Q3 2023 Equity LifeStyle Properties Inc Earnings Call

Good day, everyone and thank you all for joining us to discuss equity lifestyle properties third quarter 2023 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 asked that you limit yourself to two questions. So everyone, who would like to participate have ample opportunity.

As a reminder, this call is being recorded.

Certain matters discussed during this conference call may contain forward looking statements in the meanings of the federal Securities laws.

All 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. Reconciliation 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 now like to turn the call over to Marguerite Nader, our president and CEO .

Good morning, and thank you for joining us today I am pleased to report the results for the third quarter of 2023.

The quality of our revenue streams and the strength of our balance sheet continues to allow us to report impressive results.

Our MH portfolio is approximately 95% occupied we have had continued success in the quarter selling new homes year to date, 51% of our new home sales have been in Florida communities and 13% in Arizona.

Year to date, the mark to market increase for rent in new homes for rent increase for new homeowners has been approximately 13%. Our team has done an exceptional job of selling available inventory and we are currently at near record low levels of rental homes in our portfolio.

Our communities continue to offer an affordable option to purchase a home and made a single family housing market with limited availability and high price points.

Today's national headlines highlight that homebuyers are grappling with housing affordability driven by a lack of affordable homes and rising mortgage rates. These broader national housing trends have enhance the appeal of our communities for prospective homeowners.

Two thirds of our RV and Marine income is generated from our annual customers.

Core annual RV and marine our revenue increased 8% compared to the third quarter of last year.

Of course seasonal and transient revenue for the quarter was impacted by an increase in annual site usage, reducing site availability and weather related properties disruptions.

Our social media strategy, Leverages engaging content targeted advertising and partnerships to expand our reach and boost customer engagement with our RV members guests and prospects.

This summer was the ninth year of our 100 days of camping marketing campaign, which celebrates the time between memorial day and Labor day.

The campaign recorded 32 million impressions, the highest we have ever experienced across social media platforms, including tick Tock Instagram and Facebook.

Turning to 2024, we anticipate continued demand into next year.

Within our MH portfolio, we anticipate ending 2024 rent increase notices to approximately 50% of our MH residents. These rent increase notices have an average growth rate of five 4% for our RV portfolio, we have thought annual rates for 95% of our annual sites.

RV annual rate increases have an average growth rate of 7%.

Our snowbird residents and guests are anxious to head back to Florida, and Arizona for the season.

Our teams are prepared for their arrival and we will continue to focus on providing outstanding customer service.

I'd like to thank our team members for all their efforts this year to support our residents and guests.

I will now turn the call over to Patrick to provide further details on our portfolio operations.

Thanks Marguerite.

As we wind down our summer season, and move into a winter Sun belt season, I wanted to provide some additional color on the drivers of the 80% of our $1 $3 billion of total revenue.

Comes from annual resin syngas, and our MH RV and marine of properties.

Consistently through the years the MH portfolio has been a key driver of our business with a trend of high quality occupancy achieved by increasing homeowners.

Today, nearly 97% of our occupancy as long term or homeowners or typically with us 10 years or more.

There was somewhere around the horn on those markets collectively representing 70% of our MH portfolio.

First Florida occupancy is 95%.

Florida is the leading state for net in migration and we see demand most directly in our east Submarkets like Tampa, St. Pete Clearwater, unless some markets like Fort Lauderdale, West Palm Beach, which are consistent with historical trends.

Demand in East, Florida comes to the northeast U S.

Torque, New Jersey and Massachusetts.

Some of the top states leading on migration.

While demand in West Florida.

In the Midwest States, like Illinois, and Minnesota, which are also leading on migration.

Given this demand we have an opportunity to continue to grow MH occupancy, including through our development program.

We developed one 750, <unk> in Florida and have more than 1000 MH sites in the expansion pipeline.

Over the last three years, we have sold more than 1400, new homes in Florida, indicating consistent demand.

Our next largest markets are California, and Arizona.

Those portfolios are 97% occupied and we have opportunities to convert rental homes to homeowners marginally increased run rate occupancy as well as grow through expansions.

Portfolio wide for image over the last three years, we've sold 2600, new homes enhancing quality of occupancy by meeting important demand from homebuyers.

Moving on to the RV and marine businesses over the last 20 years, we added RV and marine as to our portfolio with a focus on long term annual revenue streams that they similarly to the MH portfolio.

Our RV properties are predominantly located in sunbelt locations.

And our marinas are mostly coastal Florida and coastal Carolinas.

Coming out of the summer season, we continue to see consistent demand from our years, especially our core annual guests.

As noted in the press release, our 2024 rate guidance for RV annuals of 7%.

For perspective average annual RV rate is approximately $500 a month. So the 7% increase translates to $35. A month are relatively reasonable amount for long for me in your customers valuing their leisure options.

For the Marina portfolio, we have continued to maintain occupancy of 90% and bolt launches had been consistent year over year evidence and consistent demand from our long term oriented customers.

Those are the highlights on the drivers of the property operating results.

With some market and property detail on our annual MH RV and marine revenues.

Together, they represent more than 80% of our portfolio revenue as well as the highest quality durable revenue streams at El S. I'll now turn it over to Paul to walk through the results in detail.

Thank you Patrick and good morning, everyone.

I'll provide a summary of our results for the third quarter and September year to date periods provide some information about the assumptions included in our updated guidance model for the full year 2023, and close with some comments on our balance sheet and debt market conditions.

In our earnings release, we reported third quarter and year to date normalized <unk> per share of <unk> 71, and $2 12, respectively.

Core MH rent increased six 8% in the third quarter and six 7% year to date compared to the same periods last year.

Growth in the third quarter includes approximately seven 1% rate growth as a result of our rent increases to in place residents and our 13% mark to market on turnover whenever a new resident moves in.

Core RV and Marina annual base rent increased 8% in the third quarter and eight 1% year to date compared to prior year.

Annual RV and marine of rent increases and generated approximately seven 4% growth in the year to date period with occupancy contributing close to 70 basis points of growth.

Rent from seasonal and transient customers on a combined basis in the core portfolio represents approximately 10% of our core revenue of.

Of course seasonal and transient rent combined decreased approximately four 8% in the year to date period compared to prior year.

Of course seasonal rent increased five 5% year to date offsetting some of the transient decline we've experienced as a result of challenging weather patterns and site usage increasing for longer term stays.

Membership dues revenue increased 4% in the year to date period during the quarter. We sold approximately 6000 100000 trails camping pass memberships.

Membership upgrade sales volume in the third quarter was slightly lower than last year, while the average sale price increased approximately 12%.

Total core utility and other income increased seven 9% in the year to date period utility income increased 10% during the same period.

Offsetting a 7% increase in utility expense.

Year to date, our utility recovery rate is approximately 45% compared to 43, 5% in the first nine months of last year.

Other income includes $2 $2 million of revenue associated with sites leased to provide housing for displaced residents in Fort Myers, Florida during the year to date period.

Core property operating expenses were in line with expectations during the third quarter.

Our two largest expense line items utility and payroll were favorable to our forecast for the third quarter and increased one 2% over prior year on a combined basis.

Utility expense favorability was mainly the result of relatively cool and wet conditions across the Midwest and northeast in August and September the <unk>.

30 day mean temperatures for those months in those areas, we're at or below the long term average.

In addition, many areas of the northeast experienced record levels of rainfall.

Payroll expense in the third quarter was one 7% lower than the same period in 2022.

Our property operations team remains focused on rationalizing staffing to meet customer demand.

<unk> and maintenance expense was elevated in the quarter relative to our expectations we.

We incurred expense related to local storm events across the portfolio, primarily tree removal to briefly in up in cost to operate onsite utility systems during periods of heavy rainfall.

Our year to date core property operating revenue growth of five 4% and core property operating expense growth of six 5% contributed to an increase in core NOI before property management of four 5%.

Okay.

As I switch topics to discuss guidance for the remainder of 2023 I'd like to highlight some initiatives that illustrate our well established approach to managing our business, which involves continually challenging the status quo and promoting innovation.

Over the years, we've implemented process improvements focused on automation and reporting enhancements that include historical weather data employee staffing trends and publicly available market driven housing data.

These and many other innovations enable the day to day decision, making that generates impressive results quarter after quarter as we continue to focus on our strategic objectives.

The press release provides an overview of fourth quarter and full year 2023 earnings guidance.

Our long standing practice has been to report quarterly guidance with a range of <unk> <unk> per share from high to low end of the range as a result, each year. When we report full year guidance at this time with only one quarter remaining in the year. We report full year guidance with a similar <unk> <unk> per share guidance range.

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.

All growth rates and revenue and expense projections represent mid points in our guidance range and are qualified by the risk factors included in our press release and supplemental financial information.

Our fourth quarter guidance assumption for shorter term stays in our RV communities was developed based on current customer reservation trends.

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.

Our full year 2023 normalized <unk>.

Guidance is $2 85 per share at the midpoint of our range of $2 82.

To $2 88 per share.

Normalized <unk> per share at the midpoint represents an estimated four 5% rate growth compared to 2022.

We expect fourth quarter normalized <unk> per share in the range of 70 to 76.

Full year core NOI is projected to increase five 1% at the midpoint of our guidance range of four 8% to five 4%, we projected core NOI growth rate range of six 3% to six 9% for the fourth quarter and expect NOI for the quarter to represent almost 26% of full year core <unk>.

NOI.

Full year guidance assumes core rent growth in the ranges of six 5% to seven 1% for MH and 8% to eight 6% for annual RV rents.

Our guidance assumptions for the fourth quarter include MH occupancy gains in the third quarter, but no assumed occupancy increase in the fourth quarter our.

Our assumptions for expense growth to reflect current expectations based on a year to date activity and our review of property level and consolidated expense projections for the remainder of the year.

As a reminder, we make no assumptions for storm events that may occur.

The midpoint of our guidance assumptions for combined seasonal and transient so a decline of four 9% in the fourth quarter and a decline of four 8% for the full year compared to the respective periods last year.

Our guidance for the full year and fourth quarter includes no assumption for acquisitions closing before year end.

Full year guidance model makes no assumption regarding other capital events or the use of free cash flow, we expect to generate in the remainder of 2023.

Before we open the call up for questions I will discuss our balance sheet and current debt market conditions.

Our balance sheet is extremely well positioned with the debt maturity schedule that shows approximately 11% of our outstanding debt matures over the next three years and around 23% of our outstanding total debt matures over the next five years. This compares to an average total debt maturity for rights of approximately 45% over the next five years in.

In addition, 22% of our outstanding secured debt is fully amortizing and carries no refinancing risk and we have no year in our schedule and more than $350 million of outstanding debt matures.

Current secured debt terms available for MH and RV assets range from $50 to 75% LTV with rates from 6% to 675% for 10 year maturities hi.

High quality age qualified MH will command best financing terms.

RV assets with a high percentage of annual occupancy have access to financing from certain life companies as well as see MBS lenders.

Life companies continue to express interest in high quality communities, though some have set limits on capacity and pricing.

We continue to place high importance on balance sheet flexibility and we believe we have multiple sources of capital available to us our debt to EBITDA is five three times and our interest coverage is five three times.

The weighted average maturity of our outstanding debt is approximately 10 and a half years.

Now we would like to open the call up for questions.

Thank you.

Ladies and gentlemen to ask a question. Please press star one one you will then hear automated message advising Yohan is raised and then wait for your name to be announced.

To withdraw your question. Please press star one again.

As a reminder, we ask that you limit yourself to two questions.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Josh <unk> with Bank of America. Your line is open.

Yes, hey, everyone I appreciate the time morning, gentlemen.

Morning.

Just curious on I appreciate all the color on 2024 on the rate growth that you are sending out.

Could you remind us of the timing of when you send out the other 50% of the manufactured housing right notices and then.

What's the framework for how you set that right is it just a function of CPI at the time or what other kind of factors go into that.

Yes, Josh it's Patrick.

On the.

Paul covered in his.

Commentary about half the increases will be sent out by this time, so where.

By the time, we get the first quarter.

The majority of the rent increases have been noticed it and go into effect.

Over the balance of the year, it's mostly ratable.

To the extent that there is a CPI based.

Yeah.

It will likely reference.

<unk> CPI as you move through the course of the year.

And then to the extent that there are market rate increases we'll revisit.

Markets that we've we have a view right now that we go through our budget process and to the extent that we feel it's appropriate to update.

By quarter, we will update it as those notices go out accordingly.

Alright, I appreciate that Patrick and then I get a lot of questions on just opex.

Is there any kind of framework you can provide us as far as like pieces as we look forward any.

The base of facts, and then I know insurances.

Pretty topical.

April 1st just kind of any kind of color you can provide on that mark.

<unk> fine I am too.

I guess I guess, Josh what I would say with respect to expenses on a forward view into 2024.

We.

In the quarter.

The second quarter and also into the third quarter has seen moderation in utility rates.

We also have seen.

With respect to our payroll.

Obviously, the ability to flex that payroll based on demand in the properties that have variable demand the transient RV properties primarily.

With respect to the <unk>.

Going back to the utilities for a moment I think that on a go forward basis, we would probably see a more steady level.

To what we're seeing now so we were at about 6% growth at the end of the second quarter that moderated further in the third quarter.

So I think we would anticipate that continuing the last thing I'll touch on.

Is R&M I think that.

Okay.

But for the local weather events that I mentioned in my opening remarks.

I think that there is some easing of pressure that we've seen in the last couple of years in terms of contract labor.

For maintenance at our properties as well as the cost of supplies.

And then Josh with respect to insurance.

As you pointed out our property level insurance policies renew on April 1st of next year.

We have set.

Seven months of experience behind us five months left to go.

So far our claims experienced this year has been good but we're only 60% through the year. So we'll have a better idea. After we meet with our brokers in January and be able to incorporate into our 2024.

Great I appreciate the time guys.

Thanks, Josh.

Thank you.

Please standby for our next question.

Our next question comes from the line of James Feldman with Wells Fargo. Your line is open.

Great. Thank you and good morning.

Good morning, Jamie.

So I guess I just wanted to kind of think big picture here.

We've been talking a lot with investors about the opportunity for recapitalization the private entity.

You've got one of the better cost of capital in the space.

Opportunity don't last forever Windows don't open don't stay open forever. Just how are you thinking about your cost of capital what's on bank balance sheets, those impairments were assets might trade and a window here, where you could really put a lot of capital to work at pretty attractive returns I know you said in the past, it's kind of hard to find stuff to buy and you'd like to focus.

Operator: Good day, everyone. And thank you all for joining us to discuss Equity LifeStyle Properties, third quarter, 2023 results. Our future 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 COO. 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.

And expanding your your communities, but just kind of big picture, where you had and what do you think we might be able to see over the next year or couple of years I guess, we'll see how long this window, even remains opening where you have this opportunity.

Sure. So obviously my focus is on the <unk> our portfolio.

Leo we've been very deliberate in the years over the years and adding to our portfolio with a focus on really long term stable cash flow.

Operator: For those who would like to participate in the question and answer session, management asks that you limit yourself to two questions, so everyone who would like to participate have ample opportunity. As a reminder, this call is being recorded. Certain managed discuss during this conference call may contain forward-looking statements in the meanings of the federal security laws. Our forward-looking statements are subject to certain economic risks and uncertainty. The company assumes no obligation to update or supplement any statements that become untrue because of subsequent events.

And we like the MH business in the RV annual business, we think it really it meets the needs of so many Americans, who want to own their own home in.

In vacation destination location.

We think the MH business is is great for a lot of reasons and that's unique because of the fact that theres really no new supply.

We do know the properties, we want it all and we will continue to work with owners to grow our portfolio.

Really with an eye towards buying assets that have the same cash flow characteristics as our existing portfolio. So I think we'll be keeping in line with what we've always done in a disciplined approach to growing our business.

Operator: In addition, during today's call, we will discuss non-gap financial measures as defined by SEC regulation G. Reconciliation of these non-gap financial measures to the comparable gap financial measures are included in our earnings release, our supplemental information and our historical SEC balance.

Okay. Thank you that's helpful.

And then your commentary on Florida in the Florida market being so strong both on the east coast and West Coast.

Marguerite Nader: At this time, I would now like to turn the call over to Marguerite Nader, our President and CEO. Good morning and thank you for joining us today. I am pleased to report the results for the third quarter of 2023. The quality of our revenue streams and the strength of our balance sheet continue to allow us to report impressive results. Our MH portfolio is approximately 95% occupied. We have had continued success in the quarter selling new homes.

Speaking to some of our industry contacts there's real questions around <unk>.

Commercial real estate insurance in Florida going forward.

How do you balance that when you think about putting fresh capital to work here, even staying in those markets.

That's the one market that keeps coming up where people are scratching their head or how does this even in a work over the long term.

I think what we've seen is the demand is so strong for people to come to Florida and experienced the affordable lifestyle that we have.

Marguerite Nader: Year-to-date, 51% of our new home sales have been in Florida communities and 13% in Arizona. Year-to-date, the market market increase for rent in new homes has been approximately 13%. Our team has done an exceptional job of selling available inventory and we are currently at near record low levels of rental homes in our portfolio. Our communities continue to offer an affordable option to purchase a home amid a single family housing market with limited availability and high price points.

Get out of.

The northeast to get out of the mid West and we just see that continuing as far as insurance as it relates to our residents. While we don't keep track of who has insurance and who doesn't.

Over the years, we kind of have an idea of that.

Not a large percentage of our homeowners are residents have homeowners insurance.

And then just in terms of where you think rates are going I know you said.

Marguerite Nader: Today's national headlines highlight that home buyers are grappling with housing affordability driven by a lack of affordable homes and rising mortgage rates. These broader national housing trends have enhanced the appeal of our communities for prospective homeowners. Two-thirds of our RV and Marina income is generated from our annual customers. Core annual RV and Marina revenue increased 8% compared to the third quarter of last year. Core seasonal and transient revenue for the quarter was impacted by an increase in annual site usage, reducing site availability and weather related property destruction.

You can find out until April next year, but.

Okay.

The commercial real estate insurance on your side that you just kind of comfortable about it.

It will work itself out.

Well.

No certainly I think as I said over the last few months.

Our claims experience is going to be a big factor in what our renewal is going to be so as I. Just mentioned we've had good claim experience. So far this year, but we still have more months to go before the renewal.

Yeah.

Okay alright, thank you.

Thanks, Jamie.

Marguerite Nader: Our social media strategy leverages engaging content, targeted advertising and partnerships to expand our reach and boost customer engagement with our RV members guests and guests. This summer was the ninth year of our 100 days of marketing campaign which celebrates the time between Memorial Day and Labor Day. The campaign recorded 32 million impressions, the highest we have ever experienced across social media platforms, including TikTok, Instagram, and Facebook. We have set annual rates for 95% of our annual sites.

Thank you.

Please standby for our next question.

Our next question comes from the line of John Kim with BMO capital markets. Your line is open.

Thank you.

Your 24 MH rate growth.

Now that the social security cost of living a document came in at three 2%.

And multifamily rents have really stalled out in the third quarter.

How confident are you that youre able to achieve and push that five 4%.

On the remaining leases and can you remind us is that five 4% on the base rate change only or does that include any pass through of expenses.

Excuse me agenda. The five 4% is on the base rate. It does include.

Marguerite Nader: The RV annual rate increases have an average growth rate of 7%. Our snowboard residents and guests are anxious to head back to Florida and Arizona for the season. Our teams are prepared for their arrival and will continue to focus on providing outstanding customer service.

The residents that moved in and assumed in place leases understanding that they would go to market upon renewal in January . So it does include the impact of the 13% Mark to market that we've talked about for those residents.

Marguerite Nader: I would like to thank our team members for all their efforts this year to support our residents and guests.

I think Patrick has some more color.

Yes, so John as we as we worked our way through.

Patrick Waite: I will now turn the call over to Patrick to provide further details on our portfolio operations. Thanks, Marguerite. As we went down our summer season and moved into our winter sun belt season, I wanted to provide some additional color on the drivers of the 80% of our $1.3 billion of total revenue that comes from annual residents and guests in our MH, RV, and Marina properties. Consistently through the years, the MH portfolio has been the key driver of our business with a trend of high-quality occupancy achieved by increasing homeowners.

Our budget process and that includes.

A review little literally property by property and their respective Submarkets.

<unk>.

A review of the competitive set not only other manufactured home communities, but other other other competitive housing in.

And those direct Submarkets as Marguerite touched on we compare very favorably just with respect to the all in cost and the value that our resident moving to one of our communities gets.

Patrick Waite: Today nearly 97% of our occupancy is long-term homeowners or typically with us 10 years or more. Although it's summery around the horn on those markets collectively representing 70% of our MH portfolio. First, Florida occupancy is 95%. Florida is the leading state for net in migration and we see demand most directly in our east submarkets like Tampa, St. Pete, and Clearwater, and west submarkets like Florida, Lauderdale, and West Palm Beach, which are consistent with historical trends.

In the in our locations.

So as we work our way through the while it's a it's a fair point.

The CPI our spread historically has been in the 150 to 200 basis points.

We're kind of in that range with the.

Mark to market that Paul just referenced.

And we did have that 150 to 200 basis point historical.

Spread to CPI with respect to our rate increases.

Kind of front in mind as we were as we were working through where we're really going to set increases, particularly for our in place long term residents.

Patrick Waite: Demand in East Florida comes to the Northeast US, New York, New Jersey, and Massachusetts, which are amongst some of the top states leading on migration. While the man in West Florida comes to them in West, states like Illinois and Minnesota, which are also leading on migration. Given this demand, we have an opportunity continue to grow MH occupancy, including for our development program. We develop one of the 750 sites in Florida and have more than 1000 MH sites in the expansion pipeline.

So we feel we feel pretty confident that that is a good value proposition in that.

That those rents will that will come through.

Any sense of timing or the quantum of the renewal rate increases and marinas.

The marinas are basically ratable over the course of the year.

So they will they'll come through over the quarter by quarter and those annual renewals. John are included in the 7% that we quoted for the RV Marine and annual rent.

Patrick Waite: Over the last three years, we have sold more than 1400 new homes in Florida, indicating consistent demand. Our next largest markets are California and Arizona. Those portfolios are 97% occupied, and we have opportunities to convert rental homes to homeowners, marginally increased run rate occupancy, as well as grow through expansions. Portfolio wide for MH over the last three years, we've sold 2,600 new homes, enhancing quality of occupancy by meeting important demand from home buyers.

Okay got it thank you.

Thanks, Jeff.

Thank you.

Please standby for our next question.

Our next question comes from the line of Eric Wolfe with Citi. Your line is open.

Hey, Thanks looks like Youre guiding to a sequential increase in <unk> as well as an increase in your annual RV growth I think it's eight 8% from 8%.

Patrick Waite: Moving on to the RV and Marina businesses, or the last 20 years, we added RV and marinas to our portfolio, with a focus on long-term annual revenue streams, that they've similarly to the MH portfolio. Our RV properties are predominantly located in Sunbelt locations. And our marinas are mostly coastal Florida and coastal Carolinas. Coming out of the summer season, we continue to see consistent demand from RVers, especially our core annual guests. As noted in the press release, our 2024 rate guidance for RV annuals is 7%.

Driving both of those.

Yeah, I think Eric when you think about the fourth quarter of 'twenty three kind of have to remember all that happened in the fourth quarter of 'twenty. Two so so with respect to the RV I'll take that first the impact of Hurricane Ian.

In Q4 of 'twenty to really what we're seeing in 2003 as the benefit of the occupancy that.

That we gained following the loss in the fourth quarter of last year. That's primarily what it is there is also some contribution that's coming from rate increases that are effective in the fourth quarter and then in terms of the <unk> change.

Patrick Waite: For perspective, average annual RV rate is approximately $500 a month. So the 7% increase translates to $35 a month or a relatively reasonable amount for long-term annual customers valuing their leisure options. For the marina portfolio, we have continued to maintain an occupancy of 90%, and both launches have been consistent year over year, evidencing consistent demand from our long-term marina customers. Those are the highlights on the drivers of the property operating results, with some market and property detail on our annual MH, RV, and marina revenues. Together, they represent more than 80% of our portfolio revenue, as well as the highest quality, durable revenue streams at ELS.

I look at the noncore contribution.

$5 million year over year, that's coming from the non core properties. This year that we didn't have we had six properties that we're.

Sorry that were offline following the hurricane last year that did not generate any NOI.

And we did not have any business interruption contribution from most of those locations.

And then we had some contribution from acquisitions in 'twenty, two and 'twenty three.

As well as some one time adjustments. So there were a number of things that were happening in the fourth quarter of last year that make a favorable comp this year.

Paul Seavey: I'll now turn over to Paul to walk through the results in detail. Thank you, Patrick. Good morning, everyone.

Got it that's very helpful and I guess, maybe sort of 90 days.

Paul Seavey: I'll provide a summary of our results for the third quarter and September year-to-date periods, provide some information about the assumptions included in our updated guidance model for the full year 2023, and close with some comments on our balance sheet and debt market conditions. In our earnings release, we reported third quarter and year-to-date normalize FFO per share of $0.71 and $2.12 respectively. Core MH rent increased 6.8% in the third quarter, and 6.7% year-to-date compared to the same periods last year.

The debt that you have.

And then secondarily I guess are you assuming any business interruption insurance proceeds in the fourth quarter and then thinking about how we should model that for next year do you think that the sort of total NOI that youre showing there.

For this year is a good base from which to grow into 2024, meaning that we should make any sort of one time adjustments or anything that we can use that as a as a run rate going into next year for those properties.

Yes.

It's a little bit challenging because we do have properties that will switch from noncore into core next year.

Paul Seavey: Rent growth in the third quarter includes approximately 7.1% rate growth as a result of our rent increases to in-place residents and our 13% market on turnover when a new resident moves in. Core RV and marina annual-based rent increased 8% in the third quarter and 8.1% year-to-date compared to prior year. Annual RV and marina rent increases generated approximately 7.4% growth in the year-to-date with occupancy contributing close to 70 basis points of growth.

And when you think about the business interruption specifically.

<unk>.

Part of the outperformance.

Our performance in the third quarter from the noncore properties was those properties that are that were offline last year that I just mentioned rich.

Returning to operations.

Maybe at.

At the same time that we are.

Receiving business interruption for prior periods. So we have this timing issue that we've talked about before in terms of the receipt of the business interruption cash I think that will taper off and those properties will return to normal operations.

Paul Seavey: Rent from seasonal and transient customers on a combined basis in the core portfolio represents approximately 10% of our core revenue. Core seasonal and transient rent combined decreased approximately 4.8% in the year-to-date period compared to prior year. Core seasonal rent increased 5.5% year-to-date offsetting some of the transient decline we've experienced as a result of challenging weather patterns and site usage increasing for longer term stays. Membership dues revenue increased 4% in the year-to-date period.

That's really what we're expecting here.

Okay alright, thank you.

Thanks, Eric.

Thank you please standby for our next question.

Okay.

Our next question comes from the line of Brad Heffern with RBC.

Your line is open.

Paul Seavey: During the quarter we sold approximately 6,100,000 trails camping past memberships. Membership upgrade sales volume in the third quarter was slightly lower than last year while the average sale price increased approximately 12%. Total core utility and other income increased 7.9% in the year-to-date period. Utility income increased 10% during the same period. Someone offsetting a 7% increase in utility expense. Year-to-date our utility recovery rate is approximately 45%. Compared to 43 and a half percent in the first nine months of last year.

Hey, good morning, everybody just as a follow up to that last question on the business interruption in the fourth quarter are you in the same position, where you're maybe over earning a little bit or getting getting by proceeds from prior periods.

That's having a positive impact on earnings or when does that kind of crossover.

I think the fourth quarter is a little bit lighter because the fourth quarter. It looks back to the summer season for our properties in Florida. So.

It kind of evens itself out.

So to speak in the fourth quarter.

Okay got it.

And then for the 50% of the MH communities that have been noticed already is that representative of the other 50% that has not.

Paul Seavey: Other incomes include $2.2 million of revenue associated with sites leased to provide housing for displaced residents in Fort Myers, Florida during the year-to-date period. Core property operating expenses were in line with expectations during the third quarter. Our two largest expense line items, utility and payroll, were favorable to our forecast for the third quarter and increased 1.2% over prior year on a combined basis. Utility expense favorability was mainly the result of relatively cool and wet conditions across the Midwest and Northeast in August and September.

Is there a difference in how those are priced.

It's a little bit more heavily weighted to the long term agreements that we've talked about those tend to have January renewals. So as Patrick mentioned earlier in the call the impact of the CPI in the market.

Increases they have greater influence as we move through the rest of the 50% during 2024.

Okay got it and then I was wondering if you could just talk through what cap rates, you're seeing currently across the business and if anything is transacting I suspect. The answer is no if youre, saying that cost of debt is in the sectors, but any color there would be great.

Paul Seavey: The 30-day mean temperatures for those months in those areas were at or below the long-term average. In addition, many areas of the Northeast experience record levels of rainfall. Payroll expense in the third quarter was 1.7% lower than the same period in 2022. Our property operations team remains focused on rationalizing staffing to meet customer demand. Repairs and maintenance expense was elevated in the quarter relative to our expectations. We incurred expense related to local storm events across the portfolio, primarily tree removal, debris cleanup and costs to operate on-site utility systems during periods of heavy rainfall.

Certainly so as an industry there really hasn't been a lot of transactions.

We look at all marketed deals as well as continuing all of our outbound efforts.

Staying connected with owners waiting for them to kind of become sellers.

Up to this point, we haven't seen a lot of stress from owners in terms of refinancing or distress sales.

I really think that.

I think that the page will turn on the calendar really before theres a pickup in activity.

Paul Seavey: Our year-to-date core property operating revenue growth of 5.4%, and core property operating expense growth of 6.5% contributed to an increase in core and a lie before property management of 4.5%.

So it's difficult to quote cap rates when Theyre, just really haven't been a lot of transactions.

Yes.

Okay. Thank you.

Thanks.

Thank you please standby for our next question.

Paul Seavey: As I switched topics to discuss guidance for the remainder of 2023, I'd like to highlight some initiatives that illustrate our well-established approach to managing our business, which involves continually challenging the status quo and promoting innovation. Over the years, we've implemented process improvements focused on automation and reporting enhancements that include historical weather data, employee staffing trends, and publicly available market-driven housing data. These and many other innovations enable the day-to-day decision-making that generates impressive results quarter after quarter as we continue to focus on our strategic objectives.

Our next question comes from the line of Samir Khanal with Evercore. Your line is open.

Hi, good morning, everyone.

Polar Mercury when I look at seasonal so that seasonal slash transient business.

You do the math its down about 6% for the year now I.

I guess, how are you thinking about that segment into next year. It's been one area, that's been sort of hard to model for the last couple of quarters here.

I mean did you kind of Big picture do you think that growth turns positive next year or do you think that sort of still another year.

Paul Seavey: The press release provides an overview of fourth quarter and full-year 2023 earnings guidance. Our long-standing practice has been to report quarterly guidance with a range of 6 cents per share from high to low end of the range. As a result, each year when we report full-year guidance at this time, with only one quarter remaining in a year, we report full-year guidance with a similar 6 cents per share guidance range. 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.

Where you are sort of giving back what you may have.

Over earned over the Covid years.

I guess.

About seasonal what we're seeing.

Gives me is.

That revenue.

Particularly in the third quarter and the fourth quarter I'll, just talk to those for a minute.

When you look at the seasonal.

Roughly.

20% of the seasonal rent comes in the month of.

October and 50% comes in the month of December and you'll remember that the biggest quarter that we have for the seasonal business. Historically has been and continues to be the first quarter and we had significant growth in the first quarter and it's driven by those customers that are spending the winter months in in the south.

Paul Seavey: 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. Our fourth quarter guidance assumption for shorter-term stays in our RV communities was developed based on current customer reservation trends. 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.

We did experience during the pandemic was activity that was.

Uh huh.

Month or more in other parts of the country or even in the south during the summer months that activity.

Paul Seavey: Our full-year 2023 normalized FFO guidance is $2.85 per share at the midpoint of our range of $2.82 to $2.88 per share. Full-year normalized FFO per share at the midpoint represents an estimated 4.5% rate growth compared to 2022. We expect fourth quarter normalized FFO per share in the range of 70 cents to 76 cents. Full-year core NOI is projected to increase 5.1% at the midpoint of our guidance range of 4.8 to 5.4%.

It was modest but it was a contributor of growth I think that that's what we saw leveling off to a degree in 2023 and for 2024, I think that we'll see a return to our historical business, which is primarily the fourth and first quarters for the seasonal business with strong demand leading into 2020.

Four.

And with respect to transient business for 2024, it's too early to talk about.

Paul Seavey: We project a core NOI growth rate range of 6.3% to 6.9% for the fourth quarter and expect NOI for the quarter to represent almost 26% of full-year core NOI. Full-year guidance assumes core rent growth in the ranges of 6.5% to 7.1% for MH and 8% to 8.6% for annual RV rents. Our guidance assumptions for the fourth quarter include MH occupancy gained in the third quarter with no assumed occupancy increase in the fourth quarter.

Where we think we'd be we focus a lot and we've talked a lot about how.

The transient business is heavily dependent on weather. So obviously, that's difficult to project a year out, but we will have.

Better clarification on that as we go into <unk>.

In January when we report and and provide our guidance for 'twenty four.

I guess as a follow up to that I mean in terms of guidance and I know you haven't provided that but will there be sort of a change in the way you kind of.

Look at guidance because again transient.

Paul Seavey: Our assumptions for expense growth reflect current expectations based on the year-to-date activity and our review of property level and consolidated expense projections for the remainder of the year. As a reminder, we make no assumptions for storm events that may occur. The midpoints of our guidance assumptions for combined seasonal and transient show a decline of 4.9% in the fourth quarter and a decline of 4.8% for the full-year compared to the respective periods last year.

Seasonal when you started off the year I think you were expecting that number to be slightly up right. So now youre down six for the year. So I'm thinking is there sort of a change in mentality or how youre going to provide guidance as you think about next year as you get into January .

I guess my view on it is there is there is.

And expectation across the business.

That we continue to perform as Margaret said Theres, a great deal of variability specific to the transient business that comes from weather I think that our hour.

Paul Seavey: Our guidance for the full-year and fourth quarter includes no assumptions for acquisitions closing before year end. The full-year guidance model makes no assumption regarding other capital events or the use of free cash flow we expect to generate in the remainder of 2023.

Historical baseline expectation has been.

As we enter a year that that transient business has a modest level of growth kind of kind of low to mid single digit growth on an annual basis I don't see a reason for or a thought that we would change that practice I think we will continue that and we will provide updates on a quarterly basis as we historically have.

Paul Seavey: Before we open the call-up for questions, I'll discuss our balance sheet and current debt market conditions. Our balance sheet is extremely well positioned with a debt maturity schedule that shows approximately 11% of our outstanding debt maturers over the next three years and around 23% of our outstanding total debt maturers over the next five years. This compares to an average total debt maturity for READS of approximately 45% over the next five years.

Net revenue stream, which again represents about 6% of our total revenues.

Okay. Thanks, so much.

Paul Seavey: In addition, 22% of our outstanding secured debt is fully amortizing and carries no refinancing risk and we have no year in our schedule when more than $350 million about outstanding debt maturers. Current secured debt terms available for MH and RV assets range from 50 to 75% LTV with rates from 6 to 6.75% for 10-year maturities. High quality age qualified MH will command best financing terms. RV assets with a high percentage of annual occupancy have access to financing from certain life companies as well as CNBS lenders.

Thanks Tommy.

Ladies sandbox, where our next question.

Our next question comes from the line of Anthony Powell with Barclays. Your line is open.

Hi, Good morning, I guess, maybe one more on trend.

Maybe one more on transient RV, if you strip out the impact of weather and also the impact of <unk>.

Site conversions.

How did demand in the quarter trend relative to earlier in the year did you see any improvement.

I mean, just any directional commentary would be great.

Paul Seavey: Life companies continue to express interest in high quality communities. Those some have set limits on capacity and pricing. We continue to play time importance on balance sheet flexibility and we believe we have multiple sources of capital available to us. Our debt to EBITDA is 5.3 times and our interest coverage is 5.3 times. The weighted average maturity of our outstanding debt is approximately 10.5 years.

I think that.

I mean, I think that what we saw overall in the north again.

We're going to qualify it by weather.

Is demand from the customers for stays in our properties.

And I would point to the ability to put through increases in rate as support for for that demand.

Operator: Now we would like to open the call up for questions. Thank you. Ladies and gentlemen to ask the question please press star 11. You would then hear an automated message advising your hand is raised and then wait for your name to be announced. To withdraw your questions, please first start one one again. As a reminder, we ask that you limit yourself to two questions. Please stand by while we compile the Q&A roster.

So.

Our ability to increase transient nightly stays.

In our properties, even in a time when the weather is challenging.

And achieve those rates as.

Is the indicator that I would look to.

Got it thanks, and maybe one more on the 13% increase in AR.

Rent to new homeowners.

How does that compare to history and is there any opportunity to push it even higher and how do you think about that segment of the business overall it seems like a pretty good support of growth in rate base that makes business. So I wanted to see kind of how that should trend over time.

Joshua Dennerlein: Our first question comes from the line of Josh Dennerlein with Bank of America. Your line is open. Yeah, hey everyone. Appreciate the time. Morning. Just kind of, morning. Just curious on, I appreciate all the color on 2024 on the rate growth that you're sending out. Could you remind us of the timing of when you send out the other 50% of the manufactured housing rate notices and then what's the framework for how you set that rate?

Yes.

Well, let me, let me start by I guess.

Setting the stage over the last couple of years, we've been through a period.

Of particularly high demand for our properties and our locations, especially in the sunbelt.

That's been evidenced from really record new home sales, which are moderating.

Joshua Dennerlein: Is it just a function of CPI at the time or what other kind of factors going to that? Yeah, Josh is Patrick. The, you know, is Paul covered in his commentary about half the increases will be sent out by this time. So where it by the time we get the first quarter. The majority of the rent increases have been noticed and then go into effect over the balance of the year. It's mostly ratable.

But if you think about that level of demand, including higher CPI.

Just the base level rate increases.

For our customers.

<unk> been higher rates or other comps that has been high over the last couple of years.

And market rate increases had been higher over the last couple of years and if you think about our long term customers with us typically 10 years or more.

There's kind of an embedded.

Increase.

Increase our net.

Joshua Dennerlein: To the extent that there is a CPI based lease, it will likely reference updated CPI as you move through the course of the year. And then to the extent that there are market rate increases will revisit markets that we've we have a view right now that we go through our budget process. And to the extent that we feel it's appropriate to update quarter by quarter will update it as those notices go out accordingly. I appreciate that Patrick.

Loss to lease write a bump to market on turnover, which is what Paul summarized.

And Thats why that the reason that number has escalated into the call at that 10% 13% range is.

Is because we've come through those periods of high demand and high CPI.

But the turnover of our resident base Hasnt changed in any meaningful way. So over time I would expect that bump to market too tend to moderate and historically that bump to market has been call. It in the.

Joshua Dennerlein: And then I get a lot of questions on just op X. Is there any kind of like framework you can provide us as far as like moving pieces. We look forward any where any base effects and then I know insurance is a pretty topical. And there you were, you know, April 1st, just kind of any kind of color you brought in that part and that insurance line on to. I guess I guess Josh what I would say with respect to expenses on a forward view into 2024.

5% to 6% range as opposed to the double digits that were seeing now.

Okay. So how quickly should that bump to market moderate is that something that will moderate over the next year or just maybe timeframe would be great.

I don't know that I can do the math in my head that quickly but.

Basic construct would be we have 10% turnover in our resident base on an annual basis.

So it would it would moderate overtime.

Okay.

Thank you.

Joshua Dennerlein: We in the quarter, second quarter and also into the third quarter has seen moderation in utility rates. We also have seen with respect to our payroll, you know, obviously the ability to to flex that payroll based on demand in the properties that have very able to man the transient RV properties primarily. With respect to the going back to the utilities for a moment, I think that on a go forward basis we would probably see a more steady level.

Sure.

Please standby for our next question.

Our next question comes from the line of Keegan call with Wolfe Research. Your line is open.

Yes. Thanks for the time guys I guess first your MH occupancy is down 30 basis points year over year in the core portfolio, what's it going to take to get that number to start trending higher.

Well let.

Let me start by just putting a little bit of context, there that we still have that.

Roughly 150 units of headwinds.

Joshua Dennerlein: To what we're seeing now, so we were at about 6% growth at the end of the second quarter that moderated further in the third quarter. And so I think we would anticipate that continuing. The last thing I'll touch on is R&M. I think that, you know, But for the local weather events that I mentioned in my opening remarks, I think that there is some easing of pressure that we've seen in the last couple of years in terms of contract, labor, for maintenance at our properties as well as the cost of supplies.

From Hurricane Ian.

And we'll we'll work through.

Replenishing that housing stock.

And.

Those submarkets in Florida as I touched on in my opening comments are seeing.

A very consistent period of high demand.

So.

Taking that out of the equation are looking forward to 2024, I would expect youre going to start to see.

Occupancy increases that are more reflective of the historical business and you just saw.

Joshua Dennerlein: And then, Josh, with respect to insurance, as you point out, our property level insurance policies renew on April 1st of next year. So we have, you know, seven months of experience behind us five months left to go so far claims have experienced this year has been good, but we're only 60% through the year. So we'll have a better idea after we meet with our brokers in January and be able to incorporate into our 2024. Thanks, Josh. Thank you. Please stand by for our next question.

We increased a little over 40 units net in the quarter.

And I think it's important to point out that over 50% of our properties are 98% occupied and have been for a number of years.

These customers are making our residents are making a long term commitment.

Stay in the community. So so we are seeing properties that stay fully occupied for long periods of time 10 plus years.

Yeah.

And then shifting gears to home sales and then obviously, it's slowing down and I think the queries and it would be existing home sales or the lack thereof, but I'm curious if there is something else that youre seeing because it is interesting to see the used home sales seem to be kind of leveling out as opposed to new home sales declining.

James Feldman: Our next question comes from the line of James Feldman with Will Fowgirl, Yalana's open. Great. Thank you. Good morning. Good morning, Jamie. So I guess I just want to kind of think big picture here. You know, we've been talking a lot with investors about, you know, the opportunity for recapitalization of private entities. You've got one of the better costs of capital in the space. You know, opportunities don't last forever, windows don't open, don't stay open forever, just how are you thinking about your cost of capital, you know, what's on bank balance sheets, those impairments, where assets might trade.

Yeah. The used home sales is just a function of what available inventory. We have so it's really not a function of demand at the property. If we had more we'd be selling more.

James Feldman: And a window here where you could really put a lot of capital to work. It's pretty attractive returns. I know you've been in the past. It's kind of hard to find stuff to buy and you like to focus on, you know, expanding your, your communities, but just kind of big picture. Where is your head and what do you think we might be able to see over the next year, a couple of years.

So.

That's the way I think a bit on the used home side and the new home sales is really just moderating back to pre COVID-19 levels, but very strong demand, especially in our key markets.

Got it thanks for the time.

Thank you.

Please standby for our next question.

Our next question comes from the line of Anthony Hau with tourists. Your line is open.

Hey, guys. Thanks for taking my question.

I noticed that the PTC sales is down 10% this year in DTC memberships all go down again this quarter gain.

James Feldman: I guess we'll see how long this window is and remains open. You have this opportunity. Sure. So, you know, obviously my focus is on the ELF, our portfolio. We've been very deliberate in the years over the years and adding to our portfolio with a focus on, you know, really long term stable cash flow. And we like the, you know, the MH business and the RV annual business. We think it, you know, it really, it meets the needs of so many Americans who want to own their own home, in a vacation destination location.

Can you provide a little bit more color on what's driving the comp.

Klein.

And which passed.

Experiencing slowdown is it the cabin pass camping pass.

It's the it's the camping pass we've seen a reduction and RV dealer Activations I think it's about a 10% decline in activations.

Which means it's coming from the point of sale at the RV dealer.

And then we've also seen a decline due to that.

Reduced transient activity at the property level, so there's not a lot of people.

James Feldman: We think the MH business is great for a lot of reasons and it's unique because of the fact that there's, there's really no new supply. And, you know, we do know the properties we want to own and we'll continue to work with owners to grow our portfolio really with an eye towards buying assets that have the same cash flow characteristics as our existing portfolio. So, I think we'll be keeping in line with what we've always done in the discipline approach to to growing our business.

People coming through you just see you just see a reduction in sales.

Gotcha.

Can you also have to provide like can you talk about how long. These automated reports are helping with like decision making.

How are you guys using the historical weather data.

And what's publicly available market driven housing data you guys were using that you werent using before.

Well, Anthony it's not that we werent using it before I want to be clear on that I was mentioning kind of over the years the things that we've done to enhance our reporting so just by way of example, I'll take the weather data.

James Feldman: Okay. Thank you. That's helpful. And then, you know, you're commentary on Florida and the Florida market being so strong, both on the East Coast and West Coast. I mean, speaking to some of our industry contacts, there's real questions around commercial real estate insurance and Florida going forward. I mean, how do you balance that when you think about putting fresh capital work here, even staying in those markets? That's the one market that keeps coming up where people are scratching their head of, you know, how's this even going to work over the long.

To kind of share that.

In my remarks, I heard commentary around the historical weather patterns the impact the amount of the rainfall and so forth.

We have internally in our regular reporting.

Information that flows out to our operations and sales and marketing team leaders about the.

James Feldman: I think what we've seen is the demand is so strong for people to come to Florida and experience the affordable lifestyle that we have and to, you know, to get out of the Northeast, to get out of the Midwest, and we just see that continuing. As far as insurance has it relates to our residents, while we don't keep track of who has insurance and who doesn't. Over the years, we kind of have an idea that they're not a large percentage of our homeowners, our residents have homeowners insurance and then just in terms of where you think rates are going, and I said, you know, you don't find out until I go next year, but I guess the commercial real estate insurance on your side, you're just kind of comfortable that it'll work itself out.

Weather patterns the forecast of those weather.

In the locations that are there.

Our infocus, depending on the time of year and those are used as a as I mentioned to drive the decisions as far as where to target our marketing how to communicate with our customers as to.

When a weekend, it's going to be nice or how we might direct.

Our activity and encourage them to visit the properties.

That's just one example of of.

Some of the reporting enhancements that we've implemented over the years and will continue to do so.

And we're also using within their home sales website, we use AI to kind of strengthen the descriptions of homes that are available for sale.

And also develop alternate E mail headlines in social media posts.

James Feldman: Well, you know, we'll know certainly, I think as I said over the last few months, our claims experience is going to be a big factor in, you know, in what our renewal is going to be. So as I just mentioned, we've had a good claim experience so far this year, but we still have more, you know, months to go before the renewal. Okay, all right, thank you. Thank you.

That could kind of improve our improve our performance and we've seen that work well over time.

Great and then Mike on Social media I think you mentioned that you had $32 million impression this year.

How should we how should we think about that number lights.

Operator: Please stand by for our next question.

Click through rate per impression like what's the conversion rate on those leads.

It is also like driving your marketing costs down as well.

Yes, I mean, the way I would look at it is the impressions are really just the total number of times our content. We're seeing so we gauge that and we see that increase over time. So that's a positive for us.

John Kim: Our next question comes from the line of John Kim with BMO Capital Market. The line is open. Thank you. Your 24 MH rate growth. Now that the social security cost limit limit adjustment came in at 3.2% and multi family wins have really just stalled out in the third quarter. How confident are you that you're able to achieve and push that 5.4% on the remaining leases? And can you remind us, is that 5.4% on the base rate change only or does that include any pass through of expenses?

And it really measures our ability to get our message out in front of our target audience. So thats, what our focus is and of course.

Click throughs, and then and then what ends up being a reservation, which is the goal.

And we have an increasingly high number of our reservations.

Our booked online or through the call center.

Over time, it's increased significantly to where it's now 70% of the overall.

Activity.

Gotcha.

Thank you.

Thanks Anthony.

John Kim: So, excuse me, John, the 5.4% is on the base rate. It does include the residents that moved in and assumed in place leases, understanding that they would go to market upon renewal in January. So it does include the impact of the 13% mark to market that we've talked about for those residents, but I think Patrick has the more color. Yes, John, as we as we worked our way through our budget process and that includes a review little literally property by property in the respective submarkets and a review of the competitive set.

Please standby for our next question.

Our next question comes from the line of John Pawlowski with Green Street. Your line is open.

Hi, good morning.

I'm curious as a follow up.

A follow up the membership question just there can.

Can you speak to the retention trends in the business and camping demand normalizes towards pre Covid levels do you expect near term declines in annual membership revenues and membership upgrade sales.

Yes, I think that we still see very strong demand for our camping pass product.

John Kim: Not only other manufactured home communities, but you know, other other other competitive housing in those direct submarkets is Margaret touched on. We compare very favorably, just with respect to the all in cost and the value that a resident moving to one of our communities gets in, you know, in our locations. So as we worked our way through the, well, it's a fair point in the CPI our spread historically has been in 150 to 200 basis points.

It is really a low cost.

Product that we offer to our members.

As an incentive to kind of start they they're camping journey with us so.

So we see we see strong demand I don't see that stopping.

As we head into the into next year I think there is just that moderation that happened as a result.

At the end of the post Covid environment, but it's I believe it's still very strong.

Okay.

Okay, and then Paul I'm not sure I understood. The response to the one question about <unk>.

John Kim: You know, we're kind of in that range with the mark to market that the Paul just referenced and we did have that 150 to 200 basis point historical spread to CPI with respect to our rate increases. Kind of front in mind is we were as we're working through where we're going to set increases particularly for our in place long term residents. So we feel we feel pretty confident that that it's a good value proposition and that that those rents will come through.

First 50% of MH rate increases represent of the total portfolio did I interpret it right that the.

Five 4% on the first batch was elevated because of the longer term stays at a higher mark to market and we should expect the second batch to be lower than the five 4% is that accurate.

Well I think you have two things two things happening one for those.

Specific to Florida, so for those increases on turnover that occurred during 2023 in Florida. Those those residents can assume the remaining term of the existing lease and they'll go to market in January when they are when they are at lease renews.

John Kim: Any sense of timing or the quantum of the renewal rate increases in marinas? The marinas are basically ratable over the course of the year, so they'll come through over the quarter by quarter. And those annual renewals, John, are included in the 7% that we quoted for the RV Marine Annual Grant. Okay, got it. Thank you. Thanks, John. Thank you.

That that cohort is moving to market come January one during 2024 in other states, where you'll see a mark to market as well. So we'll have the benefit of that the other thing that I was saying is the long term agreements are more heavily weighted toward January one so that actually those those tend to have a lower.

Average increase than the market.

Eric Wolfe: Please say and buy for our next question. Our next question comes from the line of Eric Wolfe with City. Your line is open. Hey, thanks. It looks like you're guiding to a sequential increase in the episode 4Q as well as an increase in your annual RV growth. I think it's 8.8% from 8%. Let's drive in both of those.

And the CPI increases given where CPI is right now so you're a little bit of a balancing between those two factors. So I would anticipate.

Our relative level of consistency across the year and I think John if you just look at last year at this time given the same type of information in the portfolio is basically the same you could take a look at that and see how that kind of.

I played out.

This year for year over year, similar to what Paul saying.

Eric Wolfe: Yeah, I think Eric, when you think about the fourth quarter of 23, kind of have to remember all that happened in the fourth quarter of 22. So with respect to the RV, I'll take that first. The impact of Hurricane Ian in Q4 of 22, really what we're seeing in 23 is the benefit of the occupancy that we gained following the loss in the fourth quarter of last year. That's primarily what it is.

Okay. It makes sense last one from me you share how seasonal RV bookings for the fourth quarter and the first quarter compared to a year ago.

Compared to a year ago I don't have that in front of me, John but what I can say is that.

We're seeing the as I mentioned earlier, the seasonal activity builds in terms of the percentage.

Eric Wolfe: There is also some contribution that's coming from rate increases that are effective in the fourth quarter. And then in terms of the FFO change, when I look at the non-core contribution, there's about $5 million year over year that's coming from the non-core properties this year that we didn't have. We had six properties that were offline following the Hurricane last year that did not generate any NOI. And we did not have any business interruption contribution from most of those locations.

For each month in the fourth quarter.

And as we move out of the northern season, those customers that are with us a month or longer in that part of the country and move towards the southern season, we see that.

That pace, increasing over that time period.

And following that increase into the first quarter.

Okay. Thanks for that.

Thanks, John .

Please standby for our next question.

Eric Wolfe: And then we had some contribution from acquisitions in 22 and 23 as well as some one-time adjustments. So there were a number of things that were happening in the fourth quarter of last year that make favorable comp this year. Yeah, that's very helpful. And I guess for the non-core that you referenced there a second ago, I guess are you assuming any business interruption insurance proceeds in the fourth quarter? And to think about how we should model this for next year, do you think that the total NOI that you're showing there for this year is a good base from which to grow into 2024, meaning that we should make any sort of one-time adjustments or other things we can use that as a one rate going into next year for those properties.

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.

Hi, Michael.

Marguerite on maybe just to wrap up the conversation on weather.

We've talked a lot of different things about forecasting and marketing driven off of that but I guess just to sum it up is.

Was this a particularly weaker transient.

Because the weather was less favorable and that potentially creates even more favorable setup for transient in 2024 am I interpreting that right.

I think it's pretty clear that the weather, but it's very challenging. This this summer how that plays out next year is obviously entirely dependent on the weather patterns next year, but but yes. It was an extremely challenging year in 2023.

Eric Wolfe: Yeah, I mean, it's a little bit challenging because we do have properties that I'll switch from non-core into core next year. And when you think about the business interruption specifically, the part of the outperformance in the third quarter from the non-core properties was those properties that were offline last year that I just mentioned, returning to operations at the same time that we are receiving business interruption for prior periods. So we have this timing issue that we've talked about before in terms of the receipt of the business interruption cash. I think that'll taper off and those properties will return to normal operations. So that's really what we're expecting. Thank you.

Operator: Please stand by for our next question.

Thank you.

Follow up question is about the conversations that you've had with residents on the 2020 for rent increases I was wondering if there were areas, where you were getting the most pushback from residents the residents understanding kind of the moving pieces.

This is a moderating CPI environment, but insurance costs elevated costs are up im trying to size like you.

Yes.

For the last year, you weren't able to.

To push rents as hard as.

Expenses were elevated I'm, just trying to better understand.

How residents reacted to this and we are.

Ability to kind of for rents to continue to outpace expenses going forward.

Yes, let me well, let me start by saying that it's it's shaping up to be very similar to.

Brad Heffern: Our next question comes from the line of Brad Heffern with RBC. Your line is open. Hey, good morning, everybody. Just as a follow up to that last question on the business interruption. In the fourth quarter, are you in the same position where your maybe over earning a little bit or getting B.I, proceeds from prior periods that having a positive impact on earnings or when does that kind of cross over? I think the fourth quarter is a little bit lighter because the fourth quarter looks back to the summer season for properties in Florida.

Our.

Historical practices and our historical feedback.

And particularly with the rates that have.

Recently gone out.

We'll have more conversations with.

Residents and homeowners associations.

<unk> performed Florida, there is a.

There is a kind of a well organized statutory process for.

I'll review in a discussion of rate increases, we take that opportunity to have a conversation with our.

Brad Heffern: So it kind of evens itself out, so to speak, in the fourth quarter. Okay, got it. And then for the 50% of the image communities that have been noticed already, is that representative of the other 50% that has not, or is there a difference in how those are priced? It's a little bit more heavily weighted to the long-term agreements that we've talked about. Those tend to have January renewals. So as Patrick mentioned earlier in the call, the impact of the CPI in the market increases.

Homeowners and broader resident base on priorities for the properties in addition to the.

Brad Heffern: They have greater influence as we move through the rest of the 50% during 2024. Okay, got it. And then I was wondering if you could just talk through what cap rates you're seeing currently across the business and if anything is transacting. I suspect the answer is no, if you're saying that cost of debt is in the sixes, but in color, that would be great. Certainly. So you know, as an industry, there really haven't been a lot of transactions.

The rent increase so it's a little early in the process.

Give you a full view.

But what is shaping up so far is.

Pretty typical with our historical experience.

Got it and just one final clarification for me, we talked quite a bit about properties turning over and then getting a 13% increase which I think takes them.

Just kind of commences in the start of 2020.

Could you provide what percentage of properties are turning over that are going to receive that.

It's the it's the resident turnover.

And across our portfolio generally we have about 10% turnover so that individual residents not properties right, yes, yeah, so about 10% of your.

MH residents will be received are going to see something similar to that 13% increase upon the start of the year.

Brad Heffern: You know, we look at all marketed deals as well as continuing all of our outbound efforts staying connected with owners waiting for them to kind of become sellers. Up to this point, we haven't seen a lot of stress from owners in terms of refinancing or distress sales. I really think that I think that the page will turn on the calendar really before there's a pick up in activity.

Over the course of 2024 that will help me.

Right.

Specific to Florida specific to Florida, It's effective January one, but in the other states that happens throughout the course of the year.

Super helpful. Thank you very much good luck in the fourth quarter.

Thanks, Michael.

Operator: So it's difficult to quote cap rates when they're just really haven't been a lot of transactions. Okay, thank you. Thanks.

Thank you.

Since we have no more questions on the line at this time I would like to turn the call back over to Marguerite Nader for closing remarks.

Operator: Thank you.

Thank you for joining us today, we look forward to seeing you all at NAREIT take care.

Anthony Powell: Please stand by for our next question. Our next question comes from the line up from New York now with Evacore. Yalan is open. Hi, good morning, everyone. They Paul are margarit. You know, when I look at seasonal so that seasonal slash transient business. You know, you do the math. It's down about 6% for the year now. I guess how are you thinking about that segment into the next year? You know, it's been one year that's been sort of hard to model for the last couple quarters here.

Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

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Anthony Powell: I mean, did you kind of big picture? Do you think that growth sort of turns positive next year? Do you think that's sort of still another year? Where you're sort of giving back, you know, what you may have, you know, over earned over the COVID years. I guess I'm thinking about seasonal what we're seeing, excuse me, is That revenue, particularly in the third quarter and the fourth quarter, I'll just talk to those for a minute.

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Anthony Powell: When you look at the seasonal, roughly 20% of the seasonal rent comes in the month of October and 50% comes in the month of December. Remember, the biggest quarter that we have for the seasonal business historically has been and continues to be the first quarter and we had significant growth in the first quarter and it's driven by those customers that are spending the winter months in the south. What we did experience during the pandemic was activity that was a month or more in other parts of the country or even in the south during the summer months.

Sure.

Okay.

Anthony Powell: That activity was modest but it was a contributor of growth. I think that that's what we saw leveling off the two degree in 2023 and for 2024. I think that we will see our return to our kind of historical business which is primarily the fourth and first quarters for the seasonal business with strong demand leading into 2024. With respect to transient business for 2024 it's too early to talk about where we think we focus a lot about how the transient business is heavily dependent on weather so obviously that's difficult to project a year out but we'll have a better clarification on that as we go into in January when we report and provide our guidance for 24.

Anthony Powell: I guess as a follow up to that is I mean in terms of guidance and I know you haven't provided that but will there be sort of a change in the way you kind of look at guidance because again you know transient and seasonal when you started off the year I think you were expecting that number to be slightly up right so now you're down six for the year so I'm thinking as there's sort of a change in mentality or how you're going to provide guidance to do think about next year as you get into January. I guess my view on it is you know there's an expectation across the business that we continue to perform as as Margaret said there's a great deal of variability specific to the transient business that comes from weather I think that you know our our historical baseline expectation has been as we enter a year that that transient business has a modest level of growth.

Anthony Powell: Kind of kind of load amid single digit growth on an annual basis I don't see a reason for or thought that we would change that practice I think we will continue that and we'll provide updates on a quarterly basis as we historically have on that revenue stream which you know again represents about six percent of our total revenues. Thanks so much. Thanks. Thank you. Please stand by for our next question.

Anthony Powell: Our next question comes from the line of Anthony Powell with Barclays the line is open. Hi, good morning. Maybe one more in transient RV.

Anthony Powell: If you strip out the impact of weather and also the impact of facts and versions, how did demand in the quarter trend relative to earlier in the year? Did you see any improvement? Any weakening? Just any any just directional commentary will be great.

Anthony Powell: I think that I mean, I think that what we saw overall in the north, again, if we're going to qualify it by weather is demand from the customers for stays in our properties. And I would point to the ability to put through increases in rate as support for for that demand. So, you know, our ability to increase transient nightly stays in our properties even in a time when the weather is challenging and achieve those rates. Is, you know, is the indicator that I would look to kind of thanks.

Anthony Powell: And maybe one more on the 13% increase in rent and new homeowners. How does that compare to history? And is there any opportunity to push it even higher? And how do you think about that thing in the middle of the overall? I think I could pretty good supporter of growth in your image that makes business. So I wanted to see kind of how that should trend over time.

Anthony Powell: Yeah, well, let me let me start by, I guess, setting the stage over the last couple of years. We've been through a period of particularly high demand for our properties in our locations, especially in the sun belt. So that's been evidenced from, you know, really record new home sales, which are moderating. But if you think about that level of demand, including higher CPI. Just the base level rate increases for our customers have been higher, right?

Anthony Powell: So the comp set has been higher over the last couple of years and market rate increases have been higher over the last couple of years. And if you think about our long-term customers with us typically 10 years or more, there's a there's kind of an embedded increase or net lot caught lost a lease right a bump to market on turnover, which is what Paul summarized. And that's why that the reason that number is escalated into the, you know, call that 10 13% range is because we've come through those periods of high demand and high CPI.

Anthony Powell: But the turnover of our resident base hasn't changed in any meaningful way. So over time, I would expect that bump to market to tend to moderate and historically that bump to market has been called in the 5 to 6% range as opposed to the double digits that we're seeing now.

Anthony Powell: Okay, so how quickly should that bump to market moderate? Is that something that will moderate over the next year or just maybe a timeframe would be great? I don't know that I can do the math in my head that quickly, but a basic construct would be we have 10% turnover in our resident base on an annual basis. So it would it would moderate over time. All right, thank you. Sure.

Operator: Please stand by for our next question.

Keegan Carl: Our next question comes from the line of Keegan Carl with Wolf Research.

Keegan Carl: Yelana's open. Yeah, thanks for the time, guys. I guess first, your MHI competencies down 30 basis points year-over-year in the Port Portfolio. What's it going to take to get that number to start trending higher? Well, let me start by just putting a little bit of context there that we still have roughly 150 units of headwinds from Hurricane Ian, and we'll work through replenishing that housing stock. And those submarkets in Florida as I touched on in my opening comments are seeing a very consistent period of high demand.

Keegan Carl: So taking that out of the equation or looking forward to a 2024, I would expect you're going to start to see occupancy increases that are more reflective of the historical business. And you just saw that we increased a little over 40 units met in the quarter. And I think it's as important to point out that over 50% of our properties are 98% occupied and have been for a number of years. These customers are making their residents are making a long-term commitment to stay in the community. So we've seen properties that stay fully occupied for long periods of time, 10 plus years.

Keegan Carl: And then shifting gears to homefills. And obviously it's flowing down. I think the queries and it'd be existing homefills are the lack thereof. But I'm curious if there's something else that you're seeing because it is interesting to see the used homefills seem to be kind of leveling out as opposed to new homefills declining. Yeah, the used homefills is just a function of what available inventory we have. So it's really not a function of demand at the property.

Keegan Carl: If we had more, we'd be selling more. So that's the way I think of it on the used home side. And the new homefills is really just moderating back to pre-COVID levels, but very strong demand especially in our key markets. Got it. Thanks for the time. Thank you.

Anthony Howe: Please stand by for our next question.

Anthony Howe: Our next question comes from the line of Anthony Howe with Taurus, Yelana Felton. Hey guys, thanks for thinking my question. I noticed that the TTC sales is down 10% this year and TTC membership is also down again this quarter. Can you provide a little bit more color on what's driving this decline? And which pass is experiencing slowdown? Is it the cabin pass or is it the camping pass? It's the camping pass.

Anthony Howe: We've seen a reduction in RV dealer activations. I think it's about a 10% decline in activations, which means it's coming from the point of sale at the RV dealer. And then we've also seen a decline due to reduced transient activity at the property level.

Anthony Howe: So if there's not a lot of people coming through, you just see a reduction in sales. Can you also provide, like, can you talk about how these automated reports are helping with decision making? How are you guys using the historical weather data and what publicly available market driven housing data you guys are using that you weren't using before? Well, Anthony, it's not that we weren't using it before I want to be clear on that I was mentioning kind of over the years the things that we've done to enhance our reporting.

Anthony Howe: So just by way of example, I'll take the weather data to kind of share that in my remarks I had commentary around the historical weather patterns, the impact, the amount of the rainfall and so forth. And we have internally in our regular reporting. Information that flows out to our operations and sales and marketing team leaders about the weather patterns, the forecasts of those weather in the locations that are in focus depending on the time of year.

Anthony Howe: Those are used, as I mentioned, to drive the decisions as far as where to target our marketing, how to communicate with our customers as to when a weekend is going to be nice or how we might direct our activity and encourage them to visit the properties. That's just one example of some of the reporting enhancements that we've implemented over the years and continue to do so. And we're also using, within our home sales website, we use AI to kind of strengthen the descriptions of homes that are available for sale. And also develop alternate email headlines and social media posts that could kind of improve our performance and we've seen that work well over time.

Anthony Howe: Great. And then like on social media, I think you mentioned that you had 32 million impression this year. Like how should we, how should we think about that number? Like what would it expect through rate for impression? Like what is conversion rate on those leads? Is it also like driving your marketing costs down as well? Yeah, I mean, the way I was looking at it is impressions are really just the total number of times our content was seen.

Anthony Howe: So we gauge that and we see that increase over time. So that's a positive for us. And it really, you know, measures our ability to get our message out in front of our target audience. So that's what our focus is. And of course, click through and then what ends up being a reservation, which is the goal. And we have an increasingly high number of our reservations are booked online or through the call center. Over time, it's increased significantly to where it's now 70% of the overall activity.

Anthony Howe: Thank you.

Anthony Howe: Thanks, Anthony.

John Polofsky: Please stand by for our next question. Our next question comes from the line of John Polofsky with Green Street. Your line is open. Thanks. Good morning. I'm curious to follow up. I think the retention runs in the business as camping demand normalizes towards preco levels. We expect near term declines and annual membership revenues and membership upgrades sales. I think that we still see very strong demand for our camping past product. It is really a low cost product that we offer to our members as an incentive to kind of start their camping journey with us.

John Polofsky: So we see strong demand. I don't see that stopping as we head into the next year. I think there is just that moderation that happened as a result in the post COVID environment, but I believe it's still very strong.

John Polofsky: Okay. And then Paul, I'm not sure I understood the response to the one question about the first 50% of the MH rate increases represented the total portfolio. Did I interpret it right that the 5.4% on the first batch was elevated because the longer term stayed at a higher mark to market and we should expect the second batch to be lower than the 5.4% is that accurate? Well, I think you have two things happening.

John Polofsky: One, for those, it's specific to Florida. So for those increases on turnover that occurred during 2023 in Florida, those residents can assume the remaining term of the existing lease and they'll go to market in January when their lease renews. So that cohort is moving to market come January 1st. During 2024 in other states, we'll see a market to market as well. So we'll have the benefit of that. The other thing that I was saying is the long term agreements are more heavily weighted toward January 1st.

John Polofsky: So that actually those tend to have a lower average increase than the market and the CPI increases given where CPI is right now. See a little bit of a balancing between those two factors. So I would anticipate a relative level of consistency across the year. And I think, John, if you just look at it last year at this time, giving the same type of information and the portfolio is basically the same, you could take a look at that and see how that kind of played out this year over year, similar to what Paul saying.

John Polofsky: Okay, make sense.

John Polofsky: Last one for me. You share how seasonal are the bookings for the fourth quarter and the first quarter compared to a year ago. Compared to a year ago, I don't have that in front of me, John, but what I can say is that we're seeing the, as I mentioned earlier, the seasonal activity builds in terms of the percentage for each month. In the fourth quarter, and as we move out of the northern season, those customers that are with us a month or longer in that part of the country and move toward the southern season, we see that that pace increasing over that time period and following that increase into the first quarter. Okay, thanks for the time. Thanks, John.

Michael Goldsmith: Please stand by for our next question.

Michael Goldsmith: 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. Good morning, Marguerite. Maybe just to wrap up the conversation about weather. We talked a lot of different things about forecasting and marketing driven off of that, but I guess just to sum it up is, you know, was this a particularly weaker transient season because the weather was less favorable and that potentially creates the more favorable setup for transients in 2024.

Michael Goldsmith: Am I interpreting that right? I think it's pretty clear that the weather was very challenging this summer. How that plays out next year is obviously entirely dependent on the weather patterns next year, but yes, it was an extremely challenging year in 2023.

Marguerite Nader: Thanks for that. And my follow up question is about the conversations that you've had with residents on the 2024 rent increases. I was wondering if there were areas where you are getting the most pushback from residents, you know, are the residents understanding kind of the moving pieces of, you know, this is a moderating CPI environment, but insurance costs are up elevated costs are up, you know, trying to size like, you know, for the last year you weren't able to push rent as hard as expenses were elevated.

Marguerite Nader: I'm just trying to better understand, you know, how residents reacted to this and the ability to kind of progress to continue to outpace expenses going forward. Yeah, let me, well, let me start by saying that it's shaping up to be very similar to our historical practices and our historical feedback. And particularly with the rates that have just recently gone out, we'll have more conversations with residents and homeowners associations. You know, I've referenced before in Florida, there's a, there's a well organized statutory process for a review and a discussion of rate increases.

Marguerite Nader: We take that opportunity to have a conversation with our homeowners and brought a resident base on priorities for the properties in addition to the rent increase. So it's a little early in the process to give you a full view, but what's shaping up so far is pretty typical with our historical experience. And just one final clarification for me, we talked quite a bit about properties turning over and then getting a 13% increase which I think takes them, which kind of commences in the start of 2024.

Marguerite Nader: Did you provide what percentage of properties are turning over that are going to receive that? It's the resident turnover and across our portfolio, generally, we have about 10% turnover so that an individual residence, not properties. Yeah, yeah, so about 10% of your, of the MH residents will be received it, you know, are going to see something so much that 13% increase of positive, and the start of the year. Over the course of 2024, that will happen.

Marguerite Nader: Great. Pacific to Florida. Pacific to Florida, it's effective January 1st, but in the other state, it happens throughout the course of the year. Super helpful.

Marguerite Nader: Thank you very much. Good luck getting the fourth quarter. Thank you, Michael. Thank you.

Marguerite Nader: Since we have no more questions on the line, at this time, I would like to turn the call back over to Marguerite Nader for closing remarks. Thank you for joining us today. We look forward to seeing you on it, Naderie. Take care.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.