Q4 2022 Equity LifeStyle Properties Inc Earnings Call
Yeah.
Good day, everyone and thank you all for joining us to discuss equity lifestyle properties fourth quarter 2022 results.
Our featured speakers today are Marguerite Nader, our president and CEO , Paul Seavey, our executive Vice President and CFO .
And Patrick Waite, our executive Vice President and C O O.
In advance of today's call management released earnings.
Today's call will consist of opening remarks, and a question and answer session with management relating to the company's earnings release.
For those who would like to participate in the question and answer session management's ask that you limit yourself to two questions. So everyone would like to participate has ample opportunity.
As a reminder, this call is being recorded.
Certain matters discussed on this conference call may contain forward looking statements and the meetings of the federal security laws.
Forward looking statements are subject to certain economic risk and uncertainty.
The company assumes no obligation to update or supplement any statements that become untrue because of subsequent events.
In addition, during today's call, we will discuss non-GAAP financial measures as defined by SEC regulation G.
Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information and our historical SEC filings.
At this time I would like to turn the call over to Marguerite Nader, our president and CEO you may begin.
Good morning, and thank you for joining us today.
I'm pleased to report the final results for 2022.
Strength of your loss can be seen in all facets of our business we.
We continued our record of strong core operations and SSO growth with full year growth in NOI of five 7%, which translated into a seven 4% increase in normalized <unk> per share.
Our MH portfolio with 95% occupied.
Accordingly, 96% of our sites are occupied with homeowners.
Right of ownership is evident in the well kept homes and landscaping throughout our communities.
Stability of our resident base can also be seen in the high FICO score is for incoming residents.
For the year, we experienced an all time high for new home sales with over 1100, new home sale.
Due to the strength of our operating markets, we were able to increase sales prices by 22%.
Our strongest performing properties for home sales were in Florida, with a 16% increase in sales volume.
And a 28% increase in home prices.
It is important to note that while home prices have increased to an average of $106000. They remain significantly lower than other housing options in the immediate vicinity of our community.
Turning to our RV properties in 2022, the demand was strong for RV sites across the country.
It is estimated that 67 million Americans plan to take an RV trip in the next 12 months. These trips will strengthen the commitment to the RV lifestyle.
Quarterly surveys indicate that our viewers planned to camp more this year.
The reason cited for their desire to can't more include spending time outdoors and traveling with their pets.
In the year, we continued to see new transient guests converting to a longer term commitment with nearly 4000 guests increasing their commitment to us after their initial transient stay.
Transient revenue increased 26% from pre pandemic levels with an increase in the average rate being the largest driver of that increase.
In 2022, our thousand trails membership properties performed well.
Over 23000, camping passes and initiated 28000 RV dealer activation.
These passes and Activations are the seeds for future growth in the thousand trails portfolio.
Turning to 2023, we have issued guidance of $2.84 at the midpoint for next year, which is a four 1% growth in normalized <unk> per share.
The demand for our MH communities continues to increase over the last five years, we have sold over 4000, new homes in our communities.
These news homes further enhanced the look of the community as new and existing homeowners throughout our portfolio showcase their pride of ownership.
We have noticed rent increases for approximately 67% of our residents and anticipate growth of six 5% and core MH rent revenue.
Our guidance for 2023 reflects the strength in our business. Our guidance is built based on the operating environment, each property, including a robust market survey process and continuous communication with our residents.
In 2022, our acquisitions and development teams focused on strategic RV investments and added over 600 sites to the portfolio in.
In addition, we purchased six parcels of land with approximately 300 acres of development potential.
Our vacant land is geographically diverse and will positively contribute to our future growth.
Next I'd like to update you on our 2023 dividend policy.
The board has approved setting the annual dividend rate of $1 79 per share a nine 1% increase.
The board will determine the amount of each quarterly dividend in advance of payment the.
The stability and growth of our cash flow, our solid balance sheet and the strong underlying trends in our business are the primary drivers of the decision to increase the dividend.
Historically, we have been able to take advantage of opportunities due to the free cash flow generated by our operations.
That will continue in 2023 as the dividend increase of $29 million is roughly equivalent to our anticipated increase in <unk> for 2023.
In 2023, we expect to have in excess of $100 million of discretionary capital after meeting our obligations for dividend payments recurring capital expenditures and principal payments.
Over the past five years, we have increased our dividend by an average of 10, 2%.
We had a strong finish to the year due to the hard work of E. L. F team members. The wellbeing of our residents and guests were prioritized the dedication of the property regional and corporate level is impressive I will now turn it over to Paul to walk through the numbers in detail.
Thanks, Marguerite and good morning, everyone.
Ill review, our fourth quarter and full year 2022 results I'll provide an overview of our first quarter and full year 2023 guidance.
Fourth quarter normalized <unk> was <unk> 66 per share strong performance in our core portfolio generated seven 3% NOI growth for the fourth quarter.
For NOI growth of five 7% for the full year attributed to our normalized <unk> per share growth of seven 4%.
Core community based rental income increased five 8% for the full year compared to 2021.
Rate increases contributed five 4% growth while occupancy generated the additional 40 basis points.
During 2020.
Creased homeowner occupancy by 637 sites.
Full year core resort in Marina base rental income increased nine 1% compared to 2021.
Growth from annuals was eight 8% from six 7% from rate increases and two 1% from occupancy gains.
In our seasonal RV income the strong demand trends for stays of a month or more continued in the fourth quarter generating $17, 4% growth over 2021.
The full year increase in seasonal RV income was almost 40%.
Full year growth in seasonal RV rent offset the decrease in full year transient income lease rental streams combined generated 95% growth.
For the full year net contribution from our membership business, which consists of annual subscription and upgrade sales revenues offset by sales and marketing expenses $74 4 million.
An increase of four 9% compared to the prior year.
Subscription revenues increased eight 4%, reflecting a three 2% increase in the member base and a rate increase of approximately five 2%.
During 2022, we sold almost 4700 upgrades than average sale price of approximately $7400.
Full year growth in core utility and other income mainly the result of increases in utility income.
Our recovery percentage of 44% remain consistent in 2022 compared to 2021.
Fourth quarter core operating expense increased two 1% compared to the same period in 2021.
We experience experienced some moderation in growth in utility and payroll expenses compared to earlier quarters in 2022.
In addition, during the quarter repairs and maintenance and insurance and other expenses decreased from prior year.
Overall full year 2022 core property operating expenses increased six 7% compared to 2021.
Utility expenses represent more than 27% of our core operating expenses. They increased 10, 6% for the full year.
Payroll and repairs and maintenance expenses generally increased in line with inflation for 2022.
Our noncore properties, including the assets we need.
Pacified to this group fourth quarter as a result of suspended operations. Following storm damage contributed $5 8 million in the quarter and $41 $2 million for the full year.
Property management, and corporate G&A were $119 million for the full year.
Other income and expenses net which includes our sales operations joint venture income as well as interest and other corporate income $32 $5 million for the year.
Interest and amortization expenses were $116 $6 million for the full year.
Our full year weighted average debt balance was three $2 $75 billion.
And the weighted average rate was three 4%.
We've modified our income statement presentation to include a line item casualty related charges recoveries net her.
Hurricane.
Related expenses incurred through year end, along with offsetting revenue accruals for expected insurance recovery presented in this line item.
The press release and supplemental package provide an overview of 2023 first quarter and full year earnings guidance.
The following remarks are intended to provide context for our current estimate of future results.
All growth rate ranges and revenue and expense projections are qualified by the risk factors included in our press release and supplemental package.
Our guidance for 2023 full year normalized <unk> is $2 84 per share at the midpoint of our guidance range of $2 79.
89%.
We project a core property operating income growth of five 5% at the midpoint of our range of 5% to 6%.
We project the noncore properties will generate between 18 and $22 million of NOI during 2023.
Our noncore portfolio, which includes properties acquired during 2022 as well as the six properties with interrupted operations.
Our budget assumes stabilized NOI at the six properties from a combination of resumed operation business interruption insurance proceeds.
We intend to recognize business interruption proceeds upon receipts.
As a result, we may experience some variability in recognition of income during the year as compared to our budget assumptions.
Our property management and G&A expense guidance range is lower than our 2022 actual expense.
As a result of legal activity in 2022 that we don't expect to recur.
We've also provided guidance ranges for our weighted average debt balance and interest expense.
Our guidance model includes the impact of all the acquisitions, we've announced that.
Our full year guidance model makes no assumptions regarding other capital events for the use of free cash flow, we expect to generate in 2023.
In the core portfolio, we project the following full year growth rate ranges.
Five 7% to six 7% for core revenues $6 7 million to seven 7% for core expenses, 5% to 6% for core NOI.
Full year guidance assumes core MH rent growth in the range of 6% to 7%.
We assume occupancy in our stabilized MH portfolio will be flat during 2023.
Full year guidance for combined with RV and marine our rent growth was five 7% to six 7%.
Annual RV and marine around represents two thirds of the full year RV and marine thereof.
And we expect 8% growth in rental income from annual at the midpoint of our guidance range.
Our full year core expense growth assumptions include our current projections for future utility rate increases and the potential impact of our April one insurance renewal.
Our first quarter guidance assumes <unk> <unk> per share in the range of 70 to 76.
Which represents approximately 26% of full year normalized <unk> per share.
Core property operating income growth is projected to be in the range of four 4% to 5% for the first quarter.
First quarter growth in MH, and combined RV and marine at rents are in line with our full year assumption.
We project first quarter annual RV and marine our revenue to be approximately $67 $1 million at the midpoint of our guidance range.
Our guidance assumes first quarter seasonal and transient RV revenues performed in line with our current reservation pace.
I'll now provide some comments on the financing market and our balance sheet.
During 2022, we invested cash of approximately $150 million in operating properties development properties and land for future development.
The investments were funded with available cash and proceeds from our line of credit.
At year end, our unsecured line of credit balance was $198 million.
Current secured debt terms are 10 years at coupons between $4 75, and five 5% 60.
60% to 75% loan to value and one four to one six times debt service coverage.
We continue to see strong interest from Gse's life companies and <unk> lenders to lend for 10 year term.
High quality age qualified MH assets continue to command best financing terms.
We have approximately $92 $5 million of secured debt maturing in 2023 in.
The in place rate on this maturing debt is four 9%.
Our $500 million line of credit currently has approximately $265 million available.
Our ATM program currently has $500 million of available liquidity.
Our weighted average debt maturity is approximately 10 years.
Our debt to adjusted EBITDA is five three times and our interest coverage is five six times.
We continue to place high importance on balance sheet flexibility. We believe we have multiple sources of capital available to us.
Now we would like to open it up for questions.
Thank you.
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As a reminder, we ask that you limit yourself to two questions. Please.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Nicholas Joseph with Citi. Your line is open.
Thank you just in terms of the properties that were still interrupted from hurricane and can you give us an update of what's actually happening on the ground there and when you would expect things to return to normal.
Then related to that what the business interruption and other insurance recoveries are assumed in 2023 guidance.
Yes, sure Nick it's Patrick.
So just as a reminder, at six properties in the greater Fort Myers market.
Those are <unk> with 1550 sites and two of those are marine is with 550 slips.
Four properties have resumed operations.
Two will resume operations in the next few months.
Going through infrastructure repairs and improvements in order to bring those properties back online. So by the time, we get into mid 2023.
All properties will be operational.
And we'll bring them up to full operations over the next few quarters.
And as far as the excuse me the expected contribution Nick those properties.
Get a little bit less than half of the non core NOI that we'd expect in total from those properties.
Perfect. Thank you and then just broadly on the transaction market. It looks like there are a handful of RV acquisitions sound, maybe a bit more interesting with J P 's or development.
Quarter, but just broadly what are you seeing on the transaction market today across Rfps, and then H and has there been any movement in cap rate or pricing.
Sure. Thanks, Nik so yeah in the quarter, we closed three deals one was near the shore in New Jersey.
Property that had 80% annuals I think.
And it was really a great access to a large RV customer base in population.
And then we also continued our growing relationship with RBC and invested in a new development.
And dusky, Ohio, and then we entered into a 50 50 joint venture with KLA and <unk> in the foothills of the Blue Ridge Mountain. So we're pleased about those acquisitions in the quarter I would say in general the acquisition volume was kind of down across our industry in 2022, I Havent really seen a real pickup in activity. So far this year.
Theres certainly sellers in the market, but they're not really in a rush to sell when there is uncertainty with respect to cap rates and valuations.
Thank you very much.
Thanks, Nick thank.
Thank you.
Please standby for our next question.
Sure.
Our next question comes from the line of Anthony Powell with Barclays. Your line is open.
Hi, good morning.
I guess question on the RV annual revenue growth pretty strong could you remind us.
How do you go about pricing those annual contracts.
What kind of the outlook.
Looks like for kind of future kind of ongoing growth.
Annual revenue growth to rvs going forward.
Yeah, Anthony Thanks, I think Patrick can talk you through kind of our market survey approach to how we get to the RV annual rate.
Yes, Anthony it's.
Similar to the process that we go through and our other business lines, particularly on the MH front. These are long term customers.
They typically own a unit that is located on our property for.
For years, if not more than a decade.
So we review the.
Directly competing properties as well as other choices for hospitality.
That type of weekend getaway.
In the local Submarkets.
We've come to the determination of what we feel to be.
Representative of the market.
And then we send out the rate increases.
<unk> to the MH process, we may very well.
More moderate rate increases for in place long term customers.
As new customers come in they will be there'll be charged a full market rate.
Thanks, maybe switching gears to the same store expense guide.
Guidance and the hurricane in the insurance impact.
How much of that growth is driven by the resetting of insurance rates and.
Those insurance resets cover just the impact of properties, Florida as a whole the entire portfolio, maybe more detail there would be super helpful.
Yes.
Kind of as I think about our guidance assumptions for expenses.
Cover insurance and utilities, both because I think those are two key areas to focus on those.
Those line items on a combined basis represent about a third of our total core property operating expenses.
Regarding the insurance, we are in the process of negotiating with our insurance carriers.
Really inclined to disclose too much on this call.
I'll remind you, though that we've talked about over the past five years or so we've seen premium increases around 20% each year.
Our policy renewal is April one and we plan to provide an update on the first quarter call as far as how we progress with regard to utilities our growth assumptions are based on various factors.
Including projections of rate increases that we've identified directly from the.
The utilities to the extent we have noticed I also have two third party advisers that we rely on for this information and.
Dot Gov website for the energy information administration.
All of that information triangulate that and come up with our model for utility expense increase.
Okay. Thank you.
Thanks Anthony.
Thank you.
Please standby for our next question.
Our next question comes from the line of Brad Heffern with RBC. Your line is open.
Hey, Thanks, good morning, everyone.
You had a strong fourth quarter and operating expenses with the two 1% growth, but the guidance obviously shows that reacceleration to figure that's a little bit above what you reported in 2022.
Can you walk through first what led to the low figure in the fourth quarter and why you would expect that to pick back up meaningfully.
I think.
Our experience in the fourth quarter, we had some moderation inexpensive primarily moderation in our payroll and our utility expense and then I did mention that R&M and.
Our insurance lines were down in the fourth quarter.
I'll cover the the year.
Year over year reduction first.
We have an annual process related to our.
Excuse me sorry related to our casualty insurance lines.
And we take a look at the reserves that we have established as we reviewed the activity.
At the end of the year, we identified favorable.
Developments and that supported a reduction in the reserves.
On the balance sheet, and thereby reduce the insurance expense.
<unk> expense savings.
<unk> really from a favorable comp that we had.
Because there were some elevated expenses in R&M in 2021.
The moderation in utility expense.
Tribute that primarily to a change in the mix of operations from the third quarter fourth quarter as we exited the summer season and.
In payroll expense growth moderated mainly as a result of reduced reliance on overtime as we stabilized staffing to pre pandemic levels in 2022 reduced our reliance on overtime, which generated savings year over year in the fourth quarter.
Okay got it so I guess why like for instance, the payroll, presumably you'd have easier comps in 2023 as well so is that just being overwhelmed by.
The insurance and the utility expenses, there something else going on there.
No.
I think it's less about the fourth quarter being an indicative run rate and more about kind of the fourth quarter activity I think looking to the full year of 2022, considering where we are with CPI headed into 2023.
Those are the key drivers and then as I said, a moment ago and keep in mind that a third of our expenses are utilities and insurance and we're talking about.
Increases that are meaningfully higher than CPI expected from <unk>.
<unk> of our expense base.
Okay got it and then moving to the transient business I guess can you talk about what the underlying assumption is that in the guide and then.
The core numbers I think transient was down 16% or so in the fourth quarter I know there can be some moving pieces there with the side count. So im curious if thats a comparable number and then what your expectations are for 'twenty three.
Yes.
I think if.
If you take a look at.
The guidance page in the supplemental youll see our footnote disclosure.
That provides the expected percentage contribution from annual rent.
And from that you can derive our expectations for combined seasonal and transient.
In the first quarter as well as the full year I will say that we anticipate the strong demand for longer term stays.
And our monthly David that drives the seasonal business anticipate that strong demand will continue and will offset unfavorable impact if any on transient rents, resulting from availability of fewer site market specific demand trends.
Perhaps whether the.
We expect these combined rental income stream to deliver modest growth in 2020.
And I think Brad.
Experienced.
Operating with RV parks over the last 15 years, we're very experienced it when you look at annual seasonal and transient results over that time.
Transient revenue has had the most volatility by far.
See periods of negative growth flat growth outsized growth and Thats why were really focused on the business of the annual rental stream to reduce that volatility.
Okay. Thank you.
Thanks, Brett.
Thank you please standby for our next question.
Our next question comes from the line of Samir Khanal with Evercore. Your line is open.
Yes.
Thank you Marguerite or Paul just curious are you doing anything differently. This year from a projection standpoint for expenses.
To get a better read on utilities last year.
There was sort of the two guidance increases on expenses. So just wondering.
How youre thinking about that.
Of that line utilities from a projection standpoint.
How much sort of conservatism baked in this time around.
I think.
Certainly the approach I mentioned.
The sources that we use to build our model I will say that we've refined our approach historically because of the consistency that we saw in utilities over our long history, we did place a greater reliance on our past.
<unk> experience when developing our annual model.
This year, we stepped away from that a bit.
And.
Look to these.
Excuse me other sources.
To provide insight and develop the model.
Okay got it and then just on new home sales gross revenues.
So a meaningful declines from a year over year and that number is that just a function of sort of the macro environment I, just maybe a little bit more color you can provide on that.
Yes, Patrick.
For the quarter, we were down 35% new home sales.
There's a few drivers there really largely impacted.
By the Hurricanes.
That came through Florida.
In late September and then Nicole in mid November .
We have seen some pressures just with respect to construction activity and the number of new homes that we are ready for.
For the full quarter that was exacerbated in Florida as a result of the hurricanes.
<unk>, Florida.
The disruption and just kind of the cadence.
Bob.
Home sales the marketing the showing in them.
Eventual closing of those transactions to new homebuyers experienced some disruptions that led to a push up about 50, new home sales some of that is a mix of.
Potential buyers just reassessing.
And potentially pulling back from purchasing home at this time.
The balance was for just delayed closings as we work through the timing disruptions of the Hurricanes.
That's it for me thank you.
Thanks Amir.
Thank you please standby for our next question.
Our next question comes from the line of Keegan call with Wolfe Research. Your line is open.
Hey, guys. Thanks for taking the questions maybe just on the communities are removed from the same store pool, but are now up and running could you just provide some color on occupancy and your expectation for leasing those communities back and where theyre material move outs that took place.
Yes, so just as a reminder for those properties.
It was for RV and two marinas.
So.
We don't have any of the direct impact with respect to occupancy trends.
And as we're bringing those properties back online I would expect them to largely reach full operations.
<unk> 2023, but we have resumed operations at all but.
Two of those properties to this point.
Those are modified operations.
Key categories.
But our core customers are engaged and have access to the properties with amenities coming online over time and what we've seen is a real desire for our customers to come down and come back to their place in Florida.
Get out of the winter and come down.
Start to fix their home if it was impacted or fix their RV if it was impacted.
Got it just shifting gears on the transient revenue obviously it was down in the quarter, but it was relatively offset by the seasonal growth.
Just kind of curious on transient are you guys seeing any relative softness in demand or is it primarily just a function of having less sites available.
I think it's really a function of that having having less sites available we're seeing people choose to stay with us longer so they're staying with us on a seasonal basis and staying with us on an annual basis.
So thats just having we have less available site.
Got it thanks for the time guys.
Thank you.
Thank you.
Our next question.
Our next question comes from Milan.
Wes Golladay with Baird. Your line is open.
Thank you Hey, good morning, everyone noticed the thousand trails membership dipped in the fourth quarter sequentially is this just seasonality.
Having to play here and then what is your expectations for subscription income growth. This year it was around 5% in 2020.
I think year to date I would say I can't pass sales are down and I think there are about down 3% upgrades.
Upgrades are down a little bit of down about 18%.
The camp that sales are really a decline from a heightened interest in 2021.
And the upgrade decline is really a result of a new product that we launched in 2021, where we typically seen outsized demand in the in.
In that in that time, when we launched the product.
And our expectation for subscription revenue in 'twenty three is right in line with our experience in 'twenty two.
Yes.
Okay. That's all for me everyone. Thank you.
Thanks, Matt.
Thank you please.
Please standby for our next question.
Our next question comes from the line of Anthony <unk> with choice Youre line is open.
Hey, guys. Thanks for taking my question.
Wisdom, Mark to market on the Ams portfolio, when a new tenant replaces an existing tenant is there's still plenty of 11% after the recent rate increase.
Yes.
That trend is is holding.
And then if you look at that trend on a monthly basis and certainly.
As you look at it roll it up for the quarter every quarter I think in the fourth in 2022.
Was.
Somewhere between 10, five and 11% 11, 5%.
Okay.
And so shifting gears to RV like.
There's a lot of articles about the Airbnb boss I know this might not be true in your markets, but in some markets occupancy for Airbnb is sounded like 8%, 9% just curious what do you think the implications could be for rvs.
I think the demand is very strong for our rvs are locations.
Where people want to be during the winter or in the summer.
So I think that I don't see a change to that do you see that we have less available sites like I just mentioned, so that's going to have an impact.
We've been able to push rate on the transient side and we continue to be able to do that so I think that shows the that shows the strength of the market.
Okay.
Just one more one last question for me, so I see that quarter to quarter over quarter Akamai sites for the core portfolio was down 130, I know this is not a material number but I don't think I've seen this.
Yes, I'll ask start reporting this metric can you provide some color on what you're seeing on the ground today.
Well I think youre talking about sequential quarter, but full year occupancy was essentially flat in Europe I think we were down 15 site.
Yes.
Ill call it flat.
In the quarter.
There was some impact associated with that.
The storm on our octave.
And that impact was a result of homes coming back to us, but also our ability to sell homes through the hurricane and during the hurricane.
Okay.
So my question guys.
Thanks, Dan Thank you.
Please standby for our next question.
Our next question comes from the line of Joshua <unk> with Bank of America Securities. Your line is open.
Yes, good morning, everyone.
And I guess to same store expense line items, we didn't touch on payrolls in real estate taxes.
I guess, just curious what kind of trend you assumed in both of those for your guide.
And then if you could remind us on the real estate taxes like is that a projection at this point like our best assumption or is that kind of 40 unknown known.
Yes.
For the most part.
To your latter question for the most part real estate taxes our projection.
Our greatest exposure is in the state of Florida.
Florida taxes are build in the current year same calendar year Bill as pain.
Hemant.
But we don't have visibility into the expected increases until August or September .
The.
Assumption is call.
Call It <unk>.
Mid single digit type of increase for real estate taxes, which is right in line with our historical experience.
And then with respect to payroll.
I would.
Characterize that assumption of being closer to CPI.
2020.
Closer to headline CPI or CPI or purchased headlines again.
Okay, Great and then just.
For your guide the same store revenue.
It's it's lower than your same store expense growth guidance, just kind of curious how we should be thinking about that on kind of a.
Mark go forward basis is this kind of a one off or.
Should we kind of assume that same store revenues can.
Exceed expenses.
Got it.
More normalized go forward basis.
Yes.
I mean, I think if you look at our long history.
We've not found ourselves in an environment with CPI showing as much volatility as it has in the last.
Yes.
12.
Nine months.
So our long history certainly.
Our increase in revenues was.
Call, It 100 basis points higher than CPI.
Kind of trending close to that.
And alright expenses trending close to that.
I think going forward.
As we settle out.
The opportunity for us is.
To identify where.
You'll be able to maintain and improve margins in that type of thing.
There are opportunities in the form of automation and technology implementation and so forth.
Two.
This early look at $2 23.
As the model for that.
The forever future.
Josh I would just also remember.
Remember that if we're here in January we have really good visibility into the revenue side and we've talked about that.
In October on our call in October .
But expenses, we have less less visibility into so that's how we create our model for the year.
Yes.
Okay, great. Thanks, guys.
Thanks, Josh.
Thank you.
Please standby for our next question.
Our next question comes from the line of John Pawlowski with Green Street. Your line is open.
Hey, Thanks for that Tom My first question is on the trajectory of manufactured housing rent increases. So I think last quarter you anticipated. The first batch the first 50% of MH rent increases to go out in the low to mid 6% range I'm just curious as the year unfolds do you expect.
That growth to accelerate be stable or come back come back down.
John we have.
We have an assumption.
It is kind of tied to a projection of CPI that anticipates at CPI moderate throughout the year.
The one thing to keep in mind is that.
At the.
Notices that we spend.
Alas notices that we send that will have impact in 2023 in the month of August . So it's really looking at CPI from now through call. It July .
And so our model stepped it down a bit too.
5%.
From from a starting assumption of 7%.
Okay. That's helpful.
I apologize if I missed this can you, let us know how seasonal bookings.
Actually the <unk> reservations are trending versus last year.
Yes, I think that.
The way the way I would talk about is the guidance model that we've built.
Based on our current reservation pacing for seasonal and transient.
And I think I mentioned earlier, but.
<unk> with the trend we saw during 2022, we're seeing strong demand for the longer term stays people want to be with us a month or more so if you walk through the math that we provided in the guidance page, our first quarter and full year combined rent growth for seasonal and transient is between 2% and 3%.
Based on where we are with pacing advanced visibility in the transient business as you know John .
Challenging about 60% of those rents are booked within 5% to seven days of arrival.
Tricky on a forward basis beyond the first quarter, but beyond the first quarter.
Okay last one for me on the financing markets Paul I'm, just curious if you've seen.
Cured financing terms or just the availability of that change at all core.
Really hurricane prone properties along waterfront.
I'll say, it's a little early to say there has been a change I think that.
I think there is.
We are not in the market right now.
So.
What I am hearing is.
More questions around it a bit more time spent on underwriting, but I haven't seen an indication of reduced capacity or appetite for land.
Sure.
Okay. Thank you.
Thank you.
Please standby for our next question.
Our next question comes from the line of Michael Goldsmith with UBS. Your line is open.
Good morning, Thanks, a lot for taking my question. Your 2023 <unk> guidance calls for a 10 cent range, which is consistent with the range you provided last year. So presumably you have a similar level of insight into the year I guess I was wondering what are the factors of the line items that you have maybe less or limited visibility in 2000.
'twenty three to accommodate this range.
Well certainly the.
Transient RV business.
Is the line item in the.
The greatest exposure to us.
After that I would point to our.
Membership upgrades and our just our home sale activity at the level of the properties as we look at the economic landscape and we kind of think about.
Projections for 2023, and Taco a potential recession.
It harkens back a bit.
Two 2008 and.
We certainly saw impact from the slowdown in the single family home sales market on our business.
And.
Despite the.
The fact that we continue to see very strong demand for our home sales in our properties today.
That is an area okay.
So would you say you have less visibility into kind of like that.
So the top line then you due to the expense growth for the year.
Well.
I think that.
As I mentioned earlier.
Third we have refined the way that we review our utility expense, which created a significant amount of exposure in the expense line item in 2022.
So I think that.
No.
To ask whether we have greater visibility I think that we have a model that.
Looks to have different sources of information.
And.
Based on the recent experience that we have had in our testing of that model, we think will be more reliable than our.
Method.
Got it that's helpful and then on.
Are you seeing any change in bad debt was there a change in trajectory in the fourth quarter or are you expecting any.
Change in 2023 is that built into the guidance in any way.
So.
Our rent collection rates remained strong in the MH and RV properties.
There were eviction mortgage moratoriums following the onset of the pandemic.
It caused a slight increase in our delinquent MH rents.
Those restrictions have begun to ease and.
And collecting past due rents from residents interested in resolving their dose.
Yes.
Our reserve policy takes a look at that Collectability and.
Yes.
We've seen.
Yes.
An increase in the gross receivable, resulting from the delay in processing evictions across the MH portfolio since the beginning of the pandemic that pressure started to ease in 2022.
Bad debt expense moderated in line with historical levels.
And our historical levels or about 40 call it 40% to 50 basis points of base rent.
So I think that.
<unk>.
Return to historical normal is what I would otherwise expect in 2023 absent some legislative impact that extends moratoriums or <unk>.
<unk> is our ability to.
Elektron.
One last one for me is just.
<unk> been acquiring land.
And you've been looking at expansion sites.
Given the current backdrop is this a good time to continue to.
Push on that and then what.
How are expected yields on expansion sites changed is there any difference for 23 years versus maybe in the past.
Yes.
We purchased land that's.
A fair amount of land during the pandemic and in last.
Last year I think we'll continue to do that where it makes sense certainly land that's adjacent to our properties is something that.
It's highly accretive.
There have been cost pressures placed just on construction in general, but we think that we're acquiring the land at a at a price that makes sense and we'll continue to do that youll see us do that.
This year and beyond.
Thank you very much good luck in 2023.
Thanks, Michael E tail.
Thank you.
Please standby for our next question.
We have a follow up from the line of Joshua <unk> with Bank of America Your.
Your line is open.
Yes, thanks for the follow up.
For 2023 guidance.
Is that in.
Is that kind of backwards looking CPI.
Current CPI or kind of how CPI trends over the next 12 months.
We took we took a look at at current CPI.
So the latest print.
Alright, okay.
Awesome. Thank you Paul.
Thanks, Thanks, Josh.
Ladies and gentlemen. This concludes the question and answer session. At this time I would now like to turn the call back over to Marguerite Nader for closing remarks.
Thank you very much for joining us on today's call. We look forward to seeing you at all the upcoming events.
Sure.
Yes.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
The conference will begin shortly.
Lower Johan during Q&A, you can dial star one one.
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Okay.
Okay.
Thank you.
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Yes.
Okay.
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