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Sun Communities Inc
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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities Second Quarter 2018 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 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 assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.
Having said that, I would 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 will be an opportunity to ask questions.
I would now turn the call over to Gary Shiffman, Chairman and Chief Executive Officer. Thank you. You may begin.
Good morning and thank you for joining us on our second quarter 2018 earnings conference call. The strength of Sun Communities platform continued to be evident during the second quarter, with Sun achieving 11.5% growth in core FFO per share of $1.07, ahead of the top end of our guidance range. Operating results across both our manufactured housing and RV platforms were once again very healthy. Additionally, as we indicated on our first quarter call, our acquisition pipeline is quite active and we were able to convert a number of potential opportunities during and after the second quarter.
The combination of the second quarter's operational performance, coupled with the accretive investments completed in and subsequent to quarter-end, allows us to raise our 2018 core FFO per share guidance by $0.07 at the midpoint to $4.57 to $4.63. We experienced same community NOI growth of 7.2% in the quarter, representing the 23rd consecutive quarter of mid to high single digit same community NOI growth. The largest contributors of our Same Community NOI growth were a 4% rental rate increase and a 200 basis point occupancy increase, reflecting our continued ability to attract new residents and guests to Sun's communities and resorts.
On the investment front, we've been very active, heading both operating properties as well as land for ground-up developments with a total value of $334 million. Investments in operating properties are accretive from day one and a number of them offer Sun value add, repositioning and expansion opportunities. Among this quarter's investments was an 80% equity interest and a $256.8 million portfolio with Northgate Resorts, a highly recognized owner-operator in both RV and manufactured housing space. The Northgate portfolio consists of 10 operating RV resorts, with 2,700 developed sites and 625 expansion sites in 8 states. It also includes a 315-site ground-up development currently under construction in North Carolina.
The Northgate transaction offers Sun a unique opportunity to engage with a premier owner operator with additional potential investment opportunities down the road. In addition to Northgate, on a wholly owned basis, during and subsequent to quarter-end, we purchased 7 operating RV resorts with 1,500 developed sites, 175 expansion sites and 1 land parcel for ground-up development. The operating properties included a 4-RV resort portfolio in Oregon and Utah, and 3 individual RV resorts in our core operating regions of Florida, Michigan and California.
The land parcel, which we discussed previously on our first quarter call, is located in Granby, Colorado. After completing a 2-year zoning and entitlement process, we closed on the land and are commencing the development of an 1,100 site combination manufactured housing and RV resort. These are exciting times for Sun. We continue to produce industry-leading results, while maintaining a strong and flexible balance sheet. The consistency of our operations is the result of our emphasis on implementing best practices and the pursuit of continuous improvement. To that end, we have formed a strategy and transformation team, akin to an internal consulting group that is tasked with analyzing all aspects of our business to uncover ways to capture additional revenues, improve and streamline processes and procedures and strengthen all aspects of the Sun platform.
The team is comprised of seasoned team members from the operations and accounting teams. We are making this strategic investment in our company after a period of hyper growth to ensure that we are extracting as much value from our prior activities as possible and to position Sun for continued strong performance as we embark on future growth initiatives.
With that, I would like to turn the call over to John and Karen to discuss our results in more detail.
Thank you, Gary. Our emphasis on providing superior customer experience enhances our ability to drive NOI growth as demonstrated by our results. Sun delivered a total portfolio revenue increase of 14.1% in the quarter as both our manufactured housing communities and RV resorts contributed to this quarter's performance. Occupancy in the total portfolio was stable year-over-year at 96.1%, with the manufactured home portfolio at 95%, up 30 basis points on a sequential quarter basis. RV revenues rose 20.9% in the quarter.
Revenues from home sales continue to show strength in the second quarter with a 33.6% increase. Sales volumes rose 17.7%, with a 65% increase in new home sales volume to 134 homes sold. The average new home sales price grew to $109,000 in the second quarter, up 17.4%. We are seeing particular strength in our new home sales in Florida, Michigan and South Carolina, which accounted for almost 75% of total new home sales. Preowned home sales volumes rose 12.4%, while our preowned home sales revenue grew by 13.9% in the quarter.
We gained 634 revenue producing sites in our total portfolio in the quarter, with roughly 66% of those gains in our manufactured home communities. Of these, 187 site gains were in expansion communities, predominantly in Michigan and Georgia. We also had 219 RV transient to annual lease conversions in the quarter bringing our total to 514 RV conversions for the year. We have now gained 1,250 revenue producing sites for the year and remain on track with our guidance for revenue-producing site gains in 2018 in the 2,700 to 2,900 range.
Year-to-date we have completed the construction of 375 expansion sites and expect to complete the construction of approximately 1,000 additional expansion sites during the second half of the year. For the remainder of my remarks, I will discuss our same community results, which were solid in the second quarter. Revenues rose 6.3%, driven by a 4% weighted average monthly rental rate increase and a 200 basis point occupancy gain to 97.8%.
Expenses increased by 4.6% for the quarter, in line with our expectations. This translated into a 7.2% NOI growth for the second quarter. On a year-to-date basis, we have delivered NOI growth of 6.2%. Manufactured housing revenues rose 5.9% for the quarter, while annual RV revenues increased by 8.7%. Transient RV revenues rose by 7.3% and should continue to grow as we enter the northern summer vacation season. Thus far, we are very pleased with our summer season kickoff. Memorial Day weekend was a big success, with a 27% revenue increase over the same weekend last year.
Additionally, during the July 4th vacation week, we saw a 10% revenue increase over the same period in 2017. Reservations for the rest of our summer season are pacing in line with last year at this time. In conclusion, we are very optimistic about the pace of our internal growth performance and our execution on external growth opportunities.
With that, I will turn the call over to Karen for an overview of our results and updates to guidance. Karen?
Thanks, John. Sun reported $1.07 of core FFO per share for the quarter ended June 30, 2018, $0.01 above the top end of previously provided quarterly guidance. As we disclosed in our earnings release, Sun invested in properties valued at approximately $334 million during and subsequent to the second quarter. The investments were funded with cash on hand, equity raised through our ATM program and advances from our line of credit. Additional details on our acquisition funding can be found in the portfolio activity section of our supplemental.
At the end of the quarter, we had $3.4 billion of debt outstanding, with a weighted average interest rate of 4.36% and a weighted average maturity of 7.8 years. At quarter-end, we had $20 million of unrestricted cash on hand. Our net debt to trailing 12-month recurring EBITDA was 6.5x. However, on a forward basis, accounting for the EBITDA contribution from our year-to-date acquisitions, our net-debt-to-EBITDA ratio is in the low 6s.
On the capital markets front, we repaid $178 million in 3 collateralized term loans, with a weighted average interest rate of 4.53%. Subsequent to quarter-end, we entered into a $228 million, 20-year collateralized term loan at a 4.1% interest rate. In addition, the company is in active financing discussions related to its second quarter acquisition activity. During and subsequent to quarter-end, we issued roughly 1.2 million shares of common stock through our at-the-market equity sales program at a weighted average price of $93.78 per share. This ATM activity includes the 200,000 share previously disclosed in April’s earnings release.
Moving on to guidance, we are raising our core FFO per share expectations to $4.57 to $4.63 per share from the prior range of $4.48 to $4.58 per share. To take into account the contribution impact of our closed acquisitions, completed ATM share issuances and financings and anticipated additional financing related to the acquisitions. Our guidance revision also considers an increase to our G&A expense to a range of $79.8 million to $81 million. The increase in G&A reflects changes to the company's executive long-term incentive plan, which increased amortization in the current year as outlined in our proxy as well as the staffing and training of the strategy and transformation team Gary discussed earlier, and certain onetime nonrecurring expenses incurred through the first half of 2018.
In the third quarter, we anticipate core FFO per share of $1.34 to $1.37 per share. Our same community NOI growth guidance of 6.75% to 7.25% remains unchanged. Due to the seasonal nature of our recent acquisitions, it is important to note that the full year accretion from these acquisitions is fully realized in our 2018 FFO guidance increase. Said differently, these properties make the vast majority of their annual NOI contribution in the second and third quarters. In 2019, the FFO contribution in the first and second quarters from these acquisitions is expected to be neutral, given the aforementioned seasonality of the results. And as a reminder, additional potential acquisitions or capital markets activities not specifically outlined in our discussion are excluded from revised guidance.
This completes our prepared remarks, and we'd like to open up the call to questions. Operator?
Great, thank you. We would now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Andrew Babin from Robert W. Baird. Please go ahead.
Hey, good morning. I was hoping to talk about the acquisitions from the second quarter and early third quarter. And just wondering if you could kind of classify the various components of it from a yield perspective? How we should think about that, especially considering there is a substantial development element to it? And I guess, furthermore, as a follow on question, the accretion out of the gates on the deal. Does that sort of depend and does that hinge on maintaining the revolver balance at a relatively elevated level or is the accretion from the way you see it kind of still carry through once it's permanently financed?
Hi, Andrew. There is a lot of pieces to that. I want to make sure we cover them all. I wasn't sure you were looking for some comments on the acquisitions that we made subsequent and before the quarter and then I might have missed something you asked for after that.
I guess, starting with the yields on the acquisitions will be a good start?
Okay, sure, sure. I think that if you were to take all 17 of the operating properties, the average cap rate would be 5.6%. And if you were to break out Northgate 10 properties, which is the significant component, that cap rate would be 5.5%. So we have a lot to build on there. I think that just commenting on the structure, it was necessary to structure the acquisition with Northgate's participation. When we approached them and we've had a very long-term relationship with Northgate and actually acquired another large manufactured housing community with them in a similar structure many years ago, they felt that they wouldn't have realized the full benefit of repositioning the properties, building out the expansion sites and extracting the value from under-managed properties.
So there was a strong willingness by them to want to participate on that side. And on the other hand, we felt that Sun was able to buy in on a win-win basis at today's value prior to that value being created and that upside would benefit our stakeholders. And then finally, the transaction and the agreement allows us to access other opportunities that exist in the Northgate pipeline, so we think we'll continue to see a flow of acquisition opportunity that we can elect to participate or not participate in the future. Then we had the 4-property small portfolio that we mentioned and the other 3 properties were just a single-asset acquisitions.
Okay, and, I guess, secondly, the second part of my question was more on the financing front. Given that there are financing assumptions in guidance, I guess, the revolver balance being where it is as of quarter-end. And obviously, that has come down a little bit with the new secured financing. But is there kind of an assumed blend of sources for that money? Or do you think it's mostly just going to be a large secured loan, given that run rate leverage is in the low 6s, which is fairly healthy?
We are – so Drew, definitely the guidance that we have includes assumptions for longer-term financing for the acquisitions. We are still in negotiations. And ultimately, will – it will be determined how it will wind up. But it's looking to be sort of a one-time, one loan that would replace our $121 million that's currently on our line of balance – line of credit balance.
Okay. And I guess, finally, a pretty large tick up in transient RV sites with the acquisition. And obviously, there's just quite a bit of transient in it. I guess, can you talk about plans long-term to convert more of those to seasonal and annual? And also talk a little about the geography. I noticed that New York and California site count were up, but also "other locations” which – that could possibly be Georgia expansions. But I guess, I just wanted to be clear kind of where that's occurring.
Yes. Drew, this is John. So conversions, as you know, are sort of one of the core levers that we have. And we'll continue to look for opportunities to convert from transient to annual within that portfolio. With that said, we're always very focused on maintaining the correct site balance between transient and annual to maximize revenue generated on a per site basis. Now with this portfolio, we will do the same analysis over the next 12 months to make the appropriate adjustments that maximize that return.
Okay, great. That’s all for me. Thank you.
All right, thanks.
Our next question is from Nick Joseph from Citigroup. Please go ahead.
Thanks. Maybe just following up on Drew's first question. What's the balance on the line of credit today?
We ended the quarter at $534 million, I think. And the financing was transacted yesterday, so it would at minus $228 million.
Okay, but there are no additional acquisitions on the line since June 30th that would have increased it further?
Yeah, there was the one acquisition after quarter end [indiscernible] that was $14 million.
Okay. And so does guidance assume any additional equity or after sales to pay down the line? Or is it more just terming it out with longer-term debt?
It’s – the assumption is just terming out with longer-term debt.
Okay. And then just on 2018 same-store NOI guidance, you maintained it. It looks like to reach the midpoint, you'd have to see a significant ramp in the back half of the year. So is that revenue driven? Is that expense driven? Is it something about the comps? What gives you confidence to maintain same-store NOI guidance?
So, absolutely you’re right. We do expect an acceleration in the second half NOI growth. On the second half we’re expecting similar revenue growth as in the first half of the year on lower expenses. And so I think if you – on that 6.75% to 7.5% guidance. If you had similar expense growth of between 5.9 and 6.1, it would imply about 3.8% to 4% expense growth, Nick.
Thanks.
Our next question comes from John Pawlowski from Green Street Advisors. Please go ahead.
Thanks. Gary, could you give a little more detail and sense for size of additional investment opportunities through Northgate with what they currently own and their acquisition pipeline?
Sure, as I said, they’re excellent owner operators and developers and we maintained a relationship for 20-plus years. It was 20 years ago when we did the first transaction together that turned out to be an excellent manufactured housing community. They have been focusing their efforts on underperforming assets and opportunities to really reposition what's underlining – underlying attractive locations and entitlement and zoning. They are reviewing a number of other opportunities and, in fact, have presented us with at least two additional opportunities. And for the next several years, we've agreed that as they see opportunities, we will be entitled to elect to participate with them or not, participate with them on a similar basis to what we've done previously.
Did you get a first offer first right to refusal?
I believe that is correct, yes. I'm just trying to remember the operating agreement. And yes, we did.
Okay. John, obviously, traffic's very healthy across MH and RV platforms. Move outs are accelerating a little bit. Just curious, if any few markets are driving that? And what do you think the reasons are for slightly elevated move outs?
Yes. The move out – regarding the move outs, I mean, really the change on is related to a change in the annual lease cycle. So say that the RV resorts that we've required in the past and mainly that's just to match the overall portfolio cycle. So if you kind of split that apart and you look at the MH side of things, those move outs are tracking pretty much exactly in line with 2017.
Last one from me. When you look across the markets particularly with the RV business and you look at migration trends, vacation patterns, if you could wave a wand overnight and shift your portfolio geographically, where do you think the best returns and best cash flow are in the next couple of years? What markets are you really excited about? What markets are you bearish on within your current footprint?
I'll answer it first and anyone else – John, you can add to it. I think that the single most important thing in the RV certainly is location. Some of it’s geographically patterned, but equally important is actual location to destinations, whether they be vacation resort areas, whether they be related to activities in the area, water, beachfront, ocean, lakes and alike. Hiking mountains, they definitely make up most of the interest in demand for RV communities. And then additionally, we have the retirement component, the snowbird coming down wanting warmer weather.
So I think it's a great question strategically. When we look at acquiring RV communities, we'll probably turndown as many turndown as many as we put into due diligence just because locations don't have the strategic factors that I just discussed. So I don't think it's any one part of the country. It just has to be an area where we believe there's going to be enough demand, And John, if you want to add anything?
I think John – and the only thing I would add to that is as we sort of embarked on the greenfield development, in advance of that processes, we went through a very detailed study on demographics, migration habits and that sort of thing, you know frankly that helps – the data help us decide the places we want to be. And I think you're starting to see it with some of the previously announced areas where we are. And I think more of that will emerge as time goes on.
I think anything that I would add on the transient nature we discover the average drive time is between three and four hours So the demographic studies that John and his team put together in the acquisition groups really patterns out the rings around population and determines within those rings in the three-to four-hour period, where there are enough populated areas to be able to draw upon. And that helps us a lot with how we think about it.
Okay, thank you.
Our next question is from Joshua Dennerlein from Bank of America Merrill Lynch. Please go ahead.
You've had a relation with Northgate for 20 years. When you are looking at assets, did they also kind of bid on the same assets as you? Like, how much overlap was there over the years?
Interestingly enough, there never has been any overlap. It is a family run organization. They focused a lot on ground-up development and a lot of their original assets pass to a couple of the REITs that have been consolidated in other forms over the years. And I think it's more recently that they really strategically focused on underperforming assets and creating a value by repositioning on them. And that's what we've been watching them do over the last three to four years. And I think that's, as I said earlier, what they are continuing to focus on right now.
Okay. Are they doing any more ground-up development? Is that an area where you guys can partner?
It is. And we actually – Chula Vista venture in San Diego, where – it's really where we got reacquainted again a few years ago as they were very interested in it. We had already put a request for being considered out there. And they expressed interest in participating with us. And if – and when we move forward to put a shovel on the ground, it's likely that they will participate on the same percentage basis as this transaction.
Okay, interesting thank you.
Our next question is from John Kim from BMO Capital Markets, please go ahead.
Thank you. With your recent acquisitions and planned developments, where does this take your income breakdown between RV and MH? And how comfortable are you taking – how high do you feel comfortable taking RV exposure to?
I think I’ll let Karen add, actually discussed the percentages. But I suggest to our shareholders and the audience today that this was a strategic and unusual opportunity that we took advantage of with Northgate recently that as we look through the pipeline, there is as much manufactured housing coming through due diligence now, if not more than the RV resorts. So I would expect to continue to balance out the portfolio pretty much in two-thirds or one-third basis and might increase one side or the other for a period of time, but that's generally what we expect to do.
John, and just – revenue would basically follow the sites, so we've got about 65% of the sites are manufactured housing and 35% is RV.
Okay. And then just following up on the Northgate joint venture, assuming you're managing the assets, and not the partnership?
I think that for right now, we're very pleased with what Northgate has been able to achieve. We plan to keep Northgate property management in place. They've done an excellent job in acquiring and really turning the around these properties. They've invested, as I said earlier, more than – I alluded to earlier, more than $38 million in CapEx over the last 12 months. And I think they'll do a great job managing them.
However, all the accounting and financial work has been transferred over to Sun Communities. And we'll be there to support them in every effort as we watch how these communities grow.
And the 5.5% yield that you quoted for this acquisition is that a stabilized yield or like a year one yield?
That was based on trailing 12 months.
Okay. Are you going to have the same strategy as far as converting transient to annual? And is there a high percentage of transient in that portfolio that you could get converted?
There is high. I know John mentioned it earlier and you can reiterate, which I said.
No. I mean, basically, it's – we have to look at the opportunity, John. I mean, it's a portfolio that there's a high complement of transient sites. That said, we want to make sure that we're focusing on, as I mentioned earlier, maximizing the revenue generated on a per site basis. So that's something that we will actively be inspecting over the first 12 months that we're with Northgate on this and make those adjustments as necessary to maximize that.
Okay, and then finally on the joint venture. Are these assets going to be included in your consolidated income statements and metrics? And will they eventually be included in your same-store results?
They are fully consolidated in our balance sheet and income statement. And they'll be included in same-store in 2020.
Okay, great. Thank you.
Thank you.
Our next question is from Jason Green from Evercore ISI, please go ahead.
Good morning. I was wondering if you could comment on the broader kind of image in out MH and RV acquainting markets. It seems like there have been some larger deals done recently. And I'm not sure if that is because of more willingness from private sellers to sell or some broader market force?
Yes, it’s a great question. I think there’s a lot of interesting things happening and timing in our industry is very, very interesting out there. The fact of the matter is that we do continue to see further compression in the cap rates for the high-quality and the mid-quality assets. In each of our calls, I've shared kind of what that cap range compression has been. And on the last call, we were seeing things dip in for the highly sought after, usually coastal communities or very large high-quality communities dip through five to the four cap rate range. We're now seeing further compression to the low fours. We have walked away from two, three assets that we would have been interested in, but could not justify the purchase price.
There is competition from both sovereigns from the typical funds that you would expect as well as private capital. A lot of 1031 transactions taking place that are satisfied with the lower yielding steady returns that I think have been attracted to the asset class.
So we have to work harder and knock on more doors, if you will, and turn over more rocks. Like our competitor, we have the advantage of being able to use securities that defer tax consequences. That's very, very useful. And we really rely on the long-term relationships that we have. And in some cases, as we've shared with everybody, it is the opportunity to go ahead and develop two to three ground-up communities a year in areas where we think the cost to acquire existing communities is just too great and we can develop to better returns for our shareholders.
So a very competitive environment out there right now. And I haven't seen any impact from interest rates to debt financing. So it's pretty much remained unchanged good long-term debt for high quality assets available in the 4% – just 4% to 4.5% range. And – so we are turning over a lot of opportunities in the pipeline to try and find the right ones moving forward. And for us, it's a matter not just of going on price, but really how much value add can we create, how can we take a certain cap rate and grow it into an expanded cap rate over a period of three to five years.
Great, thanks. And just one more question I apologize if you already mentioned this. But what was the rate on the temporary loan in the acquisition?
5%.
5%. Great, thanks.
Our next question is from Todd Stender from Wells Fargo. Please go ahead.
Hi thanks. Just to focus back on that loan can you talk about the mechanics of that? Is that a loan made to the joint venture? And what's the duration of that?
Yes. It's a loan made to the joint venture. It will be in place until we secure the permanent financing that we are in negotiations on for the entity level JV.
Is that going to – are you going to maintain a lien against it or does that convert to equity? What happens to that?
It just takes out our loan. It'll reduce our line of credit and it will be consolidated as a piece of the JV on our balance sheet.
As a loan?
As a loan.
Okay. How do you finance that? How you – is this a medium- loan? And how do – you think you'll use equity to finance that?
No. We're seeking a loan from our bankers, looking to be around a 5-year facility.
Okay, got it. And then for the joint venture, are you guys managing it? Are you going to a earn a fee on that?
So as I indicated before that we're kind of excited and really thrilled that having the Northgate management team continue managing it. Of course, the careful oversight all of the financials and accounting has already been switched over to Sun. So for the time being, we're real pleased to support the efforts that they are performing on the ground at those communities.
Alright. And just separately, the 7 RV resorts that you acquired, I think it's the – that's right, across five states. There’s this 175 sites available for expansions. Is that a number that you're given? Or is that your estimate of what you think you can expand to over the coming years?
Those are 175 entitled sites within the portfolio that already exists when we acquired those assets.
And then, maybe there's some upside to that number. Is that fair?
So typically what we would do with any acquisition is we will look for ground as contiguous with the existing communities. We have a whole department and staff that does that the moment that we identify properties. Even before they're closed, those properties move up to that group and that's in process right now.
And then finally back to the new home sales. Now that your average sale price has eclipsed $100,000, do you see more financing of that? Is it still cash? Any changes to that now that the price point seems pretty high?
Yes I think – this is John, Todd. Obviously, there is more financing happening in terms of new home sales and that's more related to the fact that – and frankly, one of the things I'm most excited about is not all new home sales are coming out of Florida. They're coming out of Michigan, they're coming out of South Carolina, they're coming out of Ohio and places like that, where – these are in our all-age communities, okay? And so we're seeing sort of a shift or I should say growth in that side of our portfolio towards new homes. And so that typically has supported a higher percentage of transactions that are financed than what you typically see in Florida or Arizona.
And any numbers around that? Whether it's a loan to value, 10-year term on a [indiscernible] loan? Any specifics
I mean, typically from a term basis, the terms are going to run between 15 and 20 years on those. So they're usually kept pretty tight. And from an upfront percentage, I think that the average down payments that we see on most of our financings is between 10% to 20% range.
Okay, thank you.
Our final question is from Wesley Golladay from RBC Capital Markets. Please go ahead. Sorry I’m Wes you may be un-mute by accident.
Hey sorry about that. So looking at cost [indiscernible], it seems to be a much bigger deal in California versus the years passed. And I'm wondering if you're going to allocate more resources to the area, it seems to me that everyone wants to have more affordable housing. Maybe this will be a good time to go and try and permit stuff. Is that something in the game plan?
It’s Gary. I think that strategically, our focus began in 2011 to more communities and area coverage in the East Coast. After we completed that, we began moving to the West Coast. And we are very, very focused on that area as we're growing that part of the portfolio. California is a place that is of interest to the company. We have to be very, very cautious and careful there to balance the long-term growth with the cost of operating in that area. And we have certainly identified several opportunities. We just completed one new RV development that went online this last season. We have two potential developments that we've discussed before in San Diego. And we will continue to evaluate the area just as we do everywhere else.
We're looking forward to getting Granby or Colorado new development launched in the ground as it closes last quarter. And with that, and Chula Vista in San Diego, we will have experience in the first two times operating very closely with municipalities. We are looking to solve their affordable housing issues. And we hope those two case studies will lead to more opportunities, whether they be in California or elsewhere, to really meet the challenging needs of affordable housing. So it's certainly one area we will look at.
Okay. And then regarding the current development as part of the recent acquisition. When will that open up?
It should – well, actually it's got sort of – call it a soft opening that's happening next month. I mean, it's going to be sort of the tail end of the season, but it will be fully operational for the next northern season, so right around Memorial Day.
Okay, thank you.
Yes.
This concludes the question-and-answer session. I’d like to turn the floor back over management for any closing comments.
I just want to thank everybody for joining us today on the conference call, and we certainly are available for any follow-up questions and look forward to talking to you all this year third quarter results. Thank you.
This concludes today’s teleconference. You may disconnect your lines at this time. Thank you, again, for your participation.