Q2 2024 Equity LifeStyle Properties Inc Earnings Call

July 23, 2024

Good day everyone and thank you for joining us to discuss Equity Lifestyle Properties second quarter 2024 results. Our featured speakers today are Marguerite Nader, our President and CEO ,

Speaker Change: 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.

Operator: 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 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. For those who would like to participate in the question and answer session, management asks that you limit yourselves to two questions, so everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded.

Speaker Change: Today's call will consist of opening remarks and a question and answer session with management relating to the company's earnings release.

Speaker Change: For those who would like to participate in the question and answer session, management asks that you limit yourselves to two questions, so everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded.

Operator: Certain matters discussed during this conference call may contain forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement any subject matter, statements that become untrue because of subsequent events. In addition, during today's call, we will discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information, and our historical SEC filings. At this time, I'd like to turn the call over to Marguerite Nader, our President and CEO.

Speaker Change: Certain matters discussed during this conference call may contain forward-looking statements in the meaning of the federal securities laws. Our forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update our supplement any self.

Speaker Change: Statements that become untrue because of subsequent events.

Speaker Change: In addition, during today's call, we will discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information, and our historical SEC filings.

Marguerite M. Nader: Good morning, and thank you for joining us. I am pleased to report the results for the second quarter of 2024. Our performance exceeded our expectations. For the first six months of 2024, we saw an increase in NOI of 6.4% as compared to last year. We focus on translating NOI growth to normalized FFO growth. Our normalized FFO growth year-to-date is 5.9%, driven by continued strength in our annual revenue and reduced expenses throughout our portfolio.

Speaker Change: Good morning, and thank you for joining us today. I am pleased to report the results for the second quarter of 2024. Our performance exceeded our expectations.

Speaker Change: For the first six months of 2024, we have seen an increase in NOI of 6.4% as compared to last year.

Speaker Change: We focus on translating NOI growth to normalized FFO growth. Our normalized FFO growth year-to-date is 5.9%, driven by continued strength in our annual revenue and reduced expenses throughout our portfolio.

Marguerite M. Nader: The strength of our portfolio results and our balance sheet allows us to increase full-year guidance for the second time this year. We have raised full-year guidance for normalized FFO to $2.91 at the mid- The demographics of the U.S. population support the demand for our MH and RV portfolio, with 70% of our MH portfolio catering to seniors and the strong interest in RV travel among older adults. Approximately 70 million baby boomers are currently enjoying their retirement years, followed by nearly 140 million Gen Xers and Millennials; we see long-term generational demand for all of our property off.

Speaker Change: The strength of our portfolio results and our balance sheet allow us to increase full-year guidance for the second time this year. We have raised full-year guidance for normalized FFO to $2.91 at the midpoint.

Speaker Change: The demographics of the U.S. population support the demand for our MH and RV portfolio, with 70% of our MH portfolio catering to seniors and the strong interest in RV travel among older adults.

Speaker Change: Approximately 70 million baby boomers are currently enjoying their retirement years, followed by nearly 140 million Gen Xers and Millennials. We see long-term generational demand for all of our property offerings.

Marguerite M. Nader: Our MH portfolio, which comprises 60% of our overall revenue, is approximately 95% occupied. Over the last 10 years, we have sold over 5,500 new homes in our community. These new homes contribute to the quality of housing stock in the community.

Speaker Change: Our MH portfolio, which comprises 60% of our overall revenue, is approximately 95% occupied.

Speaker Change: Over the last 10 years, we have sold over 5,500 new homes in our communities.

Marguerite M. Nader: Currently, less than 3% of our occupancy is comprised of rental properties. The high level of occupancy in our portfolio is sustainable, and based on demand, we believe we can continue to increase occupancy throughout our portfolio. With respect to our RV business, our annual segment, which represents the largest portion of our RV revenue stream, performed well in the quarter, and we anticipate growth rates of 7% for the full year 2024. Since 2018, our total core RV revenue has had an annual growth rate of 5.6%.

Speaker Change: These new homes contribute to the quality of housing stock in the community.

Speaker Change: Currently, less than 3% of our occupancy is comprised of rental homes.

Speaker Change: The high level of occupancy in our portfolio is sustainable, and based on demand, we believe we can continue to increase occupancy throughout our portfolio.

Speaker Change: With respect to our RV business, our annual segment, which represents the largest portion of our RV revenue stream, performed well in the quarter, and we anticipate growth rates of 7% for the full year 2024.

Speaker Change: Since 2018, our total core RV revenue has had an annual growth rate of 5.6 percent.

Marguerite M. Nader: We have seen significant shifts in customer behavior as we increase the number of annuals in our core portfolio by approximately 3,000 sites. This increased stable customer base will be an important part of our future performance. We are proud to share that 50 of our RV resorts and campgrounds have received the recently announced 2024 TripAdvisor Traveler's Choice Award. Each year, this award is given to approximately 10% of the businesses listed on TripAdvisor.

Speaker Change: We have seen significant shifts in customer behavior as we increase the number of annuals in our core portfolio by approximately 3,000 sites.

Speaker Change: This increased stable customer base will be an important part of our future performance.

Speaker Change: We are proud to share that 50 of our RV resorts and campgrounds have received the recently announced 2024 TripAdvisor Traveler's Choice Award.

Marguerite M. Nader: Our property teams provide guests with positive experiences when they stay with us, and referrals from our guests are a top source of new customers. We continue to engage our guests, members, and prospects through our social media strategy. We have grown our fan and follower base to over two million across Instagram, YouTube, TikTok, Facebook, and other social platforms. We are currently in the middle of our 100 Days of Camping campaign that focuses on the days of summer between Memorial Day and Labor Day.

Speaker Change: Each year, this award is given to approximately 10% of the businesses listed on TripAdvisor. Our property teams provide guests with positive experiences when they stay with us, and referrals from our guests are a top source of new customers.

Speaker Change: We continue to engage our guests, members, and prospects through our social media strategies.

Speaker Change: We have grown our fan and follower base to over 2 million across Instagram, YouTube, TikTok, Facebook, and other social platforms. We are currently in the middle of our 100 Days of Camping campaign that focuses on the days of summer between Memorial Day and Labor Day.

Marguerite M. Nader: I want to express my gratitude to our employees for their exceptional contributions this quarter. Their hard work in serving our customers is the key reason behind our ongoing success. I will now turn the call over to Patrick to provide further details on our financial performance.

Speaker Change: I want to express my gratitude for our employees for their exceptional contributions this quarter. Their hard work in serving our customers is the key reason behind our ongoing success. I will now turn the call over to Patrick to provide further details on our financial performance.

Patrick Waite: The consistency of our results over time comes from our strong property locations and the value that each of our residents and guests finds at their own property. Value is top of mind for consumers across the country, including homebuyers and vacationers. Our offerings are attractive in any economy, and we are particularly well positioned to serve customers who are looking for value in a challenging economic environment. Our MH portfolio maintains high occupancy and provides consistent revenue growth. We sold 255 new homes during the second quarter, an increase of 13% year over year.

Patrick Waite: Thanks, Marguerite.

Patrick Waite: The consistency of our results over time comes from our strong property locations and the value that each of our residents and guests finds at their home property.

Patrick Waite: Value is top of mind for consumers across the country, including homebuyers and vacationers.

Patrick Waite: Our offerings are attractive in any economy, and we are particularly well positioned to serve customers who are looking for value in a challenging economic environment.

Patrick Waite: Our MH portfolio maintains high occupancy and provides consistent revenue growth.

Patrick Waite: Since 2018, the CAGR for total MH revenue has been 5.6%. These results are driven by consistent rate growth through economic cycles, coupled with an opportunity for occupancy. This long-term demand is supported by the value residents find in our community. High-quality homes that compare favorably to alternatives in our sub-market and an active lifestyle that is not available elsewhere at the price point offered by ELS Community College. Today's homebuyers are increasingly focused on value and affordability given increases in housing costs and higher interest rates.

Patrick Waite: We sold 255 new homes during the second quarter, an increase of 13% year-over-year.

Patrick Waite: Since 2018, the CAGR for total MH revenue is 5.6%.

Patrick Waite: These results are driven by consistent rate growth through economic cycles coupled with an opportunity for occupancy growth.

Patrick Waite: This long-term demand is supported by the value residents find in our communities.

Patrick Waite: High-quality homes that compare favorably to alternatives in our sub-markets, and an active lifestyle that is not available elsewhere at the price point offered at ELS Communities.

Patrick Waite: Today's homebuyers are increasingly focused on value and affordability given increases in housing costs and higher interest rates.

Patrick Waite: Manufactured housing offers a value advantage compared to site-built homes. The average cost of purchasing an ELS new home is approximately $100,000 compared to the $500,000 average cost of purchasing a new site building. That value holds true for renters in our portfolio as well. Those who rent a new EOS home pay $1,400, or approximately 35% less than the average three-bedroom apartment in the same suburb.

Patrick Waite: Manufactured housing offers a value advantage compared to site build homes.

Patrick Waite: The average cost of purchasing an ELS new home is approximately $100,000 compared to $500,000 average cost of purchasing a new site-built home.

Patrick Waite: That value holds true for renters in our portfolio as well. Those who rent a new ELS home pay $1,400, or approximately 35%, less than the average three-bedroom apartment in the same sub-markets.

Patrick Waite: Manufactured home communities offer value in any economy, but in today's housing market, marked by constrained supply and facing price pressures and increased interest rates, ELS manufactured home communities present exceptional value. The monthly payments for homebuyers in ELS communities are approximately 70% less than the buyers of single-family homes in the same suburb, and homeowners and ELS communities enjoy comparable fixtures and finishes as site-built homeowners, as well as a resort lifestyle in a community setting, and often lower maintenance costs as well, which is another appealing factor for buyers facing higher living expenses.

Patrick Waite: The monthly payments for homebuyers in ELS communities are approximately 70% less than the buyers of single-family homes in the same submarkets.

Patrick Waite: Homeowners in ELS communities enjoy comparable fixtures and finishes as site-build homeowners, as well as a resort lifestyle in a community setting, and often lower maintenance costs as well, which is another appealing factor for buyers facing higher living expenses.

Patrick Waite: The combination of home affordability, inventory availability, and the resort lifestyle found in our communities makes our offerings very attractive to two homebuyers in today's house. For the RV portfolio, we are in the middle of the 2024 summer season, with two of the big three holiday weekends behind us, and transient RV revenue is less than five and a half percent of our total revenue and is prone to volatility largely driven by weather events. Similar to our other RV offerings, Transient Stays offer real value to our guests.

Patrick Waite: The combination of home affordability, inventory availability, and the resort lifestyle found in our communities makes our offerings very attractive to homebuyers in today's housing market.

Speaker Change: For the RV portfolio, we are in the middle of the 2024 summer season, with two of the big three holiday weekends behind us.

Speaker Change: Transient RV revenue is less than five and a half percent of our total revenue and is prone to volatility, largely driven by weather events.

Patrick Waite: Our average rolling stock nightly rate is $70, and our average rental cabin rate is $140, as compared to average hotel nightly rates of $160. Vacationers are looking for value and affordability when considering their travel options, and our RV resorts offer budget-friendly vacations in premier destinations that align with consumers' focus on value this summer, including our longer-term stays. Our average annual site rent is approximately $6,000. While a seasonal site, which is typically a four-month stay for a customer who brings their RV, is about $1,100. The combination of exceptional property locations and a variety of offerings for customers to choose from translates to consistent year-over-year revenue growth. I'll do a quick around the horn to highlight our RV performance.

Speaker Change: Similar to our other RV offerings, Transient Stays offer real value to our guests. Our average rolling stock nightly rate is $70, our average rental cabin rate is $140, as compared to average hotel nightly rates of $160.

Speaker Change: Vacationers are looking for value and affordability when considering their travel options, and our RV resorts offer budget-friendly vacations in premier destinations that align with consumers' focus on value this summer, including our longer-term stays.

Speaker Change: Our average annual site rent is approximately $6,000, while a seasonal site that's typically a four-month stay for a customer who brings their RV is about $1,100 a month.

Speaker Change: The combination of exceptional property locations and a variety of offerings for customers to choose from translates to consistent year-over-year revenue growth.

Patrick Waite: As Marguerite mentioned, since 2018, total RV revenue has produced a CAGR of 5.6%. Debt growth is supported by our strong property locations concentrated in the Sun Belt and along the coast. Florida is our largest market, and given leading in-migration trends and a strong economy, it also leads our portfolio, with a 2018 RV revenue CAGR of 6.6%. The West Region, which includes our next two largest markets, California and Arizona, had a 2018 RV revenue CAGR of 5.1%.

Speaker Change: I'll do a quick around the horn to highlight our RV performance.

Speaker Change: As Marguerite mentioned, since 2018, total RV revenue produced a CAGR of 5.6%. That growth is supported by our strong property locations concentrated in the Sun Belt and along the coasts.

Marguerite: Florida is our largest market and given leading in-migration trends and a strong economy, it also leads our portfolio with the 2018 RV revenue CAGR of 6.6%.

Marguerite: The West region, which includes our next two largest markets, California and Arizona, produced a 2018 RV revenue CAGR of 5.1%.

Patrick Waite: Our north region, ranging from the Great Lakes to the eastern coastline, produced a 2018 CAGR of 5.3 percent. The revenue growth rate for both our MH and RV portfolios is approaching 6%. Those results come from consistently meeting resident and customer demand. In today's environment, consumers are seeking value, and we continue to provide high-quality lifestyle offerings at an attractive price.

Marguerite: Our north region, ranging from the Great Lakes to the eastern coastline, produced a 2018 CAGR of 5.3 percent.

Marguerite: The revenue growth caters for both our MH and RV portfolios are approaching six percent.

Marguerite: Those results come from consistently meeting resident and customer demand.

Marguerite: In today's environment, consumers are seeking value, and we continue to provide high-quality lifestyle offerings at an attractive price.

Paul Seavey: Thanks, Patrick, and good morning, everyone. I will highlight some takeaways from our second quarter and June year-to-date results, review our guidance assumptions for the third quarter and full year 2024, and close with a discussion of our balance sheet. Second quarter normalized FFO was $0.66 per share, $0.02 higher than the midpoint of our guidance range. Strong portfolio performance generated five and a half percent NOI growth in the quarter, almost 100 basis points higher than guidance.

Marguerite: I'll now turn it over to Paul.

Paul Seavey: Second quarter normalized FFO was 66 cents per share, two cents higher than the midpoint of our guidance range. Strong portfolio performance generated five and a half percent NOI growth in the quarter, almost a hundred basis points higher than guidance.

Paul Seavey: FFO at 69 cents per share and includes 6.2 million dollars of insurance recovery revenue that has been deducted from normalized FFO. Core community-based rental income increased 6.2% for the quarter compared to 2023, primarily as a result of noticed increases to renewing residents and market rent paid by new residents after resident turnover. We increased the number of homeowners by 171 sites in the quarter.

Paul Seavey: FFO with 69 cents per share and includes 6.2 million dollars of insurance recovery revenue that has been deducted from normalized FFO.

Paul Seavey: Core Community-Based Rental Income increased 6.2% for the quarter compared to 2023, primarily as a result of noticed increases to renewing residents and market rent paid by new residents after resident turnover.

Paul Seavey: Core RV and Marina Annual Base Rental Income, which represents approximately two-thirds of total RV and Marina Base Rental Income, increased 6.6% in the quarter and 7.3% year-to-date compared to the prior year. Year-to-date in the core portfolio, seasonal rent decreased 2.4%, and transient decreased 2.7%. We continue to see offsetting reductions in variable expenses.

Paul Seavey: We increased homeowners by 171 sites in the quarter.

Paul Seavey: Year-to-date in the core portfolio, Seasonal Rent decreased 2.4% and Transient decreased 2.7%. We continue to see offsetting reductions in variable expenses.

Paul Seavey: For the June year-to-date period, the net contribution from our membership business was $29.2 million, an increase of 1.7% compared to the prior year. Membership dues revenue increased 1.3% and 2% for the second quarter and junior year to date, respectively, compared to the prior year. Year-to-date, we've sold approximately 10,500,000 trails.

Paul Seavey: For the June year-to-date period, the net contribution from our membership business was $29.2 million, an increase of 1.7% compared to the prior year.

Paul Seavey: Membership dues revenue increased 1.3% and 2% for the second quarter and junior to date, respectively, compared to the prior year.

Paul Seavey: Camping pass memberships; also, during the year-to-date period, members purchased approximately 1,800 upgrades at an average price of approximately $9,200. Core utility and other income increased 6.1% for the June year-to-date period compared to the prior year, which includes pass-through recovery of real estate tax increases from 2023. Our utility income recovery percentage was 46.4% year to date in 2024, about 100 basis points higher than the same period in 2023. Second quarter core operating expenses increased 3.4% compared to the same period in 2023.

Paul Seavey: Year-to-date, we've sold approximately 10,500,000 trails, camping pass memberships. Also during the year-to-date period, members purchased approximately 1,800 upgrades at an average price of approximately $9,200.

Paul Seavey: Core Utility and Other Income increased 6.1% for the June year-to-date period compared to prior year, which includes pass-through recovery of real estate tax increases from 2023.

Paul Seavey: Our utility income recovery percentage was 46.4% year-to-date in 2024, about 100 basis points higher than the same period in 2023.

Paul Seavey: Second quarter, core operating expenses increased 3.4% compared to the same period in 2023. Expense growth was 200 basis points lower than guidance, mainly resulting from savings in payroll and repairs and maintenance expenses.

Paul Seavey: Expense growth was 200 basis points lower than guidance, mainly due to savings in payroll and repairs and maintenance expenses. June year-to-date expense growth was 3.7% and includes the impact of real estate tax increases effective in late 2023 as well as our April 1 2024 property and casualty insurance. For the second quarter, core property operating revenues increased 4.6%, while core property operating expenses increased 3.4%, resulting in growth in core NOI before property management of five and a half percent. For the year to date period, core NOI before property management increased 6.4%. Income from property operations generated by our non-corp portfolio was $3.3 million in the quarter and $8.5 million year to date.

Paul Seavey: June year-to-date expense growth was 3.7% and includes the impact of real estate tax increases effective in late 2023, as well as our April 1st, 2024 property and casualty insurance renewal.

Paul Seavey: For the second quarter, core property operating revenues increased 4.6%, while core property operating expenses increased 3.4%, resulting in growth in core NOI before property management of 5.5%.

Paul Seavey: For the year-to-date period, core NOI before property management increased 6.4%.

Paul Seavey: Income from property operations generated by our non-corp portfolio was 3.3 million dollars in the quarter and 8.5 million dollars year to date.

Paul Seavey: The press release and supplemental package provide an overview of 2024 third-quarter and full-year earnings guidance. The following remarks are intended to provide context for our current estimate of future results. All growth rate ranges and revenue and expense projections are qualified by the risk factors included in our press release and supplemental package.

Paul Seavey: The press release and supplemental package provide an overview of 2024 third quarter and full year earnings guidance.

Paul Seavey: We've increased our full year 2024 normalized FFO guidance by $0.02 per share to $2.91 per share at the midpoint of our range of $2.86 to $2.96 per share. Full year normalized FFO per share at the midpoint represents an estimated 5.7% growth rate compared to 2023. We expect third quarter normalized FFO per share in the range of 69 cents to 75 cents.

Speaker Change: The following remarks are intended to provide context for our current estimate of future results.

Speaker Change: All growth rate ranges and revenue and expense projections are qualified by the risk factors included in our Press Release and Supplemental Package.

Speaker Change: We've increased our full-year 2024 normalized FFO guidance $0.02 per share to $2.91 per share at the midpoint of our range of $2.86 to $2.96 per share.

Speaker Change: Full-year normalized FFO per share at the midpoint represents an estimated 5.7% growth rate compared to 2023.

Paul Seavey: We project full-year core property operating income growth of 5.9% at the midpoint of our range of 5.4% to 6.4%. Full-year guidance assumes core base rent growth of 5.6% to 6.6% for MH and 3.3% to 4.3% for RV and marina. The midpoints of our guidance assumptions for combined seasonal and transient show a decline of 4.5% in the third quarter and a decline of 2.5% for the full year compared to the respective periods last year. However, core property operating expenses are projected to increase 3.3% to 4.3%.

Speaker Change: We expect third quarter normalized FFO per share in the range of $0.69 to $0.75.

Speaker Change: We project full-year core property operating income growth of 5.9% at the midpoint of our range of 5.4% to 6.4%.

Speaker Change: Full year guidance assumes core base rent growth in the ranges of 5.6% to 6.6% for MH and 3.3% to 4.3% for RV and marina.

Speaker Change: The midpoints of our guidance assumptions for combined, seasonal, and transient show a decline of 4.5% in the third quarter and decline of 2.5% for the full year compared to the respective periods last year.

Paul Seavey: Our full-year expense growth assumption includes the benefit of savings in repairs and maintenance and payroll expense during the first six months of 2024, as well as the impact of our April 1st insurance renewal for 2024. As a reminder, we make no assumption about the impact of a material storm event that may occur.

Speaker Change: Core property operating expenses are projected to increase 3.3% to 4.3%.

Speaker Change: Our full-year expense growth assumption includes the benefit of savings in repairs and maintenance and payroll expense during the first six months of 2024, as well as the impact of our April 1st insurance renewal for 2024.

Paul Seavey: The full-year guidance model makes no assumptions regarding the use of free cash flow we expect to generate in 2024. Our third quarter guidance assumes core property operating income growth is projected to be four and a half percent at the midpoint of our guidance range. In our core portfolio, property operating revenues are projected to increase 4.4%, and expenses are projected to increase 4.4%, both at the midpoint of the guidance. I'll now provide some comments on our balance sheet and the financing market.

Speaker Change: As a reminder, we make no assumption for the impact of a material storm event that may occur. The full year guidance model makes no assumptions regarding the use of free cash flow we expect to generate in 2024.

Speaker Change: Our third quarter guidance assumes core property operating income growth is projected to be 4.5% at the midpoint of our guidance range.

Speaker Change: In our core portfolio, property operating revenues are projected to increase 4.4% and expenses are projected to increase 4.4%, both at the midpoint of the guidance range.

Paul Seavey: As noted in the earnings release and supplemental package, we closed on a modification of our $500 million unsecured line of credit that extends the maturity to July 2028 and provides a one-year extension option related to our $300 million unsecured term loan. We're pleased with this execution as the modification closed with no material modification of terms, and the bank group remains substantially the same.

Speaker Change: I'll now provide some comments on our balance sheet and the financing market.

Speaker Change: As noted in the Earnings Release and Supplemental Package, we closed on a modification of our $500 million unsecured line of credit that extends the maturity to July 2028 and provides a one-year extension option related to our $300 million unsecured term loan.

Speaker Change: We're pleased with this execution as the modification closed with no material modification of terms and the bank group remains substantially the same.

Paul Seavey: Current secure debt terms vary depending on many factors, including lender, borrower, sponsor, and asset type and quality. Current 10-year loans are quoted between 5.5% and 6%, 60% to 75% loan-to-value, and 1.4 to 1.6 times debt service coverage. We continue to see solid interest from life companies and GSEs to lend for 10-year terms. High-quality, age-qualified MH assets continue to command the best financing terms. In terms of our liquidity position, we have approximately $450 million available on our line of credit, and our ATM program has $500 million in capacity.

Speaker Change: Current secured debt terms vary depending on many factors including lender, borrower-sponsor, and asset type and quality.

Speaker Change: Current 10-year loans are quoted between 5.5% and 6%, 60% to 75% loan-to-value, and 1.4 to 1.6 times debt service coverage.

Speaker Change: We continue to see solid interest from life companies and GSEs to lend for 10-year terms. High-quality, age-qualified MH assets continue to command best financing terms.

Speaker Change: In terms of our liquidity position, we have approximately $450 million available on our line of credit, and our ATM program has $500 million of capacity.

Paul Seavey: Our weighted average secured debt maturity is almost 10 years. Our debt to adjusted EBITDA is 5.1 times, and interest coverage is 5.1 times. We continue to place a high importance on balance sheet flexibility, and we believe we have multiple sources of capital available to us. Now, we would like to open it up for questions.

Speaker Change: Our weighted average secured debt maturity is almost 10 years. Our debt to adjusted EBITDA is 5.1 times, and interest coverage is 5.1 times.

Speaker Change: We continue to place high importance on balance sheet flexibility, and we believe we have multiple sources of capital available to us.

Operator: Certainly. And ladies and gentlemen, if you do have a question at this time, please press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again. One moment for our first question. And our first question comes from the line of Josh Dennerlein from BFA. Your question, please.

Speaker Change: Now we would like to open it up for questions.

Speaker Change: Certainly. And ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again. One moment for our first question.

Joshua Dennerlein: Yeah, hey guys, I saw seasonal revenue is weak during the quarter. Could you remind us how you define a seasonal customer and then just any additional detail you could provide?

Joshua Dennerlein: And our first question comes from the line of Josh Dennerlein from V of A. Your question please. Yeah, hey guys, I saw seasonal revenue is weak during the quarter. Could you remind us how you define the seasonal customer and then just any additional detail you could provide?

Patrick Waite: Yeah, Josh. A seasonal customer is a customer who stays with us longer than a month and shorter than six months.

Speaker Change: Yeah, Josh, a seasonal customer is a customer who stays with us longer than a month and shorter than six months.

Joshua Dennerlein: Okay. Is that just... Go ahead. Sorry, I was going to ask if that RV is in Marina or just apply to RV? Yeah.

Speaker Change: Okay. Is there just... Huh?

Speaker Change: Go ahead. Sorry. I was going to ask is that RV in Marina or just apply to RV just...

Patrick Waite: Well, it would apply to both, but the practical answer is that the marina customers we have are predominantly annual customers with some, you know, very limited shorter-term day use.

Speaker Change: Well, it would apply to both, but the practical answer is that the Marina customers we have are annual customers predominantly with some, you know, very limited, shorter term day use.

Joshua Dennerlein: Okay. Okay. Sorry. I cut you off. No, no, no.

Speaker Change: Okay, okay, sorry, I cut you off.

Joshua Dennerlein: Okay, and then on the RV and marina revenue outlook, I saw you lowered the annual, looks like 10 bits at the midpoint. Any particular color on that? Like which row, kind of the revision there, and then any kind of differences between the RV and then the marina side?

Speaker Change: No, no, no.

Speaker Change: Okay, and then on the RV and marina revenue outlook, I saw you lowered the...

Speaker Change: Annual, looks like 10 bips at the midpoint. Any particular color on that? Like what drove kind of the revision there? And then any kind of differences between the RV and then the marina side?

Patrick Waite: I think I'll go back to a comment I made on the April call 2024 is a little bit tricky just because of leap years and the impact of that. So we have this one-day issue that impacted the first quarter, and then it impacts the second, third, and fourth quarters in the opposite direction.

Speaker Change: I think, I mean...

Speaker Change: I'll go back to a comment I made on the April call, 2024 is a little bit tricky just because of leap year and the impact of that. So we have this one day issue that impacted the first quarter and then it impacts the second, third, and fourth quarters in the opposite direction.

Patrick Waite: So I think that this slight 10 basis point movement is really mostly attributed to refining that as we're moving through the year. And then with respect to the RV and marina and any differential there, not a meaningful difference. I think that the RV rate and the marina rates are relatively close, with RV maybe being, you know, 50 basis points higher than the marina rate increases.

Speaker Change: So I think that's the, you know, this slight 10 basis point movement is really mostly attributed to refining that as we're moving through the year.

Speaker Change: And then with respect to the, the, um,

Speaker Change: RV and marina and any differential there, not a meaningful difference. I think that the RV rate and the marina rates are relatively close with RV maybe being, you know, 50 basis points higher than the marina rate increases.

Joshua Dennerlein: Okay, I appreciate that. Thank you. Thanks, Jeff.

Speaker Change: Okay, appreciate that.

Eric Wolfe: And our next question comes from the line of Eric Wolfe from Citi. Your question, please. Hey, thanks.

Speaker Change: Thank you. Thanks, Jeff. Thanks, Jeff. Thank you.

Speaker Change: And our next question comes from the line of Eric Wolfe from Citi. Your question, please.

Eric Wolfe: Hey, thanks. Maybe to follow up on that annual RV, you're guiding for 7% revenue growth. I think I remember last year, you mentioned that you're going to be increasing rates 7% for the annual RV. Because is there like an offset for the conversion impact, because I would think that with conversions from transient to annual UT above 7% revenue growth there, but didn't know if there was some kind of

Eric Wolfe: Hey, thanks. Maybe to follow up on that annual RV, you're guiding the 7% revenue growth. I think I remember...

Eric Wolfe: Last year, you mentioned that you're going to be increasing rates 7% for the annual RV. Is there an offset to the conversion impact? Because I would think that with conversions from transient to annual, you'd see above 7% revenue growth there, but didn't know if there was some kind of offset.

Eric Wolfe: Some kind of offset in. In other words, if you're increasing the rate by 7%, right, that alone would get you to 7% revenue growth. And then if you're also converting customers from transient to annual, that would increase it above 7%. So I guess I'm just trying to understand how you sort of get to 7% revenue growth with the 7% rate increase plus the incremental impact from converting customers from transit to annual.

Eric Wolfe: Some kind of offset in.

Speaker Change: In other words, if you're increasing rate by 7%, that alone would get you to 7% revenue growth.

Speaker Change: And then if you're also converting customers from transient to annual, that would increase it above 7%. So I guess I'm just trying to understand how you sort of get to 7% revenue growth with the 7% rate increase plus the incremental impact from converting customers from transient to annual.

Patrick Waite: And there was also, Eric, some offset to that for some of the workers that were with us on an annual basis that are no longer with us, you know, from hurricane cleanup, etc. So you saw some of that reduction in annual costs that offset that rate increase.

Speaker Change: And there was also, Eric, there's also some offset to that for some of the workers that were with us on an annual basis that are no longer with us, you know, from from hurricane cleanup, etc. So you saw some of that reduction in annual count.

Eric Wolfe: That makes sense. And then, as far as transit performance is concerned, you've talked in the past about how weather is the main determinant. If you strip out the locations that had bad weather, either this quarter or this year, or however you want to define it, I'm just curious how much you see the transit business growing. I'm trying to think through how things would look different if you had maybe two consecutive years of consistent weather, or if there's some way to estimate the impact that weather is having on your transient business.

Speaker Change: that offsets that rate increase.

Eric Wolfe: That makes sense. And then, as far as the transient performance, you've talked in the past about how weather is the main determinant.

Speaker Change: If you strip out the locations that had bad weather, either this quarter or this year, or however you want to define it, just curious how much you see the transit business growing. I'm trying to think through how things would look different if you had, you know, maybe two consecutive years of consistent weather, or if there was some way to...

Speaker Change: to estimate the impact that weather is having on your transient business.

Eric Wolfe: I think what we see is that probably 10 to 15 of our properties are impacted by the weather and then the resulting issues that you see as a drag on the transient base. In the areas where you don't have that weather impact, we've seen an increase in transient revenue.

Speaker Change: I think what we see is that

Speaker Change: Probably 10 to 15 of our properties are impacted by the weather and then the resulting issues that you see as a drag to the transient base. In the areas where you don't have that weather impact, we've seen an increase in transient revenue.

Eric Wolfe: I guess, is there a way to quantify what that is? Is it just pricing, that it's up 3%, 5%, just trying to understand how much weather might be taking that growth rate down, if possible? Yes. I would say it's about 3% overall on those that are not impacted by the weather, and if you're impacted by the weather, it's not a rate issue; it's a night issue. People just aren't staying with us on those nights.

Speaker Change: I guess is there a way to quantify what that what that is like that is it's just pricing that like that it's up 3% 5% just trying to understand how much weather might be

Speaker Change: Taking that growth rate down if possible. Yes. Yes. Yes. I would say it's about three percent overall on those that are not impacted by the weather and that if you're impacted by the weather, it's not a rate issue, it's a night issue. People just aren't staying with us on those nights.

Speaker Change: Thank you.

Bradley Barrett Heffern: And our next question comes from the line of Brad Heffern from RBC. Your question, please.

Eric Wolfe: Thanks, Eric. Thank you.

Eric Wolfe: And our next question comes from the line of Brad Heffern from RBC. Your question please.

Bradley Barrett Heffern: Yeah, hey everybody. Can you give more color around the lower operating expense guidance? I think you said in the prepared comments about payroll and R&M savings, but how much of that overall is just an adjustment to lower RV expectations and then how much of it is true savings?

Bradley Barrett Heffern: Hey everybody, can you give more color around the lower operating expense guidance? I think you said in the prepared comments that payroll and R&M savings, but how much of that overall is just an adjustment to lower RV expectations and then how much of it is true, you know, savings?

Paul Seavey: Yeah, I think when I think about the full year, Brad, if you just look at the expense growth assumption, so we're 3.8% of the midpoint of our range. Utility payroll and R&M overall, that's roughly two-thirds of our expenses. And those are increasing by almost 2%. Now, that's about 100 basis points lower than the July CPI print. And I'll say that that mainly results from a favorable year over year comp that we have in R&M. So in 2023, we had some, as well. You know, to your point.

Bradley Barrett Heffern: Yeah, I think when I think about the full year, Brad, if you just look at the expense growth assumptions, over 3.8% of the midpoint of our range.

Speaker Change: Utility payroll and R&M overall. That's roughly two-thirds of our expenses.

Speaker Change: And those are increasing almost 2%. Now, that's about 100 basis points lower than the July CPI print. And I'll say that that mainly results from a favorable year-over-year comp that we have in R&M. So, 2023, we had some...

Speaker Change: a smaller

Speaker Change: scale, I'll call them storm events throughout the first six months of the year.

Speaker Change: And so we have that favorable impact. And then, you know, the remaining third of our expenses include real estate taxes and insurance. And those are going up over 7%.

Speaker Change: So, that's kind of how we think of it. Inside that mix is the impact of the transient business as well, you know, to your point.

Bradley Barrett Heffern: Okay, got it, thanks. And then it looks like the expectation right now for the cost-of-living adjustment 25 is in the mid 2% range. Is there any reason to think that MH rent growth, the differential of that to the COLA adjustment would be higher or lower than normal? There's obviously a lag when it was moving higher, so I'm curious if there's also a lag when it moves down as well.

Speaker Change: Okay, got it. Thanks.

Speaker Change: And then it looks like the expectation right now for the cost-of-living adjustment, 25, is...

Speaker Change: in the mid 2% range. Is there any reason to think that MHRNC growth, the differential of that to the COLA adjustment, would be higher or lower than normal? There's obviously a lag when it was moving higher, so I'm curious if there's also a lag when it moves down as well.

Paul Seavey: I think if you look at our latest investor presentation that we put out a couple of months ago, I think it's on page 23, it highlights the, you know, the outperformance of annual rate increases compared to COLA adjustments over the long term. So, if you go back to 2000, you see an average spread of about 140 basis points.

Speaker Change: I think if you look at our latest investor presentation that we put out a couple of months ago, I think it's on page 23, it highlights the, you know, the outperformance of that annual rate increases compared to COLA adjustments over the long term.

Paul Seavey: You know, our focus is really on negotiating those annual rent increases with our residents, which includes an open dialogue and feedback from the residents. And we'll be able to give you an update on that later in the year. And I would also remind you, Brad, that we have the...

Speaker Change: So if you go back to 2000, you see an average spread of about 140 basis points.

Speaker Change: You know, our focus is really on negotiating those annual rent increases with our residents, which include an open dialogue and feedback from the residents, and we'll be able to give you an update on that later on in the year.

Paul Seavey: And I would also remind you, Brad, that we have had the benefit in recent years of the increase in new residents who are coming into the market. And year-to-date, in 2024, that increase has been about 14%.

Speaker Change: And I would also remind you, Brad, that we have had the benefit in recent years of the increases to new residents who are coming in to market. And year-to-date, in 2024, that increase has been about 14%.

Bradley Barrett Heffern: Okay, thank you. Thanks, Chris. Thank you.

Keegan Grant Carl: And our next question comes from the line of Keegan Carl from Wolfe Research. Your question, please.

Bradley Barrett Heffern: Okay, thank you.

Bradley Barrett Heffern: Thanks, Chris. Thank you.

Speaker Change: And our next question.

Speaker Change: Comes from the line of Keegan Carl from Wolfe Research. Your question please.

Keegan Grant Carl: Yeah, thanks for the time guys. Maybe first, just two part question here. I guess one, what's your view on home sales for the balance of the year? And then how do you envision that impacting your rental homes portion of your business?

Patrick Waite: Sure, Patrick. Well, the trend that we've seen with respect to, first, I'll touch on the rental homes, and Marguerite referenced it in her opening comments. We're down below 3% of our total occupied sites. You know, that number may continue to go slightly down slightly, and I will continue to manage that overall load.

Speaker Change: that's ticked out on a year-over-year basis.

Patrick Waite: Sure, Patrick. Yeah.

Speaker Change: Well the trend that we've seen with respect to, first I'll touch on the rental homes and Marguerite referenced it in her opening comments, we're down below 3% of our total occupied sites.

Keegan Grant Carl: But just as a reminder, that's down from a high of around 9% following the GFC, and we've managed that number down to make sure that we're in a position to be able to respond to any shocks to the broader housing market if rental becomes more of a priority than home sales. With respect to our home sales, you know, 225 sales in the quarter, as I mentioned in my comments, you know, up 13% year over year.

Speaker Change: [inaudible]

Speaker Change: That number may continue to go slightly.

Speaker Change: Go down slightly.

Speaker Change: We'll continue to manage that overall load. But just as a reminder, that's down from a high of around 9% following the GFC. And we've managed that number down to make sure that we're in a position to be able to respond to any shocks to the broader housing market if rental becomes more of a priority than home sales.

Keegan Grant Carl: So we continue to see, you know, consistent demand. And while we have seen some moderation at the higher price points, we still see, you know, consistent demand for manufactured homes in our communities. And just as a reference point, pre-COVID, a year where we're selling, you know, call it 500 to 600 new homes over the course of a full year would be considered a favorable outcome. So if we're in the 200 new home sales a quarter range, we consider that to be favorable. Got it. Then, shifting gears, maybe just a more general question.

Speaker Change: with respect our home sales that you know

Speaker Change: 225 sales in the quarter, as I mentioned in my comments, you know, up 13%.

Speaker Change: year-over-year, so we continue to see, you know, consistent demand. And I, while we have seen some moderation at the higher price points, we still see, you know, consistent demand for manufactured homes.

Speaker Change: in our communities, and just as a reference point, pre-COVID, a year where we're selling.

Speaker Change: We'll call it five to six hundred new homes over the course of a full year. That would be considered a favorable outcome. So if we're in the two hundred new home sales a quarter range, we consider that to be favorable.

Speaker Change: Got it. Then shifting gears, maybe just a more general question, but just curious to see what you guys are seeing in the transaction market and if there's any movement at all on cap rates.

Patrick Waite: Sure. The transaction market, as you know, has slowed down significantly over the last few years. There are still a lot of buyers that are interested in the assets. However, their cap rate expectations have increased, but sellers really have been slow to adjust. The transaction volume is very low for institutional quality assets. These assets continue to command really strong cap rates, but there's a lack of product for sale. We're seeing smaller deals that really don't fit into our acquisition set trading, often with seller financing.

Speaker Change: Sure.

Speaker Change: The transaction market, as you know, has slowed down significantly over the last few years. There are still a lot of buyers that are interested in the assets. Buyers' cap rate expectations have increased, but sellers really have been slow to adjust.

Speaker Change: Transaction volume is very low for institutional quality assets. These assets continue to command really strong cap rates, but there's a lack of product for sale. We're seeing smaller deals that really don't fit into our acquisition set trading, often with seller financing.

Speaker Change: [inaudible]

Speaker Change: Super helpful. Thanks for the time guys. Thank you.

Samir Upadhyay Khanal: And our next question comes from the line of Samir Khanal from Evercore. Your question, please.

Speaker Change: Thank you.

Speaker Change: And our next question comes from the line of Samir Khanal from Evercore. Your question please.

Samir Upadhyay Khanal: Hi, good morning. Hey Marguerite, I just want to ask a follow-up question here.

Marguerite M. Nader: I think you said weather hurt transient growth by three percent. So I just want to make sure when you're down roughly five in the quarter, that would mean you were down two percent X weather. Is that kind of the right way to think about it?

Samir Upadhyay Khanal: Hi, good morning. Hey, Marguerite, I just want to ask a follow-up here. I think you said weather hurt transient growth by three percent, so I just want to make sure when you're down roughly five in the quarter, that would mean you were down two percent x weather. Is that kind of the right way to think about it?

Marguerite M. Nader: No, what I was saying was that for the ones that had a good weather event, you'd be up about 3%.

Marguerite: No, what I was saying that X weather, for the ones that had a good weather event, you'd be up about 3%.

Samir Upadhyay Khanal: Okay, okay. Got it. Got it. Sorry about that.

Marguerite M. Nader: And then just in terms of the acquisition, as a follow-up. You know, you said there isn't much out there in terms of acquisitions. But how should we think about your opportunity set? I mean, you haven't been active sort of in the first half of the year, trying to understand kind of the opportunities that you're seeing right now. Yeah, sure. On the acquisition side. Sure. So, you know, we've really positioned ourselves over here.

Speaker Change: Okay, okay, got it, got it. Sorry about that. And then, just in terms of the acquisition, as a follow-up, I know

Speaker Change: You know, you said there isn't much out there in terms of acquisitions, but how should we think about your opportunity set? I mean, you haven't been active, sort of, in the first half of the year. Try to understand, kind of, what the opportunities that you're seeing right now on the acquisition side.

Marguerite M. Nader: Sure. So, you know, we've really positioned ourselves over time to find internal growth from operations and expansion when we grew from 41 properties 30 years ago to 450 properties. The acquisition market has not always been conducive for us to transact, which is really why we're focused on, you know, keeping our balance sheet in great shape to be able to transact when an interesting acquisition comes to market.

Speaker Change: Sure, so you know

Speaker Change: We've really positioned ourselves over time to find internal growth from operations and expansion when we've grown from 41 properties 30 years ago to 450 properties. The acquisition market has not always been conducive for us to transact, which is really why we're focused on keeping our balance sheet in great shape to be able to transact when an interesting acquisition comes to market. We're continuing to talk with...

Marguerite M. Nader: So, we're continuing to talk with sellers who aren't quite, you know, determined whether or not they're timing their sale. And our acquisition group continues to meet with owners on a very regular basis. We know the properties we want to own. And when a transaction is completed, we're able to report on a transaction, we'll talk about it.

Speaker Change: sellers who aren't quite, you know, determined whether or not they're timing on their sale. And our acquisition group continues to meet with owners on a very regular basis.

Speaker Change: We know the properties we want to own, and when we're able to report on a transaction, we'll talk about it.

James Colin Feldman: And our next question comes from the line of Jamie Feldman from Wells Fargo. Your question, please.

Speaker Change: Okay, thank you.

Speaker Change: Thank you, Samir. Thank you.

Speaker Change: And our next question.

Speaker Change: comes from the line of Jamie Feldman from Wells Fargo. Your question, please.

James Colin Feldman: Great, thanks for taking my question. Good morning.

Patrick Waite: I'm a seasonal and transient segment. It seems the current guide implies better growth versus 3Q. I know much of that is due to the mix of seasonal versus transient. Could you talk about the transient and seasonal fundamentals in the Northeast and Pacific Northwest versus those in Florida and Arizona in a bit more detail?

James Colin Feldman: Great, thanks for taking my question.

James Colin Feldman: Morning. I'm the seasonal and transient segment. Teams current guide implies better growth.

Speaker Change: versus 3Q. I know much of that is due to the mix of seasonal versus transient, but could you talk about the transient and seasonal fundamentals in the Northeast and Pacific Northwest versus those in Florida and Arizona in a bit more detail?

James Colin Feldman: Sure, I can touch on that. As you referenced, the seasonal component is largely driven by our Florida portfolio, and that's more of a Q4 and a Q1 driver. When we look to the northern markets, we're in the middle of that season today, and it's a much smaller number, and the results are driven predominantly, I guess, consistent with the balance of our portfolio by the annual business, and if you're looking at seasonal and transient, that's going to be largely driven by the transient business in those sub-markets.

Speaker Change: Sure, I mean, I can touch on that.

Speaker Change: I mean, as you referenced, the seasonal component is largely driven by our Florida portfolio.

Speaker Change: And that's more of a Q4 and a Q1 driver.

Speaker Change: When we look to the northern markets, we're in the middle of that season today, it's a much smaller number and the results are driven predominantly.

Speaker Change: I guess, consistent with the balance of our portfolio by the annual business. And if you're looking at seasonal and transient, it's going to be largely driven by the transient business in those sub-markets. And what we've seen across those markets this year is some normalization in demand,

James Colin Feldman: And what we've seen across those markets this year is some normalization in demand, spoken of in the last few calls as well, but as Marguerite highlighted, as we move through this summer season, while we face some challenges with weather, we continue to see customer demand for our property.

Speaker Change: spoken on that in the last few on the calls as well, but you know as Marguerite highlighted, as we move through this summer season, while we face some challenges on weather, we continue to see

Marguerite: customer demands to come to our properties.

James Colin Feldman: Okay, thanks for that. And then, I guess, just to go back to the transit Action Market one more time, I mean, kind of an interesting point in the cycle, expectations for lower rates are generational, and people just want to hold on to them. You think, you know, if rates are really pulling back, this would be the moment if people have been waiting on the sidelines.

Speaker Change: Okay, thanks for that. And then I guess, just to go back to the transit action market one more time, I mean, kind of an interesting point in the cycle, you know, expectations for lower rates.

Speaker Change: We'll see what happens with the election, if they stay low or not. I mean, can you just talk about the typical seller that is even out there? Is there, you know, what's the catalyst to get them to actually transact?

Speaker Change: Or is there just really nothing out there and you just don't see anything trading, regardless of where rates are, just because it's such a tough, all three are just such tough assets to get a hold of?

Speaker Change: generation when people just want to hold on to them.

Patrick Waite: Right. Certainly, I think that could be an indication that some sellers are interested in transacting. What we've long talked about is the majority of the transactions that we've seen over time are a result of a life event of an owner. There is either a retirement or a desire for the family to sell in light of the patriarch or matriarch passing away. We've seen that happen.

Speaker Change: You think, you know, if rates are really pulling back, this would be the moment if people have been waiting on the sidelines.

Speaker Change: Right. Certainly, I think that could be an indication that some sellers are interested in transacting. What we've long talked about is the majority of the transactions that we've seen over time are a result of a life event of an owner. There is either a retirement or a desire for the family maybe to sell in light of the life event of an owner.

Patrick Waite: The key for us is to just keep engaging with these owners that are interested in the assets that we're interested in owning. There's no real change to that. You mentioned rates. Many of these assets that we are interested in do not have any financing on them. They're free of debt, so that isn't a driver for the owner to have to refinance or anything like that. There is really no distress in these assets at all.

Speaker Change: the patriarch or matriarch passing away.

Speaker Change: The key for us is to just keep engaged with these owners that we're interested in, the assets that we're interested in owning, so no real change to that. I mean, the thing, you mentioned rates.

Speaker Change: Many of these assets that we are interested in do not have any financing on them. They're free of debt, so that isn't a driver for the owner to have to refinance or anything like that. There is really no distress.

James Colin Feldman: Okay, if I could just ask, like, how many assets are you really tracking? and each property type.

Speaker Change: in these assets at all.

Speaker Change: Okay, if I could just ask, like, how many assets are you really tracking?

Patrick Waite: Well, when you say tracking, I mean, we have a target list that's been roughly the same target list for the last 30 years because there has been really no new supply in the marketplace. So we have a target list that we focus on assets that we'd like to own, and then, of course, we have a smaller subset of opportunities that we're looking at right now and that our teams engage with.

Speaker Change: in each property type.

Speaker Change: Well, when you say tracking, I mean, we have a target list that's been, you know, roughly the same target list for the last 30 years because there has been really no new supply in the marketplace. So, we have, you know, a target list that we focus on assets that we'd like to own and then, of course, we have a smaller subset of opportunities that we're looking at right now and that our teams engage with.

James Colin Feldman: Okay, but in terms of like account balance.

Patrick Waite: Well, we don't talk, we have never, we don't talk about the subset. The broader set is that, you know, those 1,000 plus opportunities that we're interested in.

Speaker Change: Okay, but in terms of like account?

Speaker Change: Well, we don't talk, we have never, we don't talk about the subset. The broader set is that, you know, is that 1,000 plus opportunities that we're interested in.

James Colin Feldman: Okay. All right. Thank you.

Wesley Keith Golladay: Thank you. And our next question comes from the line of Wes Golladay from Baird. Your question, please.

Speaker Change: Okay. All right. Thank you.

James Colin Feldman: Thank you, Jamie.

Speaker Change: Thank you.

Wesley Keith Golladay: Hi everyone, can you comment on annual RV, RV, can you comment on annual RV retention, you know, if you strip out the change in the hurricane cleanup people?

Speaker Change: And our next question comes from the line of Wes Golladay from Baird. Your question please.

Wesley Keith Golladay: Hi everyone, can you comment on annual RV, RV, can you come comment on annual RV retention, you know, if you strip out the the change in the hurricane cleanup people?

Patrick Waite: Yeah, I mean, our long-term turnover is very similar to the MH portfolio. So customers are staying with us for 10 years, so it's roughly a 10% turnover number. Okay.

Speaker Change: Yeah, I mean, our long-term turnover is very similar to the MH portfolio. So customers are staying with us 10 years, so it's roughly a 10% turnover number.

Wesley Keith Golladay: Okay, and then on the seasonal and transient side, you mentioned that night issue. Is that just fewer guests showing up, or are they just staying fewer days? And have you seen any impact on supply on the RV side?

Speaker Change: Okay, and then on the seasonal and transient, you mentioned a night issue. Is that just fewer guests showing up or they're just staying fewer days? And have you seen any impact of supply on the RV side?

Patrick Waite: I think in, well, I'll take the latter part of the question first. In certain markets, there have been new communities developed, and there's been, you know, some impact, but that's, you know, less than a handful of locations across the portfolio. So the supply question isn't one that broadly impacts the portfolio, but it may impact a specific location. And then with respect to the, excuse me, with respect to the nights, we have seen some pullback in terms of the length of those transient stays as we've progressed further from the end of the kind of pandemic period and people's ultimate flexibility.

Speaker Change: I think in, well, I'll take the latter part of the question first. In certain markets, there have been new communities developed and there's been, you know, some impact, but that's, you know,

Speaker Change: less than a handful of locations across the portfolio, so the supply question isn't one that broadly impacts the portfolio, it may impact a specific location.

Speaker Change: and then with respect to...

Speaker Change: With respect to the nights, we have seen some pullback in terms of the length of those transient stays as we've progressed further from the end of the pandemic period and people's ultimate flexibility.

Wesley Keith Golladay: And if you had to guess, would you, or estimate, would you think that we've kind of burned off all that, you know, work-from-home pandemic benefit at this point?

Speaker Change: And if you had to guess, would you, or estimate, would you think that we've kind of burned off all that, you know, work from home, pandemic benefit at this point?

Wesley Keith Golladay: It seems like we're, we're burning through the, if we haven't already, we're burning through the last of it, you know, this, this summer. Okay, thanks for the time, everyone.

Speaker Change: It seems like we're burning through, if we haven't already, we're burning through the last of it, you know, this summer season.

Speaker Change: Okay, thanks for the time everyone. Thank you. Thank you.

Michael Goldsmith: And our next question comes from the line of Michael Goldsmith from UBS. Your question, please.

Speaker Change: Thank you.

Michael Goldsmith: Good morning. Thanks a lot for taking my question. We've talked a little bit about the weather, but I was wondering if you've seen any incremental price sensitivity for your customers on the annual RV membership or transient RV business. I think you called out the average rental cabin rate is $140 compared to the average hotel nightly rate of $160. Is that gap consistent with where it's been over time? I'm just trying to get a sense of the price sensitivity of the customer right now.

Speaker Change: And our next question comes from the line of Michael Goldsmith from UBS. Your question, please.

Michael Goldsmith: Good morning. Thanks a lot for taking my question.

Michael Goldsmith: We've talked a little bit about the weather, but I was wondering if you've seen any incremental price sensitivity from your customer on the annual RV membership or transient RV business. I think you called out, you know, the average rental cabin rate is $140 compared to the average hotel nightly rate of $160. Is that gap consistent of where it's been over time? I'm just trying to get a sense of, you know, the price sensitivity of the customer right now.

Patrick Waite: Yeah, Michael, uh, Patrick, I, I, I, I guess I'll do, first, first I'll say that we have seen opportunity in rate with both our transient, our seasonal customers, and the annual has, like our MH businesses, been consistent to be very predictable. So I would say rate stability and strength across all three business lines. And just to, I guess, touch on a couple of the components that roll up into the total RV revenue. I mentioned the keggers earlier, which, if you take a longer-term view, have been very consistent when you combine the business lines.

Michael Goldsmith: Yeah, Michael, it's Patrick. I guess, first I'll say that the

Patrick Waite: We have seen opportunity in rate with both our transient, our seasonal customers and the annual has, like our MH businesses, has consistent to be very predictable.

Speaker Change: So, I would say rate stability and strength across all three business lines.

Speaker Change: And just to, I guess, touch on a couple of the components that roll up into the total RV revenue, I mentioned the CAGRs earlier, which, if you take the longer term view, have been very consistent.

Patrick Waite: But as a reminder in Q2 for seasonal and transient, on the transient front, April, which now seems like quite some time ago but is the beginning of our summer season, started with cool, wet weather in some very major markets for us, including throughout the North and Northeast, as well as California. On the seasonal front, where we would usually expect some benefit from a cold winter up North, we had a relatively mild winter, and where we would usually pick up some seasonal rain into the beginning of Q2 through extensions of people that wanted to stay in the Sunbelt.

Speaker Change: when you combine the business lines.

Speaker Change: But as a reminder in Q2 for seasonal and transient, on the transient front, April , which now seems like quite some time ago, but is the beginning of our summer season, started with cool, wet weather in some very major markets for us, including throughout the north and northeast, as well as California.

Speaker Change: on the seasonal front.

Speaker Change: where we would usually expect some benefit from a cold winter up north. We had a relatively mild winter.

Speaker Change: and where we would usually pick up some seasonal into the beginning of Q2 through extensions of people that wanted to stay in the Sun Belt.

Patrick Waite: We didn't have that same level of pick-up. And as Marguerite mentioned, also, we've had a transition with respect to hurricane workers, whether or not that be construction, traveling nurses, et cetera, as we're getting further and further away from Ian that we'll receive, but we still have that in the comp period.

Speaker Change: We didn't have that same level of pickup.

Speaker Change: And as Marguerite mentioned also, we've had a transition with respect to hurricane workers.

Marguerite: whether or not that be construction, traveling nurses, etc., as we're getting further and further away from Ian that we'll receive, but we still have that in the comp period.

Michael Goldsmith: Got it. And as a follow-up, you know how much of the same-store expense guidance adjustment was due to savings associated with lower transient RV usage? I'm just trying to get a sense of, you know, the ability to, you know, I think you've done a nice job of offsetting some of the pressure on transient RVs with lower expenses. I'm just trying to get a sense of how much of the expense reduction was your ability to kind of adjust lower due to some of the lower demand.

Speaker Change: Got it. And as a follow-up, you...

Speaker Change: How much of the same-store expense guidance adjustment lower was due to savings associated to lower transient RV usage? I'm just trying to get a sense of...

Speaker Change: you know, the ability, you know, I think you've...

Speaker Change: done a nice job of offsetting some of the pressure on transient RV with lower expenses. I'm just trying to get a sense of how much of the expense reduction was your ability to kind of adjust lower due to some of the lower demand in transient RV.

Paul Seavey: I think, Michael, what I mentioned earlier about the repairs and maintenance and the, you know, the favorable comp that we have year over year from those smaller-scale storm events is a relatively significant contributor this year as compared to what we've seen in variability on the expenses associated with the transient activity in other periods. So it's a larger piece than we've seen in the past coming from the change in transients.

Marguerite: Yeah, I think, I think, Michael, the, uh,

Speaker Change: What I mentioned earlier about the repairs and maintenance and the, you know, the favorable comp that we have year over year from those smaller scale storm events.

Speaker Change: That's a relatively significant contributor this year as compared to, you know, what we've seen in variability on the

Speaker Change: expenses associated with the transient activity in other periods. So it's a it's a larger piece than than we've seen in the past coming from the change in transient.

Michael Goldsmith: And if I can squeeze one more in, you know, can you talk a little bit about the trends that you saw over the July 4th weekend and maybe how that compared to Memorial Day? Yeah, for the fourth time

Speaker Change: And if I can squeeze one more in, you know, can you talk a little bit about the trends that you saw over July 4th weekend and maybe how that compared to Memorial Day?

Patrick Waite: Yeah, for the 4th of July, we finished up 10% year-over-year on transient. A couple of drivers, and we've spoken about the weather, and broadly, we had favorable weather for the holiday weekend. The holiday also fell on a Thursday this year as opposed to Tuesday last year. And just from a comp perspective, the Wednesday to Sunday holiday weekend this year better fits customers' time off and vacation plans than a Friday to Tuesday from last year. Overall, rolling stock performed very well. Rentals even outperformed the rolling stock. And we saw pretty consistent performance across the portfolio, with the Northeast, obviously summer-focused, performing very well, as well as the West, including California.

Speaker Change #100: Yeah, for the 4th of July we finished up 10% year-over-year on transient. A couple of drivers and we've spoken about the weather and broadly we had favorable weather for the holiday weekend.

Speaker Change #100: The holiday also fell on a Thursday this year as opposed to Tuesday last year and just from a comp perspective.

Speaker Change #100: The Wednesday to Sunday holiday weekend this year better fits customers' time off and vacation plans than a Friday to Tuesday from last year.

Speaker Change #100: Overall, rolling stock performed very well. Rentals even outperformed the rolling stock.

Speaker Change #100: And we saw pretty consistent performance across the portfolio, with the Northeast, obviously summer focused, performing very well, as well as the West, including California.

John P. Kim: And our next question comes from the line of John Kim from BMO Capital Markets. Your question, please.

Speaker Change #101: Thank you very much.

Speaker Change #101: Thank you.

Speaker Change #101: And our next question comes from the line of John Kim from BMO Capital Markets. Your question, please.

John P. Kim: So RV demand got a huge boost during COVID, but it looks like now a lot of those gains have been given back when you look at seasonal and transient RV revenue and Thousand Trails membership. They're both below 2021 levels, but they're still above 2019 levels. So I'm wondering if that's the next leg where it goes. Do we retrench all the way back to 2019, both on the revenue and membership side?

John P. Kim: Thank you.

John P. Kim: So, RV demand got a huge boost during COVID. It looks like now a lot of those gains have been given back when you look at seasonal and transient RV revenue and Thousand Trails membership. They're both below 2021 levels.

Speaker Change #103: but they're still above 2019 levels. So I'm wondering if that's the next leg where it goes. Do we retrench all the way back to 2019, both on the revenue and membership side?

Patrick Waite: Well, yeah, it's Patrick. I'll speak to revenue. I don't see retrenching back to 2019 as a trend coming through in our business. The fact that we're in a period of normalization off of that COVID peak, which is a, you know..., fair characterization. I appreciate the question. But if we look at the trend from 2019-2018, we see growth across our business lines, and that comes through in both occupancy and rate. So I would say the fundamentals of the business bear a comparison back to pre-COVID periods, and we're going through a normalization as opposed to, I guess I'll use your term, a retrenchment back to a 2019 level.

Speaker Change #103: Well, yeah, it's Patrick. I'll speak to the revenue.

Patrick Waite: You know, I don't, I don't see retrenching.

Patrick Waite: in back to 2019 as a trend coming through in our business. The fact that we're in a period of normalization off of that COVID peak, which is a, you know.

Patrick Waite: Fair characterization. I appreciate the question.

Patrick Waite: But if we look to the the trend from 2019-2018, we see growth across our business lines and that comes through in both occupancy and rate. So, you know, I would say the fundamentals of the business

Speaker Change #104: you know, bear a comparison back to pre-COVID periods, and we're going through a normalization as opposed to, you know, I guess I'll use your term, a retrenchment back to a 2019 level.

Patrick Waite: And I think the thing to also think about, John, is just as it relates to the Thousand Trails portfolio. I think the team has done a great job of focusing on growing that annual base at the properties. I think when we bought the Thousand Trails portfolio, the annual base represented about 7% of the total revenue, and today it's about 21%. So we would imagine that it will continue to grow and support strong fundamentals in the RV business.

Speaker Change #104: And I think the thing to also think about, John , is just as it relates to the Thousand Trails portfolio, I think

Speaker Change #105: The team has done a great job of focus on growing that annual base at the properties. I think when we bought the Thousand Trails portfolio, the annual base represented about 7% of the total revenue, and today it's about 21%.

Speaker Change #105: So we would envision that continuing to grow and support strong fundamentals in the RV business.

John P. Kim: At the same time, looking at your sites, the annual RV sites went down sequentially this quarter, while trains and signs went up sequentially. It's now at an all-time high. Are those going to be drivers for or leading indicators of where revenue goes on both, or is the expectation that the transit sites get converted?

Speaker Change #106: At the same time looking at your sites, the annual RV sites went down sequentially this quarter. Transit sites went up sequentially. It's now at an all-time high. Are those going to be drivers for or leading indicators of where revenue goes on both or is the expectation that the transit sites get converted at some point?

Patrick Waite: Well, I think I think that we'll continue to see conversion of, excuse me, transient customers to longer-term customers, seasonal and annuals. So I think that, you know, there's been a shift, yes, but I don't think that that suggests, you know, any change in the long-term business and the ability to attract annual customers to the properties.

Speaker Change #106: Well, I think that we'll continue to see...

Speaker Change #107: conversion of, excuse me, transient customers to longer-term customers, seasonal and annuals.

Speaker Change #108: So I think that, you know, there's a, there has been a shift, yes.

Speaker Change #108: But I don't think that suggests any change in the long-term business and the ability to attract annual customers to the properties.

John P. Kim: Final question for me: can you talk about your ability or history of converting RV sites to MH? I realize some communities have both, and some are integrated. But I'm wondering if that's a potential for the company going forward.

Nate: Final question for Nate, can you talk about your ability or history of converting RV sites to MH? I realize some communities have both and some are integrated, but I'm wondering if that's a potential...

Patrick Waite: Yeah, I would say broadly across the portfolio it's a relatively low percentage, but you know with respect to your question with respect to those properties that have multiple uses; you have MH and RV on the same property. In fact, we toured Viewpoint together a few years ago.

Nate: you know, for the company going forward.

Nate: Yeah, I would say broadly across the portfolio it's a it's a relatively low percentage but you know with respect to your question with respect to those those properties

Nate: that have multiple uses. You have MH and RV on the same property.

Patrick Waite: When we went through a 400 site expansion, which is now full, so there are 400 sites of MH at that property in Phoenix, Arizona. I believe the number, at least on the front end, in particular, was into the double digits with respect to the purchasers of those units; those MH units were coming from the existing RV customers. So there's a there's a relationship there; the more you have proximity to the MH use is proximate to the RV property, there's more of an opportunity, particularly when we have that shared use opportunity where you know you're already embedded in the community, your friends are there, your family's there, you like the location, you're familiar with the location. There's a better opportunity for us to convert that RV customer And John, are the entitlements different for RV or MH?

Speaker Change #110: In fact, we toured Viewpoint together a few years ago.

Speaker Change #110: When we went through a 400-site expansion, which is now full, so it's 400 sites of MH,

Speaker Change #110: at that property in Phoenix, Arizona.

Speaker Change #110: I believe the number, at least on the front end in particular, was into the double digits with respect to...

Speaker Change #110: The purchasers of those units, those MH units, were coming from...

Speaker Change #110: existing RV customers. So there's a relationship there. The more you have proximity in the

Speaker Change #110: The MH use is proximate to the RV property, there's more of an opportunity, particularly when we have that shared use opportunity.

Speaker Change #110: where, you know, you're already embedded in the community, your friends are there, your family's there.

Speaker Change #110: If you like the location, you're familiar with the location, there's a better opportunity for us to convert that RV customer to MH.

Patrick Waite: And John, the entitlements are different for RV or MH, so sometimes that can be a barrier to being able to put an MH on an RV, but I would imagine in the future that some of those barriers may loosen up.

John P. Kim: And John , the entitlements are different for RV or MH, so sometimes that can be a barrier to being able to put MH on an RV, but I would envision in the future that some of those barriers may loosen up.

John P. Kim: Thank you.

David John Toti: And our next question comes from the line of David Segal from Green Street Advisors. Your question, please.

John P. Kim: Thanks, John .

John P. Kim: Thank you.

Speaker Change #111: And our next question comes from the line of David Segal from Green Street Advisors. Your question, please.

David John Toti: Hi, thank you. I was wondering if you could talk about where you see MH rent increases going as we've seen them decelerate slightly and, perhaps, in the context of where CPI and cost-of-living adjustments are trending. Thank you.

David John Toti: Hi, thank you. I was wondering if you could talk about where you see MH rent increases going as we've seen them decelerate slightly and perhaps in the context of where CPI and cost-of-living adjustments are trending. Thank you.

Patrick Waite: Yeah, sure. I'll just go through the kind of recent history of rent increases. You know, historically, we've had our rent increases been roughly 140 basis points higher than the coal increase. And that's a slide in the investor presentation.

Speaker Change #113: Yeah, sure.

Speaker Change #114: I'll just go through the kind of the recent history of rent increases.

Speaker Change #115: Historically, our rent increases have been roughly 140 basis points higher than the coal increase and that's a slide in the investor presentation.

Patrick Waite: As we went through COVID and experienced a period of high demand and high inflation, our increases reached into the higher single digits, which is now normalizing, to your point. And I would expect that, long-term, the expectation of us being in the range of 140 to 150 basis points of inflation, or the coal adjustment, is a reasonable expectation. On that slide, you can see that in periods of higher inflation, our rent increases were more moderate, so the peaks don't really come through in a long-term trend for us. As we've spoken about many times, we tend to have a more moderate long-term view of how we manage rent increases over time.

Speaker Change #115: As we went through COVID and we experienced...

Speaker Change #115: a period of high demand and high inflation.

Speaker Change #115: Our increase has reached into the higher single digits, which is now normalizing, to your point. And I would expect that long-term, the expectation of us being in the range of 140 to 150 basis points.

Speaker Change #115: of Inflation or the Coal Adjustment is a reasonable expectation. On that slide you can see that in periods of higher inflation our rent increases were more moderate.

Speaker Change #115: so that the peaks don't really come through in a long-term trend. For us, as we've spoken to many a times, we tend to have a more moderate long-term view of how we manage rent increases over time.

David John Toti: Great, thank you. And my second question, I'm just curious, what do you think is the typical churn level in the memberships, as we've seen that, you know, those decline, but still have very good origination volumes? Thank you. Sure, so when we think about

Speaker Change #116: Great, thank you. And my second question was curious, what do you think is the typical churn level in the memberships as we've seen that, you know, those decline but still have very good origination volumes? Thank you.

Patrick Waite: Sure. So when we think about attrition in that member base, we have, excuse me, I'm sorry, we have our legacy members who've been with us for 20 years or more. That attrition is about 7%, and then our camping pass customers, that attrition that we see is about 33%. So about a third of those customers turn over, but the other customers have a much higher retention rate.

Speaker Change #117: So, when we think about attrition in that member base, we have

Speaker Change #118: Excuse me, I'm sorry. We have our legacy members who've been with us, you know, 20 years or more. That attrition, it's about 7%.

Speaker Change #118: And then our Camping Pass customers, that attrition that we see is about 33%, so about a third of those customers turnover, but the other customers have a much higher retention rate.

David John Toti: Does that answer your question? Yes, thank you. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Marguerite Nader for any closing comments.

Speaker Change #118: Does that answer your questions?

Speaker Change #118: Yes, thank you.

Speaker Change #118: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Marguerite Nader for any closing comments.

Marguerite M. Nader: Thank you very much for joining us today. We look forward to updating you on our third quarter call.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Speaker Change #120: Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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