Welcome to the Sun Communities Second Quarter 2016 Earnings Conference Call. At this time management would like me to inform you that certain statements made during this conference call which are not historical facts may be deemed forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumption, the Company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in this morning's press release form and from time to time in the Company's periodic filings with the SEC. The Company undertakes no obligation to revise or update any forward-looking statement to reflect events or circumstances after the date of this release. Having said that, I would like to introduce management with us today, Gary Shiffman, Chairman and Chief Executive Officer; and Karen Dearing, Chief Financial Officer. With that, I will turn the call over to Gary Shiffman. Gary, you may begin.

Good morning and thank you for joining our second quarter earnings conference call. We had a very active quarter as the team delivered strong operational results while closing on the purchase of the Carefree portfolio and commencing the onboarding and integration process of the communities. Even as we focused on this significant acquisition, we delivered yet another quarter of very positive results. Total portfolio occupancy increased for the 26th consecutive quarter to 96.1%. And our same-community portfolio achieved NOI growth of 6.9%, with a weighted average rent increase of 3.2%. We had another strong quarter of home sales as well, with a 30% increase over second quarter 2015. Notably, 278 of the home sales were rental-to-owner conversions. With respect to Carefree, our team worked diligently to secure the financing quicker than anticipated which allowed us to close a month ahead of schedule. Immediately following the execution of the purchase agreement, we began planning for the integration at a community and corporate level. This included additional community visits by our operations staff and preparation for the timely onboarding of employees by our HR team. We hosted all the Carefree managers for training and orientation at our headquarters within one week of closing. The combined Sun and Carefree teams are now putting our proven operating strategies and systems into place. The Carefree team is fully empowered to go out and execute using the Sun playbook for leasing sites, selling homes, addressing repairs and maintenance and providing best-in-class customer service to our residents. We have developed proven integration skills over the last several years and we anticipate that Carefree will be as accretive and productive of a contributor to our platform as our previous acquisitions have been. During the quarter, we completed an additional acquisition of a 183-site RV resort in Florida for…

Thanks, Gary. For the second quarter ended June 30, 2016, Sun delivered funds from operations of $0.85 per share. As previously announced, our guidance for the second quarter was in the range of $0.79 to $0.81 which included $0.08 of estimated dilution from the March issuance of equity prior to completing the acquisition of the Carefree portfolio. Results were ahead of guidance for several reasons. As a result of the early close of Carefree, dilution from the equity raise was $0.06 as opposed to our estimate of $0.08. We also picked up $0.01 contribution from Carefree operations and $0.02 of outperformance across our existing portfolio. Our reported FFO excludes certain items detailed in today's press release. Revenues for the second quarter rose by 15% to $190.8 million, an increase of $25 million over the same period in 2015. The growth in revenues reflects the strong performance across all of our segments as we continue to benefit from our organic growth initiative, including delivering site expansions and the increasing productivity and contribution of the prior-year's acquisitions. Same-community performance was strong in the quarter as revenues increased by 5.6%, driven by a 3.2% weighted average rent increase and a 250 basis point increase in occupancy from the prior year, bringing occupancy to 96.4%. Contributing to our occupancy increase was the leasing of 394 expansion sites and the conversion of 598 transient RV sites to annual or seasonal sites within our same communities. These strong top-line results helped deliver a 6.9% same-community NOI increase compared to the second quarter of 2015. Manufactured housing revenues increased by 5.5% in the same-community portfolio. As Gary indicated, the demand for the lifestyle that Sun's manufactured housing communities provide continues to grow, as year-to-date applications for our same communities increased 5% over last year and the total…

[Operator Instructions]. Our first question is coming from Nick Joseph of Citigroup. Please proceed with your question.

I appreciate you laying out the accretion from the Carefree deal, but I'm wondering if you could talk about any surprises that you've seen, either to the positive or negative, since integration? And then, also, any growth opportunities past year one that you're expecting from that portfolio?

Nick, it's Gary; I'll start out. I think it's been a pretty smooth transition so far. Albeit we only had 22 days to report, we were very, very pleased at how fast we were able to get the management team for a week's orientation over at Sun's offices. And I would suggest that to date there are no surprises one way or the other. Everything is running pretty smoothly and as we would have anticipated it. I think we have shared with the market previously that we believe we will get outsized growth above our core portfolio for the first two or three years after integration, at which time it should operate and grow similar to our core portfolio. Most of that is from the typical things we shared before, introducing Sun's operational model; empowering the staff in the way that we do to go out there and lease homes, sell homes, rent sites; the expansion opportunities that we specialize in; and being able to provide services that will allow us to maximize the rental increases. So I think those are the things we're looking to implement over two or three years. And we're looking for good, solid, positive growth going forward.

And then just in terms of guidance, were there any updates to the same-store guidance?

Nick, we're going to maintain our same-store guidance for 2016. We're very, very close to what we expected to be at through the second quarter year-to-date NOI growth. And looking out into the future, looking into our forecast, there's a little bit of seasonality in the same-site portfolio. So we're going to maintain. We think we'll be able to reach our guidance.

Maybe just staying on the same-store revenue growth, I think you did 6.1% in the first half, so the midpoint of the previous and, I guess, maintained guidance would imply an acceleration of 6.4% in the back half. Can you talk about the underlying assumptions there in terms of, I guess, occupancy and any other numbers that are baked into that?

You know, occupancy, we don't really put occupancy guidance out. We do have RPS gains; I think they were about 2,000 in the portfolio for guidance. We're running a little bit ahead of that. I think the revenue growth is really a function of where transient revenues hit and some of the other income gains that occur at different quarters of the year.

Our next question is coming from Drew Babin of Robert W. Baird. Please proceed with your question.

I was hoping you could talk about potential dispositions. It's been a topic on recent calls and it sounds like a disposition out of the Carefree portfolio or otherwise is something that's been on the table with a strong demand from private capital, sovereigns, et cetera. Could you give some update on whether that's still in the plans and any update on interest in the sector related to that?

Sure. A couple of things, Drew. First of all, in the core portfolio we had completed our plan for 30 dispositions in 2015. So there are no other plans within the core portfolio, although as we look for prudent asset management, there may be single properties in the future or segments that we wish to sell. But with regard to Carefree, we have shared with the market that we did get a lot of inbound interest in different segments of the Carefree portfolio. And we have been in dialogue with several different groups regarding some dispositions. We have not reached any terms at this point. And if we did, we would share those appropriately with the marketplace. Our goal right now will be to continue to operate and integrate all the properties. At the same time, we're talking to a number of parties. But we don't have any certainty one way or another as to when or if any transaction would take place.

Okay. And as it pertains to the line of credit balance, the final financing to come in, it sounds like, September -- at least in my numbers, it looks like there could be some remaining balance on the line of credit. How do you think about that balance? Is it something you're comfortable kind of just rolling quarter to quarter? Or given where your cost of equity is and given prospects for dispositions, is there anything sort of assumed in guidance that you can speak to on that front?

No, Drew, there's nothing assumed in guidance. You're right; we're at $357 million. That last piece of the financing for Carefree will take it down to around $220 million. We have, I think, 70 unencumbered properties from the Carefree portfolio that we could look to encumber to bring that line down. Certainly, Gary just spoke of a possibility of dispositions. And obviously, the equity market is out there. But for now I think we're just going to manage it as we go along, leave some of our opportunities open. And there's nothing in guidance for changing that.

[Operator Instructions]. Our next question is coming from Paul Adornato of BMO Capital Markets. Please proceed with your question.

Gary, you mentioned that manufactured home sales are rebounding; they're doing well. Can you give us an update on where those homes are being sold? I recall that during the downturn, the dealer network kind of collapsed and you know, it was not clear where those homes are being sold. And also, where the homes are being sited? I know that typically most of the homes do not end up in communities; they end up on private land. So if you could provide a little insight, that would be great.

Paul, I'll give you some general insight and then I'll let Karen take a closer look at how things are breaking down along the portfolio. But obviously there are few things driving demand, not the least of which is the repositioning in-amenity rich type communities that now make up the Sun portfolio. So they're appealing not only to the retirees, but to families in all age groups. I think one thing that Sun is developing is a reputation for providing high quality customer service. And I think when you couple that with the concept of the affordable housing that manufactured housing offers, that's where we're seeing a strong, strong demand. So that's kind of a macro picture. And then when we look at the portfolio, Karen, do you have any breakdown of what we're seeing?

Sure. Paul, the new home sales -- we're really seeing those in Florida and Arizona, primarily in our 55 and over communities. Preowned home sales are primarily in all-age communities. Significant growth in Michigan in those preowned home sales; also Florida, Texas and Colorado. Certainly in Texas and Colorado, very large expansion communities for us. So we're doing a lot of conversions out of the rental program from renters to owners in those two states.

Okay. And just as a follow-up, outside of Sun, how is the business doing? That was really part of the question. If I'm just someone interested in getting a home, where would I go to buy a manufactured home?

Well, it's still somewhat limited. You know, if you go back far enough, in pre-2000, there were over 4,000 retailers across the country that sold manufactured homes. Today, it's a much smaller number. And one of the things that Sun does very, very well is operate a sales center on each of our locations. So you're either going to go to -- where there are third-party retailers, quite often by some of the big manufacturers of the homes; or you're going to come to a community operator, like one of the two public companies and you're going to actually buy the home through one of their sales systems. So what we've seen in shipments of homes -- as I indicated, shipments were up in manufactured housing a little over 4% this past year. And the range since 2012 has been from about 2%, 2.5% to this year's 4% increase. So slow, steady growth in both single section and multi-section homes.

Okay, great. And switching to the all-age business, I was wondering if you could kind of drill down and let us know what's going on there? Is it still a desirable business in your view, given that your portfolio has evolved over the years?

Certainly, as we've shared with everybody, all-age is an excellent segment of the business, but we do believe in a balanced portfolio. And the reason for that is it plays to stability through strong and weak economic cycles. So the age-restricted rents tend to be very tied to CPI and other indexes and it makes sense, because the retirees in those communities are on fixed income. So what we have shared in the past is that we tend to get higher rental increases in good economic times from our all-age communities and equal to or the same as retirement communities in more challenging times. We're pretty much seeing that right now. Our leases provide for CPI and some other increases in the senior segment, but we're getting stronger rental increases in our non-age-restricted communities.

And just to follow up on that, if we were to break out CPI rent increases, what would that number look like versus the 3.2% I think that you reported for the entire portfolio?

I don't think we have the breakdown with us on hand, but I think we can definitely get back to you with it, Paul.

Our next question is coming from Jason Belcher of Wells Fargo. Please proceed with your question.

Sorry if I missed this earlier, but what was the yield on the Florida RV acquisition in Q2?

Let's see. On a trailing 12-month NOI, it was right around -- let me see if I can pull this up, 6.5%.

And then on the same-store operations in terms of the operating expenses, I know it's not a big cost, but your legal taxes and insurance line I noticed was down a good bit. Was there something unusual in the prior-year quarter or--?

No, it wasn't in the prior-year quarter; we had a very strong insurance renewal for our property and casualty insurance this last year. So we have seen some reduction in overall premium for property and casualty insurance throughout the year. And I think we had little bit of a decline in reserves on claims also.

Our next question is coming from Ryan Burke of Green Street Advisors. Please proceed with your question.

Gary, just to clarify on the cap rate that you just gave on the acquisition -- that was 6.5% economic or nominal?

That was economic.

Okay. And what type of CapEx would you normally assume on this type of acquisition?

You know, I don't have it for this acquisition. But it is property-by-property specific, so that quite often we'll have to build in as much as it would take to maybe reposition the entire property, as we have done in portfolios and individual properties before. And sometimes we'll get them in pristine condition. My recollection is that Pecan Park which is what we acquired, was in very good condition. And the acquisitions team has already put 40 adjacent acres under contract -- is in the entitlement process and we expect to double the size of the community by -- or increase the size of the community about 200 spaces. So not a lot of CapEx in this particular one.

Okay. And that adjacent parcel was owned by an entity that was not the owner of the community or the same entity?

It actually was owned by the owner of the community.

Okay. And then, Karen, I just wanted to go back to leverage. Assuming it does naturally converge on your 7 times net debt to EBITDA target by mid-2017 and you are able to dispose of some assets and utilize those proceeds to reduce leverage further, you'd obviously be below the 7 times target. Are you considering a lower leverage target beyond 2016 or 2017?

Sure. As you said, we know we'll get near that 7 times net debt to EBITDA by the middle of next year. Should certain opportunities come to us as far as dispositions to take that leverage level lower, then that would be something that we would welcome.

Okay. Welcome and look to maintain? Or just welcome and then expect to go back up towards the 7 times?

I think moving to a lower leverage level is always something that we'll be looking towards. We've been so acquisitive the leverage has popped up and gone down several times over the past several years. But I think we've shown a pretty good track record of decreasing our leverage over the past five years and to consider continuing on that trajectory would be something that we would value.

Okay. And then last question, the 74% average occupancy on the properties acquired in 2015 was a bit surprising to us. What's driving it? How much of that is the lease-up properties that came with Carefree?

I'm struggling to determine where you're coming up with that.

Yes, so the average occupancy, per the supplemental page 13, on the properties acquired in 2015 and 2016 which includes Carefree, says 73.8%.

I don't have an answer to that, Ryan. I'm going to have to check into that and get back with you.

Thank you. At this time I'd like to turn the floor back over to management for any additional or closing comments.

We would like to thank everyone for participating on the call. As always, Karen and I and other members of management are always available and we look forward to reporting next quarter's earnings. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day.