Sun Communities, Inc.

and thank you for standing by. Welcome to the Sun Community's second quarter 2023 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 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 President and Chief Executive Officer, and Fernando Castro Carantini, Chief Financial Officer. After their remarks, there will be an opportunity to ask questions. For those who would like to participate in the question and answer session, management asks that you limit yourselves to one question so everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded. I'll now turn the call over to Gary Schiffman, Chairman, President, and Chief Executive Officer. Mr. Schiffman, you may begin.

Good afternoon, and thank you for joining our call to discuss second quarter results and our updated 2023 guidance. We are pleased to share some continued strong operating results. Core FFO per share of $1.96 per quarter was in line with guidance, supported by strong 6.3% year-over-year growth in same-property NOI and 3.4% growth in recurring EBITDA. Our properties share the compelling fundamentals of resilient demand and low-to-shrinking supply, which, when combined with the unparalleled customer services our teams deliver, historically generate high, durable cash flow streams throughout economic cycles. Named property NOI growth in the quarter exceeded the high end of guidance by 150 basis points and was driven by solid revenue growth and the successful implementation of ongoing expense management. In manufactured housing, same property NOI grew 5.7% compared to 2022, driven by strong rental rate growth and bolstered by occupancy gains. In RVs, same property NOI growth of 3.2% reflected our continued focus on converting transient guests into annual residents, which increases our stream of stable revenue and improves operational efficiencies. At the end of the quarter, same property adjusted occupancy for our combined MH and RV locations was 98.7%, A year-over-year increase of 170 basis points then reflects the resilience of demand for our properties. Additionally, across our total portfolio, we gained over 1,000 new revenue-producing sites during the quarter, which represents 9.4% growth compared to last year and brings total gains to the year to nearly 1,850 sites. Main property marina LOI grew 11.9% compared to the prior year, exceeding our expectations. The outperformance was fueled by robust demand for wet slips and dry storage from voters who increasingly discover the convenient, unmatched locations and premium amenities offered throughout our best-in-class network of marinas. On a trailing 12-month basis, our same property portfolio generates 91% of total real property NOI and is a powerful engine for EBITDA and cash flow growth. We intend to remain internally focused on optimizing our embedded portfolio growth. By reinvesting in our properties and providing the highest level of customer service, we preserve and increase value for the residents, GUESTS AND MEMBERS AND HELP ENSURE PREDICTABLE LONG-TERM REVENUE GROWTH. PORTFOLIO OPTIMIZATION INCLUDES COMPLETING SELECT PROPERTY EXPANSIONS AND IN THE CASE OF MARINA'S DOC RECONFIGURATIONS TO ENHANCE PROPERTY RETURNS AND TO SCALE PROPERTY OPERATIONS. IN THE SECOND QUARTER, WE DELIVERED OVER 100 EXPANSION SITES ACROSS THREE COMMUNITIES. In May, we published our 2022 ESG report, highlighting our significant achievements, including the expansion of our GHG inventory to cover marinas and the UK, and our board's commitment to achieving net zero emissions. These and other important initiatives reinforce our dedication to being responsible stewards of all resources toward a shared goal of improving the communities in which we live, work and serve. I would like to thank all Sun team members who have been instrumental in our accomplishments in the first half of the year. As we progress through the second half of 2023, I look forward to realizing even greater achievements that will further enhance Sun's platform and the value we deliver to all of our stakeholders. I'll now turn the call over to Fernando to discuss our results in more detail. Fernando?

Thank you, Gary. During the second quarter, core FFO of $1.96 per share was in line with guidance. Real property revenue growth, as well as efficiencies in property and corporate level expenses, drove the quarter's performance, partially offset by higher interest expense. Our same property results were solid, as demand for our properties remained strong. Total same property NOI grew 6.3% in the quarter as compared to 2022. which outperformed the high end of our guidance by 150 basis points. Total same-property revenues grew 6.2% and exceeded property operating expense growth of 6%. The lower expense growth was broad-based, with moderate year-over-year growth realized in payroll, utilities, real estate taxes, and other expenses. Same-property manufactured housing, NOI, increased 5.7% during the quarter, exceeding internal expectations. Outperformance was driven by strong occupancy gains bolstered by a rental rate increase of 5.7% and lower than expected expense growth, especially in payroll and benefits. In RV, same property NOI for the quarter increased by 3.2%. We achieved strong 8.6% growth in weighted average annual rents over the prior year and operating expense efficiencies that resulted in modest 4.1% expense growth over the prior year. These partially offset a 6.1% reduction in growth in transient RV revenue. Our RV communities delivered solid results during the July 4th holiday weekend. Same property RV transient revenue increased by 8.4% compared to 2022, even as we had 5.7% fewer transient sites available. July 4th fell on a Tuesday this year, whereas last year it fell on a Monday. Adjusting for just the Friday to Monday period, same-property RV transient revenue still increased by 2.7%. While we continue to see strong holiday and weekend demand, during midweek periods, transient RV revenue growth continues to moderate from recent record levels. Strategically, we remain focused on increasing our stable annual property revenues through increased transient to annual site conversions. In addition to increasing the percent of revenues derived from annual residence, conversions result in higher NOI margins over time by decreasing the higher level of variable expenses associated with transient guests. During the second quarter, we converted over 750 transient sites across our total RV portfolio, bringing first-half conversions to nearly 1,300 sites. Since the start of 2020, we have converted over 6,000 transient sites to annual residents. and we intend to continue driving transient to annual site conversions to optimize long-term returns. In the second quarter, Marina St. Property NOI increased 11.9%. This outperformance was driven by a 9.2% increase in revenue from stronger demand overall and lower expense growth of 3.4% that significantly surpassed our internal expectations for mid-single-digit expense growth. Lower expense growth was most significant in marina payroll and benefits, utilities, and supply and repair. In terms of home sales, we were in line with our expectations in North America and are on track to achieve our guidance. Continued demand is demonstrated by an average price for new homes of $210,000 and higher margins. In the UK, economic headwinds continue to impact vacation home sales. Home sale NOI margins, while 5.7% below prior year margins, were in line with our expectations. The approximately 840 homes sold in the second quarter were 8% below our expectations. Inflation in the U.K. has remained higher for longer than anticipated, and in late June, the Bank of England implemented an unexpected 50 basis point increase in its base interest rate. We have seen the time home purchasers take to buy a vacation home continue to lengthen, and the margins on those home sales remain under pressure. Our experienced UK team continues to successfully navigate this challenging market environment with a focus on optimizing volume and margins while these conditions persist. On the real property side, we are seeing higher retention rates for park holiday homeowners, which leads to higher average resident tenure approaching eight years. We remain enthusiastic about the growth opportunity in this segment of the business. As of June 30, 2023, our $7.6 billion in debt outstanding bore interest at an weighted average rate of 4% and had a weighted average years to maturity of 7.1 years. Our trailing 12-month leverage ratio was 6.2 times. Based on our operating cash flow expectations for the remainder of the year and potential capital recycling opportunities, we anticipate the leveraging towards our long-term leverage target. As detailed in our supplemental, we are revising our full-year guidance range for core FFO per share downward by 2.2% to a revised range of $7.09 to $7.23, and established guidance for the third quarter. Our revised guidance is primarily reflective of lower expected home sales in the U.K., and higher interest expense expected in the second half of the year, predominantly from the flexible variable rate sterling denominated debt that funded our U.K. business. Since our last guidance update in April, short-term interest rates have increased meaningfully. We are evaluating opportunities to refinance and pay down floating rate debt over the second half of the year. We expect continued strong same property performance and are increasing our total same property NOI growth for the year to a range of 5.3% to 6.1%. The 20 basis point increase at the midpoint is driven by outperformance in manufactured housing and marinas, moderated by revised expectations for same property RV. We also expect additional G&A savings over the second half of the year. Our revised same property NOI growth ranges for the year are 5.2% to 5.8% for manufactured housing, representing a 50 basis point increase at the midpoint. 3.4% to 4.6% for RV, representing a 100 basis point decrease at the midpoint. The largest driver for the decrease is revised growth expectations for transient RV revenue, which is now forecasted to be a 3.9% decline for the full year. 8 to 9% for marina, representing a 110 basis point increase at the midpoint. For our UK operations, we're lowering our full year forecast for home sales NOI to a range of $65.7 to $75.4 million. The revised range represents a $10.2 million decrease to prior guidance at the midpoint and assumes we sell between 2,800 to 2,900 homes for the full year, an approximate 11% decrease in volume from April expectations. For additional details regarding our updated full-year guidance, please see our supplemental disclosures. As a reminder, our guidance includes acquisitions and dispositions and capital markets activity through July 26 and the effect of a property disposition under contract that is expected to close during the third quarter. Our guidance does not include the impact of prospective acquisitions, dispositions, or capital markets activities, which may be included in research analyst estimates. This concludes our prepared remarks. We will now open the call up for questions. Operator?