Q3 2019 Earnings Call
Our featured speakers today are Marguerite Nader.
Our president and CEO .
Paul Seavey, our executive Vice President and CFO .
Patrick Waite, our executive Vice President and COO.
And advances today's call management released earnings.
Today's call will consist of opening remarks, and the question answer session with management.
Moving to the company's earnings release.
As a reminder, this call is being recorded.
Certain matters discussed during this conference may contain forward looking statements in the meetings at the federal Securities laws.
Our forward looking statements are subject to certain economic risk and uncertainties.
The company assumes no obligation to update or supplement in these statements that become untrue because of subsequent events.
In addition during today's call.
We will discuss non-GAAP financial measures as defined the FCC regulation G.
Reconciliations of these non-GAAP financial measures.
Comparable GAAP financial measures are included in our earnings release, our supplemental information and our historical FCC filings.
This time I like to turn the call over to Marguerite Nader, our president and CEO .
Good morning, Thank you for joining us for a third quarter earnings call.
Today, we will be focused on a detailed review of our third quarter results. Our initial 2020 guidance and our rationale for the recommended 2020 dividend increase.
Our third quarter results released yesterday show strong quarter and year to date trend.
Year to date, we increased occupancy by 262 sites and this quarter merck's or 45th consecutive quarter of occupancy growth.
The wholesale market with strong as evidenced by or rental conversions and resale activity.
Our online transaction activity continues to escalate in the quarter, our RV revenue booked through our website increased 19% and our sales of I like camping passes increased by 25%.
Our summer marketing campaigns resulted in an increase in fans and followers to a current base of over 625000. These followers are converting to loyal customers.
Our RV revenue, including thousand trails has grown 5.6% year to date. This growth has been fueled by growth in our annual income in her thousand trails revenue.
The annual growth of 6.1% is comprised of 5.2% rate and 90 basis points of occupancy.
Thousand trails portfolio revenue increase from both the dues revenue and upgrade.
To date, we've seen an increase in sales up 12% and an increase of upgrade of 13%.
Turning to 2020 each year, we finish your budget process in October and provide detailed projections for the following year, we have issued guidance of $2 in 22 cents at the midpoint for next year, which is 6.1% growth rate in SFL per share.
Seasonal and transient activity require additional visibility to be able to forecast with more accuracy.
As is our practice, we will update guidance each quarter as we have more knowledge about reservations at the property level.
Our MH and RV properties continue to experience heightened demand as seen in occupancy and rate growth.
Our team members work with the homeowners can determine best use of capital investment within each asset.
Within our in each portfolio by the end of October we will have noticed 50% of our residents for rent increases and anticipate 4.4% growth and it makes revenue.
Our RV revenue is anticipated increased 5.2%.
Strengthen our RV annual base, along with strong performance in thousand trails are the main contributors to this projection.
Our product is in demand and the Democratic demographic trends are in our favor.
Baby Boomers are relocating to our key states and the demand can be seen in the increased on line on property activity.
Additionally, we are seeing an increased number of multi generational customers.
We now have customers, who have vacation dinner properties, bringing their children and grandchildren.
This exposure to the millennial and Genex demographic will be helpful in filling our future long term customer pipeline.
Linear now represent 26% of RV buyers and millennials and Genex combined represent more than half of our feet buyers.
I would like to update you on our proposed 2020 dividend policy the dividend policy as a board level decision that typically made in our fourth quarter Board of directors meeting, we feel it's helpful to highlight management's recommendation and rationale with respect to the dividends.
Historically, we have been able to take advantage of opportunities due to the free cash flow generated by our operation.
Consistent with the in the past in 2020, we expect to have in excess of 53 million of discretionary capital after meteor obligations forgiven in payments recurring capital expenditures in principle payment.
Each year to arrive at a recommendation we review our projected growth enough and so in our outstanding obligations with a goal of maintaining or underlying financial flexibility. In addition, we stress test our future obligations to ensure we can continue to meet both our financial obligations and our customer expectation.
The stress test reveals the strength of our balance sheet, which has been fortified over the years with longer term maturities.
Currently our average term to maturity is 12 years, which is double the REIT sector average, we're focused on long term value creation.
The stability and growth of our cash flow, our solid balance sheet and a strong underlying trends in our business have let our management team to recommend a 12% increase in or dividend to $1.37 for 2020.
We've increased our dividend significantly over the last few years to give a little history over the past five years, we've increased our dividend 83%.
Please note the while this is management's recommendation.
The board has not yet approved this recommendation.
Our team members continue to deliver a great experience to our customers I appreciate their hard work and I look forward to the start of the snowbird season as we welcome back our residents and gets put in winter season.
We'll now turn it over to Paul to walk through the numbers in detail.
Thanks, Margaret good morning, everyone.
Overview, our third quarter results discuss our guidance assumptions for the remainder of 2019 as well as our preliminary guidance for 2020 and provide some comments about our balance sheet.
Please note that all per share remarks reflect our recent two for one stock split.
We reported better than expected third quarter normalized FFO of $102.7 million or 53 cents per share.
As a result, the completion of the longer had Marina acquisition. Other income was higher than expected because of preferred distributions from our joint venture investment.
During the quarter. We also settled the remainder of our Hurricane Hermine insurance claim we recognized approximately $5.9 million of revenue that weve deducted from our calculation normalized AFFO.
Core base rental income was up 5.4% compared to last year with 4.7% coming from rate and 70 basis points coming from occupancy.
We gained 58 site occupied sites in the quarter as a result of increasing our homeowner count by 85, and reducing rental occupancy by 27.
Our core RV revenues were in line with guidance in the quarter annual and seasonal revenues showed strong growth of 6.2% and 3.9% respectively.
Rate increases for our annual customers contributed 5.5% with the remainder of our revenue growth generated from occupancy gains across the portfolio.
Our transient demand remains strong as evidenced by the combined growth of our transient resort revenues and our membership subscriptions. In addition, transients site usage by members was up more than 10% in the quarter compared to last year.
A limited number of locations within our RV footprint did not perform as expected, resulting in lower transient revenue than guidance during the quarter.
Membership subscriptions and upgrade sales revenues were higher than guidance in the four.
[laughter] during the quarter, we sold 50 900000 trails camping pass membership.
To date, our camping pass sales volume has increased 12% compared to last year.
Oh, great sales volume in the quarter was 859 units at an average price of approximately $6700.
The net contribution from membership sales and expenses was higher than guidance, mainly as a result of sales of our higher cost upgrade product.
Utility and other income is in line with guidance and lower than last year because of insurance proceeds received in the third quarter 2018.
In the quarter core property operating maintenance and real estate tax expenses were higher than forecast, mainly from repairs and maintenance and utility expenses.
A portion of the variances in repairs and maintenance and utility expenses resulted from utility system repairs and related water usage.
In addition, electric expenses were higher than forecast in all regions as weather patterns resulted in increased demand.
Finally, while the order was relatively mild [laughter] on the storm front, we did incur close to $500000 of storm related expenses that contributed to our variants to guidance.
Overall core NOI before property management grew 5.1% in the quarter and year to date periods.
And away from noncore properties was $4.8 million in the quarter.
This includes and away from them Arena portfolio, we announced closing in mid September .
Year to date the acquisition properties of the noncore have performed as expected.
Property management, and corporate <unk> expenses were $23.3 million in the corner.
Other income was higher than guidance.
In closing of the Marine acquisition, we recognized income from preferred distribution related to our joint venture investment that had previously been deferred.
Financing costs of 25, and a half million dollars include interest expense on borrowings to fund our acquisition activity.
Year to date normalized FFO was $1.58 cents per share a growth rate of 8.4% over 2018.
The press release and supplemental package provide fourth quarter and full year 2019 guidance in detail as well as preliminary 2020 guidance as I discuss guidance keep in mind. My remarks are intended to provide our current estimate of future results all growth rates in revenue and expense projections represent mid points in our guidance range.
Our fourth quarter normalized AFFO guidance is approximately $98.6 million or 51 cents per share at the midpoint of our guidance range.
Expect core NOI growth of 4.6% in the fourth quarter to contribute to 4.9% core NOI growth for the full year.
We assume no core MH occupancy gain during the quarter.
Looking ahead to the fourth quarter in our RV business, our current annual seasonal and transient reservation pace is inline with our expectation.
Page 17 of our earnings release shows historical and projected revenues from our membership business.
We expect total revenues of $111.3 million in 2019, a growth rate of 7.5% over 2018.
For the full year, we expect for revenue growth of 4.4% and core underlying growth of 4.9%.
The impact of the Marina acquisition can be seen in the increase in noncore and Hawaii, which is partially offset by increased interest expense.
Other income and expense has been reduced as we will no longer receive preferred distributions from the Marina JV.
Full year normalized FFO at the midpoint of our guidance ranges about $401 million or $2.09 per share a growth rate of 7.9%.
The midpoint of our preliminary guidance range for full year 2020, normalized FFO is approximately $426.4 million or $2.22 per share.
This represents a 6.1% increase over 2019 normalized AFFO per share.
Growth in court in a wide before property management is expected to be approximately 5.3%.
Our projections of core NOI and normalized AFFO growth for 2020 assume fourth quarter 2019 results will be consistent with our stated guidance consistent with our past practice, we plan to update guidance on our January call and we may adjust growth rates on certain line items. After we finalize results for 2019.
We assume no growth from incremental occupancy we may gain in our core MH properties during 2020.
Base rent is expected to grow 4.4% for the 4% coming from rate and 40 basis points from occupancy as a result of sites we filled in 2019.
In our core RV resort business, we expect 5.1% growth in 2020.
Our annual revenues are expected to represent more than 60% of our total RV revenues and we expect 5.3% growth mainly as a result of increases in rate across our portfolio.
We project, 4.6% growth and seasonal revenues and 4.8% transient revenue growth.
During the first quarter, we expect to generate more than 50% of our seasonal revenue for the year and more than 20% of our transient revenue.
The winter season is still weeks away, we considered our seasonal and transient reservation pace for the first quarter 2020, when developing our guidance assumptions.
As Mark mentioned, we have limited visibility into seasonal and transient revenues beyond the coming quarter.
We intend to continue updating guidance throughout 2020, as we have better visibility into reservation trends.
Our budget assumes total revenue generated by our membership business will be $118.1 million as shown on page 17 of the earnings release.
I assume sales and Activations of 42000, 700000 trails camping passes next year and increase of 4.7%.
I assume membership upgrade volume will exceed 3000 at an average price of around $6500.
Core property operating maintenance and real estate tax expenses are assumed increased 3.1% in 2020.
Our budget for repairs and maintenance expense assumes normal run rate operations.
We've maintained our historical practice and if not assumed expenses related to property damage or other onetime items in our guidance.
We do note that over the past few years, we've seen an increase in volatility related to weather events impact on our properties in the cost to maintain and repair assets as a result.
We intend to continue to provide updates quarterly when these unexpected events occur.
Our guidance for noncore properties include the expected contribution from the properties. We've acquired during 2019, we assume no other acquisition activity in our 2009 2020 guidance model.
Our other income and expense budget reflects normal run rate income generated by our MH and RV joint ventures. As a reminder, in 2019, we recognized approximately $2 million JV income related to a refinancing distribution from one of our joint ventures.
Our guidance for financing costs and other includes the cost of debt to fund the marine acquisition, but does not assume any impact from other future capital event.
Now I'll comment on our balance sheet.
We have no debt maturing during the remainder of 2019.
2020, we have approximately $49 million of secured debt maturing in the second half of the year.
Current secured debt terms or 10 years and coupons in the 3.5% to 4.25% range, 60% to 75% loan to value and 1.35 to 1.5 times debt service coverage.
The G fees and life companies continue to quote MH and RV deals at rates well inside CMBS.
High quality age qualified MH assets continue to command best financing terms.
We continue to place high importance on balance sheet flexibility. Our interest coverage is 4.8 times in our line of credit has $280 million of availability with an accordion feature that provide $200 million of additional capacity.
Now we would like to open it up for questions.
Ladies and gentlemen to ask a question. Please press Star then one on your telephone.
To move yourself from the Q you May press the pound key one moment for questions. Please.
Our first question comes from Nicholas Joseph from Citi. Your line is open.
Thanks.
The decision to acquire your JV partners interest in memory in the portfolio about how is and a lot performed relative to your expectations and in person MH and RV and a like for.
Sure. So we've been in the JV that included the loggerhead portfolio over the last two years and we've really had a chance to see how these top tier properties have performed on and we were happy to be able to take over 100% ownership.
That JV includes 11 coastal marine is in Florida. These properties. They have a high degree of annual cash flow with over 80% of the revenue from from annual annual site rent. We plan to operate these assets kind of side by side with our Florida location and they really be provide long term stable cash flow.
What we've seen from from 2017, I'm, an increase of about a 5% growth in Hawaii on each year and so it's in that sense and some healthy growth in and Hawaii and an overall, where we're we're pleased we are taking over the operations.
Of the assets and I'm pleased to be able to that.
Thanks is there an opportunity to acquire additional marinas how large.
Exposure could you see your exposure probably too you know there are about 4500 marinas in the United States 500, we would consider institutional quality.
So it and there's about three large owners to account for less than 5% of the overall revenue up in the Marina space. So it's highly fragmented I think a much like what you've seen us do when the RV space where.
Where there's marinas that have long term cash flow that makes sense for us that are in locations that we like you'd see us continue to buy.
Thanks.
Thanks, Nick.
Our next question comes from John Kim of BMO Capital markets. Your line is open. Thank you just sticking with loggerhead.
What was the interest rate of the joint venture debt and do you plan to refinance it or keep it on an unencumbered.
The.
The debt had to be paid off at closing and so.
What we did as you saw was use our line of credit and what we plan to do with respect to them arenas really we have the objective of.
Developing secured lending relationships to finance, the marinas that quality and characteristics similar similar to this portfolio. The plan really is to execute in a manner similar to the experience that we had in 2004, when we entered the RV business at that time, there was a select group of lenders and brokers that we're familiar with underwriting RV.
Resorts and I put together a plan at that time to partner with those lenders and brokers at the same time educating others. So that we could expand the network of available lenders a key factor that helped us with that accessing institutional debt capital for the RV space was showing the sticky relationships with customers and longer term.
From revenue streams that are really analogous to MH revenues and we think that similar characteristics exist in the Marina space and plan to build on past experience to expand the lending network for these assets.
So what interest rate could you finance marina assets today versus Hmm.
I think.
It's a little early to say that I think that as I mentioned were three and a half to kind of 4.25% in the space right now and I'd say that.
Theres theres, probably a bit of a spread to that pricing, but it's a little bit early to to talk specifics on what pricing would be.
Okay, and then a question on MH occupancy I guess, you had 43 quarters.
Occupancy growth, which I assume is year over year.
Sequentially.
And you're not assume any growth in occupancy in your 2020 guidance, which was consistent from last year, but how much room do you think is left an occupancy fronts getting.
Any potential increases from 95.4% today.
Yes, Patrick.
54% of our properties are currently 90% to 100% occupied.
We see opportunity to continue to grow occupancy across the portfolio or half of our vacancies in Florida, which is kind of really good demand profile and migration and has performed well for us.
And we're seeing strength even into secondary markets like Las Vegas is an example, Minneapolis.
So when the good demand profile and and that occupancy profile.
We're looking at 46% of our properties with an opportunity to grow up to 98% and and perhaps more in as it relates to that 98%. The ones that are 90% occupancy has been in that range for 10 plus years. So.
Once it gets to that level. It can certainly stay at that level.
Can you comment and how many sites you expect to add through expansion this year and.
2020.
Sure in 19 or about a thousand sites in a similar number a thousand to 1200 in 2020.
Great. Thank you.
Yes, Jeff.
Our next question comes from drew Babin of Baird. Your line is open.
Hey, good morning.
Andrew.
Question on your <unk> and they trade growth it looks like it's been trending towards the upper for versus maybe closer to 4% kind of in the past I'm just curious on whether there's been a contribution there from ROI capex or is that just a product of your properties being more occupied and having more contracts the dry.
Great could you maybe decompose that a little bit.
I think what what we're seeing there and we've we've talked about a little bit in the past is that we meet with the homeowners Association, we sit down and talk to them about what they would like to have happened at the property between event amenity upgrades just things that there that they're interested in and.
And when we sit with them. We are at that same time, we talk about what the rate increase is what the proposed rate increase and we share with them what our market survey. So how did we get there.
And I think as a result of that in kind of adding that additional kind of capex or amenity feature to it has been helpful. In in getting to the numbers that you that you've seen us post, but if that effectively we're taking.
The Capex dollars that we had allocated and then just discussing with our our our residents where the best use of that capital is.
Okay, I guess, one follow up to that looks like 2020 guidance assumes the rate growth kind of reverts to that 4% is there anything behind that other than just kind of caution given that it's early.
What can we assume the same sort of assumptions when it comes to the Capex projects, you mentioned that kind of the overall environment.
I think.
I think your observation is is a reasonable one I think that some of the contributors to the Upticking growth are the result of the discussions and Murray just mentioned there's also.
Potentially an increase in rate on turnover and so forth that because we don't dial in increased occupancy.
That that has contributed in the past so there's a possibility that those with.
Contribute going forwards.
Okay. Appreciate the color and one more for me it sounds like the Marina business and that you're working into a secured debt.
As possibly some larger plants within it.
I was hoping you could talk about as this business gross if it grows are there any accounting nuances or anything where that business, maybe works a little differently than a major RV.
Dealt with and or Barbary income potentially coming from fuel sales things like that maybe just expand on that a little bit and maybe some of the unique challenges that come with potentially expanding in that business.
I'd say, it's similar to what we see in the RV business Theres ancillary activity at them arenas fuel sales as an example that are not requalifying.
Revenue streams.
The structure that we have is for ownership of the marinas in operations of those businesses is quite similar to the structure that we have in the RV business.
And we pay very close attention to that of course.
But I think fit.
For purposes of debt underwriting part of what we are working to educate lenders on and really a developer program around is the long term revenue streams that that Marguerite mentioned thats really that was really the hallmark of our success in developing the RV program.
We anticipate that to continue on that on the Marina program and I think through what you could see inside of the marine aside just on like the RV side that you could have a highly transient.
On Marina that has.
A lot of ancillary revenue and you would see us not interested in that I'm just like just like what you see on the on the RV side.
Great appreciate the detail. Thank you thanks drew.
Our next question comes from Todd Stender of Wells Fargo. Your line is open.
Thanks, and Paul just to stay in that theme.
I am guessing arenas aren't able to tap agency debt that's fair to say right that is fair to say, yes. So you will stay in the secured side I mean does this eventually open up the possibility. If you can expand this property type of looking at more unsecured side.
I'd say, it's it's a it's something that's evolving I would caution everybody to remember this is quite a small part of our business. I mean, just in terms of total value, we're talking about less than $200 million that has been invested.
And so we're we're going to be working on developing these relationships exploring what the opportunities are and.
We anticipate that we'll have success with with that but I think we can we can provide updates in future quarters as we make progress.
All right. Thanks, and then just to highlight that that piece of what you've invested so far so.
Hi, guys your cost basis. The original 30 to 49, you'd just spent plus the 72 in debts.
Well. The original was 35 there were there was the initial funding and then there was an earn out so there was 35 million plus the pieces that you mentioned.
Got it okay.
And then have a yield.
Have you I guess, maybe looking at if you do on an IR basis for the last two years and what what do you. What do you. How do you look at your going in yield I guess on marinas. So what we had on that these meetings, we had done to our preferred piece that it was a 7% preferred which we discussed at the time, we entered into it and.
And this is a 6% cap rate on on the transaction that we get.
Got it and I know I know, it's small, but if you do grow it will you be breaking out a revenues expenses in Hawaii for them arenas.
I think that we would look to report revenue streams.
Similar to the Marina business similar to the RV business I should say the annual seasonal transients.
Okay got it. Thank you, yes, thanks type.
Our next question comes from Josh with dinner Lane of Bank of America Merrill Lynch. Your line is open.
Hey, guys just one follow up on number.
One follow up on the Marina you mentioned, 5% NOI growth how much of that was driven by rate versus occupancy gain.
It was roughly half and half.
Hi.
And yes, that's really have huh.
So as a like a 2.5% rate increase per year.
That's okay, yes, okay.
And then on.
Our and our an M. expenses I think you mentioned those are higher than kind of what youre forecasting was that all storm related or was there something else going on there as well.
No as well as I mentioned, we had.
Expenses coming from some water system repairs in the quarter and related utility expenses and then the electric expense was elevated just.
Elevated demand really.
About half a million dollars was related to storm activity.
Okay, Okay, and you expect that's the kind of normalize I guess going forward that we've dialed into our Q4 guidance kind of an adjustment to our assumptions based on what we experienced in the in the utility expenses in Q3.
But thats already dialed into into Q4.
Okay and is there any ability for you guys. The kind of continue pushing the utility costs down to the.
And it sort of kind of having a state of the community level.
I think that we've we've been.
Definitely active in and bundling as we call it a charging resident separately for their utility usage one area that that we are focused on is in the RV.
Communities to the extent that we're not building back customers focusing on how we can how we might be able to do something like that and then just we also have a focus on just conservation of resources. So that you will see that and just trying to kind of get that we're down to our residents and customers.
Awesome. Thank you guys. Thanks.
Our next question comes from Samir Khanal of Evercore ISI. Your line is open.
Good morning, uphold can you talk about a property taxes as we think about sort of expense growth next year I.
I know I know last year, there was some pressure from up from Florida with rich.
Might have hit this year as well, but as we think about sort of the next.
You know 12 months.
Are there any states, which are going through sort of real estate tax assessments.
Considering where property valuations are they could surprise us to the upside.
So.
I think that.
I'll talk first about Florida, we've received the annual trim notices related to the Florida real estate taxes.
The notices when they come in they present potential tax amounts theres a range from low to high on those notices.
Most of them reflect rates have increased that are generally consistent with our expectations, but there was one county in particular that proposed a significant increase at the high end of the range.
We've initiated appeals.
This county, and we have not adjusted our real estate tax expense.
In Q3, or our guidance pending outcome of those appeals overall for the year, we expect a mid single digit increasing core real estate taxes.
This year.
And who will come back in January with an update on our progress as we go through the process of receiving the final bills to understand exactly where each county falls out in the low and high end of the range.
And how we're making progress on on the Appeals I just mentioned broadly across the country I'd say, we see pockets at points in time, where there are increases.
But we're not we're not consistently seeing elevated levels of real estate taxes kind of beyond that mid single digit increase I just mentioned.
Okay. So right now I guess for 2020 right you're right.
Sort of with the real estate tax, which is kinda lumped into one line, it's about sort of.
Sort of 3% I'm, sorry, it's a 3% right now so there is there could be some.
Rich the upside if depending on where you get back for Florida, So kind of what you're saying well the real estate tax number embedded in that in that 8% growth is higher it's closer to closer to 5%.
We have some expectations of savings in some of our other line items related to two activity in 2019.
Okay got it alright, thank you.
Thank you.
Our next question comes from John Palleschi of Green Street. Your line is open.
Thanks, Paul maybe just a follow up to that last question the closer to 5% growth number for 2020 2019 was a similar growth rate for real estate taxes is that fair.
Yes, the one thing the one thing I Should've mentioned in my comments, a moment ago as I spoke to Florida.
To the extent that we do see increases in those real estate taxes. There is an opportunity for pass throughs and certain properties. So there potentially as recovery in 2020 some of that.
Tax increase in the event that.
The the appeals aren't completely successful.
Got it.
Marguerite on the acquisition front.
Curious if the jetsons portfolio met your quality geographic criteria.
And just like we've talked in the past, we we underwrite and look at.
Small industry. So there's a lot of a lot of people looking around at those assets and Ah you know and we did look at it and and did not obviously a denied obviously by it.
Okay I do you expect another large portfolio and the several hundred million dollars range to trade. The next 12 months.
Difficult to say I would say that at any point in time in the history. If you go back over 10 years.
You know a year out you really you really can't predict what will happen and you know and when it's going to happen. So I don't know the answer there's certainly some of those types of portfolios out there, it's whether or not they're going to trade I don't know.
Okay are there any leading indicators.
Folks fragment the mom and pop market are suddenly being approach and just staggering record prices, where they like okay. This is as good as it gets is there any leading indicators that there's more willing sellers coming coming to into the fold.
It's difficult to tell me, it's really on a case by case basis and it's it's a very personal decision I mean, they're making a decision and in many instances. They thought they were going to pass it along to there to their kids than that Didnt work out or there's a lot of times health comes into it and so so I think.
It's a very personal decision, we often thought that maybe a tax change may impact it or there may be other other reasons impacting in any kind of comes down to a very a very personal decision.
Okay.
Last one for me the a thousand sites of expansions. This year to 1200 2020 does that pace still keep building beyond that or is that thousand to 1200 site range a reasonable betting line over the next three to five years I.
I think when you we look out we certainly have on 5000 big acres. So if you look out.
Probably in that range, maybe it goes up 1200 to 1500 or something like that over the next few years, but that's that's effectively where we had net that's what we look at we look at you know a three to five year range. Okay. Thank you.
Thanks, John .
As a reminder to ask a question. Please press Star then one.
Our next question is some Nicholas Joseph of Citi. Your line is open.
Hey, it's Michael Bilerman here with Nick I was wondering if you can mark we talk a little bit about the marina business in the sense of.
Climate change rising water levels, and how you sort of underwrite that risk is your.
Obviously buying for long term business like Kirk.
Certainly could be impacted.
Buyback.
Certainly so we look at it and we'll look at what's happened in in the past and will also we also look to where the marine is that we purchased what the what the view is on the climate change and that.
They water impact in those areas.
And we also we'll also look to whether or not there are marinas certainly used for coastal marine of but theres marinas that are that are in.
Lakes that.
That will look to there what's happened with the lake levels and make a determination from there and and look at that again the annual the annual versus the transient basis that that is generating the revenue.
And how far in terms of the real estate this adjacent to the marine though are you looking to purchase.
If any.
Hi, I'm just wondering if yeah I mean, if that's not.
To be able to control site improves the site.
Be able to draw more both.
To the site of being there certainly not owning more of the real estate around yeah. So certainly so so where there's opportunities for upland purchases. We would we would be interested in that and we'll also look at marine is that our close in and around our communities.
To help from a customer standpoint. It also helps from a human resource standpoint from from offer our regional managers and our management teams.
And then if we think about the.
RV business.
You know shipment starts but to be down pretty significantly while still elevated or expect to be down this year.
Down to next year I guess at what point do you feel and I recognize there is a large installed base for the RV irrs, but that's some 0.1 would imagine that as a the pace of sales comes down in declines that could impact certainly the transients side, but could start impacting seasonal emmanuel.
How do you.
How much time are you spending on that and is that a risk that we need to be conscious of we certainly look at I think last year. The industry saw an increase in increasing RV sales of 4% year to date Theres been a decline in sales of 7%.
Shipments are predicted to be down 17% I think for the year to 400000, but really to put those to put those numbers into perspective from 2009 to 2017 RV shipments have increased each year on the previous high watermark was in 2006 I believe when there was about.
400000 shipments so there really have there been in excess of 400000 shipments. So while the numbers are showing decline there really at historically high numbers.
But free Alas, it's really our portfolio is comprised primarily of longer term customers.
Our and our RV annual customers they stay with us on average 10 years.
We've made the decision to kind of stay off the road and develop roots that our communities.
And then the seasonal customers also committing for a longer term and they'll movie to an annual in kind of the normal course of their lifecycle. So our focus on the the new RV years coming into the business. It's it's important mid part of our transient business. If represents just roughly 5% of our overall revenue.
But that for that business, we're really focused on as you say that 9 million installed base and we view the new our fears of the they're really good marketing tool, but that funnel of existing RV or is on the road is already a really healthy number I think the ratio of avella available site to RBS is very favorable for our business.
But last question for me you know, obviously run controls the big topic for multifamily perspective across the U.S.
I know you've dealt with it before.
There's just a lot more movement and a lot more state.
I guess, how are you thinking about that impacting your business, where you've obviously been able to push rent pretty significantly over the years for your product and I recognize.
The niche businesses more affordable product for four people, but your land rents have moved up pretty dramatically over the last decade. So can you talk a little bit about how you are sort of evaluating the landscape today and where you stand sure sure. So as you said, we've been operating and right controlling.
Firemen in for a long time, we have 23 properties that are subjected subjected to mandated rent control that's primarily in California.
And that so we've been very vocal in our opposition of rent control over the last 20 years. We've won some cases and others. We are operating in the rent control environment and you see our results as you know as a result of that rent control environment. So we're able to still generate some some very healthy growth rate, even operating and then.
But then beyond the actual strict rent control there are states that have regulations around rent increases like Florida for instance.
We operate under the terms of a prospectus and that prospectus runs with the landing governs the annual rent increases. This actually continues to be an important selling point for our residents considering to buy or properties on baby. We established relationship with the homeowner Association than we spent time focused on meeting the needs of them.
Evident and trying to achieve fair rent increases.
And so in general in our in our communities, where we have mandated renting rent control, we see a transfer at the economics from the landlord to the tenant.
So where monthly rental rates are suppressed, but theres no governor of the sale price of the home and we've seen firsthand that that does not that right control in our environment doesn't make the overall housing more affordable, they're really shifts the payment from the monthly site rent to a payment for the home. So we close.
We monitor all the activity for the stakes that we operate in and we're also working with our National Association to make sure that our industry is represented on but it's kind of for US. It's more of the same I know and no.
Others are dealing with it and you know kind of for the first time, but we've been dealing with it for for a while now.
Great. Thanks.
Thanks, Michael.
Since we have no more questions on the line at this time I'd like to turn the call back over to Marguerite Nader for closing comments.
Thank you all very much I look forward to updating you on next quarter's call.
Thank you for participating in today's conference. This does conclude the program and you may now disconnect everyone have a great deck.