Sun Communities, Inc.

Greetings. Thank you for joining us today for Sun Community's second quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will begin after the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Gary Shiffman, Chairman and Chief Executive Officer. Thank you. You may begin.

Good morning, and thank you for joining us as we discuss our second quarter 2021 results. we are pleased with the continued outstanding performance of all our business segments. In the second quarter, we delivered 61% growth in core FFO per share to $1.80 as compared to the second quarter of 2020, exceeding the high end of our guidance of $1.63 as our ongoing momentum accelerated beyond our forecasted expectations. Comparing to a non-COVID impact quarter, Our second quarter FFO per share was 53% greater than the second quarter of 2019. This outperformance, along with a positive outlook for the third and fourth quarters, once again led us to raise our core 2021 FFO guidance range by $0.31 at the midpoint to $6.25 to $6.37 per share. The change is being driven by continued outperformance of transient RV, marinas, the sustained strength in our manufactured housing portfolio, and our robust acquisition activity, particularly as we begin to realize the meaningful marina industry consolidation opportunity. Complementing our operational performance was Sun's well-received inaugural unsecured bond issuance following our investment grade rating from S&P and Moody's. we issued $600 million of senior notes in an oversubscribed offering in mid-June. Sun's access to the bond market provides us with enhanced financial flexibility to most efficiently match fund our investment activities. With a healthy pipeline of internal and external growth opportunities, we believe this was the right time for this step, and we'll look to continue enhancing our credit metrics over time for improved ratings. For the quarter, same community NOI grew 21.6% over last year, reflecting the continued demand in each of our segments and our favorable strategic positioning to capture that demand. We entered the quarter with same community occupancy of 98.8%, a 160 basis point improvement over the second quarter of 2020 with manufactured housing same community NOI growing by 5.4% and RV same community NOI growing by 85.1%. Year to date, we have filled more than 1,000 revenue producing manufactured housing and annual RV sites and have delivered more than 580 ground up and expansion sites that will continue providing the runway for growth over subsequent quarters. New site deliveries are one of SUN's key levers that we anticipate continuing to contribute to a sustained growth profile and value creation. As of quarter end, we had approximately 9,400 sites available for development that we anticipate delivering over time. We have also remained active in growing our portfolio adding 18 properties in the second quarter and through this earnings call, deploying over $719 million of capital and adding more than 5,000 sites, wet slips, and dry storage spaces. This brings year-to-date acquisition volume to over 853 million across 28 properties. Our acquisition teams remain extremely active sourcing deals and channeling them through our underwriting process. We are very enthusiastic about the opportunities we are seeing across each of Sun's businesses. Our excellent reputation as a transaction partner and our structuring flexibility gives us access to off-market transactions across manufactured housing communities, RV resorts, and marinas. Subsequent to quarter end, we completed the disposition of two manufactured housing assets that no longer fit our core strategy. We sold these assets at a 4.3 cap rate, which we believe is a very positive indicator of the value and quality of our core portfolio. Our RV resort business is benefiting from the demand for outdoor experiences. As we have been discussing throughout the pandemic, once travel restrictions began to lift, RV travel quickly emerged as a vacation option of choice. Importantly, even as broader travel has picked up, it is clear that people who have experienced the benefits of RV travel and the quality and amenities that Sun Resorts offer are becoming repeat customers. There has been no waning of demand for RV vacationing, even as other forms of leisure travel have become available and bounced back. As John will discuss, we are confident this segment will remain strong for several reasons, including our solid forward bookings for transient and our annual site conversions. In our marina business, results continue to track ahead of underwriting, and we are in the midst of an active voting season. In summary, we are pleased with our results and optimistic about our outlook. We continue to achieve strong operational results and realize internal and external growth opportunities. Furthermore, with our equity raised in the first quarter and our recent bond issuance, we are well positioned to execute on each of these prospects. Finally, I want to take a moment to recognize and thank the entire Sun team for their unwavering hard work and dedication. Our team members are the reason we continue to deliver the type of outperformance we have been discussing. We believe that one element of that success is our commitment to ESG matters, which are becoming increasingly woven into all aspects of our business. As part of that enhanced focus, there is one element I want to highlight today. We are proactively adjusting our pay structure at the property level to ensure that pay is properly aligned with a number of factors including job responsibilities, tenure of service, and appropriate living wages. While this is resulting in a payroll expense increase, we are committed to making Sun the best employer which will facilitate us continuing to foster a dedicated, skilled, and healthy team. I will now turn the call over to John to discuss our operational performance. John?

Thank you, Gary. SUN delivered a strong second quarter across the board, outperforming our prior expectations in RV, marinas, and manufactured housing. Our results reflect the combination of the stability of our best-in-class portfolio, as well as the incremental benefits of our growth initiatives across our three business lines. For the second quarter, combined same-community manufactured housing and RV NOI increased 21.6% from the second quarter of 2020. The growth in NOI was driven by a 22.5% revenue gain supported by a 160 basis point increase in occupancy to 98.8% and a 3.3% weighted average rent increase. This was offset by a 24.7% expense increase compared to the second quarter of last year when we had implemented expense saving measures including furloughs of properties impacted by COVID-related closures. Same community manufactured housing NOI increased by 5.4% from 2020, and same community RV NOI increased by 85.1%. The RV growth reflects both the impact from COVID-related delayed opening of 44 of our resorts on last year's results, as well as the incredibly strong transient demand this year. Given the stay-at-home orders that were in place during the second quarter of 2020, we think it is helpful to look at these results relative to the second quarter of 2019. For all of our comparisons to 2019, we're utilizing last year's same community pool of 367 communities. Compared to 2019, the portfolio's NOI CAGR was 9.7%, and the CAGR for revenues and expenses were 8.5% and 5.9% respectively. The RV NOI CAGR was up by 18.6%, including a 19.6% increase in transient RV revenues. Looking at the most recent holiday weekends further illustrates how demand has escalated. For Memorial Day weekend, RV revenue was up 39% compared to 2019. Similarly, for the 4th of July weekend, revenue improved 35% compared to 2019, and 36.5% compared to 2020, driven by a 10.5% increase in occupancy and a 19% increase in average daily rate. We are pleased that so many new consumers have recently taken an initial RV vacation. Moreover, we are confident that many of these vacationers have discovered the joy of RV travel and the quality outdoor experience at a Sun RV resort. Therefore, even as other forms of travel have reopened or are deemed to be safe again, we are seeing demand persist through the second half of 2021. I would like to highlight a few metrics which illustrate the increasing interest in Sun Vacations and the engagement and loyalty of our guests. Traffic to our Sun RV Resorts website was incredibly strong in the first half of 2021, up almost 80% from the first half of 2020 and 158% compared to 2019. Within this growth, we are seeing a shift to a younger audience with significant increase in guests age 18 to 34. Our social media efforts are attracting the largest following and engagement in the industry with over 1.3 million followers on three of the largest social media platforms, Instagram, TikTok, and Facebook. A big element of a Sun vacation is the community and the activities we provide. and these channels are an ideal way to continue to showcase what we offer and to nurture the community element to drive repeat guests. From the same community perspective, first-time guests to our resorts increased 80% during the first half of the year compared to 2019. We are also piloting a new RV Resorts loyalty program where guests can earn points for stays and redeem them for benefits, discounts, or free nights on future vacations. With the size of the Sun portfolio and the geographic variety we offer, we believe this program will further encourage guests to choose the Sun RV Resort as their vacation destination. As we look to the back half of the year, our transient forecast is trending 15.2% ahead of our original 2021 budget. There are a number of dynamics supporting the continuation of these positive demand trends. One is the strong sale of new RVs. According to the RV Industry Association, 2021 RV unit sales are projected to be 34% higher than in 2020 and reach a new industry record. Additionally, there are a few promising venture-backed platforms, including RVShare and Outdoorsy, which allow owners to rent their personal RVs, providing a new option for consumers seeking an outdoor vacation without the capital outlay of buying an RV. These platforms help activate otherwise idle RVs, which we believe will fuel additional demand for RV resorts. With respect to the total MH and RV portfolio, in the second quarter we gained 583 revenue-producing sites. Of our revenue-producing site gains, over 350 transient RV sites were converted to annual leases, with the balance being added to our manufactured housing expansion communities. With the increase in RV guests, we were able to realize the opportunity to convert transient sites to annual leases and achieve an average 50% increase in site revenues during the first year of conversions. Moving on to new construction, in the second quarter we delivered approximately 220 new sites, 100 of which were ground-up developments and 120 were expansion sites. The ground-up development deliveries include RV sites at our newly opened Camp FEMFO outside of Austin and Texas Hill Country. This marks the first delivery in a planned series of new ground-up family-focused RV resorts within one of our JV partnerships. Those of you wondering, FIMFO stands for Fun is More Fun Outdoors. These completed expansion and ground-up development sites will contribute to revenue growth in 2021 and beyond as they fill up and stabilize. Manufactured housing home sales in the second quarter is another area where we saw a tremendous increase compared to the same period last year. Total sales volume was up approximately 90% year-over-year as we sold more than 1,100 homes in the quarter. Compared to 2019, this sales volume represents an increase of 25%. We believe the growth is due to a number of factors, including pent-up demand from limited home moves during the pandemic, the attainable nature of the homes in our communities, an increasingly tight real estate market, and lower relative increases for the construction and material costs of our product versus site-built housing. Average home prices during the quarter for new and pre-owned homes rose 11.6% and 23.3% respectively, underscoring the overall geographic mix as well as sustained demand for our product and the strong desire to live in a high-quality Sun community. This favorable demand environment helped support attractive gross margin results for both new and pre-owned home sales, which expanded 50 basis points and 14.6 percentage points, respectively, compared to the prior year period. Additionally, brokered home sales volume was up 113% compared to the second quarter of 2020, with the average home value increasing by 26%. In terms of our operations in our manufactured housing business, we are benefiting from sustained strength and fundamentals in demand for affordable housing. Applications to live in a sun community were up more than 20% compared to 2020 in the second quarter and year to date. Turning to the marina business, we ended the quarter with 114 properties comprising nearly 41,300 wet slips and dry storage spaces. which includes the acquisition of four properties for approximately $423 million completed in the second quarter. Better than expected performance for the marina portfolio continues to come from demand for wet slips and dry storage spaces. Same marina rental revenue growth for the portfolio of 75 properties owned and operated by Safe Harbor since the start of 2019 was almost 17% for the first half of 2021 over 2019. This is a CAGR increase in rental revenue of 9.7% for the quarter and 8% for the first half of 2021. Overall, the marinas are performing ahead of expectations, and the Safe Harbor team continues to source attractive acquisitions as Gary discussed. According to the National Marine Manufacturers Industry, boat dealers are seeing record levels of demand. New boat sales reached a 13-year high in 2020, and they remain at elevated levels with most recent reported sales data through March 2021 up 30% compared to the 2020 average. In summary, we are very encouraged by our performance across all of our businesses year-to-date and our outlook for the remainder of the year. Secular demand trends are acting as a tailwind, and Sun has the platform and expertise to capture that demand and realize attractive growth. The combination of the favorable macro environment, along with the strategy Sun has been implementing for years, has positioned us very well to continue to execute on our initiatives, drive industry-leading growth, and create long-term value for all stakeholders. Erin will now discuss our financial results in more detail. Erin?