Sun Communities, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Community's fourth quarter and year-end 2024 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 meanings 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 would 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. After the remarks, there will be an opportunity to ask questions. For those who would like to participate in the question and answer session, management asks you 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 and Chief Executive Officer. Mr. Schiffman, you may begin.

Good afternoon, and thank you for joining us as we discuss the fourth quarter and full year results for 2024 and our guidance for 2025 and our recently announced Safe Harbor transaction. We had a very productive 2024 as we advanced our strategic priorities with the primary goal of simplifying our operations, focusing on core assets, and improving our balance sheet. while positioning Sun for steady earnings growth. Throughout the year, we successfully disposed of non-strategic assets, reduced our debt, and further enhanced our governance through board refreshment. Operationally, we continue to increase contribution from real property and annual income streams while diligently implementing a broad repositioning strategy to maximize revenues and align expenses more efficiently, driving sustainable earnings growth. In total, in 2024 and through the date of this call, we disposed of approximately $570 million of non-strategic assets. We also remained highly selective with development projects and acquisitions and allocated our capital towards paying down debt. As of year end 2024, we have improved our net debt to EBITDA ratio to six times. Over the last 12 months, we have added two new members to our board of directors and have announced additional plan refreshments. Additionally, the board search committee is continuing the comprehensive search process to identify and hire a new CEO. we're excited to have meaningfully accelerated our strategic repositioning with the announcement earlier this week to sell Safe Harbor Marinos for an all-cash price of $5.65 billion to Blackstone Infrastructure. Safe Harbor was an excellent investment for Sun, and the sale at this time allows us to achieve several of our strategic objectives, most notably refocusing on our core MH and RV segments and meaningfully improving our leverage profile while realizing a very attractive return. The sale price represents an approximately 21 times multiple on Safe Harbor's 2024 FFO and a $1.3 billion gain, which is a strong return for shareholders. We are pleased with how this transaction allows us to simplify our business and is expected to improve our margins earnings predictability, and revenue to free cash flow conversion. Proforma for this transaction, our core North American manufactured housing and RV NOI will increase from approximately two-thirds to above 90% of total company NOI, while also reducing our SRD&E exposure. In terms of our financial outlook, The sale is expected to generate proceeds that we intend to use to meaningfully deliver with an initial post-sale net debt to EBITDA ratio expected to be approximately between two and a half and three times at closing. The management team and the board are continuing to evaluate priority uses of the capital, which may also be used to support a combination of distributions to shareholders and reinvestment in our core businesses. I want to thank the entire Safe Harbor team for their partnership over the past four years and look forward to continuing to follow your growth and success under Blackstone's ownership. This transaction returns Sun to being a pure play owner and operator of high quality manufactured housing and RV communities supported by a strong balance sheet. We remain very confident in this business with favorable dynamics and predictable earnings. and we are particularly encouraged with our outlook as we implement the initiatives that John will discuss. Now turning to our operations, we have maintained our focus on our best-in-class manufactured housing and RV portfolio to position Sun for sustained earnings growth. As we discussed on last quarter's call, John McLaren returned to the company on a full-time basis as president to oversee our accelerated repositioning and the execution of our operating initiatives. These measures are focused on maximizing revenue for top-line growth and driving bottom-line operational results, including diligent expense management and more effective asset management to drive efficiency. I am pleased that we are already starting to see positive momentum. Turning to our results for the year, 4 FFO per share came in at $6.81. Total North American same property NOI growth was 4.1% for the year. These results reflect the increased contribution from our annual income streams, strong rental rate increases, continued high occupancy levels, and the initial impact from our expense savings initiative. We delivered strong results in our manufacturer housing segment, demonstrating the ongoing demand for attainable housing. On the RV side, we have remained focused on better aligning our cost structure with revenue, which was in line for expectations in the fourth quarter. We also made further progress to increase the contribution from our real property and annual income streams. For the full year, approximately 70% of our revenue-producing site gains came from RV transient to annual conversions. And in the U.K., Positive momentum continued with strong unit sales, which in turn drive real property income. As we look at 2025, we are encouraged by our progress and positive momentum. Our goal remains the same, to position Sun to deliver steady earnings growth. We have a clear strategic direction, focused on realizing the potential earnings of our best-in-class portfolio and platform. I want to thank the entire team for their unwavering effort and for continuing the hard work. I will now turn the call over to John and Fernando to discuss their strategy, results, and guidance in more detail. John?

Thank you, Gary. I'm excited to be back in a full-time role at Sun and very encouraged by the progress we've already made in just the past several months. Returning to the team that I helped establish has been invigorating as we build upon and refine the processes and systems that have driven our success. Everything we are implementing is based on accountability through transparent performance ranking with a focus on top-line execution and disciplined expense management in order to drive efficiency and ensure a results-oriented approach. In MH and RV, our priority is solid leadership service excellence, transparent communication, and leveraging technology and data to drive efficiency. We have already implemented expanded performance reporting in a ranking, improved communication across teams, realized expense savings, and have sharpened our focus on long-term growth. Specific to our performance relative to the $15 to $20 million restructuring plan we have implemented, we have already captured approximately $11 million in G&A savings within the plan, realize approximately $4 million in operating expense savings in the fourth quarter, and expect to expand these savings by a further $3 to $5 million relative to typical year-over-year increases in op-ex spend in 2025. We will continue to seek additional growth opportunities, continuing our work towards finding additional G&A and operating expense efficiencies, while at the same time, being laser focused on top line revenue growth opportunities, which we expect will materialize over the course of this year. We are not just setting ambitious goals, we are executing on them and positioning Sun for long-term success in 2025 and beyond. Turning to our performance in the fourth quarter, North American same property NOI increased by 5.7% compared to the same period in 2023. This was driven by a 5.8% increase in revenues, reflecting a 5.5% increase in weighted average monthly rent and a 160 basis point occupancy gain. Our manufactured housing same property NOI increased by 7.1%, and RV same property NOI grew by 0.4%. For the full year, North American same property NOI increased by 4.1% over 2023. The NOI increase was mainly due to a 4.6% increase in revenues, offset by a 5.7% increase in expenses. Same property MH revenues increased by 6.8%, with contributions from rate increases and occupancy gains, with MH occupancy of 97.6% as of December 31st. Same property RV continues to be supported by transient annual conversions. This is the third year in a row with over 2,000 conversions for the full year. Transient RV performance in the fourth quarter is slightly ahead of our expectations, with improved margins as we have enhanced our cost management strategies to better align expenses with revenues. Our holidays delivered solid performance in the fourth quarter, demonstrating resilience even amid a challenging macroeconomic backdrop. The property NOI increased by 12.9% in the quarter, and 9% for the year. We also surpassed our total unit sales guidance, reaching approximately 2,950 units sold for the year. The underlying fundamentals of the business remain stable and remain encouraged by the continued strength of the business. The Park Holidays team has done an exceptional job executing our strategy and driving strong results. Their expertise in operations, customer engagement, and asset management has been instrumental in maintaining performance across our high-quality portfolio. Fernando will now discuss our financial results and balance sheet and more details as we provide our 2025 guide. Fernando? Thank you, John. For the fourth quarter, Sun reported core FFO per share of $1.41, a 5.2% increase from the prior year. For the 12 months ended December 31, 2024, Core FFO per share was $6.81. As Gary mentioned, a key priority for Sun has been focusing on our core portfolio through the selective disposition of non-strategic assets and reduction of CapEx spend. For the year and through the date of this call, we completed total dispositions of approximately $570 million, including $180 million for the fourth quarter and year-to-date 2025. We also reduced non-referring capital expenditures, which decreased approximately $315 million, or nearly 50%, from 2023 to 2024. As of December 31st, Sun's debt balance stood at $7.35 billion, with a weighted average interest rate of 4.1% and a weighted average maturity of 6.2 years. Our net debt-to-trailing 12-month recurring EBITDA ratio was 6 times. In 2024, total debt decreased by $424 million compared to the year-end 2023. We ended the year with a floating rate debt percentage of 8.6. Turning to guidance. The company is establishing first quarter and full year 2025 guidance for diluted EPS and core FFO per share. As outlined in yesterday's supplemental disclosures, this guidance reflects the company's consolidated portfolio excluding the Marina segment. Given the uncertainties surrounding the financial impact of the Marina portfolio during the pendency of the transaction, including its operations prior to closing, the timing of the closing, and potential subsequent closing, the company is not providing guidance with respect to the Marina segment at this time. The company expects to provide updated guidance following the closing of the State Harbor sale. For illustrative purposes, we have provided historical earnings and core FFO contributions from the Marina portfolio for 2024. MH and RV same property NOI growth is expected to be 5% at the midpoint, driven by 4.2% revenue growth and 3% expense growth. The expense growth reflects budgeted reductions in supplies and repairs and other operating costs discussed earlier. Full-year manufactured housing same property NOI is expected to grow by 6.4% at the midpoint, while RV same property NOI is expected to increase by 1.5%, which assumes a 6% decline in transient RV revenue due to the conversion of transient sites to annual leases and anticipated revenue for available site growth of 4.7%. In our UK portfolio, Stained property NOI is expected to grow by 1.9% at the midpoint, with 4.9% revenue growth offset by 8.1% expense growth, primarily due to increases in UK national minimum wage and payroll taxes effective in 2025. For our consolidated portfolio, excluding marinas, G&A expense net of non-recurring items is expected to remain flat at the midpoint compared to 2024. including approximately $11 million in expense savings discussed by John earlier. As a reminder, our guidance includes acquisitions, dispositions, and capital markets activity completed through February 26, 2025, but does not factor in prospective transactions or capital markets activities, including the safe harbor sale, that may be included in research channel assessment. For additional details regarding our financial performance, please refer to our supplemental disclosures. With that, I will turn the call back to Gary for closing remarks before we take questions.