Sun Communities Inc Q2 FY2020 Earnings Call

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities Second Quarter 2020 Earnings Conference Call. At this time, management would like 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 include the effects of the COVID-19 pandemic and other details others detailed in yesterday's press release and from time to time in the company's periodic filings within the SEC. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of the release. Having said this, I'd 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'll be an opportunity to ask a question. I'll now turn the call over to Gary Shiffman, Chairman and Chief Executive Officer. Mr. Shiffman, please go ahead.

Thank you, Operator. Good morning, and thank you for joining us today as we discuss our second quarter results and provide an update on how Sun is navigating the impact of COVID-19. We hope that everyone is staying healthy and managing through this challenging time. The intensity of the pandemic across the country continues to evolve, and the environment has been challenging, but I'm happy to report that all of our manufactured housing and RV properties are open for business and performing. We have worked hard to keep our residents, guests and team members safe. From a customer service perspective, we remain focused on delivering the signature service that Sun's residents and guests have come to expect across the portfolio. We are pleased with our results for the second quarter in light of the challenges presented by the virus. The team's skilled execution of our operating and financial plans has served to mitigate the impact on our business. For the second quarter, we realized a net FFO impact of approximately $10.8 million below our original budget which is better than our initial expectation of $15 million to $18 million provided during our first quarter release. Factors driving our performance included strong manufactured housing revenues, rental program results and expense savings and personnel costs and variable operating expenses primarily due to RV resorts that were not open. Offsets to positive contributors in the quarter were largely due to the COVID-related restrictions on our transient RV business. Despite obstacles related to the virus, our reported core FFO per share was $1.12 for the second quarter. In addition, Sun Communities generated positive same community NOI growth of 1.4%. Adjusting for $900,000 of direct COVID-19 related expenses, NOI growth would have been 2%. As of June 30, 2020, all of our manufactured housing communities and RV resorts are open with varying degrees of occupancy limitations in certain of our amenities to comply with public health guidelines set by state and local governments. Over 80% of our furloughed team members have returned to work and base compensation for main office team members, executive officers and the Board has been restored to prior levels. From an operational perspective, we are seeing the resilience of Sun's unique platform in action. Total portfolio occupancy in the second quarter rose 70 basis points year-over-year as we added 851 revenue-producing sites, a 27% increase over last year. We also completed the construction of almost 500 vacant expansion, redevelopment and ground-up development sites. As the country has reopened, we've experienced steady incremental improvement in our reservation pace for July and August. Moreover, our forward bookings for September and October have surpassed pre-pandemic budgeted expectations. While the potential for local and state mandates could impact this trend, we believe this improved reservation pace reflects pent-up demand and our ability to offer a vacation option that is perceived to be both safer and easier to control as compared to other alternatives. RV travel is the preferred mode for families to get away this summer. Expected strong sales growth in June and beyond, limited only by the amount of available inventory supports this thesis as discussed by major RV manufacturers like Winnebago and Thor Industries. Articles on the RV lifestyle are trending in the New York Times and Wall Street Journal among many other national and local media outlets. While we remain optimistic on forward booking trends, we must be cognizant of the current situation related to COVID-19 and how it might affect travel in the months ahead. The underlying strength of our business in the midst of this pandemic gave us the confidence to raise $633 million of equity in May. This raise allows us to act on a very active deal pipeline and resume growth capital expenditure projects, such as site expansions and ground-up developments. While we do not know the duration of the pandemic and its ultimate financial impact on Sun's business, we do know that Sun is in a position of strength operationally due to the high-quality of our portfolio and the nature of our offerings as well as financially due to the strength of our balance sheet. It has been a challenging year thus far, and I commend each and every one of our team members for going above and beyond during these past few months. Their commitment to executing on Sun's core principles has been exemplary. John will now discuss our operating results in more detail.

Thank you, Gary. Despite the challenges presented to our business by the pandemic, we are very pleased with our performance this quarter. Quick implementation of our emergency preparedness plan, cost containment efforts, and better-than-expected manufactured housing revenues mitigated the financial impact to our second quarter results. From a total portfolio perspective, we gained 851 revenue-producing sites, a 27% increase over the second quarter 2019, boosting total occupancy to 97.3%. Moreover, the financial hardship program implemented for April and May rent is now in the 12-month installment repayment period, and we are happy to report that over 17% of total deferred rent has already been collected and approximately 400 residents have paid their deferred rent in full. Our same community portfolio demonstrated resilience in the second quarter. NOI grew by 1.4%, resulting from a 1.8% decline in revenues and an 8% decline in expenses due to delayed seasonal opening of a number of RV resorts and portfolio-wide measures taken at the property level to reduce variable expenses. Manufactured housing revenues increased by 6%, driven by a 3.9% weighted average rental rate increase year-over-year and occupancy gains over the last 12 months. Annual RV revenues increased by 3.2% and transient RV revenue declined by 37%, largely due to delayed openings at our resorts during the quarter as discussed previously. On the expense side, we experienced reductions across payroll and health benefits driven by furloughs and delayed seasonal hiring, utilities and certain maintenance items given restricted access to most amenities. Variable expense savings realized in the second quarter are expected to be lower in the second half of the year as furloughed and seasonal team members return to work and amenities that were not accessible in the second quarter due to state and local restrictions are returned to service. Same community occupancy improved 190 basis points to 98.7%, reflecting almost 2,300 revenue-producing site gains over the last 12 months. Additionally, our rental program exhibited resilience with a 17% increase in applications to rent-a-home from Sun and an elevated rental home renewal rate of 68.2% in the quarter. Total applications were up almost 5% year-over-year. This demonstrates the continued strength of our platform and the demand to live in a Sun community. With regard to rent collection, net of hardship deferrals and prepaid balances, manufactured housing collections averaged 97% for the second quarter and are at 96% as of July 21. These collection percentages are in line with 2019 figures as of the same dates. Additionally, over the second quarter, collections averaged approximately 98% for annual RV site rent, also in line with the second quarter of 2019. These strong collection figures across the portfolio are indicative of the resilience and predictability of our balanced portfolio of manufactured housing and RV communities. Moving on to home sales, in the second quarter, we sold 611 homes as compared to 927 homes last year. Shelter in place restrictions and the inability to show homes physically contributed to the year-over-year decline. While pre-owned home sales were down, new home sales revenues grew 15%, and our gross margin expanded by 7% in the quarter, driven by the sale of 140 new homes. Our average new home price increased 14% over last year to $137,000. We believe that our manufactured home price point and high-quality communities are likely to make Sun a preferred provider of affordable detached housing today and in the post-COVID economy. Our RV business, particularly our transient RV business, has shown steady improvement week after week as travel restrictions were lifted throughout the quarter. We have seen an acceleration in website visits, call volume, and reservations. For example, Memorial Day weekend trends in RV revenues were down 39% as compared to last year, while transient RV revenues for the Fourth of July weekend were down just 5.5% compared to last year. In addition, forward bookings for the month of September and October are trending greater than 10% growth over the same period last year. Gary referred to the strong projected RV sales figures and trending media coverage surrounding the growth and demand for the RV lifestyle over the past few months. We are bullish on RV vacationing and have seen the follow-through from our guests and our forward bookings. We believe that most other travel options, including air travel and cruises, could take longer to return to pre-COVID levels. Given the breadth and high-quality of the resorts we own, we are well-positioned to benefit from the increasing popularity of the RV lifestyle and vacation option. We offer an excellent product and our resort performance during this challenging time reinforces the importance of this business to our overall platform. We are resolute in our view of the long-term viability of our mission and our business model. The pandemic has highlighted the importance of affordable housing and the desirability of competitively priced and safer vacation options for consumers. Sun, in many ways, has set the standard, and we remain at the forefront of providing a quality experience to fulfill this need. I would now like to turn the call over to Karen to discuss our financial results and balance sheet preparedness.

Thank you, John. I'd like to begin by reviewing our financial results, followed by a discussion of our balance sheet as well as our expectations for the third quarter. For the quarter ended June 30, 2020, we reported $1.12 per share in core funds from operations as compared to $1.18 last year. The year-over-year change reflects the previously mentioned $10.8 million FFO impact from COVID-19, which was better than our original expectations. During and subsequent to quarter end, we acquired a manufactured home community in California with 372 developed sites and 2 RV resorts located in Oregon and Florida totaling 544 sites. Our year-to-date acquisition volume is $132 million. Additionally, we sold our only Montana community for $13 million. In May, we closed an underwritten public offering of nearly 5 million shares, netting $633 million in proceeds. We intend to use the proceeds to continue to fund our growth initiatives, including acquisitions, ground-up developments, and expansion projects. At quarter end, we had $3.4 billion in debt outstanding with a weighted average interest rate of 3.86% and a weighted average maturity of 11.6 years. Our net debt to trailing 12-month recurring EBITDA ratio at June 30 was 4.8x. The pandemic and its financial and operational implications continue to be a fluid situation. While we have seen an improvement in our level of transient RV reservations, we also recognize the recent spike in new COVID-19 cases may introduce unforeseen challenges in the third quarter and beyond, which is why we will not be reinstating guidance. In addition, a number of the variable expense savings realized in the second quarter will not continue for the remainder of the year as all of our communities are now open. Based on our original budget, the third quarter was expected to be our biggest contributor, representing approximately 31% of budgeted FFO for the year. With the information we have available today, our forecasted reduction to original budget for the third quarter is between $12 million and $15 million. This range includes expected reductions to the original budget of $9.5 million of income from real property across manufactured housing, annual RV, and transient RV, $2.5 million of net contribution from ancillary services, and $2 million of net contribution from home sales. It also includes $650,000 of additional expenses related to the acquisition of personal protective equipment and products for heightened cleaning protocols. The decisive actions we have taken year-to-date provide Sun with meaningful financial flexibility to react to operational challenges during this time. We also believe that we are well-positioned to respond opportunistically to acquisitions as they arise. Thank you for joining us today. This concludes our prepared remarks. We would like to open the call now for questions.

Our first question today is from Nick Joseph at Citigroup.

Karen, I appreciate the color into the third quarter. So the $9.5 million impact to the real property, can you please break that down between the MH annual RV and transient RV expectations?

Yes, sure, Nick. As you noted, we included a range of $12 million to $15 million, with $9.5 million coming from property income. The impact from manufactured housing is due to changes in rent increases, shortened annual RV seasons, and a small effect from transient RVs, which accounts for about $1.8 million. So the difference between $9.5 million and $1.8 million can be divided between the two categories, manufactured housing and annual RV.

That's helpful. And then for the acquisition pipeline, you mentioned the equity that you raised in the second quarter and the expectation to redeploy that. So can you talk about where the pipeline is today? And then maybe just on pricing, where initial yields are now? And if you've seen any change from pre-COVID?

Thanks, Nick, it's Gary. I would share with everyone that the pipeline is very full with a lot of attractive opportunities for Sun. Inbound calls from owner-operators looking to discuss potential transactions have never been higher. We have all the relationships built over the 30-plus years, estate planning going on, a lot of it directly driven by the pandemic and factors related to it, where the timing is just right to open up those discussions. So we expect to continue a strong pace of acquisitions, and that was the result and the driving reason for the equity offering. Going into the year, we had discussed a target of about $150 million and to date, we've closed on about $132 million and second quarter, and subsequent to second quarter, acquisitions closed were about $110 million. So we're beginning to drive up that closing rate. And we expect to continue to deploy our growth capital throughout the balance of the year. We think that having access to the equity marketplace will allow us to take advantage of external growth opportunities and provide some outsized long-term growth for our shareholders. When we look at cap rates, I would share with everyone on the call today, this is where I've been somewhat surprised. Having been focused on our industry, both manufactured and RV resorts, I had expected that there might be a little bit of relief on cap rates and I would share that the opposite has actually been our experience to date. There's lots of available capital out there, lower interest rates today, and the continued recognition of the fundamentals of both manufactured housing and the RV platforms. They've continued to push on cap rates more than I would have expected in both segments. And we've seen a lot of lower quality, less well-located communities, if you will, trading in the low 4s and sometimes a touch below. And I would give some measure, just in the interest of trying to be as helpful and transparent as we can at Sun, we have looked at more than $500 million of transactions very, very carefully, most of which would be contenders and have not been willing to come down to the pricing where these transactions have been going. That being said, we have an acquisition pipeline that allows me to say that we will be able to put the equity to work to give you some sense of where we're thinking the three properties that Karen spoke about that we have closed on the acquisitions. We're in a range of a 4.7 cap rate, up to a 6.2% cap rate range. And we will continue to be looking in that range as we move forward.

Our next question is coming from Wes Golladay from RBC Capital Markets.

Can you talk about what you're seeing for annual RV conversion from a demand perspective?

Sure. This is John. I want to mention that 2020 has been a bit challenging for RV conversions, primarily due to our strong commitment to social distancing. This has limited our face-to-face interactions with guests, which are essential for securing RV conversions. Typically, our southern conversions take place at the end of March to mid-April, while northern conversions occur in early June and early July, making the timing less than ideal. However, we have been successful in converting transient guests to annual ones because they enjoy visiting our resorts. I believe that once things stabilize and return to normal, we will see that conversion activity pick up again.

Okay. Looking at your sites, I believe you mentioned they are all open. I'm curious, are all the RV transient sites open to all guests now? I remember there were some restrictions earlier regarding the length of time they were available. I just want to clarify that all the RV sites are now open for everyone.

Every resort is open. We do have some sites in Ontario that are still not available for transient guests. And we've just got a few communities out in California where there are some limitations as the number of transient or short-term guests that you can have at any given time. So we still got a little bit of that going on right now.

Got you. And last one, do you expect to start any developments later this year?

In the quarter, we added more sites to some of the developments we initiated from the ground up last year. I'm pleased to announce that Larkspur in Colorado opened its sites in the second quarter, which is significant for us due to its prime location just south of Denver. We plan to add more site deliveries for these ground-up developments in phases throughout this year. We are firmly underway with our projects. In fact, I visited Costa Vista in San Diego last week, and it is expected to begin operations early next year.

Our next question today is coming from Joshua Dennerlein from Bank of America.

Good morning, everyone. Gary, just kind of thinking big picture, the new expanded unemployment benefits or like what expires soon unless Congress enacts additional legislation. How are you thinking about MH all-age occupancy kind of going forward if those run out, it seems like long-term, probably benefit from just the affordable nature of it, but just kind of near term.

This is Gary. John, feel free to add anything, but I can only share my perspective based on our long discussions. After over 30 years in the business, I believe manufactured housing is an exceptionally resilient asset class in real estate. It provides affordable housing, and while we’re not immune to recessions, our portfolio is intentionally balanced with both age-restricted and all-age communities. This balance has shown that our growth is most robust over time. In age-restricted communities, we do see more turnover during tough economic times, but this is counterbalanced by the rising demand for affordable housing. Historically, after economic downturns like the great financial crisis, we have experienced significant growth. So, while we are not recession-proof, we are quite resilient and have a strong opportunity to recover compared to other asset classes. Additionally, when we assess issues like bad debt, our analysis over the last 18 years shows that it has averaged around 100 to 110 basis points, ranging from a low of about 60 basis points to a high of 140 basis points annually during that period. John, you might want to elaborate on what you are observing.

Yes. I want to emphasize that we are experiencing a strong influx of people into our communities. For the second quarter, applications are up by 5%, and rental home applications have increased by 17%. Additionally, our off-the-street sales applications rose by 22%. As Gary mentioned, we can describe this situation as recession-resilient because there are individuals from various housing situations that are engaging with our product, which differs from what we've seen in the past. While we do see a slight decrease in occupancy, we are more than compensating for that with the increasing number of new applications. This has been consistent throughout the 18 years that Gary referenced, and we feel quite optimistic about the future.

And why did we choose 18 years? Because John McLaren, our Chief Operating Officer, started here 18 years ago.

All age.

I cut my teeth in collections in this business.

Awesome. One more question from me. You mentioned that about 80% of the furloughed teammates have returned. Do you have any insights on how payroll and benefits in your community will trend through the third quarter? Was the 80% fully back at the beginning of the quarter, or did that occur recently?

No, they were pretty much back by the start of the first quarter, Josh. So we're not really expecting any real reductions in payroll from that perspective for the third quarter.

Okay. Would 1Q be a decent run rate to use for 3Q for that line item then?

Well, it's tough to say because of seasonality. You've got RV, which has a higher level of team members in it. So I'd have to take a look back. You probably follow-up with Fernando on that, Josh, but I can't make that comparison right now.

Our next question today is coming from John Kim from BMO Capital Markets.

I realize transient RV has picked up since the second quarter. But I was wondering if you could share what the occupancy rate was for the transient RV segment in the second quarter and today versus the same periods last year.

Actually, John, unfortunately, I don't have that figure right in front of me. It's something that we can follow back up with you on after the call. I apologize for that.

Okay. But in your prepared remarks, it sounded like transient RV was trending ahead of last year, excluding the July 4 weekend. Is that correct?

Yes, I would describe the quarter as one where revenue has consistently increased from April to June. This growth has been driven by the easing of stay-at-home orders and related restrictions. It aligns with what Gary often mentions about the significant pent-up demand for people to go out. We can clearly observe this trend by looking at each month sequentially. While I don't have the exact figures, I know that occupancy has increased, which is reflected in our revenue. We can provide those specific details later.

This might be helpful because, John, your question is a question we're studying all the time as we look at our business platform and how we're approaching it. But one thing we've discovered when we talk about resilience through downturns in the economy, gas prices that have been approaching $5 a gallon, if those of you who can remember that far back, I can. Swings in RV annual sales. Those measures, as we look back historically, revenues have grown in our RV communities on an average of 90 to 100 basis points greater than our manufactured housing business over a 10, 15, 20 year period of time. So I think that while we're not brushing aside the impact of the pandemic, fundamentally, as John used the word bullish, we're really proponents of how resilient the RV business is going to be both annual and transient as the strong demand comes back. And we're seeing that both here in our portfolio and in our investment over in Australia, where it's pretty much forward reservations in Australia, which I reviewed the other day, are up 24% for the forward 12-month period of time, and they struggled also through closures of their internal borders, travel restrictions, and stay-at-home mandates. So I think that we feel very, very good about how our RV transient and annual business will perform subject to the uncertainty of governmental actions and things like that as the pandemic goes forward. And we're also cognizant of the changing environment daily of what's going on with the virus.

But in your $9.5 million reduction versus budget to real property, some of that was transient RV, as Karen mentioned, is that purely from the July 4 weekend? Or are you baking in some conservatism in the back half of the quarter?

Yes. There's a little bit of conservatism there. Obviously, we don't know what's going on. That reduction to transient RV represents 97.8% of what our budget is. So it's a pretty small amount of conservatism there.

Okay. On the expansion front, you've delivered 851 revenue-producing sites this quarter. Some of that was probably delayed in the first quarter. But how close is this to a run rate quarterly figure for the rest of the year?

You mean for revenue-producing sites, John? Yes. Well, I think that puts us for the year at roughly 1,150 plus or minus actually, 1,151 sites that we've gained year-to-date. Our original guidance was somewhere around 2,600. The way I'd answer that question is that some of it is due to a really strong second quarter regarding RPS and site gains, which was higher than last year, as we mentioned earlier. I think some of it also depends on what happens going forward with the pandemic. Based on the application counts, it's difficult for me to provide a specific guidance number at this time. However, I am pleased with our progress. It is close to where we were last year, about 100 sites shorter than this time last year. We're in striking distance of being in that range.

Our next question today is coming from John Pawlowski from Green Street Advisors.

I wanted to circle back on the collections conversation from earlier. The 110 bps average bad debt over the last 18 years and a high of, I believe, 140 or 150, what you referenced there. Is that high watermark a reasonable betting line over these coming years from everything you see on the ground today? Because the portfolio is better situated today, just geographically and quality but unemployment is pretty darn high right now. So just everything you see in terms of the strain on your consumer today is that 140 bps, 150 bps kind of bad debt, net bad debt numbers, a reasonable bogey?

Well, you used the word bet. We don't tend to bet a little bit. We like to be as precise as we possibly can. And it's difficult to have clarity, okay, in an environment that's pretty unprecedented. And it's scary, by the way. But I can share with you, though, is post-2008, we didn't see a spike beyond that range. And for a period of time, we've been operating in that range. I think that Karen can share with you some of the metrics because we have thought through a little bit of reserve and accruing for bad debt, but I don't think that it's anything that far out of that range.

Okay. Yes. In response to Gary's comments, we have been consistent in our approach. However, due to the ongoing uncertainty and the challenges with hardship repayments, we decided to conservatively set aside an additional $2 million for bad debt in Q2. As a result, the bad debt for Q2 amounts to approximately 100 basis points of revenue, and without that $2 million, it would be around 64 basis points.

Okay. With unemployment remaining elevated, is there a chance that you may need to reinstate the deferral program? Or are consumers or renters still approaching you for relief, even though you stopped it in June?

Yes. This is John. We cut off the program in June because we hadn’t received many requests for it, and those requests had declined significantly. At this moment, it’s difficult to predict, but we don’t anticipate needing to reinstate that program.

John, it is very fluid, but we can share with you because we do discuss this. And like all of you, we are wondering what's going to happen with the stimulus package, what's going to happen with unemployment. But there is nothing that we're seeing out of what we've shared with you where we could discuss now some vulnerability, if you will, other than the small piece that Karen shared to be conservative and on the unemployment side, there's nothing on collections. In fact, it was somewhat unusual for us to receive the request that we received for prepayment in full of the rent deferral. John, what was the percentage of that?

17%. Whereby they had 12 months to really pay this back. So interestingly enough, it's almost as if there's some conservatism by some of our residents who want to know currently that they can pay back that deferral that gives us a little bit comfort, if you will, and how we're going to navigate these uncertain times. I believe it's important to reflect on our history to highlight the resilience of our business. We faced challenging times in the early 2000s and still managed to grow. Similarly, during the global financial crisis, we continued to experience growth. This underscores that we offer affordable vacation options and housing, which are essential in all economic conditions. Our business is strong because the demand remains consistent regardless of the economic cycle. We're seeing evidence of this in our application counts and other metrics we've shared.

Okay. I appreciate all the thoughts. Maybe just one last one for me. Circling back to Nick's first question on the roughly $10 million impact on real property income for the coming quarter. I think you mentioned it's roughly half split between manufactured housing and annual RVs and the other transient. So not increasing rents on the annual RVs or manufactured housing, have you come up with a date on when you're going to start increasing rents again? Or is it a month-by-month process?

Yes, this is John. We have already started the rent increase process again. One of the key points we've always emphasized is that the most effective revenue-generating site is the one you retain. Therefore, we have approached the rent increases for 2020 with careful consideration, aiming to do what is best for all of Sun's stakeholders. We have initiated that process.

Just to remind you, about 50% of our rent increases for 2020 were already in effect before mid-March. After a pause of about 3.5 months in raising rents, we are now moving forward with those increases. With this adjustment, our average rent increase for 2020 is expected to be about 3% instead of the 4% we initially projected for the end of the year.

Our next question today is coming from Samir Khanal from Evercore ISI.

Gary, could you clarify the timing of the deployment of the $500 million equity raise? Is that primarily for this year's acquisitions, or are you considering more for 2021 and beyond?

Well, generally, we don't forecast acquisition volume other than to refer to what we've done in the previous years. We're well ahead of pace where we expected to be based on last year's acquisitions with the exemption of the Jensen portfolio. And I would simply state with $132 million closed on so far this year, we should be able to significantly exceed that with what we closed this year. And if anything overlaps into next year, we'll be glad to share this. But for right now, I can only say that our pipeline is extremely full. We are very pleased that we will be able to match up the equity growth capital that we raised to the potential acquisitions, and the timing is really hard to forecast.

Can you provide an update on your Australian joint venture and how that business has been performing during COVID-19?

Sure. I referenced it a little bit with how similar their RV business has been. But despite tight restrictions over in Australia and certainly within their internal borders, Ingenia really has continued to perform really well during these challenging times. Last quarter, they announced that total year-to-date home sales were $240 million with another 30 expected to close prior to their year-end, which was June 30. So if they close those around 270 home sales should have closed. On the Sun Ingenia development joint venture, we've been slower to deploy our capital over there than our original goal but we continue to wait for some delayed entitlement approvals that are delayed in some part due to the COVID situation there as well. Our first project, Freshwater in a place called Burpengary. We've closed 7 new homes, generating gross proceeds of about AUD 2.5 million with an additional 15 homes under contract in deposit now which are being constructed. Some delay again through COVID but on track to deliver the kind of results and returns that we hope for in that development. And then I mentioned RV, a few comments before. Similar to what we've experienced in the U.S., but looking forward, now that everything is open, the travel restrictions have been lifted with the exception of one area. 12-month bookings are strong, and they're indicating a revenue increase year-over-year of just over 24%. So they're continuing to perform well. They're getting ready to report on their year-end results, and I'm looking forward to seeing them as much of the market is.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over to Gary for any further or closing comments.

Well, we want to thank all of you for taking the time out to join us today. We believe Sun's actions in response to this unprecedented period of time ensure that our business is strong through and on the other side of this pandemic. So we look forward to speaking to you at the end of next quarter. And as I always conclude, Fernando, John, myself, and Karen are always available for any follow-up questions. Thank you, operator.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.