Sun Communities Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 27, 2023

Key Takeaways

  • Q1 results outperformed guidance: Reported core FFO per share of $1.23, beating the high end of guidance by $0.03, and achieved 6.7% same-property NOI growth, 230 basis points above expectations.
  • All key segments drove growth: Manufactured housing NOI rose 5%, RV NOI grew 4.4% with 65% of transient sites converting to annual leases, and Marina NOI jumped 15.1% on rate increases and longer transient stays.
  • Healthy development pipeline: Delivered over 200 ground-up and 130 expansion sites in Q1, added land for roughly 16,000 future sites, and maintain ample new-home inventory to meet demand.
  • Strong balance sheet and financing: Ended Q1 with $7.5 billion of debt at a 3.9% weighted rate (7.4-year maturity), issued $585 million of fixed-rate debt, cut floating exposure to 16%, and plan to deleverage toward a 5.5× target.
  • UK NOI guidance trimmed by ~10%: Lower full-year outlook reflects weaker home-sales volume and a shift toward lower-margin pre-owned home sales despite 9% uplift in real property NOI.
AI Generated. May Contain Errors.
Earnings Conference Call
Sun Communities Q1 2023
00:00 / 00:00

There are 11 speakers on the call.

Operator

Morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities First 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 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 yesterday's press release and from time to time in the company's periodic filings with the SEC.

Operator

The company undertakes no obligation to advise or update any forward looking statements to reflect events or 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 Caratini, 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 2 questions, so everyone who would like to participate has ample opportunity.

Operator

As a reminder, this call is being recorded. I'll now turn the call over to Gary Shiffman, Chairman, President and Chief Executive Officer. Mr. Shiffman, you may begin.

Speaker 1

Good morning, and thank you for joining us on our conference call to discuss Q1 2023 earnings and our updated guidance. We're off to a strong start to the year as our Q1 performance extended Sun's track record of delivering reliable NOI growth driven by our best in class properties, which supply is persistently constrained and demand remains resilient. Our focus on providing an exceptional offering for residents, guests and members backed by attentive customer service at our properties is a value proposition that creates loyalty and durable revenues for Sun. Our first quarter results were stronger than we anticipated with $1.23 core FFO per share for the quarter Exceeding the high end of our guidance, our same property NOI increased 6.7%, surpassing the high end of our guidance by 2 30 basis points, driven by strong performance across all three segments. Same property manufactured housing NOI increased 5% compared to the Q1 of 2022 due to several factors, including rental rate increases, occupancy growth and expense savings.

Speaker 1

Same property RV NOI increased 4.4% driven by 6.2% revenue growth, Primarily reflecting strong conversions of transient sites to annual leases, following the unprecedented increase in transient demand during the pandemic, We continue to benefit from heightened awareness of RV vacations and anticipate continued strong demand for annual RV leases. We are capitalizing on this demand to grow our base of long term durable rent revenues with these conversions. Same property marina NOI grew 15.1% in the quarter as compared to the same time last year. Marina outperformance was due to strong rental increases, higher demand that included longer stays by transient guests in our Southeastern marinas and operating expense savings. Demand for attainable housing and for value oriented vacationing remained high and drove same property occupancy for MH and RV 190 basis points higher compared to the same time last year.

Speaker 1

At quarter end, occupancy was 98.6%. SUNS MH and RV annual revenue producing sites increased by 802 sites in the quarter, representing the highest Q1 volume ever recorded and a 20% increase from the same period last year. Transient RV conversions to annual leases accounted for 65% of the RPS gains, demonstrating the success of our ongoing strategic focus to grow our base of long term residents. Development activity continues to contribute incremental value to our long term We delivered over 200 ground up development sites and over 130 expansion sites. We also opportunistically added to our inventory of land for future development, which now represents a pipeline of approximately 16,000 sites.

Speaker 1

Currently have sufficient new home inventory available to meet the demand for the newly delivered sites. On the acquisition front, SUN continues to remain highly selective and purchased 2 new assets during the quarter, The manufactured housing community in Michigan and the Savannah Yacht Center, a premier service oriented marina in Savannah, Georgia with the services provided by 3rd parties. Marina enhances our network, providing access to another strategic location for our members. We will be publishing our 5th ESG report in the coming weeks and are very proud of our team members for reaching many milestones in 2022. In the report, we highlight ESG achievements Such as the coastal habitat restoration program we are piloting at marinas in Rhode Island, our U.

Speaker 1

K. Operations maintaining their silver rating from investor and people and achieving ISO certification for cybersecurity. Our ESG framework score improvements and the expansion of our data coverage to include marinas and the UK demonstrate our company's commitment to being accountable to our investors, team members, business partners and the communities in which we operate. We are pleased with the strong start to our year and remain positive on our outlook. We'd like to thank our team members for their enduring dedication and hard And with that, I will turn the call over to Fernando to discuss our results in more detail.

Speaker 2

Thank you, Gary. First, I wanted to call your attention to the supplemental disclosure changes you likely noticed in the document published after the market closed yesterday. We have made a number of updates that are aligned with how we manage Sun as a whole and are intended to help you analyze our business better and more quickly. Our goal is that you find these modifications helpful and we welcome feedback. Quarter exceeding the high end of guidance by $0.03 The outperformance was driven by higher than anticipated real property revenue In manufactured housing, which benefited from rental rate growth and higher demand for our rental program sites, from RV annual revenues that benefited from conversions effective expense management at the properties.

Speaker 2

At the same property level, outperformance throughout our portfolio contributed 6.7% increase in total same property NOI. Same property manufactured housing NOI grew 5% over the prior year, resulting from a 6.4% increase in revenues and 10.4% expense growth. The outperformance in revenues was due to a 280 site increase in MH revenue producing sites, which was more than 4 times the occupancy gains realized in the Q1 of 2022. In RV, same property NOI increased 4.4% for the Q1 with a 6.2% increase in revenues and an 8.1% expense During the Q1, we converted 5 24 transient sites to annual leases, which was ahead of our expectations. As we continue to execute on our strategy of converting sites and capturing more annual revenue, we expect to also see a related reduction in transient revenue.

Speaker 2

Marina same property NOI increased 15.1% in the Q1 consisting of a 10.9% increase in revenues and a 4.3% increase in expenses. Marina same property revenue benefited from stronger than expected transient demand, especially in the Southeast and continued expense management. During the quarter, we sold 589 Homes in North America, which exceeded volume and margin expectations. In the UK, real property NOI was ahead of expectations in the quarter due to higher owner retention. NOI from home sales was below expectations in the quarter due to lower volume and the increased mix of pre owned versus new home sales.

Speaker 2

Turning to investment activity, we purchased the Savanna Yacht Center for $100,000,000 and funded the entire purchase price by issuing convertible preferred OP units. For the manufactured housing community acquired for $7,000,000 we issued a combination of OP units and cash. As of March 31, 2023, the company had $7,500,000,000 in debt outstanding. The weighted average interest rate was 3.9% and the weighted average years to maturity was 7.4 years. Our leverage ratio on a run rate basis is 6 times.

Speaker 2

Based on our operating cash flow expectations for the year, We anticipate deleveraging towards our 5.5 times long term leverage target over the remainder of the year. In terms of new financing activity, Since our last call, we completed 2 additional mortgage loans that raised $100,000,000 of fixed rate debt at a weighted average interest rate of 5.7%. In total, during the quarter, we raised approximately $585,000,000 of fixed rate debt and use proceeds to repay borrowings under our senior credit facility. Additionally, we swapped another £100,000,000 on our Sterling denominated term loan to lock in a fixed all in rate of 4.8%. At the end of the quarter, Our floating rate debt was at 16%, which is in line with our internal expectations.

Speaker 2

Excluding our senior credit facility borrowings Between now and the end of 2025, less than 8% of our total debt matures. We As detailed in our supplemental, we are affirming our guidance range for core FFO per share for the year of $7.22 to 7.42 We expect higher total portfolio real property NOI growth of 6.1% to 7% driven by additional NOI from 1st quarter positions and from higher same property NOI growth. We also expect higher contributions from North America home sales, Total SRD and E and lower G and A expense to offset a lower contribution from home sales in the UK. We now expect total same property NOI to grow by 5% to 6% for the year, representing a 10 basis points increase to prior guidance. The increase is driven by stronger than previously expected growth in same property manufactured housing and Marina, partially offset by slower transient revenue growth expectations in same property RV.

Speaker 2

Our revised same property NOI growth ranges for the year are 4.6% to 5.4% for manufactured housing, 4.4% to 5.6% for RV and 6.8% to 8% for Marina. For our U. K. Operations, we are lowering our full year range for Total real property and home sales NOI by roughly 10% to a new NOI range of $141,000,000 to $148,000,000 For additional details regarding our updated full year guidance and second quarter expectations, please see our supplemental As a reminder, our guidance includes acquisitions and dispositions and capital markets activity through April 26 and the effect of a property disposition under contract expected to close during the Q2, but it does not include the impact of prospective This concludes our prepared remarks. We will now open the call up for questions.

Speaker 2

Operator?

Operator

Thank you. We will now open the call for questions. And questions. Our first question is from Josh Dennerlein with Bank of America.

Speaker 3

Hey, guys. Thanks for the question. Just, Fernando, thanks for the color on the guidance. Just wanted to explore the UK NOI guidance range being lower 10%. Can you just go into more detail on what's driving that underlying change?

Speaker 2

Sure. Thank you, Josh, and good morning all. The drivers to the changes are actually an increase To expectations in real property NOI from the UK, that's Increasing by about 9% at the midpoint or about $5,500,000 And a decrease in expected contribution from home sales of about 20% Or about $21,000,000 that would be for the full year. So that would have The impact of performance over the Q1 and then our revised expectations for the rest of the year.

Speaker 3

So was that strategy driven where you're pushing rate harder And that's why like the real property is up 9% and then you're just getting less home sales or just kind Just kind of square it. Yes, just trying to figure out like what's driving the drop in home sales too.

Speaker 2

We're certainly we're seeing shifts in the strategy as far as stronger as Gary mentioned in his remarks, Stronger owner retention at the property level that is driving the increased expectations on the real property side. We did see softer demand in the Q1 from a volume perspective. And as Gary mentioned, in the mix of homes, which carry different margin expectations.

Speaker 1

So Josh, it's Gary. As I did suggest that shift shifts to a quality pre owned home, The price is lower and therefore the retail price is lower, the margin is similar to asset Has been, but the contribution from a used home is just smaller than a new home and we have seen A bit of a slowdown in the new home and we're well aware of the backdrop of the economy in the UK and That effect as we think through guidance for the balance of the year.

Speaker 3

Okay. In that NOI range, like how much of that profit is like home sales and how much is it like real Properties, just trying to think of like for modeling purposes, how we should think about it.

Speaker 2

Josh, in our updated guidance, the percentage split between real property and home sales About 45% coming from real property and 55% coming from home sales.

Speaker 1

Okay.

Speaker 4

Thanks

Speaker 1

guys. Which is the shift over long term that we're looking to make, but the results of what's happening Right now relate more to the economic environment there. Got it. Thank you.

Operator

Our next question is from Derek Wolf with Citi Research.

Speaker 5

Hey, thanks. Just wanted to follow-up on that because I think in March, you put out a deck that It showed that the U. K. Operations were sort of expected to be in line For the year, so I don't know, did something happen in March that caused you to rethink it? And if I'm doing the math correctly, It sounds like you're expecting like a $21,000,000 decrease in home sales on call it like original starting point of 75%, I guess around there, 75%, 80%.

Speaker 5

So that seems like a pretty material decline. So I'm just trying to understand sort of what would have changed in March that would cause That's a large decline.

Speaker 1

Hi, Derek. I think, back to the matter is the Fine has been very, very recent. The time from putting a deposit to closing and a buyer making a decision Has slowed down. Obviously, the economic headwinds in the UK, In fact that CPI is still double digit and it has an impact On the home sales decision making, but at the same time, overall, the portfolio performance is quite strong. As we indicated, the retention is high, site fees have been collected for the year.

Speaker 1

Holiday bookings are very Strong and the ancillary business that comes with those holiday bookings has been strong. Easter was an exceptional Holiday week that we just experienced on vacation homes, but we are very cognizant and aware of the economy there And have adjusted the home sales as we look out to match what we've seen in this more recent period of time, Which really did correlate with the March period of time. That being said, we can share that April, we've been following closely and there's been positive undertones, but Taking an approach to how we want to think about going forward, we made the adjustment to the home sales moving forward.

Speaker 5

Understood. And then I guess, I don't know, are you underwriting sort of similar assets today that have sort of a high home sale component? And I guess as you Sort of think about sort of underwriting them, would you change anything in underwriting, put a, I don't know, lower sort of multiple On that income stream or predict more variability there, just trying to think if anything you're seeing now would change how you underwrite the asset class longer term?

Speaker 1

Certainly, we are very, very focused on that underwriting and this is a time where Basically, we can focus more on integrating what we already have in the portfolio And extract as we like to say the low hanging fruit, develop out the sites, and grow the existing portfolio. So as Our appetite and our underwriting moving forward, it will be very, very disciplined. And As we always say, the pencil is very sharp at this time, so I wouldn't look for any major acquisition opportunity. And I would just reiterate our initial underwriting perspective in the business was long term And it remains long term. We think we have the right portfolio, best in class as a matter of fact.

Speaker 1

We demonstrated management team that has been through tough economic environments before and done well. And I think that We're watching them adjust to this difficult market that exists right out there. So as it relates to moving forward on underwriting, It is adjusted to reflect the current what we believe is short term impact to the market.

Speaker 5

Got it. Thank you.

Operator

Our next question is from Kegan Karl with Wolfe Research.

Speaker 6

Hey, guys. Thanks for the time. So starting on the same store property RV NOI, it's cut kind of material amount. Just curious what drove such a sharp change in such a short amount of time? I know you called out transient, but that should be offset by the conversion.

Speaker 6

So is it more top line or more expenses that are driving this? And if it is the former, how should we be thinking about the demand funnel right now at this time of the year relative to last year?

Speaker 2

Hi, Kegan. It's Fernando. So the revised expectations on the same Of NOI from initial guidance provided in February. That will that is primarily coming from the transient revenue line item, Where we have revised our expectations in February, we gave guidance of about 50 basis points of growth at the midpoint for the year, given the strong number of Conversions that we've made already and expectations for the rest of the year and we did see some weather impact in the Q1 In California and in the Southwest, that's those are the primary drivers. So The revenue the reforecasted revenue expectations are offset partially By expected expense savings in that part of the portfolio.

Speaker 6

And just on the demand funnel, the second part of the question, how does it compare if you're looking at your transient bookings, say month to date, how does it compare versus last year?

Speaker 2

Versus last year, we're from a pace standpoint, we're running about 5% or 6% below last year.

Speaker 6

Okay. And then changing gears here. So you mentioned at a recent conference there's an opportunity for you guys to potentially readjust your Given what your peer recently reported regarding their renewal rate, how should we be thinking about some potential upside here to your insurance expense? And is that contemplated at all in your

Speaker 1

That is not contemplated in our guidance range. Key in, the fact of the matter is that Current market rates have not really improved. We're continuing our deep dive analysis We're reviewing and analyzing our insurance needs in order to optimize cost versus risk. And as you might be referring to these options, we view include adjusting our retention pieces and levels Throughout the stack for various types of risk, more closely examining usage of our captive, which is virtually unused at this time, Looking for opportunities to work with new reinsurance groups, although that's been met with some headwinds because As we're I think all aware right now, the overall insurance market is very, very challenged. So it's Just continuing effort to improve the cost And examine that we have the right risk adjusted cost going forward.

Speaker 1

So, we would Share with the market any cost savings that we believe, we have found going forward.

Speaker 4

Great. Thanks for the time guys.

Operator

Our next question is from Michael Goldsmith with UBS.

Speaker 7

Good morning. Thanks a lot for taking my question. Same store expense guidance is down by about 120 basis points. G and A was Down by $4,000,000 So can you talk a little bit about where you're able to find the savings and just maybe overall the Flexibility or pliability of the expense model of the business and your ability to adapt it to The changing environments to accommodate some of the slowdown on the revenue side.

Speaker 2

Sure. Thank you, Michael. The expense savings would primarily come from offsetting some of the revenue Expectations on the transient RV side, that's going to be the largest driver. But also we are we did experience in the Q1 And are expecting for the rest of the year higher utility rebuilds, which is decreasing Our year over year expense on that side of the expense stack Given the increased focus on rebills to tenants, as well as we've talked about this before, but Our solar array projects of which we have 35 today and other 15 underway, which ultimately will continue to save on electric expense as we Deploy these projects. On the second part of your question on the G and A side, those expectations that Bringing those cost expectations down is primarily coming from salaries and wages.

Speaker 7

I assume that's just from lower hours?

Speaker 2

Correct. At the property level.

Speaker 7

Yes. Got it. And thanks for that. And then, my second question is just Yes. It's on the Marina business and kind of how it fits into the entire enterprise.

Speaker 7

We started kind of concerned about the Marina business and how it performed during a recession. It seems like The results are or expectations are improving and it's becoming a larger part of the business as a whole. So maybe you can talk about a little bit about the improving outlook there and then just also how it fits into the Entire portfolio and how that diversity can help you navigate the tougher times?

Speaker 1

I think that we're very pleased with the Marina performance to date, not only The outstanding performance this quarter, but what we've seen quarter after quarter over the last 2 years, Our view is that having the benefit of the entire network gives us an advantage over all competitors, And it's really showing in the demand for wet slips and dry slips as We're virtually at full occupancy with waiting lists at many of the marinas And we've had the strong benefit of strategically acquiring what we refer to as the international marinas That allow us to keep the boats that are very, very large in the Safe Harbor System and especially on the transient side when these boats come in For repair work that they often would head across the Mediterranean for, we're keeping them longer in our network as we're able to provide the service for them. So, the other thing I'd point to, we have opportunity in about 30 plus Marinos to reconfigure smaller slips into larger slips. There are 2 being redeveloped this year. There are 11 in for permitting process, so we can do that. And the advantage of this also is the ability to Able to charge higher linear footage rates for the longer boats and the greatest growth in the Marina vessel business is in boats 30 feet or greater that certainly require The wet slips, so we have a nice opportunity there to continue to grow.

Speaker 1

And I think a lot of it comes from the fact that As we have acquired the Marina platform, we've been able to invest for the long term, Making small capital improvements that are well received by the members and therefore, allowing Probably a much larger share of demand to take place currently In the Safe Harbor network. So we look to build on the strength that we saw this quarter.

Speaker 7

Gary, what's the return or IRR of a reconfiguration project like that?

Speaker 1

So when we invest for That type of CapEx, we look for a 9% to 12% return.

Speaker 7

Thank you very much.

Operator

Our next question is from Samir Khanal with Evercore.

Speaker 3

Good morning, everyone. Hey, Fernando, just Curious on the home sales contribution in the U. S. And North America, I think you gave a number of $19,000,000 What was that What was that budget before? What was that forecast before?

Speaker 3

I'm curious what you're seeing in the U. S. As it relates to home sales and if that's sort of Similar headlines to kind of what you're seeing in the U. K?

Speaker 2

Sure. Our original expectations for home sales contribution In North America, we're about $17,000,000 So we are seeing increased expectations there. In the Q1, we did see from internal expectations, we saw more pre owned homes Sold then budgeted at higher margins, which drove outperformance in that part of the business As we for the rest of the year, as we focus on, from a back to basics filling sites that we have just created Across expansion sites and our ground up development projects, well, this is one of the Levers we can pull to fill those sites, but we're home sales are performing Strong over the course of the 1st 3, 4 months of the year.

Speaker 3

Got it. And then I guess, Gary, just in terms of transactions and acquisitions, I knew you did $100,000,000 in the quarter. I mean, just trying to think about what does that opportunity set look like today? Is that the right quarterly run rate to think about? Was that too optimistic when you think about Marina's RVs and MH?

Speaker 3

Thanks.

Speaker 1

Yes. It's a great question. Certainly, cost of capital and the impact of It has a big impact on transactions. When we think of MH, Certainly, Sun has been one of the biggest consolidators. There is very little, If any cap rate expansion that we've seen, in fact, we saw another couple properties Trade with a 3 year sub three handle over the last two quarters and we were Looking and evaluating those, but they sold far inside of anything that we would have paid for.

Speaker 1

So I think that moving forward adjusting, for the fact that there are much fewer Acquisitions out there in the MH side, there will be kind of a onesie and twosie opportunity. On the Marina side, We're very, very focused on the growth that we've had and we have the ability to be very, very selective, okay, And strategically inclined to look at acquisitions moving forward. So I think it will be a quieter period of Hi, on the acquisition side moving forward.

Speaker 2

Yes. Sameer would add, just Extremely selective as far as the acquisitions that we did in the Q1, the $7,000,000 manufactured Housing community that was a near completed round of development that we bought in our backyard in Michigan that we will Fill up quickly, given that that's a tried and true model. The Savannah Yacht Center On the Marina side, really this is a 2 plus 2 equals 5 as far as how it complements The network and being able to keep more of the business within the network itself I would also point to the funding mechanism for the Savannah Yacht Center, which was a convertible Our preferred operating partnership, the entire purchase price, where we are, we did issue these securities, And they would convert at a 30% almost 30% premium to where we were trading at the time When we closed the acquisitions, it's certainly being very opportunistic and Using the funding sources that are available to us in the market.

Speaker 4

Got it. Thanks so much.

Operator

Our next question is from John Kim with BMO.

Speaker 4

Thank you. Good morning. I wanted to ask about the mortgage loans that you priced subsequent to quarter end At 5.7, I was wondering if you could provide some characteristics on what asset or assets are associated with this debt And what that means for cap rates?

Speaker 2

So, John, so these were Essentially, I'll use a non technical term, borrow ups on an existing facility with the GSEs, Where we essentially increased the LTV that had been that had come down over the course of the last couple of years From a financing that we've done in 2019, this was done on manufactured housing Assets, this was about 8 years of weighted average maturity for that financing And it would be in line with, say, our unsecured borrowing rates today Based on where the tenure is and expected spread, but Gary earlier made a comment on expectations from a pricing perspective for manufactured housing that haven't really shifted over the course of the last 12, 12 months to 18 months given the scarcity value of manufactured housing, We've seen little to no widening of pricing expectations for the highest quality Manufactured housing assets that we own in our portfolio or that we would be interested in buying.

Speaker 4

Okay. My second question is maybe a 2 parter on your U. K. Guidance. First of all, I wanted to make Sure.

Speaker 4

Or ask if this was on a constant currency basis or does this include the new currency rate versus what you had previously? But secondly, there was a report recently that property surveyors in the UK had actually increased their outlook for the year on home sales. And I'm wondering if your reduced guidance is due to vacation homes not being directly correlated to the UK housing market or perhaps A lag effect given these are secondary homes for a lot of for all the buyers or if we should not place too much emphasis on property surveyors.

Speaker 1

Hey, John. We too are aware of how the valuers are thinking about things, but that is on the general Homeowner market and what we would suggest is that is very positive because those The owners who are buying second vacation homes in the Park Holidays portfolio. So It is something that we'll just have to watch and it could be something that creates a positive In fact, as we move forward, we can only underwrite what we're seeing right now. We know that the CPI environment is 10 plus percent there. RPI on the retail side up over 13% With some evidence that there are expectations that there will be some relief in sight, and we think all that will play positive To continued sales, while are up year over year, are not at the budgeted levels We had during the year.

Speaker 1

So we hope that would be positive, but I think that's all against a backdrop, if you will, that from an underwriting The business is performing basically in line with our overall expectations when we initially acquired the property. So we remain comfortable with our outlook and our opportunity that we undertook, but we are experiencing the short term Aspects of the economy right there, which just maybe a positive, as we refer to it kind of a green shoot if If that were to come to fruition.

Speaker 4

And what about the currency impact? The British pound kind of worked in your favor over the last couple of months?

Speaker 2

John, that would the expectations would reflect the The weaker dollar by $0.03 in the FX rate.

Speaker 4

Okay. Okay. Thank you.

Operator

Our next question is from Robin Liu with Green Street.

Speaker 8

Hi, thanks for taking my question. I just wanted to touch on real estate taxes. I noticed that it was 10% increase this quarter. Do you expect taxes to trend at this level for the remainder of the year? Can you also just remind us when you expect to receive new tax assessments for next year?

Speaker 2

Hi, Robin. Our expectations for the full year for our total same property portfolio are lower Then what we experienced in the Q1, call it in that 7% to 8% range. The assessments come in on a rolling basis over the course of the year and depends on state by state Basic. So they are rolling.

Speaker 8

Can you just put in context, was the 7% to 8 Would you budget it for the initial guidance?

Speaker 2

That would be in line with our original expectations.

Speaker 8

And then my second question, I understand that there has been discussions with the Ingenium management team recently and Perhaps some Sun executives even visited Australia. Can you give us an update on the Australian joint venture and what your longer term plan is for that partnership?

Speaker 1

When we look at the opportunity, Robin, we remain very positive We're pleased with the current performance of our SunGenia joint venture. We have Two properties that have now been developed out and are selling homes. Freshwater is an age restricted development And we have a second one that's come online. And we have 3 other developments in process, which we expect to see some contribution from in the late second half of the year. With regard to Ingenia, the headstock overall, they have noted continued challenges in securing home supply and construction As related to the pandemic and that has impacted settlements or home sales closings, Which they've guided to.

Speaker 1

So we're carefully evaluating any further investment and We'll share with you and our shareholders as the year goes on as to The success is taking place in those developments.

Operator

Our next question is from Anthony Powell with Barclays.

Speaker 9

Hi, good morning. Just one more question on the U. K. Home sales. If I remember correctly from last year, I think part of The thesis was that you would be able to sell higher end homes by combining sites and upgrading sites in the UK, selling kind of the larger large units.

Speaker 9

Is that still a long term initiative for the unit or is that maybe paired back given the economic environment?

Speaker 1

No, it is a long We have several long term strategies that we talked about. Certainly upgrading to the lodges brings a Higher pitch fee with it because they are based on the size of the lodge amongst other things. So we continue those efforts. We did note that we've seen a shift to pre owned homes. So probably we've underwritten and guided to slower large growth, which would be new home growth.

Speaker 1

At the Same time, the best indication of satisfaction in one of our Park Halliday's properties comes from the fact that we're seeing this Huge increase in upgrades from existing residents. So that's a very, very positive thing. And We'll be able to share with you next quarter what we've seen in sales. But certainly those upgrades are taking place, probably a little bit slower than We forecast early in the year.

Speaker 9

Got it. Thanks. And maybe one more, I guess, on MH Base rent growth, I think 5.4% in this quarter. How does that split between, I guess, new homeowners and renewing homeowners? And how Do you expect to see that those new homeowners,

Speaker 4

where do you expect

Speaker 9

to see growth for that segment to trend over the next several quarters?

Speaker 2

Hi, Anthony. The 5.4 is a blend of the entire portfolio. We will build towards over the course of the year towards the guided range About 6.4% by the towards the end of the year and our the rental increase And our rental program is running just below 10% at 9.6%. So the 5.4 would be a combination for the entire portfolio, whether that's An owner that is renewing or a new resident in our communities.

Speaker 9

Got it. And are you able to get, I guess, market rents on those newer residents as they move in? Or is it I guess I'm trying to see as home sales increase or decrease, how that impacts your MH rent growth?

Speaker 2

When we discuss tenure in our manufactured housing of about 15 years, That's a pretty steady, right? The rental increase that we provide guidance on, that is the expectation for the portfolio, Where you would see, call it, more updated Rental increases would be in our rental program.

Speaker 1

We're going to do that. I think we just don't have a large part of market increase and we are able to push through rental increases on an annual basis across the

Operator

Our next question is from Jamie Feldman with Wells Fargo.

Speaker 10

Great. Thanks for taking my question. So I just want to go back to your comments Savannah being like an international marina, can you talk about domestically how many more of those types of marinas are out there that you might want to add to the network?

Speaker 1

I think Jamie that there probably aren't We are 4 similar marinas in the country. Lauderdale Marina Center, which was the first one we acquired, Has been performing exceptionally. It is also a prime example of where we've been able to Change the service model and utilize vendors, 3rd party vendors to perform the service and Collect lease the space to them and collect the rents and overages on the service provided. We're in the process of completing the same thing in the Savannah Yacht Center, where 85% of the revenue will come in from these 3rd parties. And as I said, the huge benefit is what it provides in value to a Safe Harbor Marina member.

Speaker 1

And this particular marina is world class. There's only one other one like it that I know of in the world that can service Well, it's 4 50 feet or longer, the superyachts as they're known and then off season service, the smaller Vessels, so I wouldn't say there are More than a handful of them in this country and Sun probably already owns 2 or 3 of them.

Speaker 4

Okay. Thank you for that.

Speaker 10

So as you think about growing the Marina business and putting incremental capital to work, I mean, is it safe to assume you're going to be looking mostly at saltwater And does that imply more likely to be buying internationally going forward? Or do you think you'll actually do more freshwater domestic marinas To grow the business. I mean, it seems like the network becomes it's a global network, it's not necessarily a domestic network.

Speaker 1

I think we're quite comfortable for the foreseeable future that there are many saltwater marinas that Strategically enhance the Safe Harbor network and those being in North America. So we've talked about from time to time, 1 or 2 points across the Atlantic, where some of the larger Boats and yachts tend to go for certain parts of the season, but one of the great benefits of Savannah, Rybovitch And Lauderdale Marina is the fact that we are seeing the results as we saw in the results this quarter of keeping those larger craft in the Safe Harbor Marina, providing them service here that we can't get elsewhere. So Our expectation is our growth will be predominantly in North America and all saltwater.

Speaker 10

Okay. All right. Thank you.

Operator

Our next question is from Wes Golladay with Baird.

Speaker 10

Hey, everyone. I just have a quick question on development. I think you delivered 200 units in the Q1. What is the plan for this year? And if you can maybe give us a peek into next year?

Speaker 1

I think generally we have about 1,000 sites to deliver an Expansion and new development. We're really pleased with what we've delivered so far. And Also, the fact that we've had all the inventory that we need To be able to place units and provide for the demand in the development and expansion. And as we go forward, we talked about being able to provide 3 to 4 new manufactured housing Developments per year, which I think is a very unique way to be able to increase our manufactured housing Percentage of our portfolio. So we're very, very happy with how development Going now and the fact that really 5, 6, 7 years of work is now leading to the fact That we've been able to build up an inventory of entitled and zone lots.

Speaker 1

Basically, that doesn't exist anywhere else in the country. So, we feel very, very good about our development going forward. Our expectation is For now at this rate, we can self fund internally. We have about $200,000,000 of capital Here Mark, so to speak for development and expansion this year.

Speaker 10

Okay. If I could just get one more. Just going to the network effect, Is that fully kicked in for RV? And then for Marina, what do you think you have the full network effect?

Speaker 1

Yes, Gary. On the Marina side, I think it's increasing every single day through the Value that's being perceived again, having a long term view as an owner operator and being able to invest capital For the types of returns that we discussed earlier, it is seen by the membership, The strategic locations, the ability to stay in a safe harbor marina up and down the East Coast now as we build out The rest of our geographic footprint, the perks that the members experience Both through advantage of service and some of the F and B and The fuel sales that we provide to the membership, that's all taking place, but I think we have a long way to go in building The continued loyalty of our already loyal membership. I think the same thing is true in the RV transient business. Sun Outdoors is only a year and a half old And we are seeing a lot of positivity as we connect the dots and travelers can go from Sun Outdoors community to the Sun Outdoors community, but there's a long way to go on that branding. At the same time, I'd remind everybody that we are reaching the largest levels Of converting transient customers to annual customers and expect that to continue And it's a benefit of moving people through our transient resorts and having them get that Outdoor experience and being able to market to them to convert as annuals.

Speaker 1

So I think there's a lot to be gained year over year. We're seeing that in the increased conversions and the stickiness, if you will, of the annual renters once they convert.

Speaker 10

Thanks everyone.

Operator

Ladies and gentlemen, we have reached the end of the question and answer And I would like to turn the call back to Gary Shiffman for closing remarks.

Speaker 1

I would just like to thank everyone for participating on the call. And we look forward to discussing our 2nd quarter results on the next call. Thank you.

Operator

This concludes today's conference. Thank you for your participation. You may disconnect your

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