Sun Communities, Inc.SUINYSE
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Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities, Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. Permit me to inform you that certain statements made during this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in 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: Charles Young, 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 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 everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded. I will now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may begin.
Charles Young: Good morning, and thank you for joining us today. I am pleased to report our fourth quarter and full-year 2025 results. We concluded the year with strong operational momentum, delivering core FFO per share of $1.40 for the quarter and $6.68 for the full year, both above the high end of our guidance ranges. The strength of our performance and optimism in our outlook is grounded in the durable fundamentals of the sectors in which we operate. We provide attainable housing and affordable vacationing to our residents and guests in our manufactured housing and recreational vehicle communities. Our operational model is anchored in high resident and guest engagement, which facilitates the recurring and predictable rental streams our properties generate. That stability reflects strong demand, limited new supply, and the value proposition our communities provide, as demonstrated by our same property MH portfolio’s 98.1% occupancy. Affordability is a core attribute of our business model. Manufactured housing offers a high-quality living environment at a cost significantly below traditional housing alternatives, while our RV communities provide accessible short and long-term vacation stays that resonate with today's consumer. After spending time at our MH and RV communities over the past few months, what stands out to me is the sense of community that we create, which I believe is a meaningful competitive advantage for our platform. In MH, our residents are members of active, connected environments that foster long-term relationships and loyalty. In RV, our long-stay guests value the flexibility and lifestyle our properties offer, using them as seasonal homes or year-round destinations. Our results this past year demonstrate these favorable dynamics. North American same property NOI growth was 7.9% for the quarter and 5.7% for the full year, reflecting strong revenue growth and disciplined expense management. From a capital allocation standpoint, 2025 was a year of meaningful positive change. Following the Safe Harbor sale, we significantly reduced leverage and enhanced our financial flexibility. We ended the year at 3.4x net debt to EBITDA, which provides substantial financial stability and a foundation for pursuing attractive, accretive growth opportunities. Importantly, we returned over $1.5 billion of capital to shareholders in 2025. Building on that, as detailed in our recent press release, our Board approved an approximate 8%, or $0.08 per share, increase to our quarterly distribution rate. This reflects our confidence in the consistency of cash flow our portfolio generates, our strong operating performance, and the strength of our balance sheet. As we enter 2026, we are building on our strong foundation and taking a focused, practical approach to long-term value creation. This is not a departure from what has worked; rather, it builds upon and further refines Sun Communities, Inc.'s strong in-place platform, with the emphasis on sharpening execution, enhancing performance, and strategically targeting capital investment. We remain confident in the strength and durability of our core manufactured housing and annual RV businesses. These segments provide recurring, predictable cash flows which we believe will continue to generate steady earnings growth and margin improvement over time. At the same time, we are focused on maximizing the performance of our RV platform to enhance growth and reduce volatility, both within the segment and as an important feeder to growing annual RV. That work is centered on improving operational execution, leveraging better data and technology, and driving greater discipline across the portfolio. Our strategy embodies thoughtful and strategic evolution and involves continued focus on what has positioned Sun Communities, Inc. well, while sharpening our focus on enhancing execution and driving sustainable long-term growth. There are three core pillars that support our strategy to drive long-term outperformance. First, thoughtful capital allocation: maintaining a strong and flexible balance sheet while delivering growth. With our best-in-class balance sheet, we will manage capital prudently while seeking to enhance growth. Second, continued optimization of our operating platform: driving greater consistency, accountability, and efficiency across the organization. And third, strategic investment in our communities, our infrastructure, and a unified digital backbone that will enhance our resident and guest experience and enable better, faster, and data-driven decision-making across the business. We have made meaningful progress over the past year simplifying the business and strengthening the balance sheet, and we believe our strategy positions us to capitalize on the opportunities ahead in our core platform. We look forward to sharing more details and updates as we advance our strategic priorities and actions. I want to thank the entire Sun Communities, Inc. team for the warm welcome over the past few months. I am proud to be a part of this organization and grateful for our team members' commitment to serving our residents and guests every day. With that, I will turn the call over to John and Fernando to discuss results in more detail.
John McLaren: Thank you, Charles. For our fourth quarter results, our team executed exceptionally well and our performance reflects that. Total North American same property NOI increased 7.9% year over year, driven by 5.9% revenue growth and 2% expense growth, with blended occupancy over 99%. Within manufactured housing, same property NOI increased 8.8%, driven primarily by exceptional MH performance and disciplined expense management. Revenue grew 7.3%, while operating expenses increased 3.2%, reflecting continued focus on balance, efficiency, and cost control. In RV, same property NOI increased 5%, driven by 2.7% revenue growth and strong expense discipline, with operating expenses up only 60 basis points. Revenue growth reflected higher RV contract rates, with transient performance in line with our expectations. For the full year, North American same property NOI increased 5.7%, driven by 4.5% revenue growth and partially offset by a 2.2% increase in expenses. We exceeded our guidance in manufactured housing, delivering 8.9% same property NOI growth for the year. In RV, same property NOI declined 1.4%, which was within our guidance range. Turning to the UK, fourth quarter same property NOI declined approximately $500,000, reflecting ongoing macroeconomic pressures, including the national minimum wage increase. For the full year, UK same property NOI increased 3.5%, supported by 5% revenue growth driven by higher MH and transient income, partially offset by a 6.6% increase in operating expenses. UK home sales volumes were down 4.9% compared to 2024's record levels. Across the organization, we remain focused on operational excellence, disciplined cost management, and leveraging technology and data to enhance efficiency and the resident and guest experience. Having been a part of Sun Communities, Inc. for nearly 24 years, I can tell you now is truly one of the most exciting times I have experienced as we carry the strong momentum we built in 2025 into 2026. Our 2025 performance reflects the dedication, skill, and focus of our team throughout the portfolio. It is a privilege to be part of it, to service and operational excellence, and I want to thank our team members for their continued commitment. As we enter 2026, we remain focused on consistent execution, driving steady revenue growth, and maintaining expense discipline. With that, I will turn the call over to Fernando to walk through our financial results and 2026 guidance. Fernando?
Fernando Castro-Caratini: Thank you, John. In the fourth quarter, core FFO per share was $1.40, beating the high end of our guidance range by $0.10. For the full year, core FFO per share was $6.68, also $0.01 above the high end of our guidance range. During 2025, we continued executing on our simplification strategy, selling over $200 million of non-strategic assets and land parcels. We also deployed 1031 exchange proceeds to acquire 14 manufactured housing and annual RV communities totaling $457 million, further enhancing the quality and growth profile of our portfolio. We purchased the titles to 32 UK properties that were previously controlled through ground leases for approximately $387 million. As a result of the ground lease purchases, Sun Communities, Inc. now holds a freehold interest in nearly all our UK property, further strengthening our long-term financial position and strategic flexibility. 2025 was a transformational year for our balance sheet. During the year, we repaid more than $3.3 billion of total debt. We ended 2025 with net debt to trailing twelve-month recurring EBITDA of 3.4x, no floating rate exposure, a weighted average interest rate of 3.4%, and a 7.1-year weighted average maturity. Following these transactions, we now have a well-laddered debt maturity profile: $492 million maturing in 2026, and no maturities until 2028. As of 12/31/2025, we had $636 million of total cash on the balance sheet. In September, we closed on a new $2.0 billion five-year credit facility, undrawn at year end, further enhancing our liquidity and overall financial flexibility. Importantly, we received two credit rating upgrades in 2025: S&P raised Sun Communities, Inc. to BBB+, and Moody's upgraded us to Baa2, reflecting the strength of our balance sheet and credit profile. Turning to capital return, for the full year we repurchased 4,300,000 shares at an average price of $125.62 per share, representing approximately $539 million of repurchase activity. After year end and through February 24, we repurchased an additional 456,000 shares totaling $57.3 million. These actions reflect a disciplined and balanced capital allocation framework, showcasing our strong financial position while returning capital to shareholders. Turning to 2026 guidance, we are establishing full-year core FFO per share guidance at a midpoint of $6.93 with a range of $6.83 to $7.03. For the first quarter of 2026, we are guiding to $1.28 at the midpoint. Within North America, we expect full-year same property NOI growth of approximately 4.5%. Breaking that down further, manufactured housing is expected to grow by 5.9% and RV is expected to grow by 0.9%. In the UK, we expect approximately 2.2% same property NOI growth for 2026. FFO from UK home sales is anticipated to be approximately $50 million at the midpoint for the year. For additional details regarding our assumptions and the components of guidance, please refer to our supplemental disclosures. Our guidance reflects completed acquisitions, dispositions, and capital markets activity through February 24. Of note, it does not assume future acquisitions, additional share repurchases, or other capital markets activity, which is often reflected in analyst estimates for the year. With that, I will turn the call back to Charles for closing remarks.
Charles Young: I would like to take a moment to reflect on what I have learned and where we are headed. These first few months, I have been focused on listening and learning deeply with our team members and our business. I spent time across Michigan, Texas, Florida, and South Carolina visiting our communities and meeting with team members on the ground. Those conversations have reinforced both the strength of Sun Communities, Inc.'s culture and the opportunity ahead to further sharpen focus, strengthen execution, and build for long-term growth. I am energized by what I have seen so far and excited about the next chapter as we turn insights into action and build on Sun Communities, Inc.'s strong foundation together. For 2026, we are focused on three core pillars: disciplined capital allocation, executing consistently across our operations, and investing in our core MH and RV platform. We look forward to keeping you updated on our progress. We will now open the line to questions.
Operator: Thank you. We will now conduct a question-and-answer session. You may press star 2 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 as we poll for the first question. The first question comes from Steve Sakwa with Evercore. Please proceed.
Steve Sakwa: Yes. Charles, or maybe John, could you talk a little bit about the data? Charles, in your opening remarks, you talked a lot about how you are using data and want to make better decisions. Are there concrete things that you can discuss with us that you have implemented, or are there things that you are currently working on that you expect to implement in 2027?
Charles Young: Hey, Steve. It is Charles. I will take it, and maybe I will throw it to John if he wants to add in a little bit more. As I said, I have had a chance to go deep within the organization out in the field, and I just want to take a moment and thank the organization for the warm welcome. Specifically to your question, I refer to it as our unified digital backbone. What I will be able to tell you is it is building off of the foundation that was put in place a couple years ago with the NetSuite implementation, and as I watched that, that really became the beginning of our digital journey, if you will, which is a big piece of what I want to try to build on and encourage us to build on. Today, if I talk to the team members around the table here with me, we have more real-time access to data than we have ever had, but there is more there as we really start to build out the platform, which is solid, but there is more from beginning to end that we do. So one of the things I will share that is a focus in my core pillars for this year is starting with the customer journey by enhancing the systems and centralizing some of the contact center work in terms of how we engage with the consumer, eventually on the MH side and our guests. Specifically, I think it will be a help on the RV side. That is one piece that I will give you, but there is a lot more to be done. The bigger picture as you think forward around where the world is going today with AI and otherwise is to continue to build on this foundation, and it needs to be around the data architecture and infrastructure that allows us then to unlock that in the future.
John McLaren: Yeah, Steve, I will just add to that. One of the things I shared with everybody last year was just really the focus on the transparency within our sales and leasing funnels, and applying that transparency because of the data that we have across with the implementation of our new ERP that we put in 2024. We can take that data and apply it across all different kinds of transactions and have that transparency, be able to deliver it to the team, be able to rank it with the team so we know better what we are doing at any moment in time. That is one application. Another one is going deeper into where the traffic comes from and being able to link where it is coming from all the way to who actually converts to a transaction, and being more targeted versus broad in terms of the campaigns that we can develop around that. That is what is taking place right now.
Operator: The next question comes from Eric Wolfe with Citibank. Please proceed.
Eric Jon Wolfe: Hey, thanks. At December, maybe Charles, you talked about slowing down buybacks, but then, of course, saw the $57 million of buybacks year to date. Could you just talk about the approach to repurchases and capital allocation this year? What you are assuming in guidance as far as the use of that $630 million of cash as well? Thanks.
Charles Young: Great. I will start. Thanks for the question. I will let Fernando come in on what is in our guidance. When it comes to capital allocation, our objective is straightforward: we want to allocate capital where it generates the best long-term risk-adjusted returns for shareholders. Where we are today as we enter 2026, I joined in a really kind of special time in the company’s history. The strength of our balance sheet, the reduced leverage that we have, we positioned ourselves with manageable maturities and significant liquidity. So there is a lot of flexibility. As I think about capital allocation for the year, we have a balanced toolkit as our approach. One is, as I talked about in my core pillars, investing in our communities and our operating platform. The ability to invest in our strength—the core portfolio, the people, and the systems—is one of those toolkits. The other is pursuing thoughtful and disciplined, accretive external growth opportunities that align with our strategy of MH and RV. So we will continue to look for opportunities there. And then, as you are talking about with the share repurchases, there is returning capital to shareholders and using share repurchases thoughtfully when they represent compelling value. These are all parts of our toolkit. We are going to be balanced as we go through the year, use our flexibility to be prudent with that use, and we will continuously evaluate what is going to add shareholder value. Fernando, you just want to give forward guidance in terms of what we have in there?
Fernando Castro-Caratini: And so, Eric, consistent with prior years, we are not assuming capital markets deployment of the cash on hand or our operational cash flow that we generate over the course of this year. So you can assume that the over $600 million of cash on the balance sheet today is generating interest income as it is used for the business. Any acquisitions that we would find and transact on, or any share repurchases, would be incremental to the baseline guidance we provided.
Eric Jon Wolfe: Thanks. And then, just a quick follow-up. The $57 million of acquisitions that are in escrow, can you just talk about what those are, the initial yields on them, and then the unlevered returns that you are targeting?
Aaron Weiss: Yeah. Thanks. It is Aaron Weiss. Thanks for the question. In terms of what we have on the balance sheet as of year end, we did talk about closing one acquisition in the January period at sort of the consistent yield range we have talked about previously in the mid-4% yield range. In terms of the remaining acquisitions, those are simply held on the balance sheet as 1031s but have not yet been closed. So we will continue to look to identify those and update the market as we see them. As Fernando indicated, to the extent that we do not ultimately close on those 1031 proceeds as occurred in 2025, that would simply move into our unrestricted cash balance.
Operator: Our next question comes from Brad Heffern from RBC Capital.
Bradley Barrett Heffern: Yes. Thanks. Good morning, everybody. Charles, can you give any updated thoughts on the UK and how it fits into the portfolio?
Charles Young: Absolutely. I appreciate the question. I have had a chance to spend some time with the UK team, get over there, and what I have observed is a high-quality operation, best-in-class portfolio, strong assets, and a very talented and capable team. I am impressed with our operational execution. That being said, they are performing well in a challenging UK macro. We all see that, and John can spend a little bit of time around some of the details and what the expense numbers have been in Q4. As I look at the business and as we just talked about being disciplined capital allocators, we continue to evaluate our entire portfolio to determine how best to create long-term shareholder value, and the UK is no different. We are going to continuously evaluate, but right now, our near-term focus is on maximizing value through disciplined execution, strengthening performance, and driving growth where we can, and maintaining cost control and flexibility. So we will continuously assess the UK in the context of our overall strategy and capital allocation priority.
John McLaren: The only thing that I would add, Brad, is that we put out in our guidance a 4.1% rent increase in the UK. That is running ahead of inflation in the UK. I think 2025 represents a really good year of home sales. We had close to 95% of the prior record that we had the year before that. When you look at it from a market share perspective, we have a team of people in the communities and locations that we have who are executing brilliantly in the face of it all. The only thing that offsets that a little bit is what Charles said on the expense side, but a lot of that is attributed to the national minimum wage, and everybody is in that boat. It is really pleasing to us to see them execute through that despite it all.
Operator: Thank you. Our next question comes from Wes Golladay with Baird. Please proceed.
Wes Golladay: Hey, everyone. How do you see the annual RV conversions this year? I think last year was just around 600. Can you give your view on 2026?
John McLaren: Hey, Wes. Appreciate the question. I think we are looking at something similar to what we saw last year. We are really pleased with how last year played out, and I am really pleased, especially as I have shared before, that the strategy we took with respect to retention within our RV annual business really took hold. We are seeing that emerge in the form of the renewal rates that we have now in comparison to this time last year, where we are running ahead. So that is how we look at it. It is going to be similar to what we experienced last year.
Wes Golladay: Okay. Thanks for that. And then, can you give your view on the transient RV? How does the pace look?
John McLaren: It is good. It is pacing well. A little bit about 2025: our RV same property NOI performance in the year finished within the guidance range. I do want to emphasize that we like to work on the entire business, so we are really focused on bottom-line results. Specific to transient RV, I will reiterate that some of what we experienced in 2025 is a direct result of the success we have had and the strategy of reducing the number of transient sites and converting them to annual guests. That was demonstrated by a 9.8% annual RV growth number and the 600 network conversions you referenced. For 2026, we continue to see better signs of stability with improved booking trends in RV. We remain thoughtful and disciplined in our approach, as demonstrated by our guidance, which reflects what we are seeing in our pace at this point in time. To emphasize further, some of the things that we are doing that are seamless to what Charles has talked about with our core pillars: we have several target initiatives in RV, which include OTA expansions—or said differently, booking channel expansions—digital booking enhancements, data-leveraging opportunities. There is a lot to unpack there, and I look forward to having those conversations as the year progresses. A lot of this lines up with what we are seeing. If you look at how we tracked in RV in 2024 versus 2025 versus what we are putting out there in 2026, you are starting to see that stabilization take hold.
Operator: Thank you. The next question comes from Jamie Feldman with Wells Fargo. Please proceed.
Jamie Feldman: Great. Charles, appreciate your comments to close the call about where you are thinking through the company. Can you give an update on where you are in the process of settling in? I think people expected maybe a noisier print for April, but you pretty much took one impairment in the UK, and everything else seems to be humming along. Then, of course, you had some management changes to start the year. Would you say at this point you are settled in and this is the story going forward? I know the UK, as you guys commented before, still watching it and seeing where the opportunity is long term. But would you say you are pretty much settled in at this point and not a lot to still review big picture, or there is still a lot to work through as you are thinking about the future of the company?
Charles Young: Thanks for the question. It is a good question. I am past my listening and learning tour, if you will. I used to be counting in days and then months, and I am in now. I am settled. The team knows who I am. I cannot say enough how special the culture here is at Sun Communities, Inc. and how welcoming it is, and I felt like I have just slid right in, and you can see it from our results that we are working well together. But there is work to be done, and the core pillars, as I laid out, are where the opportunity is ahead. That is why I cannot say I have settled in, but we have work to do in terms of investing in our communities and our infrastructure and optimizing our platform. That is where the work will be done and will continue to be done. I am busy, but I am loving it. I am getting in the flow at this point and enjoying every minute of it. I can go into more details, but at this point, what you are seeing right now: the team put up great numbers for the quarter, we have good guidance, and we are going to execute for the rest of the year. The simplification strategy that the team put in last year—I am building off of that with this core focus and laser focus on the core. That is what it is about, and that is what is going to get us into the rhythm that everybody expects us to do given the nature of this business and the affordability and attainable experiences that we provide for our residents and guests.
Operator: Thank you. The next question comes from Michael Goldsmith with UBS. Please proceed.
Michael Goldsmith: Good morning. Thanks all for taking my question. Questions on the RV guidance. Can you break down what the underlying expectations are for annual and transient, and then maybe break down what needs to happen to get to the upper end or lower end of that range? Also, a little color about what you have been noticing with the Canadian customer? Thank you.
Fernando Castro-Caratini: Thank you, Michael. I think John and I will tag-team that question. At the midpoint of our range, we do have a rental increase for our annual guests of 4%. As John mentioned earlier, we are expecting transient conversions to annual contracts of about 600 over the course of the year. From a transient revenue growth perspective, at the midpoint of the range, we are expecting about a 1.5% decline in transient revenue year over year. This would compare to a 9% decline in 2025 year over year over 2024. That points to, as John was mentioning, some stabilization as it relates to the transient side of the business.
John McLaren: I will start, Michael, on the Canadian side, which we shared before. We did experience softness in Q1 and Q3 of last year with Canadian guests. The interesting thing about that is last year we shared that Canada represented about 5% of the RV business. That represents about 3.5% of our total RV transient and annual business today. In other words, what we experienced last year with Canadian guests, combined with some of the offsetting that we did with domestic guests, has been mitigated to some degree versus what we had in 2025. It is really more about what I said earlier, and you alluded to it with the question: what are the strategies we can push on the RV side? We recently added two additional booking channels on the RV side toward the end of 2025, which should bear some fruit in 2026 in that strategies-to-push perspective. On the digital booking side, it is about contact or guest routing enhancements, easing the booking process, and process enhancements, which dovetails into leveraging the tech like Charles was talking about to capitalize on a nimble booking window that aligns more seamlessly with our revenue management capabilities that we have today. If you take it a step further, enhancing the guest journey overall—enhanced and targeted placement. This is not about the old days of RV, broadly throwing things out there, but being targeted and thoughtful in the approach and listening to the data and what it is telling us to do to pick where we want to place it, to help us find those guests, easing the booking process, the on-the-ground experience, the rebooking that happens because of a great on-the-ground experience, and ultimately the referrals that you get from that. Similar to what I have said on the MH side, building the sales force on the RV side for Sun Communities, Inc.
Operator: Our next question comes from Jana Galan with Bank of America. Please proceed.
Jana Galan: Thank you. Following up on the transaction market, given Sun Communities, Inc. has been very active in the past year, can you provide some details on product in the market, even if it is not in your buy box? Is there more or less volume today than last year in MH or RV? Any significant differences in cap rates across regions, or between age-restricted and all-age?
Aaron Weiss: Hey, great question. It is Aaron talking. We were really fortunate to move through 2025 and execute on primarily MH and also some annual RV acquisitions. As we have long said, the cap rate ranges are in that 4% to 5% range. We have not seen a massive change across the years. It is a high-quality asset class, and so the higher-quality MH communities that are probably not transacting are still being asked at sub-4% cap rates. Their quality, the quality of the cash flows—the current sellers believe that is appropriately valued. We are focused on assets in markets in which we operate. Strategically for us, we want to buy portfolios or assets in markets where we have operating leverage and an understanding of the market over the long term, and that is where we have been focused to date. What we are seeing is generally consistent with the past. We do believe the transaction market is picking up. There is a more constructive backdrop in the financing market. Certainly, the lower rate environment today versus 12 to 18 months ago is more conducive to transactional activity, but I would say generally consistent, high-quality assets. Most of what we are seeing continues to be in the single-asset, small-portfolio, local owner-operator environment, and we do not expect that to change. There are very few large portfolio owners to begin with, and while those happen episodically, we would say the market backdrop is constructive. We are generally pleased with what we are seeing in our pipeline, but it is very consistent with what we executed in 2025.
Operator: The next question comes from Jason Wayne with Barclays.
Jason Adam Wayne: Hi. Good morning. Just looking at home sales volumes that are down year over year in 2025, can you walk through your home sales assumptions for this year and how that gets baked into G&A?
John McLaren: Yes. Jason, thanks for the question. What you are seeing when you talk about the home sales for 2025 is that our focus is on real property income. Home sales expectations are really a product of enjoying nearly 98% occupancy in the portfolio, as well as very low resident turnover, which ultimately leads to stability of long-term cash flow from rent. The contribution of home sales is not really as material to FFO as the other things that we are working on. Volumes and margins for this year will be similar to what we experienced in 2025.
Jason Adam Wayne: Got it. And then it looks like the ancillary NOI guidance changed a bit as well. Just wondering how much of that is due to marinas coming out of the portfolio?
Aaron Weiss: The guidance provided is ex-marina as it relates to the contribution. So it would be contributions from our RV portfolio primarily, and then also contributions from the UK platform.
Operator: The next question comes from John Kim with BMO Capital Markets. Please proceed.
John P. Kim: Thank you. I wanted to ask if you could provide some of the building blocks for the 7.2% same-store revenue growth that you achieved in MH in 2025. It looks like you had 5.2% rental growth. You had a little bit of an uplift from occupancy, but what really made the difference to get from there to 7.2%? If you could provide the same building blocks for 2026 as far as MH same-store revenue.
Fernando Castro-Caratini: John, they will be pretty similar, as our rental increase in 2025 was just above 5%. We had occupancy gains of about 600 on the MH side last year, and then, as you can see in our supplemental, we did have some strong performance from the 10% of the business. Our rental program did drive additional growth to build to that 7%. As John has alluded to earlier, as we look into 2026, we have a rental increase back of 5%. Enjoying 98% occupancy in manufactured housing, we do still expect gains from an occupancy perspective in the 500 to 600 site range, and then there could be some additional revenue. The building blocks are very much similar over the course of both years.
Operator: Thank you. The next question comes from David Siegel with Green Street. Please proceed.
David Siegel: Hi. Thank you. It looks like the rate of move-outs has been increasing over the last couple of years. I am curious if you can provide some color on what is driving that, and if you can bifurcate it between the MH portfolio and the annual RV portfolio.
John McLaren: Yeah, great question, David. Appreciate it. For 2025, the rate of move-out was mainly attributed to RV, and a lot of that had to do with some of the Canadian impact that we experienced in 2025. This is precisely why we focused so much of our attention toward retention over the course of this year, replacing those move-outs with more domestic movements. It is paying off because we are seeing it in the form of the renewal rates that we have now as well. One thing of note: typically in an MH property, when we have a move-out, it is going to be a resident moving out versus a home moving out of the community, and so oftentimes we have a part in that transaction in the form of being able to generate a commission from a brokered home sale, which would be a part of that process and that transaction as well.
David Siegel: Great. Thank you. And then can you just briefly talk about what is driving the higher expenses in the UK recently?
John McLaren: I think much of it has been attributed to what has taken place nationally, especially the national minimum wage, and really falling more in the payroll line of things than anything else as a result of that, David.
Fernando Castro-Caratini: And that is consistent with the expectations for 2026 as well. We do have elevated expense growth in our guidance range, with the midpoint of 2.2% NOI growth, but leading the way as it relates to that increase is the national minimum wage increase that will go into effect in April.
Operator: The next question comes from Linda Tsai with Jefferies. With year-end net debt to EBITDA at 3.4x, do you have a targeted range for leverage going forward?
Fernando Castro-Caratini: Sure. We stated with the closing of the Safe Harbor transaction and all of the activity we had from a debt paydown perspective that our long-term leverage target will sit between 3.5x and 4.5x net debt to EBITDA. To get to that midpoint, there is some releveraging to do.
Linda Tsai: Do you have a view on what it would look like by year end?
Fernando Castro-Caratini: From a guidance perspective, we do not include share buybacks or any additional acquisition activity. In the guide today, we would be ending the year pretty similar to how we started.
Charles Young: Thank you. I will just jump in. It goes back to my answer earlier on capital allocation and really being balanced in terms of our approach and the tools that we have in our toolkit in terms of external growth—finding accretive opportunities there—having the flexibility with share buybacks, on top of the core pillars we talked about in terms of investing in our infrastructure, in our communities, and in our internal systems.
Operator: Thank you. At this time, I would like to turn the call back to Mr. Young for closing comments.
Charles Young: Great. Thank you for the conversation. We appreciate everyone's interest and we look forward to seeing everyone at the upcoming conferences.
Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.