Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities First Quarter 2020 Earnings Conference Call. At this time, management would like me to inform you that certain statements made during this conference 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 and 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 include the effects of COVID-19 pandemic and other are detailed in yesterday's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release. Having said that, I would like to introduce management with us today; Gary Shiffman, Chairman and Chief Executive Officer; John McLaren, President and Chief Operating Officer; and Karen Dearing, Chief Financial Officer. After their remarks, there will be an opportunity to ask questions. I'll now turn the call over to Gary Shiffman, Chairman and Chief Executive Officer. Mr. Shiffman, you may begin.

Thank you, Operator. Good morning, and thank you for joining us today as we discuss our first quarter results and provide an update on Sun's preparedness to navigate the COVID-19 pandemic. Since our fourth quarter call in mid-February, the environment has been dramatically challenged by a worldwide public health crisis. And before we begin, we wish to convey our sincere wishes for everyone's health and safety. We started the first quarter of 2020 ahead of expectations, reporting FFO per share of $1.22, $0.01 ahead of the high end of guidance. While everyone is focused on how the pandemic will affect our performance over the coming weeks and months, it's important to note that we entered the year from a position of strength and because of the underlying fundamentals of providing affordable housing and vacationing options; we expect to sustain a relative position of strength as we navigate through the pandemic. We began 2020 with total portfolio occupancy of 96.7% are well positioned from a balance sheet perspective, with approximately $380 million of unrestricted cash as of quarter end and a trailing net debt to EBITDA ratio of 5.6x. We want to commend and recognize our team and acknowledge the incredible job they have done stepping up and responding during this challenging time. Our team acted swiftly to ensure that Sun was doing its part to stem the spread of Coronavirus by adopting work from home practices at our main office and wherever possible at our communities. At our properties, we close the amenities where residents and guests gather and implemented recommended sanitation and hygiene protocols, while prioritizing health and safety by adhering to social distancing parameters, we're striving to provide Sun's trademark customer service. Given current shelter in place and social distancing orders, we do not know nor are we…

Thank you, Gary. I'll start with a recap on the strong performance and metrics in the first quarter, after which I'll provide specific details regarding the impact of the pandemic on operations, financials and the actions we've taken. As Gary mentioned, we're tracking strongly ahead of expectations for the quarter and delivered excellent same community growth, even after absorbing disruptions from the onset of shelter in place ordinances in mid to late March. Our total portfolio ended the first quarter 96.7% occupied, improving 30 basis points over last year and we added 300 revenue producing sites, even as shelter in place restrictions were put into effect. Our same community NOI increased 6.7% year-over-year, driven by 5.2% increase in same community revenues and a 1.8% increase in same community expenses. Same community manufactured housing revenue growth was 6.2%; annual RV revenues grew by 9.6%; and transient RV revenues decreased by 6% as we felt the first effects of COVID-19 related social distancing orders in March. In the first quarter, we saw same community occupancy increase to 98.4% from 96.6% in the first quarter of 2019. Even as social distancing began to impact traffic at our properties, home sales are quite strong with sales of 763 homes of which 119 were new homes and 234 rental home conversions. A core strength to Sun's operations team is the continual emphasis on refining our contingency planning and emergency preparedness and disaster recovery protocols, which are in place to rapidly deal with various out of the ordinary circumstances. By late February, the team began deploying recommended protocols throughout the portfolio and assessing how best the balance compliance with health related orders and the delivery of essential services to our residents and guests, which dictated a number of changes in the field. The steps we implemented…

Thank you, John. I will begin by reviewing our financial results followed by a discussion of our balance sheet as well as the estimated financial implications, the response to the COVID-19 pandemic has had on our business operations and the actions we have taken to-date. For the quarter ended March 31, 2020, we reported $1.22 per share in core funds from operations, $0.01 ahead of the top-end of our previously provided guidance range for the quarter. We ended the first quarter with approximately $380 million of unrestricted cash on hand after we completed a 15-year $230 million term loan at a rate of 3% that closed at the end of March. The properties for this new financing had been encumbered by a $99.6 million term loan due to mature in 2021, with an interest rate of 5.84% that was paid off at the end of February. Additionally, we paid off for term loans totaling approximately $20 million that were set to mature this year. We have no material debt maturities until 2023. We ended the quarter with $3.9 billion in debt outstanding with a weighted average interest rate of 3.64% and a weighted average maturity of 10.6 years. Our net debt to trailing 12-month recurring EBITDA ratio at March 31 was 5.6x. We also have flexibility on our balance sheet to support our business operations. As of March 31, we had $223 million of capacity on our revolving line of credit and have the ability to increase the size of our facility by $350 million to $1.1 billion. Also, our significant unencumbered asset base comprised of 143 properties provides us with additional potential funding capacity. We took decisive measures to reduce our cash spend for the remainder of 2020. We have suspended non-essential capital expenditures of $240 million, including expansions…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from John Kim with BMO Capital. Please proceed with your question.

Thank you. I was wondering, John, if you could provide some more color on when you think the RV campgrounds will be open as far as the 44 that are not open yet. And how many of those 44 could be opened by Memorial Day?

Hey, John. Thanks for the question. Yes, it's, I mean, that is going to be sort of aligned with the government mandates and as things start to lift along the way, I think we said in our prepared remarks. So we expect that sort of start happening in May. And I think one of the important things with that, John, is the fact that we often talk about our playbook, and the decades we're finding that playbook and all of this situation is just a different version of operating conditions during post natural disasters and hurricanes and things like that, that we deal with. So, as you might imagine, pretty much as soon as this all started to happen, we were preparing our plants for reopening at the same time. And through that, we've developed the three phased plan associated with reopening that will align with those government mandates that all you really have to do is drop in the open date, and it guides to prepare our team leading to opening all the way through normal operations status. And so the plan itself includes proper sequencing of reopening the resorts and the amenities, starting with ones that provide better space or social distancing. So we're really looking forward to welcoming our guests back. But again, that's going to be more along the lines of whatever the governmental authorities allow us to do.

Did the $50 million to $80 million range is that just a wide range of outcomes for how many of those open by Memorial Day just given that's a crucial date for your?

It's Gary. I think that we want to be cautious. We have been in touch with the counties, cities and municipalities who have asked us to extend our openings from generally April 1, with the anticipation that they would be opening up and sometime in May. We haven't heard otherwise. So, as of right now, we do expect to get them all opened in the month of May. But that's of course going to be dependent on any change that we hear from the municipalities.

Okay. So once the RVs are open, is there anything you're going to do on your end to limit capacity just to, I guess limit human interaction?

Well, one of the interesting things about an RV Resort as opposed to other hospitality options is there's sort of some of that built-in spread, because everybody has their own site that they're on, which promotes all by itself, social distancing. Some of the things that we've done -- some examples of some things, John, that we've already put into play to get ahead of that is, we've actually already stocked social distancing signage for all entry points. So we have what's in our communities, as well as you've seen those before conferences where they put the stickers down on the floors. And we can do that in the more highly trafficked areas to promote that as well. And I think one of the really key things that we're able to do is utilize our Online Express checking capabilities, which allows guests to check in and pay early allowing them for a touchless arrival process as well. So, there's a lot of that sort of thing that's happening. But I think by its very nature and RV Resort promotes a lot of social distancing, right out of the gate. And I also think that, Gary and I both agree that many people are going to want to get out of their houses.

Final question is, just on the a bit your ability and confidence on demand for RVs. Just given the amount of character and cancellations that you've received so far?

Yes. I think we -- all sort of feel the same way. We can't brush aside or make light of the financial impact, especially the transient RV from the current pandemic, but we really have to look through to the value of the fundamental business proposition and the platform itself, which is, John sort of indicated we're providing an affordable and cost effective vacation experience in what really is a safe, self-contained RV and we're doing it to all various demographics. So we would expect really on the other side of this unfortunate circumstance that people that are looking for unique and desirable experience like RV offers to both individuals, retirees and families, spending time in our rustic camping resorts or one of our high-end glamping experience really should be in high demand. Anecdotally, I've heard from a least a dozen people over the last two weeks or so, looking to inquire and where to get an RV, of course, if we don't can get them a discount, if we can assist them. But as recent as yesterday, one of our Board Members wanted to let me know that they bought an RV. They've actually left Michigan and they are on their way first to Colorado traveling out to California. So we really feel that the RV business could benefit strongly from this unfortunate situation. And I think we'll see that rather rapidly when the impact of stay at home and travel bans are lifted.

Our next question comes from Nicholas Joseph with Citi. Please proceed with your question.

Thanks. Appreciate the details on April MH collections, but I'm just curious as we go forward over the next few months if you expect any performance differential given different demand drivers between the all age and the age restricted MH portfolios, then maybe within owned versus rental as well.

Yes. Nick, this is John. I think the way I'd characterize is that with April rent collections that they all age portfolio is showed its resilience. And I think it also benefits along with the rest of the portfolio, sort of the proactive nature of our culture. One of the things that we've said as a company for a decade or longer has been the best revenue producing site you can gain as the one you never lose. And I think everybody knows that. Our average residency in our communities is 14 years, there's a value proposition, there's a reason why people want to be there. From a rent collection standpoint in April, rent collections for all age communities is on par with last month. I mean, and so I think that that really kind of shows coming right into this, when there was a lot of uncertainty coming into this pandemic that that value proposition that people see is realized. The other thing I'd add is a component of the all age portfolio is a bit of a reminder that, that we've shared before that, from a retiree standpoint, or when you compare 55 plus versus all age not every person who is over 55 wants to live in a retirement community. So we have a healthy component of residents within our all age communities that are retirees. And so those folks are going to be less impacted by things like job loss than others. And so, I think looking out -- looking into May, I would add that, I think that our hardship program did what it was designed to do and that takes the pressure off as well. And I would like to think that some of the things that our government has done to help promote what people's needs are with the stimulus plan and the checks that are starting to arrive that I would hope that the experience from May rent collection will be similar to that of April.

Thanks. And then anything on the rental program versus owned in terms of different risk profiles going forward?

No, I mean, it's really, it's pretty much, it's about 50:50 as far as the utilization of the hardship program. So it was -- it's very similar in nature. I will tell you that an interesting thing that's happened during this terrible crisis has been that with the rental home program our applications in April are actually up versus where they were April of last year.

Thanks. So, then just you mentioned the change to expansion and development spend and how does that impact the Australian JV or were those comments just for the U.S.?

Well, speaking to the U.S., really, I think one of the things on our expansion development spend has been the fact that and I think we might have shared this before as well, I apologize for my repeating myself. But we're fortunate that we're always in a position thinking ahead and stay in a year, year and a half ahead of what the supply needs are for expansion sites. As we shared another cause we had 2100 sites built in '17, 1200 sites in '18, 1200 in 2019. And so we've got a good supply of site. So tapering it down for a bit, really shouldn't have an impact.

It's Gary. John's remarks did reflect what's taking place in the U.S. With regard to Ingenious and Australia, it's a little bit of a different business proposition. They've been a little bit less impacted. I'd like to thank maybe that social distancing of the size of the country versus the population allows them a little bit more natural barrier to what we're experiencing here in the U.S. But demand has remained strong, there's been -- as John said, tendency for people who maybe were going to move out of Sun's Communities to kind of postpone those moves and in the sort of opposite way in Australia, they queue up what they refer to as their settlements or the home closings long and advanced. And that's dictated by a residence, home sale, primary home sale, if they're downsizing, they look to downsize to relief equity to be used in their retirement. So it's very, very important to them to understand and know that as they sell their home, they have a place to go. So if anything, there's been a little bit of an acceleration and those who have reservations and plan to move into the Ingenious communities. So that's been a positive thing there.

Our next question comes from Andrew Babin with Baird. Please proceed with your question.

Quick question just related to transient reopenings. I know a lot of the rent premium that you're able to command associated with just upgraded amenities, things like that at the properties. Can you even give a little more detail on kind of amenities might be available upon the opening which amenities may kind of lag and whether as far as there are bookings or any clarity, is that affecting pricing at all?

Yes. I mean sort of the natural sequence Drew with many openings is going to start with ones that are more social distancing promoting, so call it more of the outdoor type stuff that we have out there where there can be less contact. I think some of the things that we're doing in terms of signage, one of the things that we're also doing, we're starting to secure a supply of infrared thermometers, where we can check temperatures as our team comes in for the day and as well as when our guests check in and those sorts of things. And we're actually going to be providing wristbands everybody indicated they've been cleared. Just out of an abundance of caution that we do this and help them to build confidence for our guests coming back because they're excited to come back and they want to be there. And so, that's sort of the sequencing of it. We've not to-date made any adjustments in terms of rate.

Okay. Appreciate the color there. And just one follow-up for me. Just on the pace of expansions and development deliveries. I know you mentioned that online traffic is up, obviously onsite traffic has been down amidst all of this. Is there any kind of update on the pacing of the delivery of revenue producing sites throughout this year, whether its sites that were put in place kind of coming into the year at the end of last year, or ones that you may be planning on adding later this year? Any update there, as we model it out?

Yes. As far as the expansion site delivers, again, I don't think that there's a lot of impact from an availability or supply standpoint. I mean, it really is, from an application standpoint, as we've shared in the remarks, the apps are down only 13% thus far. We've got excellent web-based connectivity to be able to continue to collect applications and as well as do virtual showings and that sort of thing. And frankly, I've seen a lot of great creativity out of our teams out in the field. And so, again, it's going to line up more without being able to tell you exactly what's going to happen. It's all going to line up with no kind of as these things start to ease up a little bit, but in the end, we are still building a pipeline that we will remain engaged with those prospects and customers that when the time comes and we can sort of be it in pace we are used to be in at, then it's all really about the throughput that we do after that.

Thanks, john. I appreciate the transparency on the transient reopening plans. It's very helpful. Thank you.

Our next question comes from John Pawlowski with Green Street Advisors. Please proceed with the question.

Maybe just a clarification on the first question. So it sounds like, you can correct me if I'm wrong. It sounds like the $10 million in transient revenue impact assumes, basically zero revenue coming in the door in April and the vast majority of May revenue is still achievable. Is that fair?

I would say that's somewhere in between there.

Yes. That sort of ramps up to highest level in June obviously, but there -- you're correct there's a minimal amount of revenues expected in April and ramping up from there.

Okay. And then the 98% collections on the MH side in April. Is that a cash or GAAP basis? So roughly 3% of rents are deferred. Or is the cash collection 95 or is the cash collection actually 98?

98.

Okay. Final one for me. So $15 million to $18 million 2Q impact on NOI, 10 million of it coming from the transient side. What kind of impact are you assuming on the MH portfolio in 2Q? Thank you.

Okay. So John, we knew that providing that estimated impacted dollar amount was going to lead you to be wanting some more details. We felt it was the right thing to do. And so we've done it, our effort was to provide as much detail as we could. Therefore, these are the things that we have included, transient revenue reduction of 10 million that makes up the majority of the range. And the remaining $5 million to $8 million is split between home sales and brokerage, other and ancillary, annual revenues and MH revenues. It's net of expense reductions.

Okay. Understood. Are you assuming at this point that you see any diminution in occupancy on the MH portfolio?

No.

All right. Sounds good. Thanks for the time.

Our next question comes from Wes Golladay with RBC. Please proceed with your question.

How was financing availability changing for home sells? Are you seeing any changes on that?

No, I haven't.

But it hasn't been good before. It hasn't gotten any better. It hasn't gotten any worse.

Fair enough. Will still be doing any more on that on that front helping in it?

I think that we actually have a subcommittee on our Board of Directors that is really focused on improving the availability of home financing. They were on track to be able to work through probably the first manufacturer housing, loan securitization at the end of second quarter. I know John's worked very hard on it. Do we have any more color at this time?

Not at this time.

Yes. So we will keep everybody posted, but the home financing today is pretty much the same as it was two months ago.

Got you. Okay. Then looking at the [indiscernible] the increased unemployment benefits that many of the tenant should receive? Will you need to extend that hardship program beyond May and hold off on rent increases? And then a quick addition to that, one is how many leases in MH expire in 2Q?

Well, that's a good question, because that's precisely why we designed the program to include April and May because the thought process was with a hardship program and it was going to be very difficult for people to go out and find jobs in April. And so, we wanted to kind of wrap it over both of those months. And as we talked about in our prepared remarks, begin the payments, lighter payments starting over a 12-month period of time in July. So I think that provides a lot of support for our residents. My hope would be that that will one promote, like I said earlier on this call, good May rent collections as well as put some things at ease for people, as they're kind of putting things back together when the pandemic starts to hopefully taper down.

The rank collections by quarter, does someone have those available or rent increases renewals?

I'm sorry, what was the last part of your question was?

I'm sorry just the expirations that can't be expired this quarter.

I don't have the detail of that number.

No problem. And then, maybe one last one. What is the typical booking window for transient RV?

It's a pretty wide range. I mean, it can be anywhere from a year in advance and a lot of people that are booking before they even leave the resort from the year before it could be the day of.

Our next question comes from Joshua Dennerlein with Bank of America. Please proceed with your question.

Maybe just a follow up on the last question, for MH rent increases, do those all go through on January 1, or are they staggered throughout the year? And if so, have you considered maybe not pushing through any rent increase for people this year?

Yes. So the increases that are out there about 50% is what happens in the first quarter. And so those are already out Josh. And then, we have put a hole on further rent increases until things start to open up or ease up a little bit. And so I think, when you look at this sort of overall, it could have about maybe a 50 basis point impact on the guided rent increase for 2020. That's our best estimate at this point in time.

Okay. And that's all related to MH communities, where is that also with RV communities for annuals?

It's both.

Both, okay. And then if the pandemic goes on for longer and maybe if things can start opening up in May on the RV side. Has there been any thought given to how you would respond as far as like, if people can't access their sites on the RV side, maybe like reducing their rent for the year, anything on that front?

I think it's something that we talked about and something that we're just going -- have to watch and continue to see what does take place just like across the country. But we have been conservative in our thought process through the quarter slowly ramping up as we indicated earlier, we have deferred rental increases for the time being. We have eliminated all fees related delay charges, various other fees that we often do collect and try to be there for our residents. As john said, our residents are there long-term and so it'll just be a work in process. If things continue on, we're going to have to be able to provide additional transparency to you and to the market. But we do think that we really did take a very good hard look at our best estimates. And that's what we put forward with the concept of what we know now.

Our next question comes from Todd Stender with Wells Fargo. Please proceed you’re your question.

Hi, everyone. I hope you're all well.

Thanks.

Thanks. So back to the hardship program. You guys are talking about April and May tenants then pick up in July. What about June? How does it seems like they jumped over June but maybe not.

Yes. So sort of like what Gary said just a minute ago. I mean, I think that we launched the program even before April rent was due trying to think of ahead of it. So we are thinking about that, but the thought process was to just cover April and May based on the data that we had at the time, that's out there to try and set up the program, so it sort of fits with the various models that are out there. And to provide some space between when things hopefully start to slow down, when people have to start making payments back. And so I would say as far as June is concerned and tied, I mean, it's something that we will closely monitor as things evolve or emerge as we need to.

So if they were to start making their first rental payment in June, we didn't want to burden them with the forbearance pay back, so that's why we delayed an additional 30 days. And that's also why we took the route of 12 equal payments to extend it over the longest period of time to make it easiest on the residents.

All right. Thank you. So April and May will begin being paid back in July, but June will be just your standard June payment.

Absolutely right.

Got it. Thank you. Appreciate that. And then for going based compensation for the board and executives give any numbers around this just for us to look and start looking at our G&A estimate going forward.

We don't really have numbers and…

Had to add them up really quickly in my head. They just came out in the proxy Todd, I think you can add them up and take a quarter of that.

Okay. So it's one quarters worth for now [indiscernible].

Yes.

Okay.

We were very pleased proactively, our Board of Directors reached out to us very early on in the situation and wanted to do whatever they could and obviously, from a distance and strategically they've done some, but they continue to do some, but they were able to contribute financially in this way.

Okay. Finally, just for Karen, your line of credit balance ramped, but also certainly your balance. Have you spelled out how much you've tapped just kind of sit on cash to preserve liquidity right now?

I'm sorry, I missed the last part. Todd.

Well, taping your line? How much is that? Are you just sitting on cash just to preserve liquidity right now?

And also, you're right, we had $380 million of unrestricted cash on hand. We just finished the $230 million financing. We drew about $200 million additionally on our line, and we haven't drawn subsequent to quarter end. We feel like that is enough to meet our near term needs. We did our distribution in April. So we think that balance, less distributions, I think we did about $70 million, $75 million in distributions puts us in a good position to have the flexibility we need at this point in time.

Our next question comes from Samir Khanal with Evercore. Please proceed with your question.

I guess for Gary for you. Do you have any early reads as to what the impact is done to maybe, underwriting for new deals or kind of unlevered IRS cap rates and you've acquired a lot in the last few years and on the other side of this, could you see the opportunity to maybe pick up any asset? I just want to kind of get your initial thoughts here.

That's excellent question. I would state the following that we have seen significant interest in three different areas. We're seeing several types of communities that until recent events were not likely to be for sale. So that's been probably the biggest surprise, properties that were or have been for sale, but we're not priced appropriately. We're getting a lot of inbound traffic and entering in dialogue and discussions as to whether or not those are things we want to look at right now. And then properties that could have been acquired, but we didn't act on or we weren't proactive to getting to them. They're starting to surface. So I think the overall responses that we are seeing kind of a turned up interest in acquisition offerings. And as I said in my earlier remarks, we're taking a very cautious approach to those acquisitions. But I think that for the time being, we're seeing a more realistic approach to how sellers might be thinking about their valuations.

Our next question comes from John Kim with BMO. Please proceed with the question.

Thanks. Just a follow up. On your suspension of rent increases in MH, what would be the catalyst or catalysts to return back to your projected escalations? Would they be macro economic factors or metrics tied specifically within your portfolio?

Yes. Anyways, we've talked about this. I think their metrics specifically tied to our portfolio. Sitting in March along with the rest of the world, we had no idea how our residents or when our residents would be paying April rent. We've gotten through April rent, really pleasantly pleased. We've now got a look at May assuming that we see continued strength with our residents and the desire to stay in the communities. We'll take it one month at a time. And I think it will be a combination of what we see in the macro world as well as how we feel about the quality of what we're offering against other opportunities and being compassionate to our residents who have stuck by us and we want to continue sticking by us. So it's a fluid situation and something John and the ops team will have to present to management here and making a full decision as we step forward really month by month. And the first thing we'd like to accomplish, as we shared with everybody is to get our transients seasonal -- our transient business back in our seasonal communities open. I think having that step behind us will be a positive thing and how we approach when or if we put in rental increases.

Next question comes from Nicholas Joseph with Citi. Please proceed with your question.

Just want to follow up on I guess the transient and seasonal revenues. Appreciate the color for the second quarter expectations, but just curious what the scope of revenue that's been received, that could be potentially refunded if the properties open later than expected there [indiscernible] remained longer than expected. Thanks.

I don't think the concept of refunding has been anything that we are expecting. And I think that if anything, we're to approach that magnitude or discussion.

I think it's also Nick important to note that the vast majority of the seasonal or the annual site and the seasonal resorts, those sites remain occupied 12 months of the year. Like we shared in the script where it's either a park model or it's a tied down unit where they've done significant investment in their sites. And so similar to MH, it's a very significant investment that's been made by them. So I think that a lot of -- frankly, they expect to pay the rent.

So, it's not something we've been actually kind of planning at this time.

At this time, I would like to turn the call back to management for closing comment.

I just want to wrap it up by thanking everybody for participating on this call. We've shared and firmly believe that Sun is well positioned to navigate the COVID-19 pandemic. We provide a highly desirable experience that our communities and our resorts and we continue to have access to capital and are dedicated to see this through. As always, Karen, John, myself and others in the company remain around to follow-up with any questions that you have. And we look forward to updating you in the near future. Thank you, Operator.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time.