Earnings Call Transcript - SUI Q4 2020

Operator, Operator

Greetings. Thank you for joining us today for Sun Communities Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow after the formal presentation. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Gary Shiffman, Chairman and Chief Executive Officer. Thank you. You may begin.

Gary Shiffman, CEO

Good morning, and thank you for joining us as we discuss our fourth quarter and full year 2020 results as well as our 2021 guidance. We hope that you and your families are in good health as we continue to navigate the challenges of the pandemic. We are very pleased with the resilience of our portfolio and the commitment and humanity of our team members during this most difficult time. The stable growth we delivered in the environment further demonstrates the strength of manufactured housing and RV resorts through economic cycles. It also underscores our rationale for meaningfully expanding our platform with the acquisition of Safe Harbor Marinas, a business that exhibits similar stability and growth characteristics. For the year, Sun generated core FFO per share growth of 3.5%. Same community NOI growth of 4% added over 2,500 revenue-producing sites and achieved total portfolio occupancy of 97.3%, a 90 basis point improvement over 2019. To drive additional future growth, we acquired almost $3 billion of properties in 2020. Over $600 million of our acquisitions took place in the fourth quarter after the closing of the Safe Harbor transaction. Total acquisitions for the year included 24 manufactured housing communities and RV resorts with over 6,900 sites and 106 marinas with nearly 39,000 wet slips and dry storage spaces. Additionally, post year-end, through the date of this call, we have closed acquisitions totaling over $43 million, including 1 manufactured housing community, 2 RV resorts and 2 marinas. We are actively pursuing opportunities in each of our segments. Our extensive experience, track record and industry relationships have helped continue to facilitate successful MH and RV transactions. On the marina side, since the closing of the Safe Harbor transaction, we have added 7 additional marinas, inclusive of the world-class Rybovich superyacht marinas in West Palm Beach and Riviera Beach, Florida. The Rybovich team is joining Safe Harbor, and we expect them to drive incremental growth across the entire marina portfolio given the specialized nature of superyacht marina operations. As we reflect on the events of 2020 and look optimistically to the future, we are encouraged by the fundamentals of our business. The demand for high-quality, affordable housing and vacationing is as strong as ever. Even with the various shelter-in-place restrictions throughout 2020 and into 2021, applications to live in a Sun community remain at an all-time high as we received almost 50,000 applications in 2020 and sold nearly 2,900 homes. Our RV resort performance remains strong as travelers who wanted an increased level of control and safety chose our resorts for some much-needed rest. We believe that RVing attracted a large number of first timers, as indicated by a 6% year-over-year growth in RV shipments, including an almost 50% increase in RV shipments for the month of December. We anticipate that many of those first timers are likely to be repeat customers in the years ahead. We see numerous similarities with respect to marinas as a wide portion of the population became first time boat owners as well. According to industry sources, there was a 35% increase in the number of purchases by first time boat buyers in 2020. In short, we expect there will be sustained demand across each of our business lines. As we look to operational initiatives for 2021, Sun is positioned to continue to execute on our 4 core investment strategies. The first is reinvestment in our properties to ensure sustained demand and to maintain the high quality of our assets. Second is the pursuit of accretive acquisitions of operating manufactured housing communities, RV resorts and marinas. Our acquisition pipeline is as full as it has ever been. Sellers continue to see the benefits of a transaction with Sun given the certainty of execution, tax deferment strategies and the knowledge that Sun will improve and continue managing these assets to the highest possible standards. Our third investment strategy is the construction of expansion sites. And last is the construction of greenfield developments. Together, these 4 strategies support the long-term sustainability of delivering industry-leading growth. As our company has grown significantly, we have decided to expand the size of our Board and recently announced the appointment of Tonya Allen as an independent director. Tonya brings a wealth of experience and expertise in the fields of education and economic development and will be a tremendous asset to our team. We welcome Tonya and look forward to having her expert perspective on sustainability and social issues as part of our Board initiative and leadership moving forward. Our success would not be possible without the dedication and commitment of our team members, who continually place the highest priority on the health and safety of our residents and guests. Through the many challenges this past year, our team consistently rose to the occasion and worked tirelessly to produce these positive results. I would like to extend a heartfelt thank you to the entire team as I am very proud of what we have been able to accomplish together. I will now turn the call over to John and Karen to discuss the results in further detail.

John McLaren, COO

Thank you, Gary. Our solid performance for the fourth quarter and full year 2020 demonstrates the resilience of our operations across manufactured housing, RV resorts and marinas. We benefited from heightened demand for our RV resorts in the second half of the year and the steadiness of manufactured housing through all of 2020. Our same community results reflect the stability of the platform as we work through the challenges of the pandemic. For the fourth quarter, same community NOI increased by 2.1%. Excluding direct COVID-19-related expenses of $300,000, our same community NOI growth would have been 2.4%. In the fourth quarter, same community NOI was driven by a 5.7% growth in revenues, reflecting a 3.8% increase in weighted average monthly rent and a 180 basis point occupancy gain. Breaking it down further, manufactured housing revenues grew by 4.8%, annual RV grew by 1.9% and transient RV grew by almost 18%. If it were not for the mandated closures of our resorts in California starting in December as well as the continued Canadian travel restrictions, our fourth quarter transient RV results would have been even stronger. The good news is that travel restrictions were lifted in California at the beginning of February, and we have already begun to welcome our guests to these resorts. Expenses in the fourth quarter were elevated predominantly due to the costs associated with the pandemic, along with higher payroll, supply and repairs and utilities at RV resorts that had extended seasons. For the full year, same community NOI increased 4%. Excluding $2.4 million of direct COVID-related expenses, same community NOI would have increased by 4.4%. This growth reflects a 3.6% revenue increase and a 3% increase in same community expenses. The revenue growth was primarily driven by a 4.5% increase in annual RV revenues and 5.6% growth from manufactured housing revenues. Same community transient RV revenues were down 5% for the year, reflecting the delayed opening of 44 of our seasonal resorts due to COVID-related travel restrictions in the late spring and early summer. Our RV transient business saw a meaningful rebound with same community transient RV revenues growing by 5% in the third quarter and 17.8% in the fourth quarter as compared to the same periods of 2019. Our RV property performance will be affected in the first quarter by the California shelter-in-place order that ran through the early part of February. Additionally, the continued Canadian border closure has prevented some of our guests from returning to our Southern resorts for the season. Combined, these 2 events are estimated to have an impact of $8 million to $10 million on transient RV revenues, which is reflected in our first quarter and annual 2021 guidance. Even as the impact of the pandemic persists, forward bookings for the second quarter are pacing meaningfully ahead, with current on-the-books revenues 18% above this time last year. From a total portfolio perspective, we gained 578 revenue-producing sites for the fourth quarter, bringing our total for the year to over 2,500. The addition of these sites increased our total portfolio occupancy to 97.3% from 96.4% a year ago. Of our revenue-producing site gains for the year, 1,070 or roughly 43%, were in our manufactured housing expansion communities. For the year, 863 transient RV sites were converted to annual leases. The development of ground-up and expansion sites is a consistent growth driver for us. In 2020, we delivered over 1,300 vacant ground-up and expansion sites. These recently completed expansion ground-up development sites will contribute to growth in 2021 and beyond as they fill up and stabilize. Additionally, we currently have over 10,000 zoned and entitled sites in our portfolio for expansion and ground-up developments, which, when developed, should contribute to our growth in future years. Moving on to home sales. We sold 782 homes for the quarter and 2,866 homes for the year. 850 of these home sales were conversions of renters to owners in 2020. We saw new home gross profit expansion of 3.6% year-over-year, driven by strong margins in Colorado, Connecticut and Ontario. For the year, average home sales prices rose for both new and preowned homes by 11.3% and 8.8%, respectively. The new home sales and our ground-up and redevelopments in Colorado and Florida contributed to this increase. Brokered home sales throughout Sun's portfolio saw a 15% increase in total sales year-over-year as the resale market was strong as ever. Average brokered home prices in our communities increased by over 21% in 2020. A healthy resale market is very important for our success as new and existing residents see the value of choosing to live in a Sun community given the quality and level of ongoing reinvestment that goes into our properties. Sun has maintained strong rent collection rates throughout 2020. Total rent collection rates for manufactured housing communities and annual RVs for the quarter ended December 31, 2020 were over 96% and 97%, respectively, after adjusting for the impact of COVID-19-related hardship deferrals and prepaid rent balances. January collections were over 97% for both manufactured housing and annual RV. Through February 16, we have collected 95% for both our manufactured housing communities and for our annual RVs, which is consistent with prior year collections. With respect to Safe Harbor, we closed our acquisition on October 30, 2020. The fourth quarter performance was solid with a 2-month NOI contribution of $17.9 million. COVID-related tailwinds like the surge of new boat ownership, which Gary discussed, helped drive strong wet slip rental and on-land winter storage revenue. Given the ability to enjoy the outdoors in a safe and self-control environment, we anticipate marinas to be an important growth driver for the coming years. In closing, 2020 posed both numerous challenges and opportunities for Sun. We have grown as an organization and are stronger than ever. We are proud of our team members' dedication to our residents and guests and are grateful for their efforts in a truly challenging year. Karen will now discuss our financial results.

Karen Dearing, CFO

Thanks, John. For the fourth quarter, Sun reported core FFO per share of $1.16, 5.5% above the prior year and $0.04 ahead of the top end of our guidance range. These results reflect better-than-expected performance from our ground-up developments and recently completed acquisitions, including Safe Harbor Marinas. For the 12 months ended December 31, 2020, core FFO per share was $5.09, up 3.5% from 2019. We are very pleased with our results and our positioning for 2021. During the year, we acquired almost $3 billion of operating properties, including the Safe Harbor Marinas portfolio. Subsequent to year-end, we acquired a manufactured housing community for redevelopment adjacent to an existing community, 2 RV resorts and 2 marinas for a combined $43 million. We had an active year on the capital markets front, raising approximately $1.9 billion in equity to ensure the strength and flexibility of our balance sheet to support our acquisitions and growth initiatives. We ended 2020 with $4.8 billion of debt outstanding at a 3.4% weighted average rate and a weighted average maturity of 9.4 years. We had $83 million of unrestricted cash on hand and a net debt to trailing 12-month recurring EBITDA ratio of 6.9 times. Pro forma leverage, including the estimated full year EBITDA contribution from Safe Harbor and other acquisitions, is in the mid-to-high 5 times EBITDA, which is in line with our long-term leverage target. Our performance in 2020 and the confidence we have in the ability to continue to generate industry-leading results provided the incentive for our Board to raise our 2021 distribution to $3.32 per share, up 5.1% from last year. This is our fifth consecutive annual distribution increase. Turning to guidance. For the year, we expect core FFO to be in the range of $5.79 to $5.95 per share, an increase of 15.3% at the midpoint. First quarter FFO is expected to be in the range of $1.13 to $1.17 per share. Moving to internal growth drivers. We are anticipating a 2021 same community NOI growth range of 5.6% to 6.6%, which includes a blended weighted average monthly rent increase of 3.4% for manufactured housing and annual RV. Our core FFO and same community NOI guidance assumes lower transient RV revenue contributions in the first quarter of approximately $8 million to $10 million due to the California shelter-in-place order, which ended in early February, and the extension of the Canadian border closure. We expect revenue-producing site gains throughout the year to be between 2,150 and 2,350. On the development front, we plan to deliver 1,200 to 1,600 vacant expansion and ground-up development sites in 2021. For our marina business, we expect total NOI, inclusive of service and ancillary contributions, of $163 million to $169 million. With respect to our G&A guidance, we expect our 2021 G&A expense to be in the range of $164 million to $167 million. Approximately $33 million of the year-over-year increase is attributed to marinas as we scale that platform to capture and support the integration and operations of the large consolidation opportunity we see before us. As Safe Harbor transitions from a private operator to a wholly-owned subsidiary of a public company, it requires an expanded operating infrastructure and financial reporting structure to support both its regulatory obligations, primarily around reporting and future growth potential. This level of G&A supports both the operationally-intensive nature of the marina business as well as our expectation for the marina portfolio to be in high-growth mode over the next several years. In just our first 90 days of ownership, we've increased the marina portfolio's transaction value by over 20%. We want to ensure that the business and the team are set up for success and anticipate that marina-related G&A will be leveraged over time. It's important to note, there is seasonality in our portfolio. Please refer to our supplemental for additional disclosures on expected seasonality for total MH and RV NOI, marina NOI and core FFO. As a reminder, our guidance includes acquisitions through the date of this call, but does not include the impact of prospective acquisitions or capital markets activities, which may be included in research analyst estimates. Finally, we'd like to note that starting with our first quarter earnings release, we intend to provide enhanced reporting disclosures in our supplemental across MH, RV and marinas. This completes our prepared remarks. We will now open up the call for questions.

Operator, Operator

Our first questions come from Josh Dennerlein with Bank of America.

Unidentified Analyst, Analyst

It's actually Lou Asscherick on for Josh today. Congratulations on a great quarter. Just jumping on to the marina side. We thought that Safe Harbor is hosting regattas in Newport this August. Do you envision hosting similar events across the different areas in your marina portfolio over time? Are there any other events that the team is working on that might drive traffic across your marina's portfolio? I know you mentioned a little bit more on the ancillary side for the NOI, but just kind of trying to figure out what else is part of it.

Gary Shiffman, CEO

So it's Gary. We're really excited to take part in the first event you've described. This marks the start of connecting a large membership of nearly 50,000 members at the marina with the ability to travel between Safe Harbor Marinas and understand what to expect when visiting regarding the consistency of operations and services offered. This will be a great opportunity to showcase that. The Sun staff here is just as enthusiastic to participate and to see what Safe Harbor management has planned for the future. We will share more information about what lies ahead regarding these events. This is essentially the first step for Sun to engage in this kind of Safe Harbor event. Regarding marina details and disclosures, we want to inform everyone that we will provide enhanced disclosure by business segment, specifically for marinas, with our first quarter earnings release. This will include separate disclosures for our manufactured housing and RV business lines to give clearer insight into each of the three segments. In the first quarter, we will have a better view of marinas and the business segments, while also providing clarity for review and modeling by breaking apart MH and RV. This will be available in the first quarter, allowing for a deeper look into each segment.

Unidentified Analyst, Analyst

Okay. Great. And I apologize I may have missed this, but did you guys discuss the guidance for acquisitions this year? Just trying to think about if we are seeing the same flow from 4Q going forward? Or I don't know, I think you might have mentioned that 4Q is usually a big acquisition quarter. So just trying to figure out?

Gary Shiffman, CEO

Yes. You didn't miss it. You didn't miss it. We didn't give it. We typically don't give guidance. We usually have forward acquisitions. We usually reference the previous year or the previous few years. Obviously, new with Safe Harbor Marinas acquisitions. But generally, we look forward to $100 million to $400 million of MH and RV acquisitions based on historical numbers, excluding large portfolios, which basically have already been consolidated. And then separately, we spoke about or I mentioned in my remarks that I can share that the acquisition pipeline really in manufactured housing, RV and marinas is absolutely as full as it's ever been. So we certainly have our work cut out for us. We are seeing increased competition in the MH and RV space. And it might not surprise many of you that we're starting to see increased competition in the marina space. So we will be very, very selective that anything we do acquire will be the highest of quality and the highest of opportunity to provide growth and value creation for our shareholders. And we're excited to work through that pipeline and be able to present exactly what we've accomplished each quarter.

Operator, Operator

Our next questions come from the line of John Kim with BMO Capital Markets.

John Kim, Analyst

I have a couple of questions. Regarding the Rybovich portfolio, which is your largest marina acquisition since Safe Harbor, is this your first superyacht marina? Can you compare some characteristics such as margins, retention rates, or growth potential regarding superyachts versus your typical marina?

Gary Shiffman, CEO

Yes. It's Gary again. I'll defer to first quarter, when we can really look a little bit deeper into segments of the business, but I would share with you that the Rybovich marina in both locations offers services to the world's largest boats. But when you get into it, the margins remain similar, but because of the unique offerings, the occupancy, the service requirements, which specialties draw in vessels and boats that are less sensitive to the cost of staying in the marina and provide all the ancillary revenue lead towards very good returns against the investment on a pretty predictable basis. So as you look out over a long period of time, the consistency of their growth of revenue is very comfortably predictable, so those are the characteristics of it. But within it, it's just high occupancy, high demand. Their slips can accommodate boats in excess of 300 feet. So it is really the world's largest boats and yachts and sail craft. And I can share with you, it's really a list of the who's who in marina yacht ownership as it's one of the few marinas that can culminate that size and scale of boats.

John Kim, Analyst

Looking at your guidance this year for marina is at the midpoint of NOI, that's about a 6.6% cap rate. Are you seeing compression across the board on marinas? Or is it really just the Rybovich portfolio with a lower cap rate acquisition?

Gary Shiffman, CEO

Yes. I guess I would describe it that we expected some cap rate compression after our announcement, and there have been a couple of other platforms for sale over the last 12 months. And as we study them carefully and did our research and began to understand the stability of cash flow, the lack of new supply, the demand versus supply fundamentals, the growth in boat ownership, it doesn't come as a surprise to us. I think what does come as a little bit of a surprise is how fast the awareness of many other potential investors are queuing in, in the marina business. So we have heard both on a publicly announced basis and a private basis that there has been cap rate compression taking place. Certainly, marinas are changing hands at a lower cap rate than the ability of the Safe Harbor group to generate higher cap rates. So that cap rate is creeping in. And the way I describe it right now is our view on the marinas is that they're trading at a 300 basis points to 400 basis points spread above where we're seeing many manufactured housing and RV communities trading at today. So still a good solid spread. And what I'd share is that the 7 marinas that were closed, including Rybovich, traded in the range of a 6.4% to 8.5% cap rate thus far.

John Kim, Analyst

Okay. I appreciate the information that you provided on the seasonality of the marina. Can I just ask just given that 58% of NOIs in the second and third quarter, how much visibility you have on those contracts being signed? And if there's any variability in cases, any travel restrictions going forward, what the risks are to achieving that NOI?

Karen Dearing, CFO

I think you're asking about the impact of COVID and similar factors. We don't see much risk related to that. The portfolio performed strongly through COVID last year, so I don't anticipate significant impact if a similar situation arises based on last year's experience.

Gary Shiffman, CEO

Our second quarter bookings, John?

John McLaren, COO

Yes. On the RV side, our bookings for the second and third quarters are ahead of last year. As I mentioned earlier, there is significant pent-up demand for people wanting to get outdoors. The RV and marine asset classes really cater to that need. We are quite optimistic about the future, John.

Gary Shiffman, CEO

Yes, MH is all annual contracts. So we've seen how it performed in 2020, so. But for the impact on the Canadian borders John covered and the California closures that are now up in February, we are feeling very comfortable with how 2021 should play out just based on what we saw in 2020.

John Kim, Analyst

Okay. Last one for me. Just turning over to RVs. When I look at your RV site breakdown on Page 3 of the supplement, the transient RV as a percentage of total RV sites has been increasing over the last year. Now it's 16.8% from 15% a year ago. Is that due to recent acquisitions and expansions? Or is this partially due to a slower conversion rate from transient to annual leasing?

John McLaren, COO

We converted 863 transient guests to annual leases last year, which is close to our typical annual performance. We are quite pleased with that outcome. A significant factor contributing to this is the development work we've undertaken, which has increased the number of transient sites in our portfolio, creating future opportunities for converting more transient leases to annual leases.

Gary Shiffman, CEO

That conversion gets us a 40% to 60% per site revenue increase on an annual basis. So...

Karen Dearing, CFO

First year.

Gary Shiffman, CEO

So those conversions are very important to us. There's a part of our strategy that seeks to buy transient just as we seek to buy vacancy in our manufactured housing communities because it's an absolute tremendous first-year benefit when, A, we get the sites filled and manufactured housing; and B, when we convert the transient. So you will find us stepping up our conversion programs as we get more and more inventory of the transient sites going forward.

Operator, Operator

Our next questions come from the line of Nick Joseph with Citi.

Nicholas Joseph, Analyst

Gary, appreciate the comments on the cap rate differential between marinas and MH and RV. But how does it work on an IRR differential for the acquisitions that you've done recently?

Gary Shiffman, CEO

We're excited to demonstrate to the market and our shareholders growth on the marina side, if you're referencing the marina side, I think that part of the excitement by the Safe Harbor management and operational team is the ability to have a strong, well-capitalized partner to enhance and grow the business. So I think the opportunity ahead of us to create increased cap rate, which will generate into a greater IRR over a, call it, a 3 to 5 to 7-year period of time with additional, I think, contraction of cap rate, which will naturally enter in over a period of time. I think the exit cap rates in this particular asset class will be modeled probably more aggressive than the entry if our strategy proves out. And so the IRRs are very, very strong.

Nicholas Joseph, Analyst

When you compare that to MH or RV where you're getting some level of uplift, should that incremental capital be going to marinas right now or the IRR is pretty similar, given the uplift that you're seeing on the other segments?

Gary Shiffman, CEO

Yes. I would say that the capital will go out similarly where we can justify the return we're going to get on it. But due to the ability to buy at a higher cap rate and the strategy and the supposition, as we said, that there'll be cap rate contraction. Then on paper at least, the IRRs grow a little bit faster on the marina side.

Nicholas Joseph, Analyst

And then just on the G&A side and understand that it's a wholly-owned subsidiary. But obviously, there's some cost there. And I'm wondering if there's an opportunity for synergies or to consolidate some of the back end across marinas and the rest of the platform for some savings in the future?

Karen Dearing, CFO

Nick, I want to point out that the marina platform operates independently. We have taken on the entire executive team and senior operations back office, and we did not anticipate any synergies or efficiencies from that platform. Regarding the platform itself, it is scaling and growing very rapidly, but it hasn't reached full scale yet. I believe we will be able to leverage general and administrative costs over time, but I don’t expect that to happen in the near term.

Operator, Operator

Our next question is come from the line of Wes Galladay with Baird.

Wesley Golladay, Analyst

I'd like to talk about the pace of the marina deals. And how much you think was due to pent-up demand for OP units?

Gary Shiffman, CEO

That's a great question, Wes. Both the Sun management and Safe Harbor management were excited about the opportunity to create a tax-deferred security during our exploration of the transaction. This approach could help us acquire marinas that might not be accessible otherwise. As Baxter and the Safe Harbor management have mentioned in past calls, many of these marinas are second and third generation. The tax recapture, tax implications, and the general ineligibility for 1031 exchanges suggest that we have significant opportunities ahead of us. Rybovich is a prime example; do you remember the exact percentage of securities there, perhaps 30?

Karen Dearing, CFO

A 1/3.

John McLaren, COO

A 1/3 of it.

Gary Shiffman, CEO

Okay. A 1/3 of it was actually a combination of preferred operating partnership units and operating partnership units. And the Huizenga family really was aligned and wanting to protect the tax implications and obviously defer the impacts. But at the same time, as I mentioned earlier in our remarks, we're really excited to have that entire team with their experience in the superyacht marina world as part of the Safe Harbor team. So not only do the tax securities become important to acquire the property, but in this case, we acquired a management team, relationships in the industry and core competencies that are just going to enhance safe harbor's efforts moving forward. So there's a lot of benefits from having those securities.

Wesley Golladay, Analyst

Great. And maybe switching over to development. Do you have any planned starts this year? And then maybe a bigger picture for the industry. Do you have a sense of how many active developments there are for MH and RV right now nationally?

Gary Shiffman, CEO

Yes, I appreciate the question. Currently, we have around 8,400 sites in different stages of predevelopment. This includes 9 manufactured housing communities, 8 RV communities, and 2 hybrids, which combine manufactured housing and RVs in one development. As we have previously mentioned, we have been the leading consolidator of manufactured housing communities over the last decade. Recently, we have increased our efforts in new community development, particularly due to the significant compression in cap rates and the lack of new supply. Given our experience at Sun Communities as a developer of new communities, we realized that developing new communities could yield better returns than acquiring existing ones at these compressed cap rates. Moving forward, we will still acquire existing communities where the cap rates and growth potential are favorable. However, our focus on development will continue, as we believe it can generate high single-digit returns upon stabilization, which typically occurs 3 to 5 years after construction begins, depending on whether it's an RV or manufactured housing project.

Wesley Golladay, Analyst

Great. The topic of rent control often comes up in discussions with investors. Are you seeing it more in your markets for the manufactured housing segment? If so, what type of restrictions are they considering? Additionally, with the new administration, is there anything in their plans that could affect your business?

John McLaren, COO

Wes, this is John. There isn’t really any significant impact for Sun regarding that issue. It primarily relates to the fact that, as we've indicated, we've consistently seen rent increases in the 2% to 4% range over the past 20 years. While we do have some communities under strict rent control in California, they represent a minor portion of our portfolio. We have effectively managed to keep rent increases within that range. From what I've observed and heard in various locations, even in states where we only have one community, most of the discussions are within the range we would normally pursue, so it doesn't significantly affect us at this time.

Gary Shiffman, CEO

Really too early to tell. We're watching it carefully and everyone is. There's a lot of discussion out there. Certainly, a lot of discussion on the HUD front and the continued commentary to focus on affordable or obtainable housing by the government agencies, but we're yet to see any meaningful shift towards anything.

John McLaren, COO

I would like to add, Wes, that based on the numbers Gary just shared regarding our various stages of entitlement for development, we are in a unique position having completed 7 ground-up developments in the last three years. When I attend meetings with municipalities and planning commissions, I'm no longer presenting renderings of potential projects; I am showcasing our actual completed work. This, combined with the important discussion from Washington about attainability and affordability, allows us to effectively demonstrate how we contribute to addressing this crisis.

Operator, Operator

Our next question is come from the line of John Pawlowski with Green Street Advisors.

John Pawlowski, Analyst

Gary or John, I would like to understand the scalability of Safe Harbor's platform better. Given that the Rybovich team brings yacht expertise, I'm curious if, as the business expands into different regions or types of marinas, we can expect significant increases in general and administrative expenses in the coming years. Or do we now have all the necessary expertise in-house to support the growth of your marine investments?

Gary Shiffman, CEO

John, that really is a great question. And obviously, as we prepared for budgeting for the acquisition of Safe Harbor and to discuss guidance, we tried to be very, very transparent in our G&A, and we ask that question ourselves, even during the underwriting. This should be very scalable. We do underwrite to approximately 3% of revenue for G&A as we acquire the new marinas. That has been the practice of Safe Harbor. We continue to underwrite in that methodology. But in working closely with Baxter and Gavin, senior management at Safe Harbor, the addition of the Rybovich senior staff and back office is not so much of a have to have. It's a want of have. And so that's a perfect example where their skill set will be able to be spread over many of the existing Safe Harbor Marinas to be able to now take that superyacht ability to shift and provide services and ancillary revenues from other Safe Harbor Marinas to be able to deliver services back and forth, we think will incrementally grow the existing opportunities. And as we look to new opportunities, and there are several that I could point to in the pipeline, it is their skill set that is being leveraged to be able to really take a hard look at opportunities and create what we would call more strategic value post-acquisition that will benefit growth going forward. So I don't think you'll see the step. I think you see that we're there, and you'll see the incremental changes from where we are right now.

John Pawlowski, Analyst

Okay. And Karen, the $23 million in business combination expenses that are excluded from core FFO. What specific costs are included in that? And are additional costs expected in 2021?

Karen Dearing, CFO

No. So the $23 million of business combination costs are really the impact of the Safe Harbor Marinas being treated as a business combination rather than an asset acquisition. So asset acquisitions, you capitalize cost business combinations, you expense them. Those costs are just typical closing costs on real estate transactions. They are the legal costs associated with it. And the M&A advisory fees, those types of things. I think the amount is in line with what you'd see on an M&A transaction of this size and they're not anticipated going forward. Most of our acquisitions are considered asset acquisitions. So those types of costs would be capitalized.

Gary Shiffman, CEO

And the only thing that I'd add to that, the complexity of marinas, they're being the uplands in the water. We did extensive diligence from an engineering standpoint to evaluate the uplands, the utilities, the waters, the wave attenuation complexities of the business, the seawalls. So more than we would be doing at an MH or RV transaction, even at that size. One-time costs.

John Pawlowski, Analyst

Okay. Last one, if I may. Could you share the cap rate for Rybovich, just NOI? And then what it would be if you include their G&A load?

Gary Shiffman, CEO

What I can share is what I have in front of me. And I indicated for the 7 properties acquired, the cap rate range was from 6.4% to 8.5%. And Rybovich would be on the lower end of that.

John Pawlowski, Analyst

Okay. And then including G&A, what would the yield be?

Gary Shiffman, CEO

I'm sorry, I missed that.

Karen Dearing, CFO

Including G&A, the yield would be?

Gary Shiffman, CEO

Yes. I don't have that in front of me, but you could definitely follow-up with Fernando.

Operator, Operator

Our next question is coming from the line of Keegan Carl with Berenberg.

Keegan Carl, Analyst

So first, just given what's going on in Texas, have you guys heard of any reported damages either to your MH or RV or marina properties? And if so, how material of an impact do you think that will happen in the quarter?

John McLaren, COO

Hey, this is John. We've been facing some power outages and similar issues, but fortunately, aside from a few broken pipes, we haven't encountered much damage. We feel fortunate in our Texas communities and resorts that the situation isn't worse. Overall, we seem to be in good shape right now.

Keegan Carl, Analyst

Okay. That's good to hear. And then shifting gears a little bit. If we look at resident move-outs in the MH and RV space, it looks like they ticked up to 3.3% for the year. What was the driver of this? And how quickly do you expect to fill these sites?

John McLaren, COO

I believe the increase on the RV side was primarily due to our earlier conversions this year. However, we have recaptured much of that in the latter half of the year. Regarding the manufactured housing sector, our brokered home sales business has seen significant growth with more homes being sold, which is a positive development for the community. We're observing more activity overall. Additionally, as I've mentioned in previous calls, while we may experience some occupancy losses, we are witnessing a strong resurgence in application activity from new residents looking to move in.

Operator, Operator

Our next question is come from the line of Todd Stender of Wells Fargo.

Todd Stender, Analyst

Just to stay on the Rybovich deal, what were the terms on the new Series I preferred OP units, and how did that compare to the Series H?

Karen Dearing, CFO

Well, that one I'm going to have to dig up.

Todd Stender, Analyst

But similar to a preferred OP unit, there's got to be a coupon, right?

John McLaren, COO

Yes. Yes. Yes.

Karen Dearing, CFO

Yes. A 3% coupon. The Series H was a 3% also.

Todd Stender, Analyst

And there's a lockup period or some type of hold period that converts to common at some point?

John McLaren, COO

There is. I don't think we have in front of it, but we'd be glad to share it with you.

Operator, Operator

Our next question is come from the line of Josh Dennerlein with Bank of America.

Joshua Dennerlein, Analyst

Just a follow-up. We talked a lot about superyacht and it made me think about how global that industry is. What's your appetite for international expansion on the marina side?

Gary Shiffman, CEO

That's a great question. The seasonality in the superyacht industry relates to where people spend their time throughout the year. It makes sense to consider a sister marina in popular superyacht travel areas. We have identified a few options that we're discussing, leveraging the extensive experience of our team in collaboration with Rybovich, who have a strong understanding of the superyacht business. While we won't be rushing into any decisions, we are looking for one or two opportunities that align with the general Transatlantic traffic coming out of Rybovich.

Joshua Dennerlein, Analyst

Okay. Interesting. So that sounds more like a Mediterranean expansion?

Gary Shiffman, CEO

Yes. Mediterranean would be the logical spot.

Operator, Operator

Thank you. There are no further questions at this time. I would like to hand the call back over to management for any closing comments.

Gary Shiffman, CEO

Well, we'd like to thank everybody for participating on this call. We hope that everybody stays safe, and we look forward to speaking again after first quarter. Thank you.

Operator, Operator

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