safe Harbor transaction, we returned over $830 million to shareholders through a special cash distribution and share repurchases.

Additionally, we increased our regular annual distribution rate by over 10%. We have also made significant headway identifying acquisition opportunities using 1031 proceeds. We are evaluating opportunities to acquire manufactured housing properties in strong markets with attractive supply-demand dynamics. We continue to make progress on the delayed consent properties related to the Safe Harbor transaction. In May and June, we successfully closed on 6 of these properties and are working through final government approvals for the remaining 9.

Turning to our operational performance. We are pleased with the strength of our manufactured housing and annual RV businesses. Sun reported core FFO per share of $1.76 for the quarter, exceeding the high end of guidance. Total North American same-property NOI grew 4.9% in the second quarter, driven primarily by the continued growth and stability of our manufactured housing portfolio as well as the benefit of our ongoing cost savings initiatives and greater efficiency at the expense level. We believe this demonstrates the resilience of our core business and the strength of our portfolio. As announced last week, Charles Young has been appointed as Sun Communities' next Chief Executive Officer and Board member, following a thorough search process. Charles is a seasoned and highly respected leader with over 25 years of experience across real estate operations, investment and strategy.

He most recently served as President of Invitation Homes and brings with him a strong track record of driving growth, operational excellence and team development. We're incredibly excited to welcome Charles to Sun, and he will be officially joining on October 1. The Board and I are confident that his leadership, vision and deep understanding of the real estate industry will build on the foundation we created and guide Sun through its next phase of growth and value creation. I will be stepping into the role of Non-Executive Chairman of the Board. This provides for a smooth transition that allows me to continue supporting the company and our exceptional team. It has been an honor and privilege to serve as CEO of Sun for over 40 years, and I could not be prouder of what we've accomplished.

It's been an incredible journey in growing Sun from a 31 community portfolio at our initial public offering to where we are today with more than 500 communities. I'm incredibly pleased that this change is happening at a time when the company is well positioned to build on our strong foundation and continue to create value for all of our stakeholders. I'd like to close by expressing my sincere appreciation to the entire Sun team. Their hard work and dedication made these results possible and continues to reinforce Sun's strong position in the market.

With that, I'll turn the call over to John and Fernando to walk through the quarter's results and our updated guidance in more detail. John?

Thank you, Gary. We could not be more excited and proud of what our team delivered this quarter. We are executing to plan as we hold ourselves accountable with transparent performance rankings and the results are clear. We are growing top line, managing operating expenses efficiently and delivering consistent high-quality results across the organization. In our North American same-property portfolio, we reported 4.9% NOI growth for the quarter, demonstrated a disciplined balance between revenue growth and a focus on expense management, driven primarily by our manufactured housing segment, which had an outstanding quarter. Same-property manufactured housing NOI increased 7.7% and our same-property MH occupancy was up 60 basis points from the prior year to 97.6%, reinforcing the ongoing demand to live in a Sun community. As it relates to RV, we remain within our 2025 guidance range.

For the second quarter, same-property RV NOI declined 1.1%, driven by a 0.9% revenue increase off by a 3.1% expense increase. Importantly, we've been able to mitigate some of the transient softness through growth in annual RV and by continuing to flex expenses. In the U.K., we are seeing strong results. Same-property NOI in our U.K. portfolio increased 10.2% for the quarter with revenue up 9.5%, driven by strong demand across our communities as well as higher transient revenue. Expenses were up 8.8% as a result of the budgeted national minimum wage increase, but that was partially mitigated by cost savings initiatives. Park Holidays team continues to perform at a very high level. They have done a tremendous job shifting the revenue mix from home sales to recurring real property income, strengthening the long-term profile of our U.K. business.

The unmatched quality of our U.K. portfolio and operating team allow Park Holidays to command its outsized market share and underlies our confidence in continued momentum. As we look at 2025, I truly believe we are performing as well as we ever have as a team in achieving some of the best organic growth I have seen in my long career here at Sun with a focus on driving top line growth while maintaining expense efficiently. Most importantly, we have the results to prove it. I want to sincerely thank all of our team members for their tireless effort, hard work and dedication. These operating results do not happen by accident. They occur through the disciplined execution by team members who care about delivering for our residents, guests and shareholders.

I will turn the call over to Fernando to walk through our financial results and updated 2025 guidance in more detail. Fernando?

Thank you, John. For the second quarter, Sun reported core FFO per share of $1.76, exceeding the high end of our guidance range. This strong result was primarily driven by the outperformance in our manufactured housing and U.K. segments, supported by continued rent growth and stable occupancy. As previously mentioned, we closed on the sale of Safe Harbor Marinas on April 30, meaningfully simplifying our platform and creating significant financial flexibility for Sun. Following the initial $5.25 billion Safe Harbor closing, we subsequently closed on 6 delayed consent subsidiaries, totaling approximately $137 million. The cash proceeds from those sales have been deployed to support a combination of debt reduction, including $3.3 billion of debt that has been repaid, shareholder distributions and reinvestment into our core portfolio.

Turning to our balance sheet. As of June 30, Sun's total debt balance stood at $4.3 billion with a weighted average interest rate of 3.4% and a weighted average maturity of 7.6 years. Our net debt to trailing 12-month recurring EBITDA ratio was 2.9x at quarter end. Importantly, we have 0 floating rate debt outstanding. In addition to our debt reduction, we deployed capital through share repurchases under our $1 billion authorized stock buyback program. During and subsequent to quarter end, we repurchased approximately 2.4 million shares for a total of $300 million. We believe this opportunistic repurchasing enhances long-term shareholder value while maintaining balance sheet strength. We also returned capital to shareholders through a onetime cash distribution of $4 per share during the second quarter, equating to $521 million in total shareholder distributions.

With respect to 1031 proceeds from a Safe Harbor transaction, we initially allocated nearly $1 billion into 1031 exchange accounts. As of today, we have identified potential acquisitions totaling approximately $565 million, which allowed us to release $431 million into unrestricted cash accounts in mid-June. We are pleased to have received 2 credit rating upgrades this quarter. S&P Global raised Sun's rating to BBB+ from BBB and Moody's upgraded us to Baa2 from Baa3. Both agencies cite our deleveraging progress, balance sheet strength and focus on core operations as key drivers for the upgrades. During the quarter, we acquired the titles to 22 properties in the U.K. that were previously controlled via ground leases for approximately $199 million, inclusive of taxes and fees. This transaction creates financial and strategic flexibility, eliminates material lease obligations and is expected to be accretive to core FFO on an annual basis.

Turning to our full year 2025 guidance. We are raising our FFO per share range to $6.51 to $6.67, a $0.06 or just over 90 basis point increase at the midpoint, reflecting our second quarter outperformance. We have increased North American same-property NOI growth guidance to 4.7% at the midpoint, an increase of 40 basis points. Manufactured housing same-property NOI is now expected to grow 7.5% at the midpoint, reflecting continued strong performance. RV same-property guidance is being maintained at down 1.5% at the midpoint as our outlook for the remainder of the year is consistent with expectations set during our first quarter earnings call in May. U.K. same-property NOI guidance has been raised to 2.3% at the midpoint, a 40 basis point increase, driven by strong second quarter results.

We have also updated guidance to reflect changes in interest income and interest expense from the debt paydown, stock buybacks and the purchase of the 22 U.K. properties previously subject to ground leases. For additional details regarding our full year guidance, please see our supplemental disclosures. As a reminder, our guidance includes acquisitions, dispositions and capital markets activity through July 30 and the effect of the completion of the sale of the remaining Safe Harbor delayed consent subsidiaries, but it does not include the impact of additional prospective acquisitions, dispositions or capital markets activities, which may be included in research analyst estimates.

I would now like to turn the call back to Gary for closing remarks.

Well, as I conclude my final earnings call as CEO after 4 decades with this remarkable company, I want to express my deepest gratitude to the extraordinary people who have made this journey possible. To our dedicated team members, past and present, your tireless efforts and unwavering commitment to our residents, guests and one another have contributed to a company and a culture that we can all be truly proud of. To our valued shareholders and all of our stakeholders, thank you for your trust, patience and belief in our vision throughout the years.

Your support has enabled us to invest in people and properties, weather difficult periods and emerge stronger. I'm filled with immense pride in what we've accomplished together and maintain tremendous optimism for the future. While my role is evolving, my commitment to this company and all of you remains. Thank you for allowing me the privilege of leading this incredible organization. We have an exceptional team, a strong foundation and a bright future ahead. I look forward to supporting Charles and all of you as we continue to build on Sun's legacy together.

Operator, we can now turn it over for questions and answers.

[Operator Instructions] Our first question comes from the line of Steve Sakwa with Evercore ISI.

Congrats, Gary, as you transition into the new role. My first question, I guess I wanted to talk a little bit about what Fernando talked about, which is, I guess, the releasing of some of the funds into kind of unrestricted cash and just kind of your expectations about 1031 acquisition volume. And are there any kind of tax issues or tax considerations for basically not doing 1031s? And are there other special dividends that may need to be made because of that?

Steve, to answer the first question -- the last question first, no expected adverse tax impact from releasing funds out of the 1031. But we initially allocated about $1 billion towards potential 1031 transactions, recognizing that fully deploying that amount was unlikely. We've identified approximately $565 million of potential acquisitions, which allowed us to release the $431 million into unrestricted cash. Under 1031 guidelines, we'll need to close on any identified assets by the end of October. And while we continue pursuing opportunities, we are under no obligation to complete transactions that don't align with our strategy. We're also actively evaluating other strategies to maximize the value of these proceeds as we continue to assess both tax and strategic considerations for the remainder of the year.

Okay. And then maybe a question for John. I guess the transient RV business seem to be better or less bad than I think we had expected. So maybe just talk about some of the trends that you're seeing on that transient RV business and maybe some of the steps you've taken to kind of enhance the business or keep it from going down more than maybe people expected.

Sure. Steve, great question. I think I want to start with saying that when we look at our business, we look at the entire business, and our focus is on bottom line results. I mean, overall, we beat Q1. We just beat and raised Q2. So I'm thrilled, okay, with how we're performing. But specific transient RV, as you know, we took a proactive approach in revising guidance after Q1, reflecting on the current environment, those trends remain in line, just like we've shared. And as you know, a large component of our transient revenue headwinds actually is created by our success in converting transient sites in annual sites. And despite near-term volatility we faced, our transient RV business generates solid revenue and margins continues to play a vital role by creating pipeline for more annual conversions.

And so the ways that we're addressing these things head on is like we've shared with continue to flex operating expenses within RV and continue to build upon as we have adding more annual RV sites to the mix that we have in our portfolio. And so we do things here and there in various parts of the portfolio where we see an opportunity to be laser-focused on a specific opportunity for conversion or things that we can do to enhance revenue and obviously, the flex on expenses, but it's pretty surgical the way that we look at it.

Our next question comes from the line of Jana Galan with Bank of America.

Congratulations on a great quarter, and congratulations to Gary. Just following up on that, I was curious if you could talk a little bit and explain how the renewals for the annual memberships work? And are they kind of spread out through the year? Or do they hit in a particular quarter?

Jana, it's John. Good question. Appreciate it. It's -- there are some periods of the year like in the early part of the year where we had more of our annual renewals in Florida and Arizona and places like that, that we've talked about earlier this year. But then it's pretty pro rata as the year goes on as we step into like the summer annual season that we have up north.

And then on the MH occupancy gains, just curious if you could talk a little bit about the outlook for the second half of the year for MH home sales. And it looks like rental homes picked up a little bit, but just curious how you're thinking about those 2 components.

Yes. I think on the U.S. home sales side, I mean, one thing, Jana, I would tell you is that we're really focused more than anything on real property income and home sales expectations that we have, not just for the back half of the year, but what we've seen in the first half of the year are really a product of running at close to 98% occupancy and having very low resident turnover, which obviously leads to stability of long-term cash flows and the rent. And so I think what you would see in the back half of the year is something similar to what we've experienced in the first half.

Our next question comes from the line of Eric Wolfe with Citibank.

For the U.K. ground lease purchases, can you just talk us through the economics on that and what you meant by increasing your strategic flexibility?

Sure. Eric, so the transaction creates flexibility across the portfolio in the U.K. by converting leasehold interest into freehold ownership, we gain full control and eliminate future rent escalations, which improves long-term economics for these properties and for the portfolio overall. The ground lease repurchases, which totaled nearly $200 million blend to about a 4.25% yield going in.

So 4.25% yield. So it's accretive relative to, call it, the 3.75% on cash. Is that what you mean by accretive?

Yes.

And then second question, maybe I missed this in your -- the answer to Steve's question, but there was a really big turnaround in the transient. I guess I'm trying to understand how much of it is like execution on the operating side, things that have you actively changed to either better market it or operate it versus is it better weather, just market conditions? Because it went from like negative 20% to negative 6%. It feels like a pretty big change in growth. So trying to understand how sustainable that improvement is and sort of what you've started, like how you're trending in the third quarter thus far.

Eric, the first quarter decline in revenue of just over 20% is really due to seasonality and the transient sites that are open during -- and active during that period of time. We forecasted and budgeted a quarter-over-quarter improvement because the majority of our transient-focused assets are open during the summer months, and that's why you're seeing that improvement. I'll remind everyone over the course of the full year, we are projecting at the midpoint of our RV guidance, a decline of just over 9% for transient RV revenue.

Our next question comes from the line of Michael Goldsmith with UBS.

Can we get an update on the restructuring process from the perspective of the expense savings? John, I know you've been all over this, but can we get an update on the progress that was made in the last quarter? And then where are the future opportunities from this?

Sure, Michael. Great question. So I'm going to start again by saying that we are really focused on the entire business, balance between expense discipline, top line growth, which I've been saying since I returned, is leading to the bottom line results that we're enjoying today. And overall, beating guidance, Q1 was great for the team, beating and raise in Q2. So we're thrilled, okay? And I expect it to continue specific to the plan that we talked about walking into the year, within the first half, we've expanded that savings, I would say, beyond $17 million, which -- much of which lies in payroll, utilities as well as meaningful standardization and expansion and adoption of the procurement platform that I've talked about before, which encompasses many different supplier [ repair ] and other expenses related to property operations.

So we're doing exactly what we said we'd be doing on expenses, and we'll continue that work, growing additional savings in the second half of 2025. Just to give you a little bit of an example, we had one particular large supplier that we're working with where we went -- underwent in the second quarter an extensive product standardization project, renegotiated unit pricing for those products, applied an overall discount to those products and as well as we'll benefit later from additional annual rebate for those products. So it's -- the work has been extensive, but I can't emphasize enough the amount of focus and effort that's being placed on the top line as well, okay, which is what's growing the company. And so we will stay very focused on all of it and particularly MH performance through retention, occupancy gains, rate gains, revenue growth and all the things that I've talked about before with our collections, which has led to bad debt savings. It's just a laundry list of things that I'm really proud of that the team is accomplishing this year.

Congratulations, Gary, on a legendary run.

Our next question comes from the line of John Kim with BMO Capital Markets.

Congrats, Gary, on your tenure and ending on a high note. I wanted to ask a follow-up to Jana's question on the MH occupancy. It looks like rental homes is now 12% of total MH sites. And I was wondering if you're embracing the rental home business more.

John, this is John. Thanks for the question. The answer to that is yes, because those are all future homeowners in our community.

So how far -- how much higher do you think that could go? And how much was that a contributor to your occupancy growth this quarter?

Yes. I think it's going to be the sort of thing that will ebb and flow like it has over the course of my career. I mean we've had times where we've been up in the 16% range. We've had times where we've been in the 9% range, okay? So we're going to utilize it in the best strategic way possible to maximize growth within the portfolio.

Our next question comes from the line of Brad Heffern with RBC Capital Markets.

Equity Lifestyle has talked about some increased turnover and vacancy in their annual RV business. Is that something that you've seen as well?

No, we grew ours in the quarter.

Okay. Easy enough. And then on the Canadian customers, have you seen an impact? I know sometimes they can be more concentrated in the winter months, but I assume you have some cross-border travelers during the summer as well.

Yes. Good question, Brad. Yes, we talked about earlier in the year with some of the impact of Florida. And we did see, and I think I've shared on various conferences and that sort of thing where we saw some impact in Maine, places like that, that were closer to Canada in the summer months. And that's frankly, some of the work that the team has been doing to try and fill those vacancies with domestic customers, which has led to us being well within what we put out there in terms of guidance for transient RV.

Our next question comes from the line of Jamie Feldman with Wells Fargo.

Congratulations on all the progress on restructuring the company and management changes. I guess on that topic, can you talk more about the decision to hire Charles Young. Obviously, you had an extensive search, lots of candidates. What is it about Charles that you think is a good fit? And then how should we think about how he fits into the role in terms of what everyone else will be doing as he gets here, what he brings to the table and maybe also delineate just, Gary, what you think your role will be and everyone else on the team's role with such firepower coming in?

Sure. I'll start it out and then open it up to anyone else. But we were really excited to announce the appointment of Charles Young as Sun's next CEO. His effective starting date will be October 1. The Board reviewed a very wide list of candidates and as indicated, ran a very thorough process. So this was a very important decision for this company, and we feel very comfortable with where it landed and very happy to welcome Charles aboard. I think that in Charles, what we saw is over 25 years of leadership experience specific to real estate operations, development and investment management and his track record, including in the residential REIT asset class where he's lining up his current role as President of Invitation Homes, we felt it made him really uniquely suited and qualified to come over and lead Sun through what we view as its next phase of growth, and sharing all the strategic progress that we made and positioning the company to be pure MH RV moving forward.

I think it's a great opportunity for Charles to bring in his experience and continue to grow the company out in the future. My anticipated role is to support Charles' success. I think that Charles in his interview with the succession committee, the Board and eventually time that I and others have had with him indicated an excitement to be able to have access to myself based on the 40 years of experience in the industry in both building the company, but in understanding the manufactured housing and RV industry itself. So my goal will be to support him, and he has expressed interest, as I said, in being able to access and gain the benefit of that experience and that knowledge so he can put it to work in the way he sees fit with an existing team that's looking forward to him coming onboard. And I'll stop there and see if you have anything else to add, John, about how the team is thinking about things.

Yes. I think one of the things that truly makes Sun a great company is the diversity of experience our team members bring to the table. And in that vein, I think to having someone as accomplished as Charles join our team as this extensive SFR and beyond background serves to enhance what we do both strategically and tactically. I've experienced that myself, okay, having left Sun for a short while in '05, went to multifamily, and I was able to bring back some invaluable skills and most certainly played a role in our success after I returned. So I'm very excited about bringing that another side to real estate into our strategy here at Sun.

Our next question comes from the line of Jason Wayne with Barclays.

Just on the impairment charges recorded in the quarter, could you walk through the change in strategic plan for the North America properties? And were the U.K. development write-downs related to the ground leases at all?

Thank you for the question. The write-downs in the U.K. were not related to the ground lease acquisitions. We actually recorded a gain of about $26 million related to the ground lease repurchase. But you mentioned it, strategic shift. We are not -- as an organization, we are not developing new greenfield projects, not just in the U.K. but in the U.S., and that is what is leading to the impairment charges given the strategic shift for these assets.

Got it. And then, yes, there's been some reports that some of your peers in the U.K. are looking to sell Holiday Parks. So following the ground lease transactions, is there any plan to sell U.K. ops?

Yes. I think what we've shared with shareholders, stakeholders before is that we are really taking the view that during a tough market and backdrop in the U.K., the best thing that we can do at this time is support what we believe is an excellent operating team headed by Jeff Sills, Chris, Richard, some of the best operators that are in the industry and very, very focused on our strategy of increasing real property income and reducing dependence on the margin of the home sales. We've been very, very successful in accomplishing that. Really pleased with how we're growing the real property income and creating value, if you will, in accomplishing that strategy. So for right now, we will continue moving forward in that direction and any future opportunity that we look at will benefit from the value that we're creating right now.

Our next question comes from the line of David Segall with Green Street.

Congratulations, Gary, and congratulations, Charles. Can you talk about the decision to buy out the U.K. ground leases now versus when Park Holidays were acquired or at any point in the next century that remained on those leases?

Thank you, David. It was an opportunistic acquisition for these ground leases. We did not have to do it. But certainly, as we looked at our capital allocation strategy, this was one that created a lot of financial and strategic flexibility.

Great. And as you think about the other potential uses of proceeds for the $400-plus million of capital that had been allocated to 1031 exchanges and has now been released. What are the other potential places you could deploy that money?

Yes. David, it's Gary. I would suggest all the options remain available to us. I would suggest that the 1031 is just one form of many tax mitigation options that we have, and we are comfortable with where we think we'll end up for the year. But outside of 1031, we continue to review a nice pipeline of high-quality manufactured housing communities. So within that, within the availability of our stock buyback program, we have optionality there. And through potentially even looking at opportunistically acquiring other of the land leases in the U.K., there are a host of strategies that we're looking at. I hope we've demonstrated to our shareholders and stakeholders. We've been very, very thoughtful in the use of proceeds, how we're thinking through tax mitigation, and that's ongoing work we're doing, and it's work we look forward to sharing with you in the near future.

Our next question comes from the line of Peter Abramowitz with Jefferies.

Just wondering on the 1031 acquisition opportunities you've identified, could you talk a little bit about economics and sort of your underwriting, what you're expecting in terms of going in yields for those?

Yes, sure, Peter. We've talked about going-in yields of 4 to 5 cap rates. But the fact of the matter is for the higher quality communities that we do look at, they will fall into that lower end or tighter cap rate, if you will. But beyond that, it's first about the going-in cap rate, but the yield that John and his team can generate and growth in each successive year. So we look for opportunities where there's high demand, low supply, and that's how we've really focused on things. There's been no shortage in the pipeline of opportunities. The fact of the matter is we are being very selective, and we are turning down more things than we're actually looking at, and we'll continue to do so and, of course, balance the value to our shareholders of acquisition of manufactured housing communities as to other uses of capital.

That's helpful. And then I guess in light of that, could you just talk about the share repurchase program and kind of how you view the attractiveness of that? Is it sort of -- there's a level at which the stock trades and you won't do it above that? And I guess just how you think about the returns on that versus more acquisitions?

Sure, Peter, the share buybacks is one tool in the toolkit for us from a capital allocation perspective, which includes strategic reinvestment into the current portfolio. It includes acquisitions, whether inside of the 1031 or outside of it and then the share repurchases.

Our next question comes from the line of Adam Kramer with Morgan Stanley.

And all the best to you, Gary, going forward. I wanted to ask, I guess, sort of in similar light around capital allocation. How do you guys view sort of development and expansion opportunity here and maybe compare and contrast that to the acquisition opportunity that you just talked about in sort of the 4% to 5% cap rate range?

Yes. I think I'll talk about it from a -- like Fernando said, there's really nothing we're doing from a greenfield development perspective, nothing in the pipeline. But we are currently evaluating a handful of expansion projects that achieve the returns that we want in the U.S. and some U.S. communities that are highly occupied with outstretched demand, I would say, that meet accretive return hurdles. So that's really the extent of what we're talking about on the development side right now.

Okay. That's helpful. And then just -- I think you maybe alluded to this, but are there future potential ground lease termination repurchase opportunities in the Park Holiday portfolio? Or is this the kind of the sole one?

Small opportunity there, but still available. We have about just above 10 additional properties that are still subject to ground leases in the U.K.

Our next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Gary, again, best of luck in the new role. I wanted to go back to Steve Sakwa's question just around the strong performance on the transient side. John, I know you kind of gave some commentary around kind of doing more on the annual side and things like that. But again, still very curious about just from a blocking and tackling perspective, you kind of just provide some concrete steps that you may have taken just that resulted in the better results, just kind of given how much of a drag transient has been for the past couple of quarters. Like what really changed this quarter? And what did you do to change it?

I don't know that it's really changing as much as it's enhancing what we already do from a strategic and I'll call it, tactical perspective. I mean we are hyper focused on things like retention, okay? It's about having engagement with guests that come to book another stay for the season and having those conversations. It's about -- everybody has heard me say over and over again on the conversion side, the best revenue-producing site you can gain is the one you never lose. And so when you function that way and you're a little bit more, we'll call it, defensive in terms of your occupancy, it leads to great -- better net results, okay?

And which is why I think that we are still seeing even coming off of 3 years of record growth and conversions growth this year, okay? And so -- but it's things like that. It's the fundamentals of what we do, which is spending time at the properties and really taking the data and the technology we have to better -- maybe that's one of the bigger changes is, in fact, the data that we have in comparison to when I was COO before, it helps guide us into where we go, why we go, when we go better than we've ever had, okay? And so we can be more laser-focused on the time that we spent at which properties over the course of the year.

There are no further questions at this time. I'd like to pass the call back over to Mr. Shiffman for any closing remarks.

Thank you, operator, and thank you for everyone who attended today. I couldn't be more pleased with the positioning of the company and the support of the existing team for Charles to step in and really be able to operate the incredible portfolio for future growth. Thank you, everybody.

Goodbye. This concludes today's teleconference. You may now disconnect your lines. Thank you for your participation.