Sun Communities, Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Community's first quarter 2020 earnings conference call. At this time, management would like to inform you that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of 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 include the effects of the COVID-19 pandemic and other details in yesterday'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 would like to introduce management with us today. Gary Shiffman, Chairman of Chief Executive Officer, John McLaren, President and Chief Operating Officer, and Karen Dearing, Chief Financial Officer. After their remarks, there will be an opportunity to ask questions. I'll now turn the call over to Gary Shiffman, Chairman and Chief Executive Officer. Mr. Shiffman, you may begin.

Thank you, operator. Good morning and thank you for joining us today as we discuss our first quarter results and provide an update on SON's preparedness to navigate the COVID-19 pandemic. Since our fourth quarter call in mid-February, the environment has been dramatically challenged by a worldwide public health crisis. And before we begin, we wish to convey our sincere wishes for everyone's health and safety. We started the first quarter of 2020 ahead of expectations, reporting FFO per share of $1.22, one cent ahead of the high end of guidance. While everyone is focused on how the pandemic will affect our performance over the coming weeks and months, it's important to note that we entered the year from a position of strength and because of the underlying fundamentals of providing affordable housing and vacationing options, we expect to sustain a relative position of strength as we navigate through the pandemic. We began 2020 with total portfolio occupancy of 96.7%, are well positioned from a balance sheet perspective with approximately $380 million of unrestricted cash as of quarter end, and a trailing net debt to EBITDA ratio of 5.6 times. We want to commend and recognize our team. and acknowledge the incredible job they have done stepping up and responding during this challenging time. Our team acted swiftly to ensure that SUN was doing its part to stem the spread of coronavirus by adopting work from home practices at our main office and wherever possible at our communities. At our properties, we closed amenities where residents and guests gather and implemented recommended sanitation and hygiene protocols. While prioritizing health and safety by adhering to social distancing parameters, we are striving to provide SONS trademark customer service. Given current shelter in place and social distancing orders, we do not know nor are we in control of the duration of the current changes in operating conditions brought on by the pandemic. However, we can't adjust certain controllable operating expenses, modify our capital deployment plans, and manage our liquidity. On the expense side, SENS directors and executive officers have set the tone by electing to forego their compensation for at least the second quarter. The balance of our main office team members have also taken salary reductions in recognizing that we are all in this together. Additionally, we have placed a number of our team members on furlough due to the closing of our amenities and the temporary reduction of transactions. The company will continue to pay both its share and the team members' share of costs associated with providing each furloughed team member's uninterrupted health care benefits. We have implemented a rent forbearance program for residents financially impacted by the virus. who have elected to apply and provide the necessary information related to their hardship in order to qualify for the program. Approximately 2.9% of our manufactured housing residents, inclusive of our rental home program, have applied and been approved. Requests from our annual RV guests have been minimal. In our manufactured housing portfolio, we have collected 98% of our rents as of April 22nd, which is on par with last month and prior year. In our RV portfolio, approximately 55% of our RV sites are leased annual sites. For annual RV rents currently due, collections are at 92% relative to the percent collected at the same time last year. Of the remaining 45% of RV sites which are transient, we are experiencing an impact from the pandemic with delayed resort openings and canceled reservations. John will provide additional detail. Given limited visibility on the return to normal operating conditions and the duration of the current situation, we are suspending our 2020 financial and operating guidance. We have also determined it prudent to temporarily reduce or suspend certain capital spend on expansions and ground-up developments, and we continue to evaluate acquisitions with measured caution. John and Karen will provide further details on the unavoidable financial impact associated with the pandemic. However, we believe that even in the times of uncertainty or disruption, Sun's portfolio and the industry in which we operate are well suited to withstand the impacts of a recession. Sun provides a high quality affordable housing option that has historically demonstrated stability and resilience during a downturn and a stronger earlier bounce back through recovery as the macroeconomy improved. While different circumstances caused the great financial crisis in 2008, the underlying business model at Sun and the demand for affordable housing which Sun provides resulted in significant growth in the five years after the GFC. We anticipate that our RV resort business will demonstrate a similar pattern as it provides similar affordability in a market with proven strong demand and limited supply. Our RV resorts provide an affordable vacation option where guests can travel an average of two to three hours safely in their own vehicles without the need to get on a plane, stay in a hotel, or congregate in a public space. For now, the pandemic has galvanized our operations team to stay ahead of the situation and steer us in the right direction. They meet daily to ensure that residents, guests, and Sun team members are receiving compassion and unparalleled service during these times. They monitor local shelter in place mandates and are literally writing the playbook on how to navigate this fluid situation. There is no precedent for what the world or SUN is experiencing. We've had to make some extremely difficult but necessary decisions to ensure that SUN continues to be the nation's premier owner-operator of manufactured housing and RV communities. John and Karen will now provide additional operational and financial updates. John? Thank you, Gary.

I'll start with a recap on the strong performance and metrics in the first quarter, after which I'll provide specific details regarding the impact of the pandemic on operations, financials, and the actions we've taken. As Gary mentioned, we were tracking strongly ahead of expectations for the quarter and delivered excellent same-community growth even after absorbing disruptions from the onset of shelter-in-place ordinances in mid to late March. Our total portfolio ended the first quarter 96.7% occupied, improving 30 basis points over last year, and we added 300 revenue-producing sites even as shelter-in-place restrictions were put into effect. Our same community NOI increased 6.7% year over year, driven by a 5.2% increase in same community revenues and a 1.8% increase in same community expenses. Same community manufactured housing revenue growth was 6.2%, annual RV revenues grew by 9.6%, and transient RV revenues decreased by 6% as we felt the first effects of COVID-19 related social distancing orders in March. In the first quarter, we saw same-community occupancy increase to 98.4% from 96.6% in the first quarter of 2019. Even as social distancing began to impact traffic at our properties, home sales were quite strong with sales of 763 homes, of which 119 were new homes and 234 were rental home conversions. A core strength of SUN's operations team is the continual emphasis on refining our contingency planning and emergency preparedness and disaster recovery protocols, which are in place to rapidly deal with various out-of-the-ordinary circumstances. By late February, the team began deploying recommended protocols throughout the portfolio and assessing how best to balance compliance with health-related orders and the delivery of essential services to our residents and guests which dictated a number of changes in the field. The steps we implemented are aimed to help ensure the safety of our residents, guests, and team members, assist our residents who are facing extreme financial challenges, and to support our local communities wherever we can. In terms of health and safety, we seamlessly implemented work from home for all positions that can be remote, we enhanced our cleaning protocols, closed public amenities and discontinued social gatherings. Our on-site offices remain available for essential services. We have also stepped up our communications and virtual servicing options for current and prospective residents. We have adopted a financial hardship program to provide forbearance under certain terms to residents impacted financially by the pandemic and temporarily suspend evictions, late fees, and rental rate For residents that qualify for the Financial Hardship Program, rent will be deferred through May and be payable in 12 equal installments beginning in July 2020. We estimate the deferred rent equates to $1.9 million for each of the two months and it includes resident owned homes on sites and our manufactured housing rental units. Now I'll provide some details related to the current quarter that will help frame our best estimate of financial expectations with regard to the actions just described and the impact of the pandemic. We are very pleased with April rent collections. In our manufactured housing portfolio, as Gary indicated earlier, we have collected 98% of our April rent to date. While we are experiencing lower traffic at the communities as would be expected with shelter in place mandates, We are still seeing demand for move-ins and actually expect fewer move-outs during this time. For the month of April, while the total application count is down approximately 13% on a year-over-year basis, web applications are up 111% and represent 45% of total applications compared to only 19% in April of the prior year. Our technology platform has the capability to capture online applications and steer prospective residents to use SUN's web services. Our platform also has the capabilities to provide remote virtual home showings and tours, allowing us to nimbly adapt in the face of this evolving landscape. Now we would like to provide some perspective on our RV portfolio. Our portfolio consists of over 26,000 annual sites and approximately 22,000 transient sites. The annual RV sites are located in resorts that are open year-round as well as resorts that are open on a seasonal basis. The majority of our annual sites are either park models or sites where RVs are tied down and the guest has made significant investments in personalizing their sites by building decks, indoor outdoor rooms, and porches and installing landscaping and hardscaping, essentially making these very permanent in nature. These guests return year after year to what is typically their vacation home. On the transient side of our RV business, it has been our experience for more than 25 years that most of Sun's transient RV guests enjoy the convenience and safety of driving in their own vehicle to a vacation destination they are familiar with and comfortable at. Based on many years of operating experience and engagement with our transient guests, we believe they are likely to return to our resorts once shelter-in-place and nonessential travel restrictions are lifted. Historically, over 50% of our transient RV guests return to the same resort each year, providing a predictable and steady income stream. For the time being, however, we have received an increased number of reservation cancellations related to shelter-in-place directives. Additionally, we have 44 RV resorts that would have been open on or around April 1st, but are being prohibited from opening by local authorities. As of now, we expect these resorts to open at various points in May as restrictions are lifted. Thus far for May and June, guests are calling frequently inquiring about our opening date and taking a wait-and-see approach with regard to their planned vacations. Forecasting for what we know related to cancellations, bookings, resorts that are not currently open, and the fact Memorial Day weekend is included in this quarter, our best estimate for the second quarter includes a reduction of $10 million of transient revenue from our original budget expectations. In addition to this forecasted reduction in transient RV revenue just discussed, Based on the current environment, there are a number of additional revenue sources that could be impacted temporarily. These include lower manufactured housing revenue due to rental increases being deferred and lower occupancy gains, lower annual RV revenue related to fewer transient to annual site conversions and the associated rent pickup, lower other and ancillary income due to various fees not being collected as a result of delayed resort openings. and lower home sales and brokerage fees as a result of stay at home orders and travel restrictions. Despite the near term disruption to our operations, we are confident in the long term viability of our mission and business model, which has stood the test of time throughout many of the most difficult economic times and downturns over the life of the industry. During those periods, this industry has been characterized by its steady, predictable cash flow, fueled by strong consumer demand for home ownership, as well as the demand for affordable vacationing. I would now like to turn the call over to Karen to discuss our financial results, balance sheet, and provide a summary of the potential impact to our second quarter as a result of the pandemic. Karen?