Sun Communities Inc (SUI) 2025 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities fourth quarter and year-end 2025 earnings conference call. At this time, management would like for 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 merely 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.

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 will now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may begin.

Good morning, and thank you for joining us today. I'm 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 $68 for the full year, both above the high end of our guided ranges. The strength of our performance and optimism in our outlook is grounded in the durable fundamentals of our 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 portfolios 98.1% occupancy. Affordability is a core attribute of our business plan. Manufactured housing is a high-quality living environment at a cost significantly below traditional housing alternatives, while 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 a 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 3.4 times 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 built upon and further refine some 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 involves continued focus on what has positioned Sun 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 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 team for the warm welcome over the past few months. I'm 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'll turn the call over to John and Fernando to discuss results in more detail. John?

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 a 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% and while operating expenses increased 3.2%, reflecting continued focus on balance, efficiency and cost control.

In RV, same-property NOI increased 5%, driven by a 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 America same-property NOI increased 5.7% and 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 a 5% revenue growth driven by higher MH and transient income, partially offset by a 6.6% increase in operating expenses. UK home sale volumes were down 4.9% compared to 2024s record levels. Across the organization, we remain focused on operational excellence, disciplined cost management and leveraging technology and data to enhance efficiency and the resin guest experience.

Having been a partisan for nearly 24 years I can tell you now is truly one of the most exciting times I've experienced as we carry the strong momentum we've 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. and I want to thank our team members for their continued commitment to service and operational excellence. As we enter 2026, we remain focused on consistent execution driving steady revenue growth and maintaining expense discipline.

With that, I'll turn the call over to Fernando to walk through our financial results and 2026 guidance. Fernando?

Thank you, John. In the fourth quarter, core FFO per share was $1.40, meeting the high end of our guidance range by $0.01. For the full year, RFFO per share was $668 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 nonstrategic 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 now holds a freehold interest in nearly all our UK properties, 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 12-month recurring EBITDA of 3.4 times.

No floating rate exposure and a weighted average interest rate of 3.4% and with a 7.1-year weighted average maturity. Following these transactions, we now have a well-laddered debt maturity profile with $492 million maturing in 2026 and no maturities until 2028.

As of December 31, 2025, we had $636 million of total cash on the balance sheet. In September, we closed on a new $2 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 on 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 4.3 million shares at an average price of $1.25 and $0.62 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 $693 million. With a range of $6.83 to 703.

For the first quarter of 2026, we are guiding to $1.28 at the midpoint. 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'll turn the call back to Charles for closing remarks.

I'd like to take a moment to reflect on what I've learned and where we are headed. These first few months, I have been focused on listening, learning and engaging 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 Stone's culture and the opportunity ahead to further sharpen focus, strengthen execution and build for long-term growth. I am energized by what I've seen so far and excited about the next chapter as we turn insights into action and build on SUN'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 Instructions)

Steve Sakwa, Evercore ISI.

Yes. Charles or maybe John, can you maybe just talk a little bit about the data and Charles in your opening remarks, you talked a lot about how you're using data. You want to make better decisions. Are there concrete things that you can discuss with us you've implemented? Or are there things that you're sort of currently working on that you expect to implement in '27.

Steve, it's Charles. I'll take it, and maybe I'll it to John if he wants to add in a little bit more. As I said, I've had a chance to go deep within the organization out in the field and 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's building off of the foundation that was put in place a couple of 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, encourage us to build on.

Today, as I talk to the team members around the table here with me we have more real-time data access the data than we've ever had. But there's more there as we really start to build out the platform, which is solid, but there's more from beginning to end that we can do. And 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. And our guests, specifically, I think it will be a help on the RV side and eventually on the MH side.

So that's one piece that I'll give you, but there's 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.

Yes. Steve, I'll 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 now and have that transparency, be able to deliver it to the team, be able to rank it with the team, okay? So we know better what we're doing at any moment in time. That's one application.

Another one is going deeper into where the traffic comes from, okay, whereas the data, okay, and being able to link where it's coming from all the way to who actually converts to a transaction. Okay, and being more targeted, it's like being more targeted versus broad in terms of the campaigns that we can develop around that. That's what's taking place right now.

Eric Wolfe, Citibank.

At December 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 through purchases and capital allocation this year, what you're assuming in guidance as far as the use of that $630 million of cash as well?

Great. I'll start. Thanks for the question. I'll let Fernando come in on what's 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, and I joined at a really kind of special time in the company's history. The strength of our balance sheet, the reduced leverage that we have we position ourselves with manageable maturities and significant liquidity. So there's a lot of flexibility. And so as I think about capital allocation for the year, we have a balanced toolkit as our approach.

One is, as I talked about in our core pillars, is investing in our communities and our operating platform. the ability to invest in our strength, as I just said, the core portfolio, the people and the systems is one kind of of those toolkits. The other is pursuing thoughtful and disciplined accretive external growth opportunities that align with our strategy of MH and RV. And so we'll continue to look for opportunities there. And then as you're talking about with the share repurchases, there's returning capital to shareholders and using share repurchases thoughtfully when they represent compelling value.

These are all parts of our toolkit. We're going to be balanced as we go through the year, use our flexibility to be prudent with our use and we'll continuously evaluate what's going to add shareholder value. Fernando you just want to give forward guidance in terms of what we have in there.

And so Eric, consistent with prior years, we don't -- we're 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 billion of cash on the balance sheet today is generating interest income as it is used for the business. any acquisitions that we were -- that we would find and transact on or any share repurchases would be incremental to the baseline guidance we've provided.

And then just a follow-up -- 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're targeting?

Yes. Thanks. It's Charles. 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 that sort of the consistent yield range we've talked about previously in the mid-4% yield range.

In terms of the remaining acquisitions. Those are simply held on the balance sheet at 1031, but have not yet been closed. So we'll continue to look to identify those and update the market as we see them, as Fernando indicated, to the extent that we don't ultimately closed on those 1031 proceeds as occurred in 2025 that would simply move into our unrestricted cash balance.

Brad Heffern, RBC Capital.

Charles, can you give any updated thoughts on the UK and how it fits into the portfolio?

Absolutely. I appreciate the question. look, I've had a chance to spend some time with the UK team, get over there. And what I've observed is high-quality operation, best-in-class portfolio, strong assets and very talented and capable team.

I'm impressed with our operational execution. That being said, they're 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 and as I look at the business and as we talked about as being disciplined capital allocators, we continue to evaluate our entire portfolio to determine how best to create long-term shareholder value and UK is no different.

We're going to continuously kind of 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'll continuously assess the UK in the context of our overall strategy and capital allocation priorities. John, if you want to add anything?

I mean the only thing that I would add Brad, is that I think we've put out in our guidance that we've put out a 4.1% rent increase in the UK, that's running ahead of inflation in the UK. I think 2025 represents a really good year of home sales that we had close to 95% of the prior record, okay, that we had the year before that.

And when you look at sort of from a market share perspective, we got a team of people and the communities that we have and the locations that we have that are executing brilliantly, okay, in the face of it all. And so the only thing that sort of offsets that a little bit is like what Charles said with -- on the expense side, the lot that's attributed to the national minimum wage, okay? And there's everybody is in that boat. And so it's really pleasing to us to see them execute through that despite it off.

Wes Golladay, Baird.

How do you see the annual RV conversions this year? I think last year is just around $600 million can you give your view on 2026?

Wes, I appreciate the question. I think we're looking at something similar to what we saw last year is what we track. Really pleased with how last year played out, and I'm really pleased, especially as I've heard before that I think the strategy that we took with respect to retention within our RV annual business really took hold we're seeing that emerge in the form of the renewal rates that we have now in comparison to this time last year, where we're running ahead. So that's kind of how we look at it. It's going to be sort of similar to what we experienced last year.

Okay. And then can you give your view on the transient RV, -- how does the pace look.

It's good. It's pace you well. I think A little bit about 2025, as you know, our same-property NOI performance in the year finished within the guidance range. I do want to emphasize, as I always do, that we'd like to work on the entire business. So we're really focused on bottom line results specific transient RV. I will reiterate that some of what we experienced in 2025 as a direct result of the success we've had in the strategy of reducing the number of branding sites and converting them to annual guests. And that really formed in the way what we did last year was demonstrated by a 9.8% annual RV growth number and the 600 network conversions you referenced.

I think 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 I will tell you reflects what we're seeing in our pace at this point in time, but emphasize further, okay, some of the things that we're doing that are really sort of seamless to what Charles has talked about with our core pillars.

We have several target initiatives in RV, which include OTA expansions or I should say differently, booking channel expansions, digital booking enhancements, data leveraging opportunities Again, there's a lot to unpack there, and I look forward to having those conversations as the year progresses, but we think a lot of this really lines up for what we're seeing and if you look at sort of how we track an RV in '24 versus 25 versus what we're putting out there in '26, you're starting to see that stabilization take hold.

Jamie Feldman, Wells Fargo.

Charles, I appreciate your comments to close the call about kind of where you are thinking through the company. Can you just maybe to give an update on just where you are in the process of settling in, just in terms of, I think, people expected maybe a noisier print for 4Q, but you pretty much took one impairment in the UK and everything else seems to be kind of humming along. So -- and then, of course, you had some management changes to start the year. But would you say at this point you're kind of 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're pretty much settled in at this point and not a lot to still review big picture? Or there's still a lot to work through as you're thinking about the future of the company.

Thanks for the question. It is a good question. I can't say that my work is done. It's continuing. I'm past my listening and learning tour, if you will. I can't -- I used to be the content in days and then months and I'm in now. And so I am settled. The team knows who I am I can't say enough how special the culture here is it on and how welcoming and how I felt like I just kind of 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, is where the opportunity is ahead. So that's why I can't say settled in, but we have work to do in terms of investing in our communities and our infrastructure in terms of optimizing the platform, that's where the work will be done and will continue to be done. So I'm busy, but I'm loving it. And I'm definitely kind of getting in the flow at this point and enjoying every minute of it.

Again, I can go into more details, but at this point, what you're seeing right now, the team put up great numbers for the quarter. We have good guidance, and we're just going to execute for the rest of the year. The simplification strategy that the team put in last year building off of that with this kind of core focus and laser focus in on the core. And that's what it's about, and that's what's going to get us -- to get into this -- the rhythm that everybody expects that us to do given the nature of this business and the affordability and attainable experiences that we provide for our residents and guests.

Michael Goldsmith, UBS.

Questions on the RV guidance. Can you just kind of break down what the underlying expectations are for annual and transient and then also maybe break down what needs to happen to get to the upper end or lower end of that range and also a little lower, but what's -- what you've been noticing with the Canadian customer.

Thank you, Michael. I think John and I will tag team that question. But at the midpoint of our range, we do have a rental increase for our annual guest of 4%. As John mentioned earlier, we are expecting transient conversions to annual contracts, agreements 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 '25 year-over-year over '24. So that points to, as John was mentioning, some stabilization as it relates to the transient side of the business. But John, if you want to go into.

Yes, I'll start, Michael, with on the Canadian side, which as we shared before, we did experience that softness in Q1 and Q3 of last year with Canadian guests. The interesting thing about that is, I think last year, we shared that Canada represented about 5% of the RV business. That represents about 3.5% of our total RV transit 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, I think, frankly, it's been mitigated to some degree versus what we had in 2025. So it's really more about what I said a little bit earlier.

And so -- and you sort of alluded to with the question, like, what are the strategies we can push, okay, on the RV side, which I talked about the work that we're doing on booking channels. We recently added two additional booking channels on the RV side, literally towards the end of 2025, which should bear some fruit in 2026 and that strategies to push perspective. On the digital bookings side. It's about contact or guest routing enhancements, easing the booking process enhancements, which frankly, dovetails into leveraging the tech like Charles is talking about to capitalize on a nimble booking window that aligns more seamlessly with our revenue management capabilities that we have today.

And then if you take a step further in the things that we do, enhancing just the guest journey overall, enhanced and targeted placement. This is not about the old RV days or just broadly throwing things out there, but it's about being targeted and thoughtful in the approach and listening to the data and what it's telling us to do okay, to pick where we want to place it to help us find those guests, helping the easing of 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've said on the MH side, building the sales force on the RV side for Sun.

Jana Galan, Bank of America.

Following up on the transaction market, given Sun has been very active in the past year, can you provide some details just on product in the market, even if it's not in your buy box, and is there more or less volume today than last year in MH or RV and any significant differences in cap rates across regions or between age-restricted and all age.

It's Aaron talking. We did -- we were really fortunate to move through 2025 and execute on primarily MH and also some annual RV acquisitions. As we've long said, the cap rate ranges are kind of in that four to five range. We haven't seen a massive change across the years. This is a high-quality asset class.

And so the higher quality MH communities that are probably not transacting are still being asked that sort of sub four cap rates, their quality, quality of the cash flows the current sellers believe that that's appropriately valued, where we're targeting assets again in markets in which we operate.

So strategically for us, we want to buy portfolios or assets in markets where we have operating leverage, where we have an understanding of the market over the long term, and that's really where we have been focused to date. So what we're seeing is generally consistent with in the past. We do believe the transaction market is picking up. There is a little more constructive backdrop in the financing markets. 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.

And most of what we're seeing continues to be in the single asset small portfolio local owner-operator type environment. And so we don't 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 and we're generally pleased with what we're seeing in our pipeline, but it is very consistent with what we executed in 2025.

Jason Wayne, Barclays.

Just looking at home sales volumes that are down year-over-year in '25. Can you just walk through your home sales assumptions for this year and how that gets baked into G&A?

Yes. I think Jason, thanks for the question. I think what you're seeing when you talk about the home sales for 2025 is, frankly, our focus is on real property income and home sales expectations is really a product of enjoying nearly 98% occupancy in the portfolio as well as very low resident turnover, which ultimately leads to the stability of long-term cash flow for rent. So I think the contribution of home sales is not really a material to FFO as the other things that we are working on, the things that we're doing, and I think volumes and margins for this year will be similar to what we experienced in 2025.

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?

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.

John Kim, BMO Capital Markets.

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%. And if you could provide the same building block for 2026 as far as MH seems to revenue?

They'll 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 backdrop of 5%.

Enjoying 98% occupancy in manufactured housing. We do still expect gains from an occupancy perspective in that $500 to $600 million site range. And then there could be some additional revenue opportunity there. But the building blocks are very much similar over the course of both years.

David Segall, Green Street.

It looks like the rate of move-outs has been increasing over the last couple of years. Curious if you can provide some color on what's driving that? And if you can bifurcate it between the MH portfolio and the annual RV portfolio.

Yes. Good question, David. Appreciate it. I think for 2025, the rate of move-out was mainly attributed to RV. But that was -- and a lot of that had to do with some of the Canadian impact that we've experienced in 2025. But again, this is precisely why we focused our -- so much of our attention towards retention over the course of this year and replacing those move outs to more domestic movements. But -- and as I said earlier, I think it's paying off because we're seeing it in the form of the renewal rates that we're having now as well.

One thing of note, typically in an MH property when we have a move out, it's going to be a resident moving out versus a home that is 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 of that transaction as well.

And then, can you just briefly talk about what is driving the higher expenses in the UK recently.

I think much of it has just been attributed to what's taking place nationally, especially the national minimum wage and really falling in more of the payroll line of things than anything else as a result of that, David.

And that's consistent with expectations for 2026 as well. We do have elevated expense growth in our guidance range with the midpoint of 2.2% for 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 of this year.

Linda Si, Jefferies.

With year-end net debt to EBITDA at 3.4 times, do you have a targeted range for leverage going forward?

Sure. We have -- 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 3.5 and 4.5 times net debt-to-EBITDA. So to get to that midpoint, there's some releveraging to do.

Do you have a view on what it could look like by year-end?

From a guidance perspective, certainly, we don't include share buybacks for any additional acquisition activity. So we -- in the guide today, we would be ending the year pretty similar to how we've started.

Sorry, I'm just going to 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 being -- finding accretive opportunities there and 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.

Thank you. At this time, I would like to turn the call back to Mr. Young for closing comments.

Great. Thank you for the conversation. We appreciate everyone's interest, and we look forward to seeing everyone at the upcoming conferences.

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