SUI - NYSE

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities Third Quarter 2025 Earnings Conference Call. At this time, management would like me to inform you that certain statements made during the 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 obligations 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. [Operator Instructions] As a reminder, this call is being recorded. I'll now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may now begin.

Good afternoon, and thank you for joining us on today's third quarter earnings call. This is my first earnings call as Chief Executive Officer of Sun, and I want to start by saying how excited I am to be a part of this exceptional team. Since stepping into the role on October 1, I spent my first month listening, learning and engaging across the company. I have already visited a large number of our communities, and I look forward to continuing my tours. My first few weeks reaffirmed what drove me to Sun, the strength of our teams, the scale of the platform, the quality of our communities and the opportunity in front of us. It is clear that Sun's success has been built on a strong foundation, underpinned by a deep commitment and dedication to our residents and guests. I'm thrilled to be joining at this pivotal moment in the company's journey, and I look forward to building on Sun's strong legacy. My near-term focus includes 3 key areas: one, deepening my understanding of the MH and RV business, ensuring I'm grounded in every aspect of our company's operations and culture; two, supporting our team as we deliver on our strategy and commitments; and three, assessing opportunities for disciplined long-term growth. I am grateful for the warm welcome I have received from the Sun team. I look forward to working together to continue to drive excellence in all that we do for the benefit of our team members, residents, guests and our stakeholders. With that, I'll turn the call over to John and Fernando to review our third quarter results and outlook in more detail. John?

Thank you, Charles. On behalf of the entire team, we are thrilled to welcome you to Sun Communities. Your deep understanding of and experience in the real estate industry and fresh perspectives have already been additive, which will help guide Sun through this next exciting chapter of growth and value creation. Turning to our performance. I'm very pleased with our third quarter results. Sun reported core FFO per share of $2.28, exceeding the high end of our guidance range, driven by strong same-property performance in North America and the U.K. For the third quarter, within our North American same-property portfolio, NOI increased 5.4%, led by manufactured housing, which delivered 10.1% NOI growth and maintained a solid 98% occupancy. Through the end of September, 50% of our MH residents have received their 2026 rent increase notices, averaging approximately 5%, reflecting the continued strength and stability of our portfolio. In our RV business, same-property annual RV revenue was up 8.1%. Transient RV revenue performed in line with expectations, declining by 7.8%, with roughly half of this decline due to our strategy of reducing transient sites as we continue to successfully convert transient guests into RV annuals. As I've shared before, the volume of RV transient annual conversions has returned to a more normalized growth pace following several record conversion years. RV same-property NOI declined 1.1%, and we remain focused on cost controls with same-property RV expenses down year-over-year. For 2026, annual RV rental rates are being set with an estimated average annual increases of approximately 4%. In the U.K., same-property NOI grew 5.4%, supported by 4.8% revenue growth and 4% expense growth. While home sale volumes are lighter given broader macro challenges and when compared against recent record volumes, our team continues to maintain elevated market share by providing differentiated services and amenities at Park Holidays' high-quality communities. Our Park Holidays homeowners have received 2026 rent increase notices averaging approximately 4.1%. Our U.K. team continues to execute exceptionally well as they strategically shift the earnings mix toward recurring real property income while driving operational excellence. I want to take a moment to thank our entire team for the discipline and dedication towards achieving our goals and continuing to position us for a strong future. Their commitment to operational excellence, including expense discipline and top line growth, resident and guest relations and accountability is what enabled us to deliver these great results. With that, I will turn the call over to Fernando to review our financial results and updated 2025 guidance in more detail. Fernando?

Thank you, John. I will start with an update on capital deployment and our balance sheet. Following the initial safe harbor closing on April 30, we completed the disposition of the remaining 9 delayed consent properties for total proceeds of approximately $118 million, with the final closing taking place on August 29. In addition, during the third quarter, we sold a land parcel for $18 million. In October, we acquired 14 communities for approximately $457 million using 1031 exchange proceeds. These properties include 11 manufactured housing and 3 annual RV communities, all located in existing Sun markets, allowing us to leverage our teams, scale and infrastructure. In the U.K., during and subsequent to the quarter, we purchased the titles to 7 properties previously held under long-term ground leases for approximately $124 million. Year-to-date, we have purchased 28 ground leases for approximately $324 million and agreed to purchase 5 additional ground leases for approximately $63 million with closing expected by the end of the first quarter of 2026. These transactions create meaningful financial and strategic flexibility and eliminate significant lease complexity. As of September 30, total debt stood at $4.3 billion with a weighted average interest rate of 3.4% and a weighted average maturity of 7.4 years. Pro forma for the closed transactions and our common distribution in October, our net debt is approximately $3.7 billion, and our net debt to recurring EBITDA on a trailing 12-month basis is approximately 3.6x. Under our $1 billion authorized share repurchase program, we have repurchased approximately 4 million shares for $500 million year-to-date at an average price of $125.74 per share. We continue to view buybacks as a way to enhance long-term shareholder value while maintaining balance sheet flexibility. Turning to our full year 2025 guidance. Based on our strong third quarter results and recent capital actions, we are raising our core FFO per share expectations by $0.04 at the midpoint to a range of $6.59 to $6.67, reflecting continued operational strength and disciplined execution of our strategic priorities. North American same-property NOI growth guidance has been increased to 5.1% at the midpoint, up 40 basis points from the prior quarter, driven by solid performance across both manufactured housing and RV segments. Manufactured housing same-property NOI is now expected to grow by 7.8% at the midpoint, reflecting continued outperformance through the third quarter and steady demand across the portfolio. RV same-property NOI guidance has been raised to a 1% decline at the midpoint, supported by stable third quarter results and improving transient trends relative to prior expectations. U.K. same-property NOI guidance has been increased to approximately 4% at the midpoint, reflecting better-than-expected third quarter performance and continued real property strength in the Park Holidays platform. For additional details regarding our full year guidance, please see our supplemental disclosures. Our guidance reflects all completed acquisitions, dispositions and capital markets activity through October 30. It does not include the impact of potential future transactions or capital markets activity, which may be reflected in research analyst estimates. I will now turn the call back over to Charles for concluding thoughts. Charles?

Thank you, Fernando. The team delivered a strong performance in the third quarter, and we are encouraged by the positive momentum. I am incredibly excited to be at Sun, and I look forward to providing updates as we work together to drive consistent growth for years to come. We have concluded our prepared remarks, and we will now open the call for questions. Operator?

[Operator Instructions] Our first question is from Steve Sakwa with Evercore ISI.

Charles, I realize you've only been on the job 30 days, but I'm just curious kind of your initial observations and some of the positives and maybe challenges that you've seen? And are there some kind of low-hanging fruit items that maybe you've uncovered given your background at Invitation that you think you can implement at Sun over the next 6 to 12 months?

Great. Steve, thanks for the question. Hello to everyone. Let me start with how excited I am to join Sun's outstanding team. And Steve, I appreciate the question as I'm sure many have been thinking it or wanted to ask it. So congrats on getting it out there. As you mentioned, I've been here for all of a month. So please allow me to level set and give you a few of my early thoughts, clarify what I've done and where I want to focus in the near term. Let me start with the quarter. As you can see from this quarter's performance, the team is executing at a high level. So well done to the leaders on the call with me here today and to the entire Sun team. It's great to join such a high-performing team. So my first priority really has been around how do I support the team to finish our commitments and finish the strong -- the year strong 2025. As I mentioned in my earlier remarks, my first 30 days have been on focusing and on engaging with the team and getting up to speed on all aspects of Sun's businesses. Over the past several weeks, I've been on the road visiting our properties. I met with apartment leaders, spending time in the field with our team members. It's incredibly valuable for me to know our business up close and from the ground up. And I've been impressed by the strength of the team at all levels as you ask about what I'm seeing. The scale of the platform feels familiar, which is great to see and the quality and location of our communities really stands out to me, and I plan to build on all of these strengths. So it's been exciting to validate what originally drew me to Sun. Looking forward, so as we look beyond my first 30 days and next 30 and beyond that, my long-term focus is on driving consistent and profitable growth that creates long-term value. And Steve, as you know me and others know me, my background is in residential housing. So operational excellence and resident and guest satisfaction will remain at the heart of everything we do. Internally, I'm a big believer in the value of culture, one that continues to reflect Sun's values while empowering our teams to deliver their best for our residents and guests. And from a financial perspective, I plan to stay disciplined in how we allocate capital. Any future enhancements will be thoughtful, data-driven and focused on creating long-term value for our stakeholders. But as I think about it all, and let me end with this because I know it's kind of early in my time, what really stands out from my experience is that in today's world, affordable living and attainable experiences that Sun provides is needed now more than ever. The value proposition offered by our high-quality communities and team members is unparalleled. And what this quarter performance shows you with our 98% occupancy is that the demand for affordable housing has never been greater. So I'll end here. I'm generally excited to join Sun at such a pivotal time in the company's history and truly believe in the exceptional opportunity ahead of us.

Our next question is from Jamie Feldman with Wells Fargo.

Great. I appreciate the thoughtful response there, and congratulations on the new role. I guess as you're thinking about the strategy of the company, what are your thoughts on the U.K. or maybe for the broader group there, what are the latest thoughts on the U.K.? I know you've been buying up some of the ground leases. But is this still a long-term hold for the company? And I know the growth looks pretty good actually, but maybe just share your latest thoughts.

This is Charles. Why don't I jump in and just give you my initial kind of what I've done to date on that, and then I'll turn it over to Aaron to get into the ground leases. In my first 30 days, I've had a chance to engage with the Park Holidays team. And as I mentioned, I'm evaluating all aspects of our business, including the U.K. And I'm encouraged from what I've seen. The team's discipline, execution and focus stands out. Performance has been solid, and the team has executed on our strategy to grow recurring real property-based revenue. Again, I'm going to stay high level. I'll spend more time digging in. Aaron, you can fill in a little bit on the ground lease approach.

Yes. Thanks, Charles. Year-to-date through October, we've now acquired 28 ground lease properties and have another 5 under contract, which will bring the total purchases to 33. All these transactions are accretive to our earnings, were completed at attractive yields. And as Charles, I think, alluded to, meaningful flexibility to manage the portfolio strategically over time. Most importantly, from a strategic and flexibility perspective, following all of these closings, 49 of our 53 U.K. communities will be owned on a freehold basis. To comment in a way that John and I have commented previously, consistent with what we have said in the past and in light of our continuing strong performance despite those headwinds, we have the best team in the business in the U.K. They are managing the best assets in the market and are focused on executing an operational plan to ensure as with our entire portfolio that we are optimizing our properties and maximizing value for our stakeholders.

Our next question is from Jana Galan with Bank of America.

Congrats and welcome, Charles. A question on the transaction market, given you've been very active this year in both the dispositions and acquisitions. If you can maybe talk to kind of pricing, what's out there and any kind of additional opportunities?

Appreciate the question. Thank you. We just want to highlight that the most important part of what we've announced from a transactional perspective is that we've been very disciplined and selective in deploying the capital. These are all high-quality assets. They definitely fit our long-term strategy. Leveraging the long-term industry relationships that we've had. We are seeing an increase in the transactional activity in the market, but the overall opportunity set of properties that meet that acquisition criteria is consistent with what we have seen historically. The transactions we've announced and the transactions we are seeing that meet our criteria are much more likely to be in the single asset or small portfolio opportunities. We are looking thoughtfully and prudently at adding communities in our portfolio to the extent they meet those criteria. What we did see from the transactions we executed on was cap rates in the low 4% area. We would expect that to continue to be the area in which we would continue to transact. And as we noted in our release, we do have another $50 million of potential 1031 transactions in the pipeline. But beyond that, I would suggest that the overall environment is very consistent with what we've been seeing, though we are able to acquire these single assets or small portfolios, we will remain selective, and we aren't seeing significant large portfolios of assets that meet our underwriting criteria, but we'll continue to underwrite and look thoughtfully at these opportunities.

Our next question is from John Kim with BMO Capital Markets.

I wanted to ask about your transient RV performance, which was better than expected. Have you had an impact from the Canadian customer base this quarter? What is your engagement like with your customers there? And what are you seeing? And can you remind us about the seasonality of the Canadian transient RV customers? Do you have more in the summer or winter months?

Yes. Thanks, John. This is John. I'll respond to that. First, I appreciate what you said. I'd like to say again how pleased I am with -- when we talk about RV -- annual RV revenue being up 8% in the quarter. Our RV NOI overall is performing towards the higher end of the guidance range we provided. As you know, I think most people know that our Canadian guests represent less than 5% of total transient and 4% of our RV annual business. And as I've shared, we have experienced softness with Canadian customers coming down to Florida. So back to your question about sort of seasonality. We addressed some of that back last winter as well as some of that slowness in the Northeast this summer. But I will tell you, we are -- we've been sort of hyper focused on the annual RV side on retention in 2025. I think you all have heard me talk about that before. And that has led to overall good net conversion results with converting a net almost 700, okay, so far this year as well as we've been focused on with some of the short-term Canadian softness that we've dealt with just more -- getting more domestic RVs to help fill that Canadian guest gap. And then what we're seeing going out forward is a little bit stronger booking trends on the transient RV side, okay, over recent weeks as well as some really encouraging activity in terms of renewals of RV annuals coming into the next season. So it feels like the work that we're doing where we focused our attention over the course of 2025, and I can't emphasize enough, you can't just flip the switch and do well retention. It takes a year to build that up, okay, which is what we've done. So we've put in that work, which is why we're seeing the trends that we're seeing now. And so I'd like to say that we're a little more positive than we were at this point last year.

Given your exposure in Michigan and some of the Northeast states, do you have a pretty even seasonality pattern with your Canadian RV customers?

I mean it's going to be mostly like -- it's going to be mostly in the first quarter, and it's going to be -- and then some in the third quarter up in the Northeast, but it's not really Michigan. It's more like Maine and places like that.

Our next question is from Eric Wolfe with Citigroup.

I was just wondering if you could talk about how you came up with 4% annual RV increase for next year. If there's any reason why it's down from, say, 5.1% the previous year, if you're trying to prioritize occupancy or -- just trying to understand the strategy around that increase. And then also, at what point you have good sort of data on the acceptance of that? So meaning like by the time we get to the end of the fourth quarter or first quarter, do you generally know sort of what your annual RV revenue will be for the year?

Yes. Great question, Eric. Thanks for -- this is John again. Specific to RV, our rent increases are intentionally set to continue reinforcing what I was mentioning earlier on retention, okay? Excellent operational execution remains key in retention, ultimately net RV annual conversion, which means the experience that our guests have at the properties, frankly, is far more valuable than anything we can do from an external marketing perspective. This is why I'm so focused on retention. You have heard me say before that the best revenue-producing site that we can gain is the one we never lose, okay? And as I shared, we believe the strategy is paying off, and we are, in fact, running ahead of last year's renewal pace for RV annuals. And this all kind of culminates, which is why we've been prudently tempered, as I would say it, with a 4% RV annual increase for 2026. I mean it is retention really remains one of the most valuable drivers for consistent long-term growth for us, particularly in the RV space.

Our next question is from Adam Kramer with Morgan Stanley.

Congrats, Charles, on the new role and looking forward to working together. I wanted to ask about just the drivers of the guidance raise for the U.K. business. And I recognize there's some moving parts there with the ground leases, but just maybe fundamentally, like what's happening with that business currently and sort of what's embedded in the new outlook versus the prior?

Sure, Adam. The increase in same-property growth for the U.K. portfolio on the real property side is really a reflection of outperformance coming in the third quarter, and that's leading to the almost 180 basis point increase at the midpoint for NOI growth for the year. We saw stronger transient growth in the quarter as well as success from an expense containment perspective across utilities and supplies and repair.

Great. And maybe if I could just sneak in a quick follow-up here. Just wondering about tax implications. I think you guys have bought about $580 million or so, and I think the gains from the safe harbor sale were to be in the $1.4 billion range. So just wondering maybe high level, is there a tax asset that can offset some of the liability here that you have from those gains?

[indiscernible] Thanks for the question. I think that was referring to the safe harbor potential tax liability. To follow on what we've talked about in the past when we announced the transaction and even prior to that, we started implementing a broad tax mitigation strategy. Some of those efforts were the 1031 exchange programs we've talked about. There was the May special distribution. And then throughout the year, beginning in early 2025 as well as through to now, we have been selling nonstrategic assets that have generated losses. We also have the ability to use NOLs. We're continuing to use those strategies. We're continuing to follow through. And as we've talked about before, the tax implications are generally in the year for the year. So we will continue to work through those as we move towards year-end and provide an update as appropriate. We would suggest we are very happy with how we've proceeded over the course of the year, particularly since the initial closing at the end of April this year.

Our next question is from Michael Goldsmith with UBS.

Welcome, Charles. Sticking with the U.K., can we just talk a little bit about the U.K. home sales environment? I noticed NOI from U.K. home sales were down pretty materially in the third quarter, so year-over-year. So is there -- is that a reflection of the environment overall? Or is there some kind of individual events that are weighing on that?

Michael, it's John. Appreciate the question. Yes, I mean, as I've said in my prepared remarks, home sales in the U.K. are a little lighter than they were last year. But I have to emphasize, we are really pleased with the overall performance of the U.K. business. U.K. same-property NOI grew by 5.4% in the quarter. We raised our U.K. same-property NOI guidance for the balance of the year. Our team in the U.K. continues to execute exceptionally well. They've done a great job of strategically shifting the earnings mix towards stable recurring real property income while maintaining strong market share and pricing power despite what you're talking about is the challenging macro backdrop. But I do think this is really a tribute to the high quality of the portfolio, the exceptional service that happens on the ground by the team and the skill, performance, mindset inherent in that group of people that are led by Jeff, Richard and Chris. I mean, as you know, 2024 was the highest volume year of home sales for Park Holidays. And while 2025 volumes will be lighter, okay, than they were, I think they remain solid in line with our overall operational strategy in the U.K. One of the things kind of looking forward, we did have, as I think Fernando kind of alluded to, a strong 2025 vacation season in the U.K., and that may ultimately contribute to the pipeline for future home sales going out.

Our next question is from Jason Wayne with Barclays.

Just you reported $630 million in 1031 escrow at the end of the third quarter, netting this month's deals against that would suggest around $175 million of remaining funds. So just wondering if you turned down any deals this month or what's causing the delta between that and the $50 million remaining today?

Yes. So originally, thanks for the question. When we announced it, we originally put $1 billion into 1031 exchange accounts. And then we ultimately, as part of second quarter earnings, reallocated approximately $430 million into unrestricted cash, which left about $565 million earmarked for acquisitions. As part of this closing, it was about $457 million, and we do have some residual capital allocated to 1031s. As naturally part of these transactions, you do tend to over allocate 1031 funds for maximum flexibility. So we did expect a slightly less amount of actual transactions, but we ultimately executed on about 80% of those proceeds. In terms of our approach, I just want to reiterate, we're being incredibly disciplined and selective. The funnel we looked at over the course of 2025 was much larger than what we ultimately executed on, and we did not feel any pressure to move forward with any transactions that did not meet our long-term objectives. We have a lot of long-standing deep relationships across the industry throughout the organization, and we're able to leverage those, and we'll continue to leverage those to find these attractive communities on a one-off or small portfolio basis. So we're very happy with what we've landed on. And you can assume that for every deal we do announce and close, there were many transactions and communities we passed on because they did not meet our quality and underwriting criteria.

Our next question is from Wes Golladay with Baird.

I just have a quick question on your land parcel sales. I know in the past, you were looking to be more of a developer and you may have some more inventory. Just wonder if you can quantify how much land you have left to sell -- for potential sale.

Thank you for the question. I think overall, we will continue to look to maximize value of unproductive assets. We've been very aggressive in exiting nonstrategic assets over the past 18 months in excess of $600 million of operating assets as well as land parcels. We wanted to highlight that we will continue to do that even as we look to grow the portfolio with high-quality communities and assets that we may acquire in due course. There may be smaller transactions like the one Fernando alluded to in his opening remarks, about $18 million, but we do not have substantial land assets you should be looking for, for sale. To the extent we do have some additional land, it will likely be adjacent to existing assets and may provide some incremental growth through expansion in the future.

Our next question is from Brad Heffern with RBC Capital Markets.

Welcome, Charles. On the regulatory side, there's clearly been an increased emphasis from this administration on housing affordability. Obviously, that's the main selling point of manufactured housing. I know the main impediment historically to supply has been at the local level, but I'm wondering if there's anything you're tracking at the national level or that could potentially be helpful that might come out of this.

Brad, it's John. I appreciate the question. I mean to answer your question directly, the answer is no. I mean there isn't a lot that's really changed. I mean I think you know that we've been an active participant in anything related to affordable housing as it relates to government support. We'll continue to be an active part of that. But in the meantime, we are obviously very skilled, experienced in being able to work at the local level, and we have shared a lot at the local level through some of the things that we've done in the past that we can be -- well, I would just say we're always ready, okay, because we possess the skills, the experience and the know-how if something does get turned up, if you will, to help boost that and accelerate that process. But for right now, we'll just be prepared.

Our next question is from David Segall with Green Street.

You still have room to run on the buyback authorization, but it seems like you paused the buybacks in October. So I'm just curious how you're weighing -- utilizing the remaining runway on the authorization versus additional acquisitions.

Thank you, David. You can expect us to continue being prudent with -- from a capital allocation perspective. I'd love to remind everyone that since the Safe Harbor sale, we have paid down over $3 billion of debt, meaningfully reducing leverage and removing our floating rate debt exposure, returned over $1 billion of capital to shareholders via special distribution and share buybacks and an over 10% increase to Sun's common distribution, acquired over $450 million of high-quality assets, acquired ground leases in the U.K., significantly improving financial and strategic flexibility for that portfolio. So we'll continue weighing right, all options in front of us from a capital allocation perspective and be thoughtful as it relates to how that next dollar is allocated.

Great. And just with regard to expenses, can you talk about what's driving the cost savings? You talked about it for the U.K. business in particular, but I'm curious for more broadly.

Yes. Thanks, David. This is John. I think more broadly, speaking specifically to like COM expenses within the operations side, we have expanded what we said we're going to do. We're sort of towards the top end of that range and much of that has lie in payroll-related line items, various supply and repair categories, tech-related costs. But one of the bigger pieces is meaningful standardization, expansion and adoption of our procurement platform, which encompasses many different expense-related items centered on property operations. And additionally, I would share that we continue to harness transparency and the power of our technology to drive additional operational efficiencies. So I'm really pleased with how it's going. We will continue to focus on additional expense savings, but we're also very focused on additional revenue growth opportunities, okay? And the results of which are reflected in what you're seeing today in terms of our results, not just for the quarter, but for the whole year and the performance we've had in 2025. And some of that on the top line has come in the form of retention, occupancy gains, rate gains, revenue growth as well as the great job the team has been doing from a collections perspective, which has turned into overall savings within bad debt. So I mean, to really sum it up for you, David, it's fundamentals and execution. They are the focus and what you're seeing happen in real time. You're seeing this happen in real time to our overall bottom line results.

Our next question is from Tayo Okusanya with Deutsche Bank.

Charles, welcome aboard. The transient RV business, could you just talk a little bit about what trends you're seeing at this point, again, whether you're kind of at the point where we're kind of getting towards the demand normalization everyone is looking for or whether for whatever reason that hasn't come back and kind of what may be delaying the eventual demand normalization of that business?

Yes. This is John. I'll start. Great question. It's actually a question we've been asked pretty much all year long. And I think that the best way that I would answer that is, again, we're really happy with our RV same-property NOI performance being at the top end of that range, okay? We've done really well coming off of 3 record years of transient RV conversions and still growing them. On top of that, we've got 23,000 transient sites we can convert in the coming years if we want to, okay? And so when we think about -- I would tell you, what is normalization, what is stabilization, I would just say, well, what is it, okay? Because it's a balance between what we do from both an annual side and the transient RV side. And the goal is to maximize what we can do from an overall RV NOI. And I think what you're seeing happen and what I've shared earlier in the call has been, we are seeing improved trends, not just on the annual RV renewal side, but as well as our current pacing that we're seeing on the transient side. So it's a difficult question to answer. But I think what we're seeing right now is actually pretty positive.

And Tayo, if I could add, we are actually seeing an improvement from a forecast perspective for the full year for just transient RV revenue performance. When we last spoke in July, we were forecasting about a 9.25% decline in revenue. That has improved over the last 3, 4 months by about 30 basis points for full year performance. So we're actually seeing slight improving trends from that standpoint.

Our next question is from Steve Sakwa with Evercore ISI.

Just -- and I'm sorry to ask this on kind of the RV business. So I believe the RV business is down 2.8% year-to-date, but the forecast for the full year calls for down 1%, which was a 50 basis point improvement. So that implies a pretty big, I think, acceleration or improvement 4Q to 4Q. Can you just maybe speak to what's driving that, number one? And then secondly, I know you guys have a lot of cash sitting on the balance sheet that's not restricted. How do we just think about that use of cash kind of moving into '26?

So Steve, you're right as it relates to expectations for fourth quarter NOI growth for our same-property RV portfolio. The main driver of that will be -- or one of the drivers for that will be transient growth where we're expecting a smaller decline than what we have seen on a year-to-date basis. That would be the largest driver.

And Steve, on the second question on the capital allocation. Again, I'm going to stay high level because of the time that I've been here, but I've been digging in with the teams and my perspective has always been to take a disciplined approach that balances growth, operational needs and shareholder value. And what I've seen so far is the team has executed very effectively across all of those areas. It's been very disciplined. And I expect that balanced and disciplined approach to continue as I dig in and get a deeper understanding with the teams. And we'll continue to review that framework, work closely with the Board and evaluate all options for long-term shareholder value.

Our next question is from John Kim with BMO Capital Markets.

It's a followup. Charles, I wanted to know what you thought of the rental home business within the MH communities. Is that's something that could be built up within Sun?

Yes. Again, this is part of my deep dive into the business. I've obviously, with my background, I have been spending a lot of time with John and Bruce understanding that business and how it works. Obviously, I have history and perspective. It seems to be executing really well, and I'm asking some questions as to kind of where we go from there. I don't have much more to add at this point, but it is something that I am particularly interested in given my background. John, do you want to add anything or?

Yes. I would just -- I think you know this, John. I mean, I've been around that program since its inception here at Sun. And one of the things I think is super important, one of the biggest benefits that it brings to the company is a key traffic driver to our communities, okay? Because we have lots of prospects that come to the property, thinking they might want to rent it, ultimately end up purchasing a home and become a homeowner. So that in itself is an important part of that program. And like I said, it drives a lot of traffic to us. So it's something that we will continue to have as one of the tools that's going to drive growth across the portfolio.

And if I could just follow up on the U.K. ground lease acquisitions. It provides you with some earnings accretion and flexibility. Can you just comment on what that flexibility means? Is that on the financing of the asset? Is it flexibility in how you may spend capital to develop on the asset? Or just does it give you just more value when -- if and when you decide to sell some of these communities?

Thanks for the question. It's Aaron again. Yes, to all of those questions. I think fundamentally, we acquired the business with these in place. They were part of our original underwriting. And due to our capital position and the opportunity presented by the current landlords, we're able to acquire them, incredibly helpful for the team on the ground in terms of managing the portfolio and owning them on a freehold basis. And certainly, to the extent we continue to assess the portfolio, just as we've done in the U.S., we've considered certain single asset, noncore asset sales and things like that. We will continue to do that. It provides that flexibility and ultimately, just increases it strategically and certainly remove some incremental lease payments we were making overall. So it does check a lot of boxes, both for the team here as well as for the team in the U.K., simplifying and improving flexibility and strategic optionality.

Our next question is from Brad Heffern with RBC Capital Markets.

I may have missed this, but did you give the cap rate on the recent acquisitions? And also, can you give a rough yield, I guess, on the ground lease purchases?

Aaron, again, thanks for the question. We did comment and said we were acquiring in the low 4% cap rate area, which is consistent with what we've shared with the market over the last few months from an expectations perspective. And in terms of the ground leases in aggregate, roughly in the same range, slightly higher from a yield perspective, low to mid-4%.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Charles Young for any closing comments.

Thank you for joining our call today, and I appreciate the welcome messages from each of you. I look forward to seeing many of you in person at the upcoming conferences over the next few weeks. Thank you.