Sun Communities, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Sun Community's 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 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 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 Sniffman, Chairman and Chief Executive Officer. John McLaurin, President. Fernando Castro-Cartini, Chief Financial Officer. Aaron Weiss. Executive Vice President of Corporate Strategy and Business Development. 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 yourself to one question so that everyone who would like to participate has ample opportunity. As a reminder, this conference is being recorded. I'll now turn the call over to Gary Sniffman, Chairman and Chief Executive Officer. Mr. Siffman, you may begin.

Good afternoon, and thank you for joining us to review Sun Community's 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 a safe harbor transaction, we returned over $830 million to shareholders for special cash distribution and share rate purchases. 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 down six of these properties and are working through final government approvals for the remaining nine. Turning to our operational performance, we are pleased with the strength of our manufactured housing and annual RV businesses. Some 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 Community's 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 1st. 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 in 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 the 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 UK, we are seeing strong results. Same property NOI in our UK 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 Holiday's 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 UK business. The unmatched quality of our UK portfolio and operating team allow Park Holiday's to command its outsized market share and underlies our confidence and 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 discipline 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 update 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 UK segments, supported by continued rent growth and stable occupancy. As previously mentioned, we closed on the sale of Safe Harbor marinas on April 30th, meaningfully simplifying our platform and creating significant financial flexibility for some. Following the initial $5.25 billion Safe Harbor closing, we subsequently closed on six 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 30th, 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 2.9 times at quarter end. Importantly, we have zero 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 one-time 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 two credit rating upgrades this quarter. S&P Global raised Sun's rating to BBB Plus 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 UK 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. UK 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 pay down, stock buybacks, and the purchase of the 22 UK properties previously subject to ground license. 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 30th, 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 four decades with this remarkable company, I want to express my deepest gratitude to the extraordinary people who have made this journey possible, who are 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.

Thank you. We'll now be conducting a Q&A session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Thank you.

Our first question comes from the line of Steve Sacqua with Evercore ISI. Please proceed.

Yes, thanks. Good afternoon. And 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 funds. 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?

I think to answer the first question, the last question first, no expected adverse tax impact from releasing funds out of the 1031s. But we initially allocated about a billion dollars 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, thanks. And then maybe a question for John. I guess the transient RV business seemed 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 hey steve uh great question you know i think i think i want to start with saying that you know 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 and revising guidance after q1 you know reflecting on the current environment, those trends remain in line, just like we shared. And as you know, a large component of our transient revenue headwinds actually was created by our success in converting transient sites and annual sites. And despite near-term volatility we face, our transient RV business generates solid revenue and margins. These play a vital role by creating a 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, you know, we do things here and there in various parts of the portfolio where we see an opportunity to be, you know, laser focused on a specific opportunity for conversion or things that we can do to enhance, you know, revenue, you know, and obviously the flex on expenses.

But it's pretty surgical the way that we look at it.

Thank you. Our next question comes from the line of Jana Gallen with Bank of America. Please proceed.

Thank you, and 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?

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

Thank you. 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 two components.

Yeah, I think on the U.S. home sales side, I mean, one thing, John, I would tell you is that You know, 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, 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 in the rent. And, you know, so I think that what you would see in the back half of the year is something similar to what we've experienced in the first half.

Thank you.

Our next question comes from the line of Eric Wolf with Citibank. Please proceed.

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

Sure. Hey, Eric. So the transaction creates flexibility across the portfolio in the UK by converting leasehold interests 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 four and a quarter yield going in.

So four and a quarter yield. So it's accretive relative to call it the 3.75% on cash. Is that what you meant by accretive?

Yes.

And second question, maybe I missed this in your, you know, the answer to Steve's question, but, you know, 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, you know, is it better weather or just market conditions? Because it went from like negative 20% to negative, negative six, it feels like a pretty big change in growth. So trying to understand how sustainable that improvement is in sort of what you've started, like how you're trending in 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 at 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.

Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed.

Good afternoon. Thanks a lot for taking my question.

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 on the progress that was made in the last quarter and then where are the future opportunities from this? Thank you.

Sure, Michael. Great question. So I'm going to start again by saying that we are really focused on the entire business. You know, 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, you know, overall, beating guidance Q1 was great for the team, beating and raising Q2, so we're thrilled. Okay, and I expect it to continue. Specific to the plan that we talked about walking into the year, you know, within the first half, we've expanded that savings, I would say, beyond $17 million, much of which lies in payroll utilities as well as, you know, meaningful standardization and expansion and adoption of the procurement platform that I've talked about before, which encompasses many different supplier and parent, 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 underwent in the second quarter an extensive product standardization project, renegotiated unit pricing for those products, apply an overall discount to those products, as well as we'll benefit later from additional annual rebate for those products. So 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, which is what's growing the company. And so we will stay very focused on all of it, and particularly the You know, 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's accomplishing this year.

Thank you very much. Good luck in the back half, and congratulations, Gary, on a legendary run. Thank you, Michael.

Thank you. Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed.

Thank you and congrats Gary on your tenure and ending on a high note. I wanted to ask a follow up to Jan'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?

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

How much higher do you think that could go, and how much was that a contributor to your occupancy growth this quarter?

Yeah, 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 you know, 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.

Thank you. Our next question comes from the line of Brad Hefner with RBC Capital Markets. Please proceed.

Yeah, hi, everyone. Thanks. Equity Lifestyles 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.

Yeah, good question, Brad. You know, yes, we talked about earlier in the year with some of the impact in Florida, and we did see, and I think I've shared on various conferences and that sort of thing, where, you know, 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, you know, being well within what we put out there in terms of guidance for transit and

Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed.

Great. Thanks for taking my question. 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, you know, 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 Suns next CEO. His effective starting date will be October 1st. 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 winding up his current role as president at 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 MHRV moving forward. I think it's a great opportunity for Charles to bring in his experience and continue to grow the company out into 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 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 on board. And I'll stop there. Thank you. See if you have anything else to add, John, about how the team's thinking about things.

Yeah, 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 that 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. Having left Sun for a short while, in 05 went to multifamily and I was able to bring back, you know, some invaluable skills and most certainly played a role in our success after I had returned. So I'm very excited about bringing that, you know, another side to real estate into our strategy here at Sun.

Okay. Thank you for the color and good luck. Thank you.

Thank you. Our next question comes from the line of Jason Wayne with Barclays. Please proceed.

Hi. Thanks for the question. 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 UK development write-downs related to the ground leases at all?

Thank you for the question. The breakdowns in the UK 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 UK but in the US, and that is what is leading to the impairment charges given the strategic shift for these assets.

Got it.

And then, yeah, there's been some reports that some of your peers in the UK are looking to sell holiday parks. So following the ground lease transactions, is there any plan to sell UK ops?

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 UK, 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.

Thank you. Our next question comes from the line of David Siegel with Green Street. Please proceed.

Thank you and congratulations, Gary, and congratulations, Charles. Can you talk about the decision to buy out the UK ground leases now versus when park holidays were required 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 strategies, this was one that created a lot of financial and strategic flexibility.

Great. Thank you. 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?

Yeah, David, Kerry, 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 to potentially even looking at opportunistically acquiring other of the land leases in the UK, 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. our 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.

Thank you. Our next question comes from the line of Peter M. Roberts with Jefferies. Please proceed.

Yes, thank you for the time and thank you for taking the question. 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?

Yeah, sure, Peter. We've talked about going in yields of four to five 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 in 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.

Thanks, Gary. 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, you know, there's a level at which the stock trades and you won't do it, you know, above that? And I guess just how you think about the returns on that versus more acquisitions.

Sir 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.

All right. Thank you.

Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed.

Hey, thanks for the time here, guys, and all the best to you, Gary, going forwards. So I wanted to ask, I guess sort of in a similar light around capital allocation, how do you guys view sort of development and expansion opportunity here, you know, and maybe compare and contrast that to the acquisition opportunity that you just talked about in sort of the four to five cap rate range?

Yeah, I think I'll talk about it from the, 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 creative return hurdles.

You know, that's really the extent of what we're talking about on the development side right now. Okay, that's helpful.

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 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 UK.

Thank you. Our next question comes from the line of Otomayo Okosanwa with Deutsche Bank. Please proceed.

Hi, yes, good afternoon, everyone. Gary, again, best of luck in the new role. I wanted to go back to Steve Sacco's question just around, you know, 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 know, to kind of just provide some, you know, 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 if 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, you know, everybody's heard me say over and over again on the conversion side, you know, the best revenue producing site you can gain is the one you never lose. And so again, When you function that way and you're a little bit more, you know, we'll call it defensive in terms of your occupancy, it leads to great, you know, better net results, okay? And which is why I think that we are still seeing, even coming off of, you know, three years of record growth and conversions, growth this year, okay? And so, you know, but it's things like that. It's the fundamentals. of what we do, which is spending time at the properties and really, you know, taking the data and the technology we have to better, you know, maybe that's one of the bigger changes is in fact, the data that we have in comparison to when I was COO before, you know, 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, you know, more laser focused on the time that we spent at which properties over the course of the year. Gotcha.

Thank you.

Thank you.

There are no further questions at this time. I'd like to pass the call back over to Mr. Sniffman 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.