Sun Communities - Q3 2017
October 24, 2017
Transcript
Operator (participant)
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities Third Quarter 2017 Earnings Conference Call. At this time, management would like me to inform you that certain statements made during this conference, which are not historical facts, may be deemed forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's periodic filings with the SEC. 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.
Gary Shiffman (Chairman and CEO)
Good morning, and thank you for joining us on our third quarter earnings conference call. The strength of our platform and the consistency and execution of our playbook drove solid results in the quarter as we closed out a highly successful summer in both our manufactured housing communities and RV resorts. FFO per share in the quarter was $1.13, driven by a 7.7% increase in same-community NOI and a 160 basis point improvement in same-community occupancy to 97.2%. In the quarter, we added 394 revenue-producing sites, an increase of 35% over the third quarter in 2016.
Home sales were once again strong as we sold 805 homes in the quarter, relative to the 895 sales in the third quarter of 2016, which included a large inventory of homes that were acquired as part of the Carefree portfolio. In the quarter, we delivered over 350 expansion sites in four communities, bringing the year-to-date total sites delivered to over 1,000. The fourth quarter will be a busy one, as we expect to deliver an additional 1,200 expansion sites by year-end, in addition to 130 redeveloped sites at Ocean Breeze, Jensen Beach, Florida. The full revenue impact of these expansion and redevelopment site deliveries will be realized in 2018 as the sites fill. The ability to grow our site count using owned land inventory, which is already zoned, provides us with an attractive risk-adjusted return.
Beyond the roughly 2,200 expansion sites we're on track to deliver in 2017, we'll have approximately 7,200 additional sites that we can develop to drive organic growth over the next several years. We continue to replenish our inventory by buying parcels adjacent to our existing communities, as well as acquiring communities with expansion potential. On the acquisition front, we expect to continue to add single communities and small portfolios, which complement our existing footprint. During the third quarter, we added 4 high-quality, age-restricted properties in California for a total investment of approximately $55 million.
The acquisitions included a 331-site RV resort in Pismo Beach, two manufactured housing communities totaling 350 sites near the Redwood National Forest on Humboldt Bay, and a 118-site manufactured housing community across the street from our existing 477-site in Royal Palms in Cathedral City. Proceeds from our May equity offering were used to pay for part of these acquisitions, and we expect to deploy the balance of our proceeds by year-end in additional acquisitions and the November redemption of our $85 million Series A Preferred Stock. Prior to turning the call over to John, I wanted to review some key differentiating features, not only about the manufactured housing and RV asset class, but more specifically about the Sun Communities platform.
Through a combination of sizable acquisitions and expansions, we have built a platform that is uniquely positioned to continue delivering attractive internal growth over the coming years. There are four levers in our portfolio that we expect to generate perennial organic growth. First, the manufactured housing and RV business has low resident turnover, and our monthly rental rates have historically increased by 2%-4% on an annual basis. Given increased demand an high occupancy levels, we anticipate that Sun will be able to deliver results at the high end of this range. Second, Sun's manufactured housing portfolio occupancy is currently 95.2%, and we believe that it has an additional 300 basis points of occupancy gains that can be captured over time. Third, the development and lease-up of expansion sites will further supply the portfolio with occupancy opportunities....
As mentioned earlier, the 7,200 sites available for expansion post-2017 gives us a multiyear runway of additional sites on which we can execute. Said differently, this is the equivalent of adding 36 communities of 200 sites each to our portfolio, with the potential to produce low double-digit internal rates of return. Last, we have approximately 16,000 transient RV sites, a portion of which will be converted to annual leases over time. Historically, we have benefited from a 40%-60% increase in annual revenue per conversion. It's these levers, along with external growth through potential acquisitions and selective greenfield developments, that will power Sun's growth engine. With that, I'd like to turn the call over to John to discuss our operations in more detail.
John McLaren (President and COO)
Thank you, Gary. The third quarter was another strong quarter for Sun. Total revenues increased by 7.4%, with a solid contribution across the platform. Revenue from the total portfolio, excluding transient income, rose 7.3%, and for our transient revenue, was up 9.2%, signaling a successful close to our RV summer season. Same-community revenues rose 6.2% in the quarter, driven by a 160 basis point occupancy gain to 97.2%, while we were able to maintain same-community expenses with a 2.9% increase in the quarter. This translated to same-community NOI growth of 7.7% for the quarter and is tracking at the high end of our annual guidance for the year at 6.8%.
With two major summer holidays, the third quarter is Sun's seasonally highest quarter for RV revenues. Same-community RV revenues were up 6.7% for the quarter and 6.6% for the year. Same-community transient RV revenues were up 6.6% for the quarter and 5.7% for the year, off of a lower transient site base due to annual conversions over the past year. For the Fourth of July and Labor Day weekends, same-community transient revenues growth was 5.2% and 20.4%, respectively. As we look ahead to the winter season, transient RV bookings are running at 81% for the fourth quarter, ahead of the 78% last year, despite any perceived impact from the hurricane.
Turning to total portfolio revenue producing site gains, in the third quarter, we have added 394, of which 254 were conversions from transient RV to annual RV sites. On a year-to-date basis, we have added 1,833 revenue-producing sites and are on track to deliver approximately 2,600 revenue-producing sites by the end of the year. Before turning to our financial results, I wanted to take a moment to discuss the impact of Hurricane Irma on the portfolio. As we outlined in our prior press release, Hurricane Irma caused minor damage to our mainland Florida and Georgia communities and caused severe damage to three communities in the Florida Keys, which had a total of approximately 190 sites that will require redevelopment.
With respect to the balance of the properties affected by the hurricane, I am pleased to report that nearly all of the cleanup and repair work is complete and the properties are fully operational. As a result of our experience with storms of this nature, Sun put into practice its hurricane preparedness plan, engaging an extensive group of third-party contractors in advance of the storm to ensure an immediate response to any potential damage. Consequently, we were able to quickly and efficiently return to full operations and deliver superior service to our residents. We are extremely proud of our team's efforts before, during, and after the storm, demonstrating once again the skill and execution ability that embodies Sun's operations platform overall. Karen will now discuss our financial results. Karen?
Karen Dearing (CFO)
Thanks, John. Sun reported $1.13 of FFO per share, excluding certain items, for the quarter ended September 30, 2017, in line with our previously provided guidance. For the nine months ended September 30, 2017, FFO per share, excluding certain items, was $3.19, up 10.4% for the nine months ended in 2016. Our adjustments to FFO included charges related to Hurricane Irma. In the quarter, we recorded $7.8 million of catastrophic weather charges, primarily related to tree removal and debris cleanup, public area damages, and minor flooding. In addition, we will be taking 3 of our Florida Keys properties, totaling approximately 190 sites, out of service due to the extent of the damage. These properties, which were acquired as part of the Carefree portfolio, are not part of our same-community pool.
We have included a walk of estimated expenses and recoveries in the portfolio activity section of our supplemental. It is important to know that these estimates reflect our best evaluation of repair costs and insurance recoveries for the full impact from the storm on Sun properties. We continue to work closely with our insurance providers to finalize these estimates, but we do not anticipate material changes to current estimates. We do, however, expect additional insurance recoveries for loss of revenue and redevelopment costs associated with the Florida Keys communities, which cannot be estimated at this time. With respect to liquidity, at quarter end, Sun had $137 million of unrestricted cash, no borrowings on our line of credit, and a net debt to trailing twelve-month EBITDA ratio of 6x.
As you know, we acquired four high-quality age-restricted communities in California for a total purchase price of $55 million. The acquisitions were completed using a combination of cash, common stock, and debt assumption of $4.6 million. The common stock portion comprised $21.4 million of the purchase price, issued at $88.36 per share. We believe that the ability to issue common stock for this transaction gave us a distinct advantage in being able to secure these properties. On the capital markets front, we had a relatively quiet quarter as we addressed most of our maturities earlier in the year. We recently announced the November redemption of our $85 million Series A preferred stock, which carries a 7.125% dividend.
With regard to FFO, we are raising our guidance for the fourth quarter to $0.96-$0.99 per share, which implies an annual FFO per share range of $4.15-$4.18. This does not include any assumption for additional acquisitions. We also want to remind you that we will be issuing 2018 guidance in conjunction with our fourth quarter earnings. This completes our prepared remarks, and now we'd like to open up the call to questions. Operator?
Operator (participant)
Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Once again, that's star one to register any questions at this time. Our first question is coming from Drew Babin of Robert W. Baird. Please go ahead.
Gwen Clark (Director and Equity Research Analyst)
Hey, good morning. Quick question, first of all, on the acquisitions, I was hoping you could talk about, cap rates on those deals and maybe the potential expansion opportunities that may or may not exist within these properties.
Gary Shiffman (Chairman and CEO)
Drew, Looking at my notes here, the average cap rate for the four communities was 5.9%. We were very able, very pleased at what we were able to actually achieve in California with these acquisitions. And the comment on the broad market for anyone who might be interested is, we haven't seen much change in cap rates since we commented last quarter. Most of what we're seeing for the high-quality properties is in the 5%-6%, or five to six cap rate range. And we look for continued opportunity really up and down the West Coast from north to south.
Gwen Clark (Director and Equity Research Analyst)
Okay, that's helpful. And one more for me. On the collateralized receivables on your balance sheet, I was wondering, to the extent that Sun lends to, the tenants on their homes, are these tenants required to carry insurance?
John McLaren (President and COO)
Drew, hey, this is John. Yes, in the case of financed contracts to purchase homes, every one of them is required to carry insurance.
Gwen Clark (Director and Equity Research Analyst)
Okay, great. That's good to know. Thank you.
John McLaren (President and COO)
Yep.
Operator (participant)
Thank you. Our next question is coming from Nick Joseph with Citigroup. Please go ahead.
Nick Joseph (Senior Equity Research Analyst)
Thanks. Maybe following up on those, what percentage of the overall residents have insurance on their homes across your portfolio?
John McLaren (President and COO)
So this is John. You know, certainly, again, in the case of financed contracts, it's essentially all of them. You know, we, you know, many of our residents do carry insurance down in Florida, but many homes in Florida, as you know, as you might know, are purchased with cash. So, I mean, really, it's more a personal choice than anything else on whether a resident chooses to insure or not. It's not, it's not something that we actively track.
Nick Joseph (Senior Equity Research Analyst)
Okay. On the cap rates for the acquisitions, was there any differentiation between the three MH and the one RV? I know you gave the blended 5.9, but just curious how it breaks down between the two.
Gary Shiffman (Chairman and CEO)
No, there really wasn't any differentiation. They're all over the board, from a low of 5.35 up to 6.4.
Nick Joseph (Senior Equity Research Analyst)
Thanks. Just finally, in terms of acquisition opportunities, after hurricanes, do you typically see additional opportunities to acquire assets? What is the timing before those deals maybe materialize?
Gary Shiffman (Chairman and CEO)
I think it's an interesting question that I know that after Andrew we actually did pick up a community in Homestead, and it turned out to be an excellent opportunity for us. I don't foresee a you know big opportunity for us or our competitors. But certainly if something's out there, we'll take a look at it. And the timing really is definitely uncertain. I think the most devastation took place in the Keys, and everyone's still trying to understand what next steps will be, including Sun.
I think John would share with you that basically we're at the front of the line, and all the municipalities looking to redevelop the 190 sites that were damaged, and there are many others in line as well. So we'll just have to wait and see what happens.
Nick Joseph (Senior Equity Research Analyst)
Thanks for the color.
Gary Shiffman (Chairman and CEO)
Mm-hmm.
Operator (participant)
Thank you. Our next question is coming from Gwen Clark of Evercore ISI. Please go ahead.
Gwen Clark (Director and Equity Research Analyst)
... Hi, in the prepared remarks, you talked about 300 basis points of occupancy gains that you might be able to realize. Can you talk about the timeline for that?
Karen Dearing (CFO)
Sure. So, we were talking about the portfolio being 95.2% occupied for MH portfolio, and with, I think it's about 130 communities that are 98% or more occupied, we really feel like we have that runway of, you know, 250-300 basis points in the total portfolio. In time frame, if you're looking at, I don't know, RPS is those 2,600 this year. You know, you could imply something from there.
Gwen Clark (Director and Equity Research Analyst)
Okay. On a different topic, do you have any idea what the bookings on the transient business would have been if not for the conversions?
John McLaren (President and COO)
Gwen, this is John. Can you mind repeating the question?
Gwen Clark (Director and Equity Research Analyst)
For the transient business, do you know what the bookings would have been if not for the conversions that you guys had?
John McLaren (President and COO)
That's, you know, what I can tell you is what we do track, which is that we're about 81% right now, against 78% last year on the transient side. And I think the important point with that is that that revenue, 81% of revenue booked, is a higher figure, again, you're on a smaller site base, transient sites that we have.
Gwen Clark (Director and Equity Research Analyst)
Okay, and that's same store?
John McLaren (President and COO)
Yes.
Gwen Clark (Director and Equity Research Analyst)
Okay. Thank you very much.
John McLaren (President and COO)
Yep.
Operator (participant)
Thank you. Our next question is coming from John Kim of BMO Capital Markets. Please go ahead.
John Kim (Senior Equity Research Analyst in U.S. REITs)
Thanks. Good morning. I think you mentioned that, the expansion sites are expected to well exceed your prior target of 2,000 for the year. Can you just comment on how you, how you were able to increase this capability just in the past few months, and what a good run rate is going forward on an annual basis?
Gary Shiffman (Chairman and CEO)
Well, I think for all run rates going forward, we're gonna defer to guidance, which we'll release with next quarter's earnings call. But I think just to clarify anything that might have been confusing, this will be our largest year of delivery of expansion sites at right around 2,100. We have a inventory about 7,200 remaining expansion sites that are zoned and entitled after we deliver those sites. And beyond that, we're in the budgeting process to really determine what we will bring to market in 2018 and beyond.
John Kim (Senior Equity Research Analyst in U.S. REITs)
So 2,100 is the target for this year? But for some reason, I heard the number 1,200 additional sites this year, and that's why I was-
Gary Shiffman (Chairman and CEO)
Yeah, 1,200 additional, for the balance of the year, bringing the total to 2,100 for 2017.
John Kim (Senior Equity Research Analyst in U.S. REITs)
Okay. And then, can you remind us on the average cost to prepare a site for occupancy?
John McLaren (President and COO)
Yep. This is John. The average cost generally runs between $32,000-$37,000 a site.
John Kim (Senior Equity Research Analyst in U.S. REITs)
Got it. Okay. Gary, you mentioned the rental increases expected to be at the high end of your annual 2%-4% annual range. Besides supply-demand dynamics in your communities, can you just describe for us the other market forces that determine these rental increases?
Gary Shiffman (Chairman and CEO)
Certainly, we have some bit of rent control in our California properties, and well, that's a small percentage that would dictate what the rents could be on the West Coast. Elsewhere, we have very little restriction portfolio-wide that would control any ceiling that would be below those numbers. Where we do have CPI, we do have CPI, plus other triggers that will allow us to get to that 2%-4%. And it's more a matter of where occupancy, demand, and certainly other competitive forms of housing, like multifamily and site-built housing is, that dictate how we'll be able to push our rents going forward.
And we're always mindful of what we refer to as not stripping the equity out of the underlying home value. So we've got to maintain and invest in the CapEx of the communities so that as people go to sell their homes and look at the current market rent, they feel like they're getting value as compared to the competition out there. So those are the things that we look at, but we feel comfortable that at this point, as Karen said, with 130 or more communities at or above 98% occupancy, we'll be able to achieve on the higher side of rental growth, you know, for the foreseeable future.
John Kim (Senior Equity Research Analyst in U.S. REITs)
Okay, thanks for the color. And then my final question is on your average price for new homes. It exceeded $100,000 this quarter. Can you just describe if that's due to mix, if this is an ongoing trend, and also, what kind of, LTVs did, buyers utilize to finance this, these purchases?
John McLaren (President and COO)
Yes, so this is John. I think that, I think what we've seen over the last few years is that number has steadily continued to rise as we see more demand, not just in Florida, but in other parts of the portfolio for new homes. So my expectation at this point is that, that sort of level would continue. From an LTV standpoint, you know, still a fair amount of the new home sales are cash deals, 'cause still the majority of them are coming out of sort of the snowbird-type areas. And like I said, we're seeing some growth in other parts of the country as well. So most of it's cash, but if it is being financed, you know, typically, you know, I think the terms on that would...
There would be a fair amount of cash that would be brought in, in terms of down payment. So from an LTV, I'd have to get back to you on that. It's something that, just to give you a number that's solid.
John Kim (Senior Equity Research Analyst in U.S. REITs)
Okay, great. I'll follow up. Thank you.
John McLaren (President and COO)
Yep.
Operator (participant)
Thank you. Our next question is coming from Joshua Dennerlein of Bank of America Merrill Lynch. Please go ahead.
Joshua Dennerlein (Senior Equity Research Analyst in REITs)
Hey, good morning, guys. Question on the redevelopment of the three properties in the Florida Keys. Will you have to do anything different than how they were set up before, to maybe hurricane-proof them in the future? Or can you rebuild them kind of exactly the way they were?
John McLaren (President and COO)
Yeah, so we've been working really closely with the appropriate municipalities insofar as those three communities are concerned, so there's nothing that we're aware of at this time that really changes. I will add, though, that you know, one of the things that we noted through this is, you know, if you go back to Hurricane Andrew in 1992, really the construction standards for homes post that event really improved, and particularly in more active wind zone areas like the Keys. And we were really impressed to see that most of the homes that were built post 1992 seemed to weather the storm very well. So to answer your question, and really, there's nothing that comes up at this time.
Joshua Dennerlein (Senior Equity Research Analyst in REITs)
Okay, thanks, John.
John McLaren (President and COO)
Yep.
Joshua Dennerlein (Senior Equity Research Analyst in REITs)
And maybe for Gary: For cap rates in California, do they tend to skew higher than maybe other locations like Florida, just because of the rent control, for-
Gary Shiffman (Chairman and CEO)
You know, the opposite is actually true. They seem to be more compressed just because the desirability of West Coast property, in particular in California, function of demand. And that's why, you know, as many of you have seen in some of the documentaries and television shows, we, like other manufactured housing owner-operators on the coast, have, you know, million-dollar manufactured housing homes or manufactured homes in our communities, you know, on coastal areas overlooking the ocean. And so, there is still a more compressed cap rate that we encounter, and have to really exhibit a lot of discipline, to make sure that we can get growth that is positive for our shareholders, as we look on the West Coast.
But it's probably opposite of intuitively what you would think due to the rent control.
Joshua Dennerlein (Senior Equity Research Analyst in REITs)
Okay. Thanks, Gary.
Gary Shiffman (Chairman and CEO)
Mm-hmm.
Joshua Dennerlein (Senior Equity Research Analyst in REITs)
And then one kind of last question from me. Big picture, we saw ELS move into the marina industry, picked up a portfolio there. Any, any thoughts on maybe moving into the marina business as well, or have you ever looked at it?
Gary Shiffman (Chairman and CEO)
I think that I have had some personal experience in it, and I think for us, that first and foremost, some will continue to focus on acquiring communities that really can advance the growth strategy for the shareholders. We do have communities and acquire communities that often times have small arenas, even self-storage, even some multifamily adjunct, as an adjunct to the existing community, that have been built. But for the foreseeable future, we've got a good, solid pipeline. We like the stickiness, if you will, of the revenue in this asset class, so it's where we'll remain focused.
Joshua Dennerlein (Senior Equity Research Analyst in REITs)
Okay. Thanks, Gary.
Gary Shiffman (Chairman and CEO)
Mm-hmm.
Operator (participant)
Thank you. Our next question is coming from Neil Malkin of RBC Capital Markets. Please go ahead.
Neil Malkin (REIT Equity Research Senior Associate)
Hey, good morning, guys. Thanks for taking my questions. Just to go to the hurricane, two things: Did you see a noticeable impact on home sales, particularly in September, from the hurricane? Also, are you seeing increased demand in some of your Florida communities from some displaced residents?
John McLaren (President and COO)
Yeah, I think that the answer is really not really on the home sales side as a result of the hurricane. You know, we had a week where we were, you know, cleaning up, sorting things out, and that sort of thing. But really, I would tell you, we were closing business the next week. In fact, we had a retail order the next week because somebody wanted to buy a new home, so that was... It got back to battery pretty quick. As far as,
Gary Shiffman (Chairman and CEO)
... you know, displaced residents are concerned, really, I mean, the best thing I can give you is just what we said, which is the tracking that we see, particularly on the RV side, and that pipeline versus last year. But tracking, generally speaking, is pretty similar to what we're used to seeing.
Neil Malkin (REIT Equity Research Senior Associate)
Okay, thank you for that. And then do you have an estimate for the EBITDA or lost EBITDA on the three communities that you're going to be redeveloping on an annual basis? And then, for reporting your FFO, are you gonna be adding back the lost EBITDA for, like, a normalized purpose, or will that just be, you know, excluded in 2018?
Karen Dearing (CFO)
So the estimated NOI from those properties is around $1.2 million, and those properties will be-
Gary Shiffman (Chairman and CEO)
That's for 2017.
Karen Dearing (CFO)
That, yeah, that's based on 2017 actuals. I'm sorry. That's, that's correct, Gary. 2017 actuals and Q4 expectations. And so that $1.2 million will be just removed from our guidance for next year.
Gary Shiffman (Chairman and CEO)
That'll be added back at the time we would receive it.
Neil Malkin (REIT Equity Research Senior Associate)
Okay, great.
Karen Dearing (CFO)
Yeah, at some point in time, if we receive business interruption recovery, that'll come in all at once. It'll show up as other income line item, and we'll remove that from FFO.
Neil Malkin (REIT Equity Research Senior Associate)
Okay, thanks. Last one from me. The RV side is, you know, seems to be on fire. I know you guys talked about, you know, focusing some asset allocation to that side of the business. Are you seeing any noticeable signs of pickup or improving health, things that portend increase in strength over the next several years, be it, you know, RV insurance underwriting or, you know, different millennials or baby boomers increasing their purchases of RVs? Anything along those lines, you know, that kind of give you, you know, confidence in the future of that side of the business?
Gary Shiffman (Chairman and CEO)
I think that, you know, the basic comments that we share, the supply-demand has remained pretty steady with numbers that indicate about 9 million registered RVs out there and about 1 million registered RV sites. And of those 1 million sites, only a portion of them are able to accept the bigger, new, modern rigs. So there is a shortage of supply, not much development that we're aware of coming up to meet that, and very, very solid growth year-over-year in the RV business, where they're shipping more and more RVs that are being bought each year over the previous year.
So, I think that, beyond that, we would just expect to be able to maintain the type of occupancies, and that completes our marketing efforts as we're getting more sophisticated in developing better tools to really maximize site night revenue on the transient side of things. So we should continue to see growth there, and as John said, we see growth oftentimes when we convert from transient to annual. So for the foreseeable future, there's nothing we could point to other than the strong demand out there for the type of sites that we're leasing.
Neil Malkin (REIT Equity Research Senior Associate)
Good. Thank you.
Operator (participant)
Thank you. Our next question is coming from Ryan Lumb of Green Street Advisors. Please go ahead.
Ryan Lumb (Equity Research Analyst)
Thank you. Gary, you're quoted saying you have a high degree of visibility into your acquisition pipeline. Do you mind expanding on that in terms of maybe number of communities or the scale to which you can deploy capital going forward?
Gary Shiffman (Chairman and CEO)
Sure. I think what I would say is that the pipeline has remained pretty consistent, very similar to what it's looked like over the last 5 years, with the exception in pulling out any kind of a large portfolio transaction. So what we're seeing is a pretty even distribution of manufactured housing, both age-restricted and all age, and destination locations on the RV side. And we would expect to do levels of acquisitions that are pretty similar to what we've done each of the last 3, 4, 5 years, without the transactions of the portfolios. And they seem to be in the $100-$200 million range for annual goals.
We've done about $95 million through this quarter in acquisitions this year, and with an unchanged pipeline, feel comfortable we'll get to that level by the end of the year. And it's really about maintaining the discipline to make sure that we're matching the growth pattern that we're trying to continue being able to deliver. And so we're not there just buying any communities. We're buying communities where we think we can add value, oftentimes by filling vacancies or either acquiring with the property expansion ground or where we see contiguous ground that we think we can acquire and expand the communities.
So the best thing is kind of to look at what we've done historically, and that's what we should continue to be doing.
Ryan Lumb (Equity Research Analyst)
... Great, thank you for that, color. And, in the third quarter, how many expansion sites were leased up in part of the same-store pool?
Karen Dearing (CFO)
In the same-store pool, do you ask for the third quarter?
Ryan Lumb (Equity Research Analyst)
Right. Yep.
Karen Dearing (CFO)
109 expansion sites were filled in the third quarter.
Ryan Lumb (Equity Research Analyst)
Sure. And so kind of to compare that, your occupancy includes, recently completed, but also vacant expansion sites. So to compare to that, how many expansion sites are in the same-store pool, but vacant in the third quarter, if you have that number?
Karen Dearing (CFO)
Expansion sites vacant, let's say that I can tell you that the MH occupancy, if we didn't adjust for those vacant expansion sites, the MH occupancy would be 95.3% versus the 96.7%.
Ryan Lumb (Equity Research Analyst)
Okay, that's helpful. Thank you.
Karen Dearing (CFO)
Mm-hmm.
Ryan Lumb (Equity Research Analyst)
And then lastly, just, would you consider expanding or, you know, promoting your rental program in an effort to expedite the lease-up of your expansion sites?
Gary Shiffman (Chairman and CEO)
I think that we are very comfortable with the current level of how we run the rental program, and we do use it primarily today to accelerate occupancy in our expansion sites, or if we were to acquire portfolios with a large amount of vacancy. Short of that, it's declining in the base portfolio as we reach high occupancies, and we're converting those renters into sellers. But I wouldn't foresee any acceleration beyond what we're doing right now.
Ryan Lumb (Equity Research Analyst)
Okay, that's helpful. That's all for me. Thanks, guys.
Gary Shiffman (Chairman and CEO)
Mm-hmm.
Operator (participant)
Once again, that is star one, if you'd like to register a question at this time. Our next question is coming from Todd Stender of Wells Fargo. Please go ahead.
Todd Stender (Managing Director and Senior Equity REIT Analyst)
Hi, thanks. Can we hear more about the specifics of the California acquisitions, the in-place occupancies, rental rates, and then I know you entered them at a 5.9 cap rate, I guess, across the board. What's an expectation for a stabilized yield, maybe in, call it 24 months?
Gary Shiffman (Chairman and CEO)
Sure. Trying to dig out and see if I have the occupancies here in front of me. I don't. Do any of you have... Oh, here we go. How about 99% on an average for the four communities? Rental ranges in the $485 per month on up to $602. And 5-year estimated revenue compounded annual growth rates of 4%.
Todd Stender (Managing Director and Senior Equity REIT Analyst)
What's a good number would you call for a stabilized yield in, in California? If you're entering at a 5.9, maybe there's some room for growth, where, where would you expect them to start to level out at?
Gary Shiffman (Chairman and CEO)
I'd really have to take a look and get into these particular communities. I know what we look for in general, but let me see if we have that information in front of us. You know, I'd like to think that we certainly could pick up, you know, get them certainly to 7-7.25 within a 4-year period of time, 5-year period of time, where we've acquired them. But there isn't a lot of occupancy growth here, so I'd hesitate to just throw a number out without taking a look at these communities specifically.
Todd Stender (Managing Director and Senior Equity REIT Analyst)
Sure. And to the Pismo Beach acquisition, it's an age-restricted RV community. Is something like that subject to rent control? I know we certainly know it in the MH side, but where does rent control come into that, if at all?
Gary Shiffman (Chairman and CEO)
There is no rent control at Pismo Beach, for that reason, because it is RV.
Todd Stender (Managing Director and Senior Equity REIT Analyst)
Okay. And, how about, any, any, premium for being age-restricted RV? Over the years, we've heard that all age and age-restricted MH, cap rates are kind of on top of each other, but, I guess I'm not as comfortable with age-restricted RV communities. What, what kind of premium would you expect on that, if any?
Gary Shiffman (Chairman and CEO)
You know, I think that that's a subtlety that I would leave in the eye of the beholder. I think we would look past the age-restricted nature in RV and look to the quality of the asset and the growth dynamics, its location, the fundamentals, and just value it based on that without any negative or positive on an RV, that type of RV community, whether restricted or not.
Todd Stender (Managing Director and Senior Equity REIT Analyst)
Okay. I would suspect that these are sellers that have been holding with long hold periods. Any tax-efficient requirements? Did you guys issue any OP units, anything like that?
Gary Shiffman (Chairman and CEO)
Yeah. So, I think that you are correct. There were tax implications on all the different acquisitions, and we entered into, was it $22 million of-
John McLaren (President and COO)
21.4.
Gary Shiffman (Chairman and CEO)
Of regular stock.
John McLaren (President and COO)
Common stock.
Gary Shiffman (Chairman and CEO)
Common stock. It originally started as operating partnership units, but because of certain estate planning and changes in the family structure, it ended up being common stock. So, what it allowed us to do was, with the advantage that we had of the OP units against other sellers, that got us, you know, in the door, and it didn't end up to be used OP units. We used common stock, but it certainly was helpful, and it's always helpful in our negotiations, certainly when we're against a private competition, to be able to offer the OP units.
Todd Stender (Managing Director and Senior Equity REIT Analyst)
Okay, great. Thanks, Gary, for the color.
Gary Shiffman (Chairman and CEO)
Mm-hmm.
Operator (participant)
Thank you. Our next question is coming from Steve Sakwa of Evercore ISI. Please go ahead.
Steve Sakwa (Senior Managing Director and Senior Equity Research REITs Analyst)
Thanks. Just two quick questions. On that 5.9 yield you quoted on the California assets, is that a kind of Prop 13 adjusted number, or would you expect that to slightly lower the yield going into next year?
Gary Shiffman (Chairman and CEO)
No, that's on an adjusted basis.
Steve Sakwa (Senior Managing Director and Senior Equity Research REITs Analyst)
Okay. And then, as you talk about the kind of ground select ground-up development versus the redevelopments or the expansions, can you just maybe remind us of the yield differential between those two? And has anything materially changed in the kind of the lease-up process or time to fill the ground-up developments, which I guess was kind of one of the key reasons these just didn't happen? I mean, are you doing anything differently to fill them and to change the economics of ground-up development?
Gary Shiffman (Chairman and CEO)
I don't think we're doing anything differently. We'll use the rental program, certainly. I think we talk about if we build an RV community ground up, we're able to stabilize it within a 2-year period of time because on day one, we open it up, and the RVs can roll in, so to speak. We don't have to spend the time selling the homes and the efforts marketing to sell the homes. So, that same size, 300-site community, would probably take 3-3.5 years to stabilize in manufactured housing. On the expansion side, of course, it's a lot easier on the manufactured housing, just due to the fact that so many of the fixed costs are in place.
The margins are higher, the returns are obviously better because of the fixed costs. So, we have to be very, very discerning in where we develop greenfield development for manufactured housing, as well as RV, but even more so with manufactured housing because of slower absorption. We have 2 of those communities being developed right now in Larkspur, Carolina, Larkspur, Colorado, that will come online when, John?
John McLaren (President and COO)
Larkspur will come online beginning of next year.
Gary Shiffman (Chairman and CEO)
Carolina?
John McLaren (President and COO)
Carolina.
Gary Shiffman (Chairman and CEO)
Carolina will come online-
John McLaren (President and COO)
Carolina's coming out mid-next year.
Gary Shiffman (Chairman and CEO)
I think that as we open those, we'll be able to share with everybody exactly what our results are with those two developments.
Steve Sakwa (Senior Managing Director and Senior Equity Research REITs Analyst)
Okay, thanks.
John McLaren (President and COO)
Thank you.
Operator (participant)
Thank you. At this time, I would like to turn the call over to Gary Shiffman for closing comments.
Gary Shiffman (Chairman and CEO)
Thank you, operator. I'd certainly like to thank everybody for participating on the call, and we are available for any follow-up questions and look forward to our next conference call.
Operator (participant)
Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day.