Sun Communities - Q4 2015

Transcript

Operator (participant)

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Sun Communities Fourth Quarter 2015 Earnings Conference Call on the 23rd of February, 2016. At this time, management would like me to inform you that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the 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 this morning's press release form 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'd like to introduce management with us today: Gary Shiffman, Chairman and Chief Executive Officer, and Karen Dearing, Chief Financial Officer. Throughout today's recorded presentation, there will be an opportunity to ask questions. If you'd like to ask a question at that time, please press star and then one. I would now like to turn the conference over to Gary Shiffman. Please go ahead, sir.

Gary Shiffman (Chairman and CEO)

Good morning, and thank you for joining us for Sun's 2015 Fourth Quarter Conference Call. Before we begin reviewing our results, I'd like to take the time to acknowledge the Sun Team for their remarkable efforts throughout the year. We have accomplished a great deal, reported impressive financial results, and have firmly established a path to continue profitably growing our platform and generating consistent results for all of our stakeholders. We've been continually working to strengthen the quality, geographic diversification, and growth profile of our portfolio. Over the past three years, we've acquired and successfully integrated 90 manufactured housing and RV communities with over 33,000 sites located primarily in high-growth areas, as well as retirement and vacation destinations.

As these properties enter the Sun platform, our team is able to create and extract additional value by applying our operating expertise, which has translated into strong earnings and cash flow growth for our shareholders. 2015 was another transformative year for Sun, as we successfully acquired and integrated 38 high-quality manufactured housing and RV communities, including 30 communities comprised of nearly 12,500 age-restricted sites. These additions not only deepened our market share within our core markets, they also altered the complexion of our portfolio, providing us with a more diversified exposure to multiple demographics across age groups. This diversification helps drive more consistent performance across varying economic cycles. The transformation continued with the disposition of 20 communities, 16 of which were sold in the fourth quarter of 2015, which reduced our exposure to both slow growth and challenged locations.

Since 2014, we have sold a total of 30 communities, completing an important part of repositioning the portfolio for future growth. Our team delivered another year of industry-leading results, with same-site NOI growth of 8.8% in the quarter and 9.1% for the year. Contributing to these results were multiple drivers, including a same-site revenue growth of 7.4% and 7.6% for the quarter and year, respectively, and the delivery of an additional 1,905 revenue-producing sites, of which 1,505 were in the same-site portfolio. These metrics are a testament to the value and level of customer service Sun delivers to its residents, as well as Sun's operational strength. Demand for our communities and the lifestyle it affords our residents and RV guests is evident, given our occupancy levels and the impressive pace of total home sales. In the fourth quarter, total home sales increased 33.7% and increased 26.3% for the year.

Total home sales volume is the highest in the company's history. Further, the demographics continue to favor our portfolio of homes, as we provide home ownership and rental solutions with value, affordability, and flexibility for tens of thousands of buyers and renters. Our focus during the year extended to the management of our balance sheet and ensuring that Sun has the financial flexibility and capacity to pursue a full menu of growth opportunities. This includes both bite-size or transformational acquisitions, as well as the construction of additional expansion sites. To that end, in the fourth quarter, we raised $233 million of capital to replenish the capacity on our revolver, along with retiring $85 million of 2016 maturities. Additional capital was also provided by the aforementioned disposition of 16 communities within the quarter, generating $174 million in sales proceeds.

The timing and impact of strengthening our balance sheet has had both near and long-term implications. In the near term, the capital raise resulted in roughly $0.03 dilutive impact to our fourth quarter per-share results. Additionally, the sale of the 13 communities, not included in guidance, that took place in late November had a dilutive impact of roughly $0.01 for the fourth quarter. The impact of all of the fourth quarter dispositions will be dilutive by $0.045 per share in each quarter in 2016. This should begin to reverse as we move through the year and redeploy the capital through the acquisition of additional communities. The long-term implication of our strengthened balance sheet is that it positions Sun for sustainable, positive future growth.

During our extensive history as a public company dating back to 1993, and more importantly, a manufactured housing company dating back to the 1970s, we have demonstrated capabilities for delivering consistent results through our discipline, capital allocation, and operational expertise. As we look ahead, we expect to build upon our past success by continuing to drive growth both organically and through accretive acquisitions, which in turn will create additional shareholder value. I'll now turn the call over to Karen for a more detailed review of our results and financial position. Karen.

Karen Dearing (CFO)

Thank you, Gary. For the fourth quarter ended December 31, 2015, we delivered funds from operations of $48.9 million, or $0.81 per share, which is an increase of 17.4% as compared to $0.69 per share in the fourth quarter of 2014. Our results were impacted by the $233 million equity offering we completed in the fourth quarter by roughly $0.03 per share. Additionally, the 13 communities that we sold in late November had an impact of approximately $0.01 per share. For the 12 months ended December 31, 2015, funds from operations was $210.6 million, or $3.63 per share, a 7.7% increase over the prior year. Our reported FFO also excludes certain items detailed in today's press release. Revenues for the quarter increased by 37.9% to $168.2 million, an increase of $46.2 million over the same period in 2014.

The growth in revenues for both the quarter and the year reflects the positive impact of the addition of the American Land Lease portfolio and other organic initiatives we executed on during the year. Revenues for the 12 months ended December 31st, 2015, increased 39.3% to $674.7 million from $484.3 million for the same period in 2014. Net operating income for the company grew 37.4% and 44.3% for the quarter and year to date, respectively, when compared to the same period last year, primarily reflecting the benefit of our acquisition and integration efforts, as well as the benefits from our operating activities. Now, let's turn to a review of the major drivers of our results. On the operations front, total portfolio occupancy for the 12 months ended December 31st, 2015, was 95% compared to 92.6% at the end of 2014.

During the fourth quarter of 2015, the company added 548 revenue-producing sites, bringing the total occupied site additions to 1,905. This increase marks our seventh consecutive year of occupancy gains. Revenue from same-site increased by 7.6%, which is comprised of a 3.3% weighted average rent increase and a 270 basis point increase in occupancy over the prior year. The occupancy increase includes the conversion of 480 transient RV sites to annual or seasonal sites and the filling of 490 expansion sites. Also, transient RV and other property revenues contributed a 170 basis point increase to the total same-site revenue gain for the year. For the quarter, same-site revenues grew 7.4%, while expenses increased by 4.1%, resulting in strong same-site NOI growth of 8.8% and making this our ninth consecutive quarter of high single-digit same-site NOI growth. These results contributed to same-site NOI growth for the year of 9.1%.

Our exceptional operational performance is occurring across both our MH communities and RV resorts. In our manufactured housing portfolio, same-site revenues grew by 6.7% for the fourth quarter when compared to the same period last year, which is primarily due to growth in occupancy of 220 basis points and rent increases of 3.4%. Total same-site RV revenues increased by 10.7% when compared to the same quarter in 2014. The growth in total same-site RV revenues for the year was 10.2%. We continue to see an increase in return visit guests and are successfully attracting new first-time visitors to our resorts, evidenced by a 360 basis point expansion in occupancy and a 5.4% growth in average daily rate for the year-over-year results.

Our call center, supported by digital, social, and mobile initiatives, has experienced a 30% year-over-year growth in incoming calls, which has resulted in a 15% increase in average net daily reservation dollars. Another driver of our results is home sales. For 2015, new home sales were 273 as compared to 113 in 2014, an increase of over 140%. Pre-owned home sales for the year were 2,210 as compared to 1,853 in 2014, an increase of 19.3%, bringing total combined home sales to 2,483, a new single-year record and an increase of 26%. Margins continue to improve as well, at 16.2% for new home sales and 29.9% for pre-owned home sales, with an average home sales price of over $81,000 for new homes and $26,000 for pre-owned homes. Also, brokered home sales have increased from 618 in 2014 to 1,244 in 2015, which marks the highest resales in the company's history.

The number of home sales, broker resales, and high per-home selling prices are positive metrics indicating demand by high-quality applicants looking for manufactured home ownership in our communities. Now, I would like to turn to our transaction activity and balance sheet. We had an active year of adding to and pruning our portfolio as we effectively recycled capital, ensuring that we are constantly improving the quality, cash flow, and growth profile of our assets. Specifically, we purchased 38 communities during the year for roughly $1.1 billion, which includes the second phase of the American Land Lease portfolio acquisition, which contained 26 communities for approximately $743 million. The 2015 performance of the total ALL portfolio exceeded expectations in both community NOI and sales performance, and the six-property burger portfolio also had strong year-one results.

On the disposition side, we sold 20 communities for the year, generating gross proceeds of approximately $225 million. 16 of the community sales occurred in the fourth quarter, generating gross proceeds of $174 million. The largest of the dispositions, a sale of 13 communities, occurred in late November. Approximately $126 million of proceeds are currently in other assets and are designated for a 1031 exchange. All of the sold communities, as Gary mentioned, no longer fit our growth profile and, importantly, have helped reduce exposure to some less desirable locations, including Indiana, where we have cut our site count by 49% to 2,900 sites while increasing our occupancy to over 90%. While the sale of these assets was the right decision for the long-term positioning of Sun, the Q4 dispositions will have an impact on our run rate for 2016 of roughly $0.045 per quarter.

We expect that this dilution will be partially offset throughout the year as we deploy the cash to acquire additional communities. We ended the year with a strong financial foundation that will support future growth. As of the end of the year, we had $425 million of capacity on our line of credit and $171 million in cash, including the amount in other assets from the aforementioned sale. We also took the opportunity to further delever by retiring $85 million of our 2016 secured mortgage maturities. We have $107 million in debt maturities remaining in the balance of 2016 and are exploring various refinance opportunities. The ultimate decision to retire or refinance is still being evaluated and will depend on our overall capital needs for the year.

Given the repositioning of the balance sheet, we ended the year with an interest coverage ratio of 3.1 times and a net debt to trailing 12-month EBITDA ratio of 6.6 times. And now, turning to guidance, details of which can be found in today's earnings release. We anticipate FFO per share for the year of $3.72-$3.79 and $0.87-$0.89 for the first quarter. The guidance incorporates the dilution from the Q4 asset sales and the cash that is on the balance sheet to start the year that we have not yet deployed. Our 2016 guidance does not consider the impact of any acquisitions that have not yet been announced or any potential capital market activities. Absent the ALL transaction, our average acquisition run rate for the past three years has been $250 million, which is in line with our expectations for 2016.

As any significant acquisition closes, we will update guidance accordingly. Notably, the guidance assumes same-site NOI growth of 6.7%-7.8%, a weighted average rent increase of roughly 3.5%, strong home sales, and the addition of expansion sites, the majority of which will be completed in the fourth quarter. Additional details about guidance can be found in our press release. Over the past four years, you've watched Sun grow dramatically from an asset base of roughly $2 billion in 2012 to $4.6 billion at the end of 2015. We have reduced leverage, strengthened our portfolio mix and geographic locations, and have a proven record of effectively acquiring and integrating properties, all of which position us to continue to provide excellent operating results and value to our shareholders through 2016 and beyond. With that, I'd like to turn the call back to the operator to begin the question and answer session. Operator.

Operator (participant)

Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please press star and then one. If you happen to be using a speakerphone today, please pick up your handset or depress the mute function so your signal can reach our equipment. Again, that is star one if you'd like to ask a question. We will take our first question from Paul Adornato from BMO Capital Markets.

Paul Adornato (Real Estate Analyst)

Thanks. So with the sale of the lesser-occupied properties, you now have total occupancy north of 95%. And so I was wondering how much higher that number can go?

Gary Shiffman (Chairman and CEO)

Thanks, Paul. It's a good question and one that we're very focused on as we prepare guidance and look at our prospects going from 2016 even beyond. We are really comfortable that we can achieve similar occupancy gains for the next few years, primarily based on continued high demand for affordable housing, which is driving levels to what we consider as beyond historical levels. We're experiencing community occupancy levels of 97%, 98%, and greater today. And in fact, 111 of our manufactured housing communities have occupancy at 97% or greater, and 90 of the 111 are above 98%. So high demand is taking our occupancies to new levels, giving us vacancy to fill up. Some of this is a result of a newly realized benefit of the rental program, with turns happening so quickly today. There's very little downtime or vacancy where sites are not generating rent.

Additionally, since virtually no rental homes actually move out of the community, their points of occupancy, if you will, are retained as the renters are converted into homeowners. There's no loss of revenue and no vacancy created. Additionally, what I'd point to is that there are 9,000 transient sites with the potential to be converted to permanent rentals. That's additional potential occupancy for us to gain. And for every 1,000 expansion sites, over a point of vacancy or inversely, a percentage of occupancy gain potential is created. And then again, I'd point to the fact that, of course, when we have higher occupancy, it generally translates into higher rental increases.

From where we're at currently in the portfolio to where we're viewing full potential, we have a good, on average, 3-4 points to gain and then a point in expansion and then easily points available through conversion of RV sites into permanent sites for the homestay on all 12 months of the year.

Paul Adornato (Real Estate Analyst)

That was great. Thanks. Just two quick follow-ups based on your response. That is, on the rental turns, is that your operations doing better on the turn, or is it just much higher demand that you're able to fill the sites, the rentals, that much more quickly?

Gary Shiffman (Chairman and CEO)

No, I think it's consistent as to the turns, how they've been historically. But as the communities have filled and as we've had the rentals convert into homeowners, all that's happening is more historic levels of 96% full occupancy are looking to look like 97%, 98%, and even 99% today.

Karen Dearing (CFO)

I think the demand for the rental program is still very significant, Paul. I think I mentioned that we have 47,000 applications, and I'd say 80% of them, 85% of them are for applications to live in the rental program. So demand is quite high, and we do quick turnover, so that's really leading to that higher stabilized occupancy level.

Paul Adornato (Real Estate Analyst)

I guess maybe the same sort of question with respect to the conversion of transients. Is that due to better marketing efforts on your part, better demand, a combination of both? Maybe you could tell us a little bit about your marketing efforts there.

Karen Dearing (CFO)

Well, I think it is a combination of many things. First and foremost, I think it's a testament to the quality of the RV communities that we have and the amenities that we have for our guests to enjoy there. So as we've taken over a lot of these rental communities over the past several years, the amenities we've added, the attractions we've added have really increased guests at the resort. And once they do a transient stay, they like the resort so much, they've been converting even more so to annual seasonal guests. And certainly, the operations group is highly focused on making that happen.

Paul Adornato (Real Estate Analyst)

Maybe just one more with respect to your disposition of some of the family or all-age communities. Is that a statement about all-age versus age-restricted, or is it just geographical? In the past, it's that the all-age has been a good business for you. And I was wondering if now we're seeing a divergence of the two businesses.

Gary Shiffman (Chairman and CEO)

No, it is not a reflection of any difference in strategy. It just reflects, as Karen shared in her remarks, the asset management and decision to shed properties that we don't think have the greatest long-term growth potential for the portfolio and the shareholders. In total, what we completed in 2015 was our strategic plan to dispose of 30 properties, so 20 in 2015 and 10 in 2014. That program is completed. It related to specific properties. We've grown our age-restricted ratio in our portfolio from under 10%-25%. I think that we are very comfortable with where we're at today. We believe that having the right balance between age and age-restricted communities really provides the best avenue for riding through all economic cycles. As we've shared before, we find that there is greater pricing elasticity in all-age communities.

We can get higher rental increases in good economic times and equal to or slightly greater rental increases as compared to age-restricted communities in more challenging economic times. On the flip side, we do experience about 100 basis points difference in home turnover where the homes actually leave our communities between the two segments, approximately 2% of the homes turn over in all-age communities versus 1% in age-restricted. But having the mix and balance that we have currently leaves us very comfortable that we're well-positioned for really all economic cycles. So we're very comfortable.

Paul Adornato (Real Estate Analyst)

Great. Thank you.

Operator (participant)

We'll take our next question from Nick Joseph from Citi.

Nick Joseph (Senior Equity Research Analyst)

Thanks. Can you give more details on the November property sales? What was the cap rate and what was the buyer profile?

Gary Shiffman (Chairman and CEO)

Sure. I think it was a mix of public and private. The cap rates ranged from 5.8-6.9 among the 20 properties sold in the fourth quarter.

Nick Joseph (Senior Equity Research Analyst)

Is that just for the November, or is that including the previously announced dispositions as well?

Gary Shiffman (Chairman and CEO)

Those numbers are for the 20, let me get that, 13 and 3, 16 dispositions that took place fourth quarter.

Nick Joseph (Senior Equity Research Analyst)

Okay. Thanks. And then given the meaningful impact of the November asset sales on 4Q and 2016 results, why did you not put out a release on their closing at the time?

Karen Dearing (CFO)

Well, as you know, Nick, we have and as we've discussed on prior calls, our intention to dispose of these properties. We have been fine-tuning our portfolio through those strategic dispositions and trying to look to redeploy that capital for higher growth. The sale of these 13 properties that took place late was not material to our total assets. Although it did have a minor impact to Q4, we just felt it made more sense to disclose it in the context of the full-year guidance along with everything else that was occurring in the rest of the portfolio.

Nick Joseph (Senior Equity Research Analyst)

Thanks. And then finally, just in terms of the rental program, you talked about the strong demand in the home sales and the percentage of renters in the portfolio decreased meaningfully to 13.5%. So what percentage of the portfolio occupancy overall would you ideally like to see as renters?

Gary Shiffman (Chairman and CEO)

Oh, I think we look for it to decline in our core portfolio rates as we shared that as we get to the higher occupancy levels, it will decrease 8%-10%. The goal is to see the rental program to be used only for things related to expansion where we can accelerate and increase NOI on a more rapid basis and get the communities and the expansions to stabilize faster. And of course, then convert those renters at 8%-10% a year into homeowners. So we saw a 210 basis point decline from 2014-2015. It's a net decline in combination with dispositions, expansions, and acquisitions. I think in 2016 guidance, we look for a decrease of about 4% overall in rental units in communities that are 97% and above.

We don't see any further significant year-over-year growth in our core portfolio unless it's related to some of the lower-occupied communities, expansions, or new acquisitions.

Nick Joseph (Senior Equity Research Analyst)

Thanks.

Gary Shiffman (Chairman and CEO)

Sure.

Operator (participant)

We'll take a question from Jana Galan from Bank of America, Merrill Lynch.

Jana Galan (Director)

Thank you. Gary, I was hoping you could comment on the size of the acquisition pipeline, maybe pricing types of assets you're seeing, and whether you think you may see more opportunities this year given the recent weakness in the CMBS market.

Gary Shiffman (Chairman and CEO)

Sure. Thank you. They're all good questions. And Sun certainly has been and remains an acquisitive company with an acquisitive strategy. I would share with everyone that we have a very strong pipeline of acquisitions under review. It is very similar in character and nature to what the pipeline has looked like over the past 3-4 years. When you look to an average of what we've acquired over the last 3-4 years, factoring out the large portfolio acquisitions, we've averaged about $250 million per year in acquisitions. Basically, onesies and twosies. And I would expect similar growth through acquisitions as we work through that pipeline. That said, I would just point out that we have worked very, very hard over the last 4 or 5 years to begin to build what we believe is best-in-class platform, both manufactured housing and RV-wise.

We're very selective at this point as to what we're reviewing and what we'll acquire. We won't be buying just for the sake of buying. So it will continue to be the type of assets we've been acquiring over the last four years. When we look at cap rate expectations, I think one of the things that we can do, as Nick asked, we can look at the most recent 16 dispositions ranging from 5.8-6.9 to kind of set the stage for what those type of assets have been trading at. So I think that's helpful when you consider the higher-quality type properties that Sun is acquiring. As single assets, generally, they trade within a 50-basis-point range of a 6 cap rate.

For both manufactured housing and RV communities, for Sun, it's about finding the right assets that, when well-managed by Sun's team, they can create significant incremental growth in NOI within a three-year period of time and therefore really build the cap rate up from where we acquire them to where they would be valued in that 36-month period of time.

Jana Galan (Director)

Thank you. And maybe just on your outlook for home sales in 2016, based on the guidance, it looks like it should be another record year. Just curious if there's any kind of macroeconomic data you're looking at that could potentially kind of lower your outlook there?

Karen Dearing (CFO)

No, I don't think that we would expect any macroeconomic event to decline our expectations. We are indicating, as you mentioned, an increase in new home sales of about 25% next year and an overall increase in home sales of about 7%. We believe new and pre-owned home sales trends will continue. We're ahead of inventory sales year-over-year in January by 33%. Ultimately, I think, as we've shared on many calls and in our investor presentations, the cost differential between site-built housing and manufactured housing is just too wide. We just don't expect that to be closing at all.

Jana Galan (Director)

Thank you.

Operator (participant)

Ladies and gentlemen, if you would like to ask another question or ask a question, please press star one at this time. We'll go to Drew Babin from Robert W. Baird.

Drew Babin (Senior Research Analyst)

Good morning. Most of my questions have been asked, but I had a couple of quick ones. The guidance for 1,750-1,850 increase in revenue producing sites in 2016, is that a number that's reflected kind of fully within your guidance from one end to the other? Obviously, adding occupied new revenue-producing sites can drive a lot of occupancy upside. Would you say that that is fully reflected in your guidance for this year, or could that be a potential source of upside as that's built out?

Karen Dearing (CFO)

Yeah. Drew, let me try to answer that for you. Yes, it is in our guidance fully. Basically, we're looking at about 1,850 sites that it's around 400 expansion sites being filled. Those are the sites that we actually brought on in 2015. The expansion sites in 2016, there's about 1,000 sites going on. Those really aren't going to come on until the fourth quarter. So those sites really don't have an impact in 2016. I mean, 2016, sorry.

Drew Babin (Senior Research Analyst)

Okay. That's helpful. And then also too, just if you sell more properties or should there be any new kind of sources of capital coming in, are there any issuances of preferred OP units, convertible securities like that that might be that you might take a look at repurchasing or tendering for?

Gary Shiffman (Chairman and CEO)

I don't think other than something unexpected coming in the area of dispositions, I would share that we have completed our strategic plan to sell properties. Of course, we would always look at any opportunity that came our way. On the capital side, there is nothing else that we would share with the marketplace at this time. However, I'd suggest that Karen and all management is always looking from a strategic standpoint on what we could do in the capital marketplaces to improve the balance sheet. But nothing in particular we'd point to now.

Drew Babin (Senior Research Analyst)

Great. Thank you very much.

Operator (participant)

We'll take a question from Ryan Burke from Green Street Advisors.

Ryan Burke (Senior Analyst of Equity Research)

Thank you. Gary, I wanted to clarify on the cap rates that you've been quoting on the dispositions. Are those nominal or economic?

Gary Shiffman (Chairman and CEO)

Those would be nominal. Yes.

Ryan Burke (Senior Analyst of Equity Research)

Nominal. And on forward or trailing NOI?

Gary Shiffman (Chairman and CEO)

Those would be on trailing 12 months.

Ryan Burke (Senior Analyst of Equity Research)

Okay. Trailing 12 months. Okay. Thanks. Separate question. Karen, is it correct that the first phase of the Green Courte properties roll into the Same store pool in 2016?

Karen Dearing (CFO)

Both phases of the Green Courte portfolio roll into Same store in 2016. The second phase was although closed on January 6th, we received revenue reflective as of January 1st. We had a four-year increase.

Ryan Burke (Senior Analyst of Equity Research)

Thanks. Do you have a feel for what impact the rolling of those properties had to your same-store revenue guidance for 2016? I'm essentially trying to get a feel for what revenue growth for the 2015 pool will be in 2016.

Karen Dearing (CFO)

I don't have. We haven't started it that way, Nick. So I'm sorry. I just don't have that information in front of me. I mean, Ryan, sorry.

Ryan Burke (Senior Analyst of Equity Research)

No problem. I'll circle back on that. Last question, probably for Gary. In terms of financing for buyers of manufactured homes, the FHFA appears to be moving in a direction that would help buyers that live outside of Sun's communities but not those that live inside of Sun's communities. Did that outcome surprise you? And can you speak a little bit to what level of competition you typically see from manufactured homes that aren't within communities but sit outside of communities on single plots of land?

Gary Shiffman (Chairman and CEO)

Yeah. I'll try not to be too cynical about the GSE financing programs. But after 30-plus years of being in the industry, recognizing that they have a responsibility to finance all forms of housing, including affordable housing, I am a bit cynical because they have not, as of yet, come forth with a program that has benefited communities. So it doesn't surprise me that we don't see any change to that in the near future. Obviously, if there were some change and there was some discussion 6, 12 months ago, we'd be very interested in following up on it. With regard to financing programs outside of communities, they're generally referred to as site home packages. They've existed for the 30-plus years that I've been in the industry. And again, it is a different customer and a different product line than the proposition that we have in the rental community.

We do not experience any competition from that type of financing on the land home package.

Ryan Burke (Senior Analyst of Equity Research)

Okay. Thanks. And I'll slip one more question. There's one or two portfolios out there that are rumored to be being shopped that are called a billion-dollar-plus in value. Your earlier comments would suggest that you might not be interested in those portfolios. But can you give us a feel for your level of interest, if any?

Gary Shiffman (Chairman and CEO)

Yeah. Certainly. We shared, I think, third-quarter commentary that there have, in fact, been several large portfolios that have come to market. Sun has had the opportunity to consider and review them. And they were not of a high-enough quality asset based on our current platform to pursue those portfolios. That being said, there are a handful of high-quality portfolios that are out there. We do continually remain in contact with those portfolio owners as they do fit the character and nature of our portfolio. But at this time, there's really nothing to share with regard to those portfolios.

Ryan Burke (Senior Analyst of Equity Research)

Okay. Thank you.

Operator (participant)

Thank you, ladies and gentlemen. I would now like to turn the conference back over to company management for any closing remarks.

Gary Shiffman (Chairman and CEO)

We'd like to just thank everybody for participating on today's fourth-quarter call. Both Karen and I and other members of management remain available throughout the day to follow up with any questions. We certainly look forward to announcing first quarter's performance on our next quarterly conference call. Thank you, operator.

Operator (participant)

This does conclude the Sun Communities 2015 fourth quarter conference call. Thank you for your participation.