Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities fourth quarter and year-end 2018 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 meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in 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 the remarks, there will be an opportunity to ask questions. I'll now turn the call over to Gary Shiffman, Chairman and Chief Executive Officer. Mr. Shiffman, you may begin.
Good morning, and thank you for joining us as we review our 2018 fourth quarter and full year results and provide an overview of 2019 guidance for Sun Communities. In 2018, Sun continued its track record of delivering industry-leading growth for its shareholders. For the year ended 2018, we generated annual core FFO per share growth of 9.8%, driven by same community NOI growth of 6.7% and occupancy gains of 2,600 revenue-producing sites. Throughout the year, we invested in 20 operating properties valued at $364 million, $14 million in fully zoned and entitled land parcels, and a $54 million strategic investment and partnership with Ingenia Communities Group. Additionally, we invested $153 million of capital into the construction of expansion sites and ground-up development projects. Subsequent to year-end, Sun has completed $325 million of acquisitions in seven operating properties. The demand for our communities and resorts is evident in our results.
Our existing manufactured housing portfolio exhibits 95% occupancy, inclusive of 145 communities which are at 98% or greater. We believe we have a runway of 250- 300 additional basis points of occupancy to gain in the manufactured housing portfolio over time. The level of demand to live in a Sun community is evidenced by the almost 48,000 applications received last year and supports our core expansion strategy. Additionally, our balance sheet is well-positioned to support our growth initiatives.
The acquisition pipeline remains full. We are acting on opportunities such as the seven communities we added quarter to date as of February 19th, which include a 730-site age-restricted manufactured housing community in Edgewater, Florida, a 321-site RV resort located in Old Orchard Beach, Maine, a 518-site manufactured housing community near Portland in Oregon, a 400-site manufactured housing community in Buckeye, Arizona, two manufactured housing communities in Shelby, Michigan, with a total of 1,308 sites, and a 291-site RV resort in Millsboro, Delaware. These contribute a total of 3,600 additional sites to our portfolio since January 1st. I also wanted to announce the board of directors' decision approving a 5.6% increase to Sun's current dividend of $2.84 per share to $3 per share, the third consecutive year with a dividend increase.
Before moving on to John and Karen's reports, I want to reiterate Sun's strategy of building a sustainable business model that provides affordable housing and vacationing solutions for a wide range of consumers. Sun Communities is built on four core investment strategies. First, the reinvestment in the upkeep of our existing operating portfolio allows us to capture steady annual rental increases and achieve very low annual turnover. Second, the acquisition of operating properties contribute to our revenue and earnings while also offering accretive yield expansion as they are integrated into the Sun platform. Third, capital investments in the expansion of existing communities provide outsized occupancy and revenue growth opportunities at attractive returns.
Fourth, the allocation of capital to ground-up developments provides Sun with an opportunity to build the highest quality communities and achieve higher incremental returns in locations where purchasing an existing operating property would prove too costly. We're hard at work implementing these four core investment strategies to ensure a continuation of the growth achieved for the long term. With that, I'll turn the call over to John and Karen to discuss our results and guidance in more detail.
Thanks, Gary. For 2018, Sun delivered great fourth quarter and full year results, reinforcing the strength of our platform and the quality of our portfolio. A large part of our strong performance comes from the consistency of our same community portfolio. In the fourth quarter, same community NOI grew by 8.4%, primarily driven by a 4.1% increase in weighted average rent, continued occupancy gains, and same community expense growth of 1.4%. For the full year, same community delivered 6.7% NOI growth, driven by a 6.1% revenue growth and a 4.9% increase in operating expenses. Our 6.1% same community revenue increase for 2018 was driven by a 5.9% increase in manufactured housing revenues, a 9.3% increase in annual RV income, and a 3% increase in transient RV revenues.
Regarding our total portfolio occupancy gains in 2018, we had 722 revenue producing site gains for the fourth quarter and 2,600 revenue producing site gains for the full year, an 8% increase over full year 2017. Of our 2,600 gains for the year, over 800, or 31%, were in our manufactured housing expansion communities. We also had over 1,150 conversions from transient RV sites to annual leases. To continue generating additional occupancy opportunity in communities that are near capacity and show strong customer demand, we completed the construction of 1,300 vacant expansion sites across 13 communities and resorts in 2018. Approximately 1,000 of these sites were developed in 10 manufactured housing communities, while 300 sites were constructed in three RV resorts. Home sales were once again strong with 3.3% and 10.6% growth for the fourth quarter and the year respectively.
Our sales of new homes grew by 45.3% for the year as we saw higher demand in Florida with a 50% increase in sales over 2017. Additional demand in new home sales came from our communities in Michigan, Ontario and Arizona with 152 new homes sold, a 67% increase over last year. Sales in these four locations accounted for over 75% of our new home sales in 2018. Pre-owned home sales grew by 6.3% for the year to an all-time record of just over 3,100 homes sold. These sales included 1,122 conversions of former renters to homeowners across the portfolio. On the greenfield development front, we continue to be active. 2018 saw Sun's first ground up premier RV resort welcome its guests at Cava Robles in California's Central Wine Country.
We currently have two new RV resorts under development, one located in Colorado and the other in South Carolina, as well as one new manufactured housing community in Colorado, all of which we expect to open their first phases in late 2019. Upon stabilization, we anticipate a development spread of 250- 300 basis points over the prevailing cap rates that one would pay for existing communities in these locations. In addition, by year-end, we will be opening the nearly 200 sites at our three Florida Keys communities that were impacted by Hurricane Irma. We had a very strong year, and we're extremely motivated by what lies ahead. The tailwinds of our sector continue, we offer an excellent product across the portfolio, and we are well positioned to maintain our track record of growth.
With that, I will turn the call over to Karen to discuss our financial results and our guidance.
Thanks, John. Sun reported $1.03 core FFO per share for the fourth quarter, in line with our previously provided guidance. For the 12 months ended December 31st, 2018, core FFO per share was $4.58, an increase of 9.8% over 2017. During the year, we deployed a total of $585 million in growth initiatives, including the acquisition of operating properties and fully zoned and entitled land parcels, the construction of expansion and ground up developments, and a strategic investment into and partnership with Ingenia Communities Group. Since our $506 million equity offering in September 2018, we have invested $336 million in the acquisition of five manufactured housing communities and three RV resorts, and have about $390 million remaining to deploy on a levered basis, which will be additive to earnings once invested.
As Gary mentioned, during the fourth quarter, we invested $54 million in Ingenia Communities Group, representing a 9.9% stake in the company. We also formed a 50/50 joint venture with Ingenia to establish and grow a manufactured housing community development program in Australia. This is a unique opportunity to partner with a proven leader in a market that is early in its growth cycle, prime for consolidation, and benefits from strong demographic trends and favorable supply-demand dynamics. The 9.9% investment is carried as marketable securities in other assets on our balance sheet, and the remeasurement of Ingenia's shares, along with any dividend distributions, flow through our income statement on a quarterly basis. We do not expect contributions from the development JV in 2019. We ended 2018 with $3.1 billion of debt outstanding, with a 4.45% weighted average rate and a weighted average maturity of nine years.
Unrestricted cash on hand totaled $50.3 million, and we had a net debt to trailing 12 months recurring EBITDA ratio of 5.6x , giving us additional leverage capacity to fund our 2019 capital plan. Turning to 2019 guidance. For the full year, we expect core FFO per share in the range of $4.76-$4.86, and core FFO per share for the first quarter of $1.10-$1.13. These results will be driven by the expectation of a same community 4% weighted average rental rate increase and same community NOI growth in the range of 6.2%-7%. Our same community growth is impacted by approximately $1.9 million of previously capitalized leasing costs, which, if adjusted, would result in same community NOI growth of 6.6%-7.4%.
The lease accounting change will impact property operating and maintenance, rental program operating expenses, general and administrative expense, and home selling expenses, and overall will have a minimal impact on FFO. We are expecting an increase of 2,500-2,700 additional revenue-producing sites in 2019, of which roughly 60% are gained in manufactured housing sites and 40% in RV conversions from transient to annual leases. As in 2018, our core FFO guidance includes an add-back for lost earnings from the three offline Irma-impacted Florida Keys communities of $1.5 million. As is our practice, our guidance does not include the impact of prospective acquisitions or capital markets activities, which may be included in analyst estimates.
Please refer to our earnings supplemental information for additional guidance on home sales, seasonality by quarter, general and administrative expenses, and other details. This completes our prepared remarks. We will now open up the call for questions. Operator?
At this time, we will be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question comes from Drew Babin, Baird. Please proceed with your question.
Hey, good morning. A question on the transient side. It looks like your initial guidance for 2019, 2.7%-3.3%, it's a bit lighter than what you had in 2018. Is there anything going on there as far as the consumer or your confidence in how that might drive that business? Is there anything related to converting more of those sites to annual? Is there anything unique going on there?
Hey, Drew. This is John. Yeah, the moderation associated with transient revenue growth is really a direct result of the outsized growth we continue to have converting transient guests into long-term annual guests within our resorts. As you know, every time we convert, it does lower the number of transient sites available to rent. We generate an additional 40%, 60% of revenue for that site. In 2018, that process generated annual RV revenue growth of 9.3% for same community, as well as 6.7% total same community RV revenue growth. I think more importantly, it really continues to be a testament for the high quality of our resorts are known to offer. Really, it's just the balancing of what types of sites we have and the more people stepping up and wanting to be annual guests at Sun, which is great.
Okay, it sounds like there's nothing baked in there as far as just kind of general macroeconomic volatility or anything.
Not at all, no.
Okay, got it. One last one for me. It looked like recurring CapEx was up very much in the fourth quarter, or there was just a lot of 2018 spending timed in the fourth quarter. What was that specifically? As far as 2019 goes, what would you maybe expect a per site recurring CapEx spending to be like relative to 2018?
Drew, I'm going to start off on this question, and then John might add something at the end. Specifically, we spent over $10 million in special project road repairs in 2019, the majority of which completed in the fourth quarter, so that's the big pop that you see there. We believe firmly in the continued upkeep of our communities and the value that that presents creates for our residents and guests and our shareholders. Several years ago, we began allocating additional dollars for road repairs. The 2018 spend of $10 million is about $4 million higher than the amount spent in 2017. We would expect that 2019 spend for the additional road special project dollars to be in the range of like $5 million-$8 million.
To add to what Karen said, this is John. Our continued commitment to reinvest back in our communities is, from a service perspective, is what we consider the first most important step in providing the service levels that we want to for our residents. Frankly, our resident satisfaction is paramount. I would add, this has really been a differentiator for Sun and at the core of our strategy for over 40 years. Our customers have rewarded us well in the form of the rent growth, the form of record home sales, record occupancy gains, and high demand, which has allowed for us to do the expansion developments and further growth externally in the form of acquisitions and new development. We're obviously very proud of our reinvestment strategy and the service levels we have, it's really served to build a very solid resident sales force for our communities.
Okay, great. That's all for me. Thank you.
Our next question comes from Nick Joseph, Citigroup. Please proceed with your question.
Thanks. You mentioned the additional acquisition capacity from the 3Q equity raise beyond the deals you have already completed. What's currently in the acquisition pipeline, and where do you see stabilized cap rates today?
Good morning, Nick. It's Gary. We continue to have good visibility and transparency into a robust acquisition pipeline. We should continue to be able to sustain our external growth around the same cap rates that we've been able to acquire. By way of information, the seven properties that we have bought since January 1st had an average five cap rate. We've seen very little change to the compression of cap rates that's taken place as so much capital has been attracted to manufactured housing. We would expect to be able to continue to acquire at that cap rate level. I'd also share the remarks that we share frequently that we look at cap rate, but more important to the cap rate going in is the quality and location of the community as well as the growth trajectory.
We look for growth that we can generate by putting them onto the Sun operating platform. The operations team does a fabulous job accelerating occupancy, so we like to buy vacancy on an existing cap rate of NOI. We look for expansion opportunities, the low-hanging fruit such as expense savings that we can implement when we can find under-market rent opportunities and repositioning entitled properties into more modern properties by deploying capital investment. Cap rates for the company are pretty consistent. It's really the discipline that we exhibit to gain the acquisitions that have the kind of growth profile that we're looking for.
Thanks. Then, Gary, you mentioned building a sustainable business. How do you think about the scalability of the platform as G&A has grown at an outsized rate and is expected to do so again in 2019?
Yeah. I'll let Karen talk a little bit in a moment about the actual numbers on G&A so that everyone can get a clear idea of how they're shaping up for 2019. I think the scalability and the four core investment strategies that I discussed in my prepared remarks really address the most frequently asked question that Sun's management team has, which is: What's the runway for continued growth like we've been able to deliver for the last seven, eight years?
It is through all the strategic planning that goes into place, the solid balance sheet that we've been able to put together, the certainty of our cost of equity to do the capital raise, the type of acquisitions that we're looking for, replenishing our inventory of expansion sites, the ground-up developments where it's too costly to acquire on a going-in cap rate, yet the demand in those areas are very important. All these things are what lead to the runway of growth and our certainty to be able to continue to deliver. I think that the scalability that you're asking about, the G&A that Karen will review, is all put in place intentionally and strategically to be able to continue this type of growth.
Okay. Specifics for G&A in 2018. We'll start there, then I'll move on to 2019 guidance. Growth in G&A was 9.7%. That actually represents a decline as a percentage of revenues from 7.57% in 2017 to 7.23% in 2018. I remind you that our G&A numbers are fully loaded, and we don't make a property management allocation. If you did apply a 4% management fee, our G&A growth would be about 3.8% year-over-year. 2018 did include some additional costs related to the creation of our transformation team, APEX, which is a revenue generation and cost savings through re-engineering team, and some additional costs related to changes in our long-term incentive programs that was undertaken by our compensation committee to bring them more into market. If you look into 2019, on the face, G&A growth is 9.7% at the midpoint.
When you adjust for the $3.5 million impact of the leasing accounting change, the actual increase is 5.45% at the midpoint. That's a decline as a percentage of revenues from 7.23% in 2018 to 6.18% in 2019. Again, if you take out that management fee, our G&A is actually presenting a reduction of 3.4% to a half percent increase year-over-year. I think with a little bit more detail into these numbers, you can see that we're very pleased with our G&A cost containment and the scalability of our platform.
Thanks for all the color.
Our next question comes from Wes Golladay, RBC Capital Markets. Please proceed with your question.
Hi. Good morning, everyone. I want to look at the capital markets. You did a $265 million term loan that was 25 years. That sort of stood out. I guess, what drove the long duration of it, and what is the investor demand for 25-year loans, 30-year loans, still the very long duration?
I think the investor demand has been very strong, Wes. I think that we took the opportunity to extend, I think it was about 13 years at a really very favorable 4.17% interest rate. I'm going from memory there.
No. It was an extend and blend transaction that brought down $77 million more of proceeds and extended the loan for about 13 years, I think, as Gary said.
In the same property pool. We were very pleased, and I think that as we look at the nine-year average duration of our debt, we will continue to look for opportunities to extend it out and lock in that cheaper cost to capital throughout 2019 as well.
Okay. Looking at the initial forecast for the 2018 revenue-producing site, it looks like actual results were just a little bit below that. Is there anything special going on, construction delays, or just a little bit less conversions on the RV side?
No, not really. I think that really the way we look at 2018 finishing out 2,600 net revenue-producing sites, that's the highest number of revenue-producing sites we've ever achieved in our history. We're actually pretty pleased with that milestone. I will add that with any construction, sometimes you deal with some delays from time to time, whether it's weather related, and that had a little bit of an impact in Q4 on projects that we expected to come earlier in the quarter that didn't, but are now completed today. Other than that, really, we're very confident in the guidance that we have out there.
Okay. Thanks a lot, guys.
Yep.
Our next question comes from Joshua Dennerlein, Bank of America Merrill Lynch. Please proceed with your question.
Hey, guys. Thanks for the question. I saw that in your guidance for 2019, you added a new line item, ground-up development sites constructed. Looks like you're going to have 800- 1,000 in 2019. How should we think about that line item, and how does it compare to the expansion sites constructed?
It's a great question, Josh. I think, as we've indicated, we look to develop two to three new communities per year in areas where there's high demand. Cap rates are just far too compressed today. Sun has a long history of ground-up development, and we're doing it in a way where we don't put too much risk into development. The challenge with development is the absorption curve and the front-end expenses create some dilution in the early years. I think that when modeling out, one could think of probably $0.02- $0.03 of dilution related to our development program at any given time. At the same time, we develop out to a return on investment probably 250- 300 basis points greater than what we could deploy the capital in the area for given cap rates.
The IRRs that we share before we underwrite the developments have to be to a high single-digit unlevered level. Final comment that I would make that we've reiterated before. It takes about, on a 300-site development, about three years for total stabilization to hit that IRR in an RV community and closer to five years in manufactured housing. We do use our rental program to accelerate occupancy in our manufactured housing program. Then John and his team are able to convert the renters into homeowners, and that's really how the model achieves the returns on the investment.
Thanks, Gary. Appreciate that. For the expansion sites that you're planning to construct this year, I know you purchased some land in 4Q, and one of the properties you acquired in the first quarter had expansion site possibilities. Is that where the majority of the expansion sites are going to come online this year, or are there other locations that you're already working on?
I just add, I'll let John talk a little bit about the calendar for expansions, but if we've acquired the land recently, it's usually going into the inventory to be developed out in the future. I'm going to guess most of that, once the entitlements in place, the site plan has to be completed, the construction has to be completed. If we bought something within a 12-month period of time, you probably won't see it actually put into place in the portfolio for at least 24 months.
I think that's exactly correct. When I look at what the projects that we have set up for 2019 within our guidance range of 1,200-1,400 expansion sites, it's a combination of communities, Josh, okay? Meaning that some of them are in properties that we acquired three years ago. Some of them are, we do have some parcels that we've acquired for expansion adjacent to existing communities. Just overall, the guidance that we have for expansion development in 2019 is represented across eight manufactured home communities and 11 RV resorts. It's pretty much all over the country.
Thank you. Then just one last quick one from me. Have you been shown any opportunities yet in the Australian JV?
Excellent question. We have. Ingenia reported their half-year earnings earlier this week. We were very pleased with the results. They seem to be tracking our expectations. On the JV side, they have presented one opportunity that the Sun board has agreed to move forward with. There is a second opportunity in the diligence period of time. I would expect by year-end, Sun will be with Ingenia in the ground on two different development opportunities.
Great. Thanks, Gary. I'll just put you on mute for
Our next question comes from John Pawlowski, Green Street Advisors. Please proceed with your question.
Thanks. Sticking with Australia, John, you and your operations team, in any given month, how much time are you guys spending on Australia, and what exactly is the role of Southfield, the team at Southfield's role helping or overseeing Australian operations?
Well, very little of my time. They are great operators, which is one of the important points. When we went into this, one of the important things that we had to know was that we fit culturally and operationally. We're very confident in the way that they run their communities, which are in just remarkable locations across the eastern coast of Australia.
Yeah, I think John's been out there one time now?
Yep.
I've been out there several times, and will be out there again shortly. Our head of acquisitions, Jon Colman, is sharing the responsibility directly with me. He's been out several times as we inspect the proposed JV opportunities. I would just echo what John said. It's very important to understand that this investment was predicated on the confidence of the development and operation team of Ingenia and what they've demonstrated and the quality of the communities that we've seen there. I would say that we have a group, the name of the JV is Sungenia, a Sungenia board call at least twice per month to review progress, but it's not taxing at all on our operations team right now, nor do I expect it to be in the future.
Okay. You mentioned the acquisition pipeline's very full. Could you give some specifics on what dollar volume could look like in 2019?
Yeah, I think that what I would share, and it's stale news already, but as we went back and looked at 2015, 2016, 2017 for our 2018 thought process and for the equity raise, we probably averaged around $200 million of acquisitions that were done in onesies and twosies. We finished the year well above $300 million last year. Is it $365 million so far this year?
Well, it was $364 million last year.
$325 million .
It's $325 million this year.
$325 million this year in a very short period of time. Some of those, again, overlapping from fourth quarter as acquisition activity is sometimes a little hard to pinpoint on the closing. There's a lot of things that stall it, defeasance of existing debt, third-party reports and things like that can sometimes slow things down. Our expectation is that we would do another $100 million-$200 million in estimated acquisitions through the balance of the year.
Okay. Last one for me, Gary. When you sit with the board and you guys pull up the price charts for you and your peer versus any other real estate type, they ask you, "All right, what could go wrong? What could upset the apple cart?" Are there any regulatory policy risks out there at the state or local level or anything on your minds that operations seem to be in check, any more outlier events that could again disrupt what has been a very favorable story?
Well, it's a good question, John. Risk management is on the forefront of the dashboard for our board and for many, many public companies out there today. We do review what can go wrong and what steps we can take at all levels within the company, all different department levels. There is a standing committee that Karen heads, along with some of her team members that report directly up to the board. We do manage to the best we can emergency response situations, disaster recovery, certainly regulatory issues as they come up, review them with the board. There are none that I could point to directly right now that I would say keep us up at night. I would suggest that the best way to manage them, and John's operations team does a fabulous job, as the other department heads, are to create customer satisfaction at the communities.
When you look at the type of CapEx that we generally put into the properties, the special projects that Karen talks about. Some of you who have met with me have heard me say this before. There are two things that I've learned over my career. Number one is you can't strip the equity out of the residents' home ownership by simply increasing the rents without reinvesting in the communities. We take that CapEx as very important to maintaining the equity. Then the second thing I point to is John's core focus throughout the company and through the operating team is customer satisfaction. It's through that customer satisfaction, we can sit here and say that over our tenure, I can't think of a hostile situation with the homeowner association that we haven't been able to work through.
Nobody likes the rental increase, and this is what I always say, but if you're reinvesting back in the community rather than just raising the rents, we tend to have pretty satisfied customers.
Okay. Thank you.
Our next question comes from Steve Sakwa, Evercore ISI. Please proceed with your question.
Thanks. Good morning. I guess first, maybe just on operating expenses, sort of the trends that you're seeing in OpEx and also real estate taxes as you move into 2019, and just maybe some of the risks kind of to the upside or downside there.
Certainly, you pointed out real estate taxes. We are seeing some pressure on assessments in both Florida and Texas. I think our guidance indicates that continued pressure on real estate taxes. Just as a side note, we basically appeal assessments in most states as a matter of course, we record our tax expense as assessed and reduce the taxes when we have a successful appeal. As far as POM, I think if you took out the impact of the leasing cost change, POM would be in the 2.8%-3.8% growth. That's a little lower than last year, but we did have some non-recurring charges in 2018 related to some significant utility usage in Q1, that was weather related. Some general liability reserves and workers' compensation reserve increases.
Other than that, I would say insurance premiums for property and casualty is one of the items that has seen some pressure. There was very little impact of minimum wage increase in the 2019 guidance.
Okay. Karen, I don't know if you can I don't want to get too bogged down, obviously the lease accounting change is having some negative impacts on a couple line items, it sounds like there may be some incremental capitalized costs that are in effect offsetting that. I'm just wondering if you could sort of speak to that and maybe what those changes are.
Yeah. We were able to restructure certain of our commission payments to be lease transaction specific. The additional G&A cost of the $3.5 million that we talked about in POM has about $2.2 million for the total portfolio. They were basically substantially offset by the allowable capital costs. Basically allowable commission capitalization for home selling expenses and our rental home expenses. The impact to FFO in 2019 was minimal.
Okay, thanks. That's it for me.
Our next question comes from John Kim, BMO Capital Markets. Please proceed with your question.
Thank you. Good morning. Maybe the first question for Karen. You're entering the year with lower leverage from the capital raise. I know you discussed $390 million of traditional capacity or acquisitions, can you just remind us, is your intention to run the company at lower leverage than you had in previous years?
Yeah, as you pointed out, we are at 5.6x net debt to recurring EBITDA. We're very pleased to be there, but we are comfortable operating in, and we believe the asset class and its stability of cash flow really supports a leverage level in the low sixes. I think as we deploy capital for acquisitions in the rest of our 2019 capital plan, I think we expect our leverage may increase to near the 6x level.
Okay, on Ingenia, how much additional capital do you think you'll put into the business this year between the development JV, and also potential consolidation opportunities?
That's a great question, John. On the JV side, on the development side, the estimate for this year is approximately $25 million.
Consolidation, and as part of that, how important is it for you to maintain your 9.9% stake in the company?
I think that it's important that we will look towards how the company performs, and we'll make decisions as Ingenia continues to demonstrate the type of progress we expect. There is a restriction that time has passed now that would allow us to acquire up to an additional 3.5% in the marketplace. That is available to us, again, we'll let them demonstrate how they're performing, and we'll make decisions as we go.
Okay, on your revenue producing sites, it looks like the guidance this year is basically flat as far as 2,600 at your midpoint that you'll deliver. Going forward, is there any ability to increase that amount that you could deliver per year?
No, I think the way I'd answer that right now, John, is I'm happy with the guidance that we've presented for 2019.
That's, I guess
I think that the question was, is there any more opportunity, John?
Is 2,600 the most you could deliver in any year, or is there ability to potentially do more past 2,600 this year?
I'm going to go with what John said. I think we're comfortable at the 2,600 level.
Right.
Okay, great. Thank you.
Our next question comes from Jason Belcher, Wells Fargo. Please proceed with your question.
Yeah. Hi, I guess first, just a bookkeeping question. On that $188 million term loan you all refinanced in the quarter, what was the interest rate you were paying on that?
I believe it was between 3.8% and 3.9%.
Okay. Thank you for that average cap rate for quarter to date acquisitions. Just wondering if you could share a range. Is it a pretty tight range around 5% or what kind of range is it?
Yeah. It's a pretty tight range. As I said, beyond the cap rate, we're probably looking at something that has either vacancy opportunity or expansion opportunity. There are 70 sites of expansion that came with the community that would probably have been bought at the lower of the cap rates that we acquired. It's that growth opportunity that we'll pay up for, but pretty tight on both sides of it.
Lastly, could you all just give us an update on your social media and mobile engagement efforts? Just maybe update us on what kind of traction you're seeing there and what percentage of your customers are interacting or booking with you through those channels now.
Yep. This is John. We're seeing, once again, real nice growth on all the different channels that we have out there in social media, as well as just our digital strategy overall. Really, we are seeing more bookings come online. We actually have some plans that are in development right now where we expect to give some updates over the course of this year to lift that up. Some of it's related to just the overall things that we're doing from a transformation strategy standpoint within the organization. I expect to provide a little bit more color on that as the year progresses.
Just in terms of percentage of bookings coming through digital channels, tell us where that's shaken out now versus, say, a year or two ago.
Yeah. I would say that it's incrementally gone up. It's been more of a step-by-step sort of increase that we've had, it certainly is an opportunity that we're focusing a lot of attention on. Again, something I expect to report a little bit more detail on later in the year.
All right. Thank you.
Yep.
Ladies and gentlemen, we have reached the end of the question- and- answer session. I would like to turn the call back to Gary Shiffman for closing remarks.
Well, we'd like to thank everybody for joining us on the conference call, and John, Karen, myself, and of course, Fernando, are available for any follow-up. We look forward to having everybody join us on the first quarter earnings call. Thank you.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.