Sun Communities - Q4 2025

Executive Summary

• Sun Communities’ latest reported quarter (Q3 2025) delivered Core FFO per share of $2.28 (vs. $2.36 in Q3 2024) on $697.2M of revenue, while GAAP diluted EPS was $0.07; management raised FY25 Core FFO guidance to $6.59–$6.67 and tightened operating outlook, setting up Q4 seasonality and FY delivery as catalysts.
• North America Same Property NOI rose 5.4% in Q3, led by MH (+10.1%) with blended MH/annual RV adjusted occupancy at 99.2% (+130 bps YoY); UK Same Property NOI grew 5.4% with tighter cost control.
• Balance sheet de-risked post Safe Harbor sale: total debt $4.27B at 3.4% WAC and 7.4-year WAM; Net Debt/TTM Recurring EBITDA at 3.3x; new $2.0B revolver undrawn; YTD buybacks of ~$500M support per-share accretion.
• Preliminary 2026 rent growth framework (MH +5.0%, Annual RV +4.0%, UK +4.1%) and Q4 Core FFO guidance of $1.31–$1.39 underscore near-term visibility; emphasis on disciplined 1031-funded MH acquisitions and UK ground lease buyouts adds medium-term optionality.

Note: The company has not yet filed Q4 2025 results or an earnings call for the quarter ended December 31, 2025. The most recent earnings materials available are Q3 2025 (reported Oct 29–30, 2025). The recap below synthesizes Q3 performance, the Q4/FY guidance provided on Oct 29, and prior quarters for trend analysis.

What Went Well and What Went Wrong

• What Went Well

  • Manufactured Housing strength: NA Same Property MH NOI +10.1% in Q3; same-property MH revenue +7.3% with occupancy and rate tailwinds; blended MH/annual RV adjusted occupancy reached 99.2% (+130 bps YoY).
  • Balance sheet upgrade: Net Debt/TTM Recurring EBITDA improved to 3.3x; no borrowings on new $2.0B revolver; fixed-rate debt profile with WAM 7.4 years; investment-grade ratings reaffirmed.
  • Guidance raised: FY25 Core FFO midpoint lifted by $0.04 to $6.63; NA Same Property NOI range raised to 4.6–5.6%; UK Same Property NOI raised to 3.7–4.4%.
  • Management quotes: “Sun delivered strong third quarter results… exceptional performance in manufactured housing… demand fundamentals… remain intact” — CEO Charles Young.

• What Went Wrong

  • RV transient softness: NA Same Property RV revenue −7.8% YoY and RV Same Property NOI −1.1% in Q3 as mix shift to annual reduces transient availability; ongoing Canadian softness cited.
  • Home sales down: Total home sales revenue −9.2% YoY in Q3, with lower volumes and margin compression, notably UK home sales NOI −21.2% YoY.
  • Non-cash impairments: Q3 asset impairments of $165.9M (mainly six U.S. RV assets due to reduced projected cash flows); earlier Q2 impairments tied to strategic pivot away from greenfield.

Transcript

Operator (participant)

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 materially from expectations are detailed in today's press release and from time to time, in the company's periodic filings with the SEC. The company undertakes no obligations to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.

Having said that, I would like to introduce management with us today. Charles Young, Chief Executive Officer, John McLaren, President, Fernando Castro-Caratini, Chief Financial Officer, and Aaron Weiss, Executive Vice President of Corporate Strategy and Business Development. After their remarks, there will be an opportunity to ask questions for those who would like to participate in the question-and-answer session. Management asks that you limit yourselves to one question. Everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded. I'll now turn the call over to Charles Young, Chief Executive Officer. Mr. Young, you may begin.

Charles Young (CEO)

Good morning. 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 $6.68 for the full year, both above the high end of our guidance 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 portfolio's 98.1% occupancy.

Affordability is a core attribute of our business model. Manufactured housing offers a high-quality living environment at a cost significantly below traditional housing alternatives, while our 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 the 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 approximately 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 builds upon and further refines Sun's strong in-place platform, with an 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're 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 and 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.

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?

John McLaren (President)

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%, while operating expenses increased 3.2%, reflecting continued focus on balance, efficiency, and cost control. In RV, same-property NOI increased 5%, driven by 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 American same-property NOI increased 5.7%, driven by 4.5% revenue growth and partially offset by 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 U.K., fourth quarter same-property NOI declined approximately $500,000, reflecting ongoing macroeconomic pressures, including the national minimum wage increase. For the full year, U.K. same-property NOI increased 3.5%, supported by 5% revenue growth, driven by higher MH and transient income, partially offset by 6.6% increase in operating expenses. U.K. home sales volumes are down 4.9% compared to 2024's record levels.

Across the organization, we remain focused on operational excellence, disciplined cost management, and leveraging technology and data to enhance efficiency and the resident guest experience. Having been a part of Sun 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 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 in 2026 guidance. Fernando?

Fernando Castro-Caratini (CFO)

Thank you, John. In the fourth quarter, core FFO per share was $1.40, beating the high end of our guidance range by $0.01. For the full year, core FFO per share was $6.68, 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 non-strategic 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 U.K. 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 U.K. 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 3.4x, no floating rate exposure, and a weighted average interest rate of 3.4%, 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, 5-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 Sun 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 $125.62 per share, representing approximately $539 million of repurchase activity. After year-end, and through February 24th, 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 $6.93, with a range of $6.83-$7.03. 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 U.K., we expect approximately 2.2% same-property NOI growth for 2026. FFO from U.K. 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 24th. 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.

Charles Young (CEO)

I'd like to take a moment to reflect on what I've learned and where we are headed. These first few months, I've 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 Sun'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 (participant)

Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using a speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment as we poll the first question. The first question comes from Steve Sakwa with Evercore ISI. Please proceed.

Steve Sakwa (Senior Managing Director)

Yeah, thanks. Good morning. Charles, or maybe John, could you maybe just talk a little bit about the data? You know, 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 that you've implemented, or are there things that you're sort of currently working on that you expect to implement in 2026?

Charles Young (CEO)

Hey, Steve, it's Charles. I'll take it, and maybe I'll throw 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, you know, 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. As I watched 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 and encourage us to build on.

You know, today, as I talk to the team members around the table here with me, we have more real-time data, access to 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. 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. 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. It needs to be around the data architecture and infrastructure that allows us then to unlock that in the future.

John McLaren (President)

Yeah, Steve, I'll just add to that. You know, one of the things I shared with everybody last year was just really the focus on the transparency within our sales and leasing funnels, applying that transparency because of the data that we have across, you know, 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, okay, 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, you know, 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? 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.

Operator (participant)

The next question comes from Eric Wolfe with Citigroup. Please proceed.

Eric Wolfe (Director)

Hey, thanks. At December, Charles, you talked about slowing down buybacks, of course, saw the $57 million of buybacks year to date. Could you just talk about the approach to repurchases and capital allocation this year, what you're assuming in guidance as far as the use of that $630 million of cash as well? Thanks.

Charles Young (CEO)

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. You know, where we are today, as we enter 2026, and, you know, 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. There's a lot of flexibility. As I think about capital allocation for the year, we have a balanced toolkit as our approach. You know, 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 those toolkits. The other is pursuing thoughtful and disciplined, creative, external growth opportunities that align with our strategy of MH and RV. We'll continue to look for opportunities there. As you're talking about with the share repurchases, there's, you know, 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, you know, give forward guidance in terms of what we have in there?

Fernando Castro-Caratini (CFO)

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. 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 to the baseline guidance we've provided.

Eric Wolfe (Director)

Thanks. 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, you know, the unlevered returns that you're targeting?

Aaron Weiss (EVP of Corporate Strategy and Business Development)

Yeah, thanks. It's Aaron Weiss. 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, at 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 as 1031 exchange, but have not yet been closed. 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 close on those 1031 proceeds, as occurred in 2025, that would simply move into our unrestricted cash balance.

Operator (participant)

Thank you. Our next question comes from Brad Heffern from RBC Capital. Please proceed.

Brad Heffern (Director)

Yeah, thanks. Morning, everybody. Charles, can you give any updated thoughts on the U.K. and how it fits into the portfolio?

Charles Young (CEO)

Absolutely. I appreciate the question. You know, look, I've had a chance to spend some time with the U.K. team, get over there, and, you know, what I've observed is, you know, high-quality operation, best-in-class portfolio, strong assets, and a very talented and capable team. I'm impressed with our operational execution. That being said, they're performing well in a, you know, challenging U.K. 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.

You know, as I look at the business and as we just 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 U.K. 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. We'll continuously assess the U.K. in the context of our overall strategy and capital allocation priority. John, if you want to add anything?

John McLaren (President)

I mean, the only things I would add, Brad, is that, you know, I think we put out in our guidance that we put out a 4.1% rent increase in the U.K. That's running ahead of inflation in the U.K. You know, I think 2025 represents a really good year of home sales that we had, you know, close to 95% of the prior record, okay, that we had the year before that. When you look at it sort of from a market share perspective, you know, we got a team of people in the communities that we have and the locations that we have, they're executing brilliantly, okay, in the face of it all.

You know, the only thing that sort of offsets that a little bit is like what Charles said, with, you know, on the expense side, a lot of that's attributed to the national minimum wage, okay? Everybody's in that boat. So it's really pleasing to us to see them execute through that despite it all.

Operator (participant)

Thank you. Our next question comes from Wesley Golladay with Baird. Please proceed.

Wesley Golladay (Senior Research Analyst)

Hey, everyone. How do you see the annual RV conversions this year? I think last year was just around 600. Can you give your view on 2026?

John McLaren (President)

Hey, Wes, appreciate the question. I think we're kind of 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 shared 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, you know, emerge in the form of the renewal rates that we have now in comparison to this time last year, where we're running ahead. That's kind of how we look at it. It's going to be sort of similar to what we experienced last year.

Wesley Golladay (Senior Research Analyst)

Okay, thanks for that. Can you give your view on the transient RV? How does the pace look?

John McLaren (President)

It's good. It's pacing well. You know, I think, you know, a little bit about 2025, as you know, our RV same-property NOI performance in the year finished within the guidance range. I do want to emphasize, as I always do, that we 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 is a direct result of the success we've had and the strategy of reducing the number of transient sites and converting them to annual guests. That really formed in the, in the way what we did last year was demonstrated by a 9.8% annual RV growth number and the 600 network conversion to reference.

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. You know, to emphasize further, okay, some of the things that we're doing that you're 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. We think a lot of this really lines up for what we're seeing.

If you look at sort of how we tracked on RV in 2024 versus 2025 versus what we're putting out there in 2060, you're starting to see that stabilization take hold.

Operator (participant)

Thank you. The next question comes from Jamie Feldman with Wells Fargo. Please proceed.

Jamie Feldman (Managing Director and Head of REIT Research)

Great. Thank you. Charles, 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, you know, where you are in the process of settling in, just in terms of, you know, I think people expected maybe a noisier print for 4Q, but you know, pretty much took one impairment in the U.K., and everything else seems to be kind of humming along. And then, of course, you had some management changes to start the year. Would you say at this point, you're kind of settled in, and this is the story going forward? I know the U.K., as you guys commented before, you know, still watching it and seeing where the opportunity is long term.

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?

Charles Young (CEO)

You know, 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 used to be an accountant in days and then months, and, you know, I'm in now. I am settled. The team knows who I am. You know, I can't say enough how special the culture here is at Sun and how welcoming and how I felt like I've 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. The core pillars, as I laid out, is where the opportunity is ahead.

That's why I can't say I've settled in, but we have work to do in terms of, you know, 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. I'm busy, but I'm loving it, and, you know, 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, you know, 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, I'm building off of that with this kind of core focus and laser focus in on the core. That's what it's about, and that's what's going to get us to get into this, the rhythm that everybody expects us to do, given the nature of this business and the affordability and attainable experiences that we provide for our residents and guests.

Jamie Feldman (Managing Director and Head of REIT Research)

Thank you.

Operator (participant)

The next question comes from Michael Goldsmith with UBS. Please proceed.

Michael Goldsmith (US REITs Analyst)

Good morning. Thanks all for taking my question. 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, you know, a little color about what's been going on, what you've been noticing with the Canadian customer? Thank you.

Fernando Castro-Caratini (CFO)

Thank you, Michael. I think John and I will tag team that question. At the midpoint of our range, we do have a rental increase for our annual guests 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 2025 year-over-year over 2024. That points to, as John was mentioning, some stabilization as it relates to the transient side of the business.

John, if you wanna go into...

John McLaren (President)

Yeah, I'll start, Michael, with on the Canadian side, which as we shared before, you know, 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 transient 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, has been mitigated to some degree versus what we had in 2025. It's really more about what I said a little bit earlier.

You sort of alluded to it with the question, like, what are the strategies we can push, okay, on the RV side, which, you know, 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 from that strategies to push perspective. On the digital booking side, you know, it's about contact or guest routing enhancements, easing the booking process enhancements, which frankly dovetails into leveraging the tech, like Charles was talking about, to capitalize on a nimble booking window that aligns more seamlessly with our revenue management capabilities that we have today.

If you take it a step further in the things that we do, enhancing just the guest journey overall, you know, enhancing targeted placement. You know, this is not about, you know, the old RV days of 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, 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.

Operator (participant)

Thank you. Our next question comes from Jana Galan with Bank of America. Please proceed.

Jana Galan (Director)

Thank you. You know, 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? 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?

Aaron Weiss (EVP of Corporate Strategy and Business Development)

Hey, great question. 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 4%-5% 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 at sort of sub 4% cap rates. Their quality, the quality of the cash flows, the current sellers believe that that's appropriately valued.

When we're targeting assets, again, in markets in which we operate, strategically for us, we wanna 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. What we're seeing is generally consistent with the past. We do believe the transaction market is picking up. There is a little more constructive backdrop in the financing market. Certainly, the lower rate environment today versus 12, 18 months ago is more conducive to transactional activity, but I would say generally consistent, high-quality assets. 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.

Operator (participant)

Thank you. The next question comes from Jason Wayne with Barclays. Please proceed.

Jason Wayne (Vice President, Equity Research Analyst)

Hi, good morning. Just looking at home sales, volumes that are down, year-over-year in 2025. Can you just walk through your home sales assumptions for this year and how that gets baked into G&A?

John McLaren (President)

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 stability of long-term cash flow from rent. I think the contribution of home sales is not really as 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.

Jason Wayne (Vice President, Equity Research Analyst)

Got it. Then it looks like the ancillary NOI guidance changed a bit as well. Just wondering how much of that is due to, you know, marinas coming out of the portfolio?

Fernando Castro-Caratini (CFO)

The guidance provided is ex marina as it relates to the contribution. It would be contributions from our RV portfolio primarily and then also contributions from the U.K. platform.

Operator (participant)

The next question comes from John Kim with BMO Capital Markets. Please proceed.

John Kim (Managing Director, US Real Estate)

Thank you. 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. 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%? If you could provide the same building blocks for 2026 as far as MH same-store revenue.

Fernando Castro-Caratini (CFO)

John, 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. 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 500-600 site range. There could be some additional revenue opportunity there. The building blocks are very much similar over the course of both years.

Operator (participant)

Thank you. The next call comes from David Siegel with Green Street. Please proceed.

David Siegel (Analyst)

Hi, thank you. It looks like the rate of move-outs has been increasing over the last couple of years. I'm 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

John McLaren (President)

Good question, David. Appreciate it. I think, you know, for 2025, the rate of move-out was mainly attributed to RV. A lot of that had to do with some of the Canadian impact that we've experienced in 2025. 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 with more domestic move-ins. 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, you know, 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.

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, so that transaction as well.

David Siegel (Analyst)

Great. Thank you. Can you just briefly talk about what is driving the higher expenses in the U.K., recently?

John McLaren (President)

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

Fernando Castro-Caratini (CFO)

That's consistent with expectations for 2026 as well. We do have elevated expense growth in our guidance range with a midpoint of 2.2% for NOI growth. 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.

Operator (participant)

Thank you. The next question comes from Linda Tsai with Jefferies. Please proceed.

Linda Tsai (Senior Analyst)

Hi, good morning. With your net debt-to-EBITDA at 3.4 times, do you have a targeted range for leverage going forward?

Fernando Castro-Caratini (CFO)

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. To get to that midpoint, there's some releveraging to do.

Linda Tsai (Senior Analyst)

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

Fernando Castro-Caratini (CFO)

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

Operator (participant)

Thank you.

John McLaren (President)

Charles, jump in.

Charles Young (CEO)

Sorry, I'm just gonna jump in. It goes back to my answer earlier on capital allocation and really being balanced in terms of our approach and, you know, the tools that we have in our toolkit in terms of external growth being, you know, finding creative 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.

Operator (participant)

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

Charles Young (CEO)

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

Operator (participant)

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