Q2 2022 Equity LifeStyle Properties Inc Earnings Call
Speaker 1: from property operations generated by our non-core portfolio was $8.2 million in the quarter and $18.6 million year to date. These results were in line with our expectations. Revenues generated by our recently acquired assets reflect our strategic focus on long-term revenue streams. Revenues created by our non-core portfolio was $8.2 million year to date. Revenues created by our non-core portfolio was $8.2 million year to date.
Speaker 1: During the year-to-date period, only 8% of our non-core property operating revenues were generated from transient rent.
Speaker 1: Property management and corporate G&A expenses were $30.8 million for the second quarter of 2022 and $61 million for the year-to-date period.
Speaker 1: Other income and expenses, excluding transaction and pursuit costs, generated a net contribution of $9.4 million for the quarter.
Speaker 1: New home sales profits along with our ancillary retail and restaurant operations generated approximately $4.1 million in the second quarter and $6.7 million a year today.
Speaker 1: Interest in related amortization.
Speaker 1: Expense was $28.1 million for the quarter and $55.5 million for the year-to-date period.
Speaker 1: The press release provides an overview of third quarter in the year 2022 earnings guidance.
Speaker 1: As I provide some context for the information we've provided, keep in mind my remarks are intended to provide our current estimate of future results.
Speaker 1: All growth rates and revenue and expense projections represent midpoints in our guidance range and are qualified by the risk factors included in our press release and supplemental financial information.
Speaker 1: A significant factor in our guidance assumptions for the remainder of 2022 is the level of demand for shorter-term stays in our RV communities. For shorter-term stays in our RV communities.
Speaker 1: We have developed guidance based on current customer reservation trends.
Speaker 1: We provide no assurance that our actual results will be consistent with our guidance, and we assume no obligation to update guidance as conditions change.
Speaker 1: Our full year 2022 normalized FFO guidance is $2.73 per share at the midpoint of our range of $2.68 to $2.78.
Speaker 1: Full year normalized FFO per share at the midpoint represents an estimated 7.5 percent growth rate compared to 2021.
Speaker 1: We expect third quarter normalized FFO per share in the range of 66 cents to 72 cents. The range of 66 cents to 72 cents.
Speaker 1: Full year core NLI is projected to increase 6.1% at the point of our guidance range of 5.6 to 6.6%
Speaker 1: We project a core NOI growth rate range of 4.7 to 5.3 percent for the third quarter and expect NOI for the quarter to represent 25 percent of full year core NOI.
Speaker 1: Full year guidance assumes core rent rate growth in the ranges of 5.2 to 5.4% for MH, and 6.2 to 6.4% for annual RV rents. And 6.2 to 6.4% for annual RV rents.
Speaker 1: Our guidance assumptions for the third and fourth quarters include MH occupancy gained in the second quarter with no assumed occupancy increase in the second half of the year.
Speaker 1: Our assumptions for expense growth reflect current expectations based on year-to-date activity and our review of property level and consolidated expense projections for the remainder of the year.
Speaker 1: As a reminder, we make no assumptions for storm events or other uninsured property losses we may incur.
Speaker 1: The midpoints of our guidance assumptions for combined seasonal and transient shall a decline of 3% in the third quarter and growth of 11.1% for the full year compared to the respective periods last year.
Speaker 1: Our guidance for the full year and third quarter includes the impact of the acquisition activity with closed in the first and second quarters with no assumptions for additional acquisitions during the year. Our guidance for the full year and third quarter
Speaker 1: We have repaid all debt with maturity dates in 2022.
Speaker 1: The full year guidance model makes no assumptions regarding other capital events or the use of free cash flow we expect to generate in the remainder of 2022.
Speaker 1: And now some comments on debt markets and our balance sheet. During the quarter, we observe significant volatility in the debt capital markets. In the debt capital markets.
Speaker 1: In April , we closed the previously announced $200 million secure
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Speaker 1: Okay, thanks everyone. I apologize for that delay. I'll restart with some comments on debt markets in our balance sheet. During the quarter, we observed significant volatility in the debt capital markets.
Speaker 1: In April , we closed the previously announced $200 million secured loan at a fixed rate of 3.36% for 12 years.
Speaker 1: Proceeds were used to repay 2022 maturities that carried a weighted average rate of 4.2%.
Speaker 1: Shortly after we locked raid on that loan, treasured is began to rise.
Speaker 1: The 10-year moved around 175 basis points before it topped out close to 3.5% in the middle of June .
Speaker 1: During that same time period, we noted varied reactions from lending sources, but they generally behaved in a similar manner by increasing spreads on loans and limiting capacity for new deals.
Speaker 1: For comparison, the loan we closed in April would likely price around 150 basis points higher if we locked rate today.
Speaker 1: In the face of extreme volatility and uncertainty, ELS is well positioned with a maturity schedule that shows only 15% of our outstanding adventures over the next five years.
Speaker 1: This compares to an average of approximately 45% for REITs.
Speaker 1: In addition, 23% of our outstanding secured debt is fully amortizing and carries no refinancing Our outstanding secured debt is fully amortizing and carries no refinancing
Speaker 1: Current secured debt terms available for MH and RV assets range from 50 to 75% LTV with rates from 4.25% to 5% for 10-year maturities.
Speaker 1: High quality, age-qualified MH will command best financing terms.
Speaker 1: RV assets with a high percentage of annual occupancy have access to financing from certain life companies as well as CMBS lenders.
Speaker 1: Life companies continue to express interest in high quality communities, though some have set limits on capacity and pricing. click!
Speaker 1: We continue to place high importance on balance sheet flexibility and we believe we have multiple sources of capital available to us.
Speaker 1: Our debt to Eva Dowery is 5.3 times and our interest coverage is 5.7 times.
Speaker 1: The weighted average maturity of our outstanding secure debt is approximately 12 years.
Speaker 1: Now we'd like to open it up for questions.
Speaker 2: Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1. One moment for our first question.
Speaker 2: Our first question comes from the line of Keegan Carroll from Berenberg. Your question, please.
Speaker 3: Hey guys, thanks for your questions. Maybe first, you just hope it's reconciled with performance a bit on the course seasonal, trans-en-rb-based, trans-blend-com. Maybe it's what drove the slower growth as a function of the sight mix or something larger.
Speaker 1: Yeah, I think, you know, what we saw...
Speaker 1: Keegan, as we made our way through the quarter, was...
Speaker 1: certainly strengthen the seasonals. It's very strong interest on the part of our customers to spend more time at our properties. And we talked quite a bit about the weather in April and May and its impact on the transient business. And you know, into June .
Speaker 4: We didn't quite see the development that we expected in terms of the demand for those shorter term stays. And then I think also I mentioned it in my comments, but the seasonal stays in Florida, they were extended just because it was tough weather up north, which caused people to want to stay in Florida for a longer period of time, which we were the beneficiaries of that in the seasonal area. Which we were the beneficiaries of that in the seasonal area.
Speaker 3: Got to just clarify one thing on that. So I saw that the days actually spent in the parks were up. I'm curious is that just a function of more seasonal stays in West Transia or are you seeing a shift in how people are staying with maybe less trips but extended stays and going further into the week.
Speaker 4: I think the overall transient is up slightly by about a half a day, but what you're seeing is that shift from transient to seasonal and annual, which is making up the additional cost to 17ible EXP all night.
Speaker 3: Got it. Just one more here. Maybe on the to life, fourth weekend, what drove the weaker end to income there? Was it particularly volume or price? And were there any sort of elevated cancellations that they'd be coming into the end? Maybe coming into the end?
Speaker 1: I think, you know, in terms of
Speaker 1: When you think about the booking window, what we have seen with our customers is
Speaker 5: When we look...
Speaker 1: Overall, sorry, those customers who make their reservations 90 days in advance.
Speaker 1: That represents about 20% of the reservations at the end of the period. So we have a significant portion that are making their decision within eight or nine days of arrival. That represents 55% to 60%. And so we've long talked about whether dependency and so forth. But that really is the kind of timeframe that we have an indication as to what's happening with that transient.
Speaker 3: that short-term customer and when they're coming to the property. Got it. So it's primarily weather and then, you know, I guess there's just from your seat, there's not necessarily anything that's going to concern you going into the weather day weekend. Labor Day weekend.
Speaker 1: As I just said, 60% of the revenue comes from those customers who are making their reservation eight to nine days in advance. So Labor Day is a ways out.
Speaker 3: Okay, great. Thanks for the time, guys.
Speaker 6: Thank you.
Speaker 2: Thank you one moment for our next question.
Speaker 2: Our next question comes from the line of Lizzie Doykin from Bank of America. Your question, please.
Speaker 7: Hi everyone, good morning. I just wanted to, hi. I just wanted to understand the utility recovery rate a bit more which took down this quarter. Historically, what has that number been for two to you? And just if you could break down how exactly you're passing through these costs to the resident, what specific measures are you by taking to... what specific measures are you by taking to...
Speaker 7: relieve some of that pressure to utility costs.
Speaker 1: Yeah, so just overall, I think our long-term history and we focus really on the full-year activity, not so much quarter to quarter, but 45% is really kind of the midpoint of the recovery range and it's consistent with what we saw in the quarter. With regard to our practices, we definitely focus on, we call it unbundling.
Speaker 1: So to the extent that there are charges that are utility in nature, that the customers are reimbursing us for the expense. The customers are reimbursing us for the expense.
Speaker 1: We separate that from the rent and charge that to them separately in every chance we get, essentially. One of the limiting factors for us in utility recovery relates to our transient RV business. Just that short term stay, the infrastructure is not there to measure that activity for a very brief period of time and charge those customers. So when customers are annuals or have longer term stays in those RV communities,
Speaker 1: We are able to build them back for their utility usage, but not those shorter term stays.
Speaker 4: And Lizzie, that also helps from a conservation standpoint. We find that if people are sub-metered, they will use less and that just helps from an energy conservation standpoint.
Speaker 7: Okay, got it. Thank you. And my second question is just around the transient demand. What visibility do you have for that, you know, trending into the second half as we go into the third quarter and the fourth quarter, you know, given the nature of bookings? Do we expect the third quarter to be...
Speaker 7: the heaviest period for transients.
Speaker 1: Yeah, so I mean our third quarter guidance, the two and a half to three and a half percent decline in the combined seasonal intransion. Yeah.
Speaker 1: That's based on our current pace for seasonal transient rent. The seasonal pace continues to reflect demand for longer term stays. That's showing about a mid-teens percentage growth compared to last year. Transient pace looks similar to the experience we had in the second quarter, you know, kind of evidenced by what we saw over the fourth of July weekend. It's down, call it 67%.
Speaker 1: When we think about that transient pace, particularly in the third quarter, the booking window that I mentioned a minute ago is really important. I'll say it again, just in 2019 and 2021, about 40% of the booked reservations were made more than 90 days in advance of planned arrival, but by the end of the third quarter in those years.
Speaker 1: that reservation category represented about 20%. So as we step into the quarter, that reservation made a while ago represents significantly more than it ends up representing and that's because those short-term reservations kind of eight to nine days ahead of arrival, they end up representing 60% in total. So, we're going to be able to get the reservation category to be able to get the reservation category represented about 20%. So, we're going to be able to get the reservation category
Speaker 6: Thank you. Thank you, Love. Thank you.
Speaker 2: Thank you one moment for our next question.
Speaker 2: And our next question comes to the line of Samir Kannal from Evercore ISI. Your question, please.
Speaker 8: Can Margarit or Pro-Paul the morning? I guess I'm just trying to dig a little bit deeper into this transient crew where you brought down the forecast by 300 basis points. Is there a way to quantify between?
Speaker 8: You know, what we're trying to figure out is how much of that is related to sort of things just slowing here, right? You over or last year, comms are tougher versus whether or transient conversions here. I'm not sure if you can quantify that.
Speaker 1: I mean, I guess the way that I think about it, I think you're right. We certainly, when we think about 2021 and the comparison to 2022, and I'll set aside weather because that variable just exists in our business, but when you think about the comparison of last year this year, you certainly had in 2021 a maximum level of flexibility in terms of our customer's ability to...
Speaker 1: kind of live and work in most any place they chose. And that drove, you know, outsized demand. The other thing that I'll say in comparison last year to this year, certainly the overall inflationary impact. I think there's been a lot of discussion and questions around gas prices and I think that, you know, the...
Speaker 1: The response that we have to that question is it's really kind of all costs that are rising and I think are causing our customers to potentially pause and change their behavior or patterns as compared to last year. But when you think about all of this activity and roll it all up compared to 2019, we're showing continued strength relative to that year as a base year.
Speaker 4: And I think, Samir, if you, you know, we have experienced operating RV parks over the last 60 quarters. And when you look at the annual seasonal and transient results over that time, transient revenue has been the most volatility by far. We've seen periods of negative growth, flat, and then outside growth. But we really, you know, we've continued to focus our business on that annual rental stream to avoid the volatility and, you know, you saw that come through in the quarter. When you think about a, I think, over a 10-year period of time,
Speaker 4: The transient growth has contributed approximately 30 basis points of our overall NOI growth, so it's not a large driver of our operating results by design and the way we built our portfolio.
Speaker 8: Okay, got it. And I guess my next question is, is on the MH rate growth side, when your forecast can sort of low 5% rate increases? When your forecast can sort of low 5% rate increases?
Speaker 8: I guess Margarie, given where inflation is today and cost and years, which you're seeing as well, what is your ability to push that up further? Let's say over the next 12 months, Toronto, is there a point in which you start to get pushed back from the customers, trying to see how much more upside there is to that growth.
Speaker 9: Yes, Samaritan's Patrick. Just as a reminder, we're about to enter our budget process for 2023 and we'll have better visibility into the impacts of CTIs as we work our way through that process.
Speaker 9: About a quarter of our rents have some tie to CPI, so by and large, our portfolio is market-driven.
Speaker 9: And we'll keep pace with the market. Over time, we do recognize our long-term relationship with our customers, but we tend to track very closely in line with the market and expect the CTI as an impact. Based on history, I would expect that we're going to track favorable.
Speaker 9: I would highlight that Florida with 40,000 on each site is a driver of our business. And just given the structure of leases and prospectuses in that sub market, CPI does play a role there. Roughly complete.
Speaker 9: year to date.
Speaker 9: 15% of our sites in Florida, so roughly 6,500, has experiencing increases based on CPI. Those CPI increases have rolled through without incidents. The thing about our residents that have CPI-linked cases and perspectives is they're very well versed on CPI, so they watch it closely, and it tends not to be a surprise with respect to the results, the resulting impact on renting.
Speaker 10: can come at on them.
Speaker 10: any differences that you might expect from the next cycle of the MH housing sales and how that might differ from single-family home sales, you know, which is obviously expected to cool. Do you expect MH patterns to be different in terms of sales?
Speaker 4: I think about 50% of our vacant sites and our ability to put homes are in Florida. And Florida is a really high demand market. We have a product that is attractively priced, which I think is beneficial. And really you've seen that in the quarter as we've increased our home sales. So I would continue to see robust demand in our...
Speaker 4: well-positioned portfolios. I would caution that in times when it's difficult for one to sell their home up north, you may tend to see some decline in home sales. And I think that we have positioned ourselves well over the years. When we could sell homes and thought we were in a very good position to be able to sell homes, we've done that. And we've reduced our rental pool significantly.
Speaker 4: So there is some room in that rental pool, should that need to increase. But right now we feel very confident that we look out to the rest of the year.
Speaker 10: Great, that's helpful. And just one follow-up relative to strategy. Obviously with the increased price sensitivity amongst some of your customer segments, gasoline, housing, and so forth, are you planning any strategic shifts in terms of product to meet more sensitive customers or lower price points or higher volumes?
Speaker 10: So that changes coming around those anticipation.
Speaker 4: We'll always look on the MH home sales side, we're really pushing through some of the costs that we're getting from the manufacturers. We'll always look to ways to maximize everything for our customer. I don't have anything right now that I can highlight other than making certain that we get the best price from the manufacturer that then we can then pass that through to our customer.
Speaker 6: Thanks for the color.
Speaker 2: Thank you. One moment for our next question.
Speaker 2: And our next question comes from the line of Brad Heffern from RBC. Your question, please.
Speaker 11: Hey, good morning everyone. Given the limited visibility you have in a transient, I guess why I got down at this point, is that based largely on the relatively small proportion of forward bookings, or are you seeing some sort of consistent demand erosion of data there?
Speaker 1: I think Brad, it's our practice, our historical custom to take a look at our reservation pace and adjust based on the information that's available at the time that we update our guidance. So we followed our historical practice.
Speaker 11: Okay, and so that's basically just suggesting that the reservation pace is down, you know, a temporary person or something like that. Okay, so that's basically just suggesting that the reservation is down, you know, a temporary person or something like that.
Speaker 12: Right. Right.
Speaker 11: Okay, got it. And then on the acquisition front, can you just talk about what you've seen in terms of capital that you've seen in terms of capital that you've seen in terms of capital that you've
Speaker 4: Sure, so in the quarter, we closed on two RV parks. The blend of those purchases from a cap rate perspective is about a five cap. Both properties are ocean side resorts, one on the east coast, one on the west coast. And I think that's kind of in line with the types of cap rates we've seen.
Speaker 11: Okay, and any color on anything that you've seen on a major marine is as well?
Speaker 4: I think that we haven't seen a noticeable change in the cap rates for pricing in general. I think cap rates are somewhere in the 4 to 5%. There are exceptions with really very high quality age-qualified MH trading more aggressively, but other than that we haven't seen a real change in cap rates.
Speaker 12: Okay, thank you.
Speaker 12: Thank you, Britt.
Speaker 2: Thank you one moment for our next question.
Speaker 2: And our next question comes to me, I know Wes Galaday from Baird, your question please.
Speaker 2: Hey, good morning everyone. I just have a quick question on the annual RV. I guess, do you think any of the softness and the transient will end up still and over into the annual side? And will you may see some turn pick up? And then maybe a follow up to that. It's my understanding that the portfolio lag CPI a bit for both the image and the annual RV. And can you either confirm that? And I guess how you capture all the CPI that you missed this year that the rent increase for this year will be maybe a 2023 event.
Speaker 1: Yeah, so I guess I'll go to the latter part of the question first in terms of our...
Speaker 1: rate increase process. On the MH side, as Patrick earlier mentioned, we've started our process for 2023. By the end of September , we'll have sent our first notices to residents for MH rent increases, effective January 1st of 2023. As a reminder, I think we've talked before, 25% of our leases overall have a tie to CPI. Remaining 75% of our market driven. We're remaining 75% of our market driven.
Speaker 1: And by the time of our October earnings call, notices to about 50% of our MH residents will have been sent. So we'll take a look and kind of figure that out. On the RV side of the business, the rates will have also been noticed. It's a much greater percentage. It's closer to 95% by November . So in this time period right now, the next three months, there's a significant amount of activity related to COVID-19.
Speaker 4: setting rates that become effective in 2023. And then we would continue to anticipate that we will continue to see that transition from a transient and a seasonal to an annual. And if you think about it just from the, just considering the northern locations, our properties are a really attractive vacation, opportunity for people to spend the summer, 90 miles from their home, have their resort cottage there. And I think that that will only become more attractive.
Speaker 2: Got it. And then I guess for Labor Day, how important is that for the quarter? And then when we look at that, you know, the guidance, how much of that is just to having, you know, fewer sites because of the conversions. And then, you know, maybe just demand being down. Would it imply that rate is still low to mid-single digits for the people that you show up?
Speaker 1: Yeah, I think that rate, yes, you're right in terms of the rate increase, in terms of the impact of the weekend, our holiday weekends tend to be kind of a two-ish million dollar number for the contribution.
Speaker 1: So we anticipate something similar for Labor Day.
Speaker 2: Got it. Thanks, everyone.
Speaker 13: Thanks.
Speaker 14: Please.
Speaker 2: Thank you one moment for our next question.
Speaker 2: next question comes to the line of John Paloski from Green Street. Your question please.
Speaker 1: Thanks for the time. Paul, the reduction to 2022 revenue growth guidance after the second quarter of the expectations. Is that solely driven by Transant or are there any other business lines that you have some incremental concern over? That you have some incremental concern over?
Speaker 1: Yeah, it's really driven by our transient, our transient business.
Speaker 8: Okay, um, maybe Paul or Marguerite, could you remind us the average turnover rate within the total 1000 trails membership program and then just in recent years and then historically during soft economic times. How do you see that turnover rate, that Christian rate change?
Speaker 1: Well we have two pieces inside that business. We have the legacy members and the attrition associated with them is about 10%. The cabin pass members, they have a higher attrition rate. That rate is closer to about 25%.
Speaker 1: I think on the legacy members during...
Speaker 1: Really, through the cycles that we've seen with our legacy membership, their decision-making really is built around the memories that they have at the properties and their desire to camp. Our focus is on encouraging them to camp at the properties because we see that as the greatest indicator of retention, more so than their economic circumstances at a point in time.
Speaker 1: The campus membership has perhaps a bit more sensitivity to changes in the economy.
Speaker 2: Thank you. We'll take one moment for our next question.
Speaker 2: And our next question comes in line, and we're Anthony Ha from Truist, to your question, please.
Speaker 8: Hi everyone, thanks for taking my question. What is the market market premium on the image lot rent when there is a home owner turnover today?
Speaker 9: It's going to vary broadly.
Speaker 4: With respect to Florida, we've been seeing 10 to 15 percent. That's obviously a strong market for us and it's a major driver of that growth in the portfolio. And that's born out of a market survey, basically what's happening in and around the community, looking at single-family rental, multi-family, MH, and those are important components, which provides then what the market increase should be.
Speaker 15: Thanks, and what do you think that number will be by year end? Do you think it will go up to like 20% and 25%?
Speaker 4: I definitely don't think it's going up to 20 or 25 percent. I think we look at it on a monthly basis. We look at what's happening in and around our properties and also look at our resident base and understand that we have a long-term relationship with our resident base and want to make certain that we're evaluating it from a fair perspective.
Speaker 2: Thank you one moment for our next question.
Speaker 2: And our next question comes to the line of Anthony Powell from Barclays. Your question, please.
Speaker 16: Hi, good morning. On transit, maybe just some more qualitative thoughts on what you think is going on with the customer there. Is it inflation that's maybe impacted some customers? Is it the availability of alternate travel experiences? What do you think may be driving some of the softness? And I know it's above 19, but I guess what do you think the right baseline is for us as we look at the business in the next several quarters, not just this year, as we try to get a sense of where we should be on a runway basis?
Speaker 4: Yeah, I mean, I think, you know, I think there's inflationary pressures in all areas, which begin to put pressure on incremental or last-minute decisions. The transient line item is a volatile line item. It's something that people are deciding as Paul has walked through, you know, based on, you know, the forward booking. So what we've tried to do and lay out for you is our best guess of what we see happening for the rest of the year.
Speaker 4: But I think we've long said that this is a particular area that can surprise us on the negative or the positive and you've seen that happen over the last 60 quarters within the business.
Speaker 16: Thanks, and maybe demographically, how does a seasonal and transient customer differ besides geographic origin? Are they similar in income and whatnot? And just maybe what's your view on that seasonal customer over the next several quarters? Sure. The primary, the seasonal customer is the customer that stays with us. Aswhat our personal
Speaker 16: Thanks, and maybe democratically, how does a seasonal and transient customer differ besides geographic origin? Are they similar in income and whatnot? And just maybe what's your view on that seasonal customer over the next several quarters? Sure, the primary, the seasonal customer is the customer that stays with us in the South. The Florida Texas.
Speaker 4: Arizona and they stay with their snow birders. They get out, you know, they get out They're getting out of the cold and spending 30, 60, 90 days with us and in the corner We saw that we saw that group stayed with us longer into April because the weather was good in Florida, good in Arizona and it wasn't so good up north.
Speaker 2: Thank you, one moment for our next question.
Speaker 2: And our next question comes in line of Nick Joseph from Citi. Your question, please.
Speaker 8: Thanks, Marker, do you want to go back to your comments about that cap rates? It sounds like they haven't moved much. And then maybe tie that to Paul's commentary on the volatility in the capital markets. How much, when would you expect to see an impact to cap rates from higher interest rates? How much would they need to move before you think it would actually impact the transaction market?
Speaker 4: No, it's difficult to answer that question. I think owners have seen really a decrease in the number of interested bidders due to the financing environment, so potential buyers are pulling back. But they're still seeing, sellers are still seeing twice as many bidders as they did six years ago. So they still seem like they're very popular. I think the rising interest rate environment could present an incentive to sellers who were maybe not.
Speaker 4: long it takes for the cap rates to change and be affected. These assets are in really high demand and we continue to just see really strong demand for them so there's really no change in the cap rates.
Speaker 8: Hey, Marguerite. It's Michael Billiman. I just want to come back on RVs and transient and just explore a couple of topics. You talked a little bit about alternative travel. You look at the front page of the journal this morning, air travel is breaking down at all levels of summer. I think the online air travel was broken. I would have thought that experience could have driven the opposite for your transient business. More people wanting to get in their cars, cash prices are down 10-15 percent off their piece.
Speaker 4: trip plan to Disney World and that's where they want to go and they don't want to drive from Chicago. But I do think that the comparisons for our transient traffic, looking at it from 2019 to 2022 are significant increases. It's just the year over year comparisons are difficult.
Speaker 6: Thank you one moment for our next
Speaker 6: Our next question comes in line of Michael Goldsmith from UBS. Your question, please.
Speaker 17: Good morning, place off for team, my question. My first question on the, good morning. My first question's on the expense expectations for the back half of the year. Corporating expenses up 7% in the second quarter. I didn't call for it to slow in the back half. What are the factors that can help slow the growth of expenses in the back half of the year? And then as you look out, which should expense be growing kind of in the rate of inflation, is that the right way to think about it?
Speaker 1: property expense expectations.
Speaker 1: They reflect the rapidly increasing CDI environment that we've been operating in throughout 2022.
So, you know, we saw that. Now, in terms of the deceleration, we also test our forecasted growth by reviewing our actual 2021 results. And in the latter half of last year, we incurred almost $5 million in R&M legal utility and some other expenses that we don't expect to recur. So if the expense growth rates were adjusted, you'd see less of that deceleration that you mentioned.
Got it. That's helpful. And my second question is on the transient revenue. I guess just to try to put the performance in the Fourth of July weekend into perspective, you know, in the weekend surrounding the holiday weekend, you know, this summer travel season, were core transient revenues X the impact of the conversions? Were those up year over year?
I'm sorry, Michael. Or transient revenue ex aback.
Essentially, you've converted a number of transient RV sites, you know, 40% to annual and to other types. But I guess what I'm trying to understand is, you know, we're the weekends surrounding Fourth of July , which seems like it was impacted by weather among other things. You know, we're core, we're RV transient revenues up if you back out impact of some of the conversions.
Oh, I think the answer to your question is that the conversions are not the sole reason for the decline in the transient pace.
I think the answer to your question is that the conversions are not the sole reason for the decline in the transient pace. There is.
the factors that we talked about.
Again, weather is just there as a factor, but then also some of the inflationary pressures. They are impacting the transient customer who would have been a transient customer last year or the year before and was it a transient customer this year impacting their decision.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Marguerite Nader for closing comments.
Thank you for joining us today. We look forward to up to you in the next quarter and are available for any questions you may have. Thank you.
Thank you for your participation in today's conference. This does include the program. You may now disconnect. Good day.
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