Q2 2025 Equity LifeStyle Properties Inc Earnings Call
Vice president and CFO in advance of today's call management. Release 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. Ask that you limit yourself to 2 questions. So everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded certain matters. Discussed during this conference call may contain 4 looking statements. In the meaning of the federal Securities laws, before we look at say, Mr. Subject to certain economic risks and uncertainty. The company assumes, no obligation to update or supplement any statements that become untrue because of, uh, because of subsequent events in addition. During today's call, we will discuss non-gaap Financial measures as defined by sex by SEC regulation. G, reconciliations of these non-gaap Financial measures to the comparable. Gaap Financial measures are included in our earnings.
Release our supplemental information and our historical SEC filings. At this time, I would like to turn the call over to Margaret nater, our CEO.
Margaret nater: Good morning, and thank you for joining us today.
Margaret nater: I am pleased to report year-to-date and second quarter results.
Margaret nater: For the first 6 months of 2025, our noi increased 5% as compared to last year.
Margaret nater: We focus on translating noi growth to normalized ffo. Growth driven by continued strength in our annual revenue streams and reduced expenses throughout our portfolio.
Margaret nater: Our normalized per share ffo growth. Year-to-date is 5.7%.
Margaret nater: The strength of our portfolio results in our balance sheet allow us to maintain our full year. Guidance for ffo per share, the demographics of the US 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.
Margaret nater: During periods of broader Market uncertainty. It's important to highlight the core strengths that drive the stability of our business and our outlook for continued performance.
Margaret nater: Our MH portfolio represents about approximately 60% of total revenue with portfolio. Wide occupancy over 94%
These metrics reflect, not only strong operational execution but also the resilience of our asset base.
Margaret nater: A key driver of the stability is the unique composition of our resident base, as 97% of our residents and our MH portfolio. Our homeowners
Margaret nater: This High proportion of owner occupied units, contributes meaningfully to reduced, turnover and increased length of stay.
Margaret nater: The result is a more consistent cash flow and lower operating volatility.
Margaret nater: Our communities Foster, a sense of belonging and engagement, this engagement, reinforces retention promotes neighborhood, stability and supports long-term value creation. Our communities offer our residents the chance to build connections that directly contribute to their quality of life.
Margaret nater: Within our RV footprint, annual RV Revenue grew 3.9% year to date driven by retention across our Park models Resort, cottages and RV accommodations.
Margaret nater: Our RV annual customer base is split between winter and summer seasons.
Approximately 70% of our annual revenue comes from Sun Belt locations.
Margaret nater: These customers are typically active adults who are retired or semi-retired these customers closely resemble, our manufactured housing, customers seeking a warm Community oriented destination, during the colder months,
Margaret nater: The remaining 30% of our annual revenues generated for summer focused properties, representing families with children. They value seasonal Recreation and returned to us for the activities amenities and sense of community are properties. Provide.
This seasonal balance allows us to serve a diverse range of long-term annual customers and support stable, recurring Revenue throughout the year.
Margaret nater: We are proud to share that 55 of our RV resorts and campgrounds. Have received the recently announced 2025 TripAdvisor. Travelers Choice Award.
Margaret nater: Each year, this award is given to approximately 10% of businesses listed on trip advisor.
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: I want to thank our team members for their outstanding efforts for this quarter, their dedication. To our customers is the foundation of our success and their work is greatly appreciated. I will now turn the call the call over to Patrick to provide further details on our financial performance.
Patrick: Thanks Margaret our core MH portfolio, continues to see high occupancy and generated Revenue, growth of 5 and a half percent in the quarter.
Patrick: Con constrained supply of new, MH sites supports the value of our communities and their product offerings.
Patrick: We are actively adding new home, Inventory and key markets, an investment that improves the quality of our communities over time.
Patrick: The new inventory revitalizes. The communities encourages other homeowners to invest in their own homes and helps maintain property values for all.
Patrick: As homeowners in our communities, stay with us, an average of 10 years, this new inventory, brings stable occupancy, and a steady Revenue stream.
Patrick: I'd like to highlight our MH communities in Florida, California and Arizona, which together represent approximately 2/3 of our MH Revenue.
Patrick: In Florida, we are focused on bringing in new home, Inventory to be strong demand.
In the Tampa St. Pete, submarket. For example, we've sold nearly 700 new homes over the last 5 years, as Florida continues to be a hub of immigration.
Our California, communities continue to be highly occupied and in demand, as they provide outstanding value with their within their respective markets, where alternative housing costs are among the highest in the country.
Patrick: In Arizona's, Phoenix and Mesa submarkets, we have sold 800 homes over the last 5 years.
Patrick: Like, Florida and Arizona benefits from demographics as the Aging population looks for affordable. Low maintenance housing options in a warm climate
Patrick: To leverage this to me and we have added 700 development sites in Arizona over the last 5 years.
Patrick: Our home offerings are attractive in any economy and they are well, positioned with new homes that are appreciated by customers, seeking value in a challenging economic environment.
Patrick: Plus with approximately 90% of our customers and communities paying cash for their homes. Our home buyers are less sensitive to interest rates.
Shifting over to the RV business, annual sites account for More than 70% of our core RV Revenue. Providing a stable base of Revenue and occupancy.
Patrick: Our annual site offerings continue to provide outstanding value for C customers who want affordable, second homes or a lake house or those who want a home away from home in the Sun Belt?
Patrick: An annual RV site puts this luxury Within Reach for these customers.
Patrick: For the transient business. We continue to experience a short booking window.
Patrick: And for the second quarter, the weather was cool to start.
Patrick: To start the camping season and Rain impacted weekend weather, particularly in the Northern and South Central us.
Patrick: Throughout the second quarter, our teams focused on their operations, Playbook.
Patrick: Which includes growing revenue and strategically planning and executing an expenses.
Patrick: Our team's carefully managed their expenses, as they maintain high levels of services to continue to meet customer service, our customer expectations,
Patrick: 1 of the ways. This is accomplished is through the use of technology. For example, using a scheduling platform to manage our team members schedules on site to reduce overtime.
Patrick: As I touched on, in my discussion about the Arizona Market, we continue to develop sites in our MH and RV portfolios over the last 5 years. We've delivered 1500 Mah sites and 2,900 RV sites across the portfolio.
While we've seen an increase in the cost of development over time, we are also seeing an increase in revenue from developed sites over time.
Paul: I would now like to turn it over to Paul.
Paul: Thanks, Patrick. Good morning, everyone. I'll highlight some takeaways from our second quarter and June year to today results review. Our guidance assumptions for the third quarter and full year 2025 and closed with the discussion of our balance sheet.
Paul: Second quarter normalized ffo with 69 cents per share in line with the midpoint of our guidance range.
Year to date in 2025, we have successfully executed on our overall operating plan as evidenced by achievement of normalized ffo per share at the midpoint of our guidance range for the 6-month period.
Paul: Strong core portfolio performance generated 6.4%. Noi growth in the quarter compared to the same quarter last year. 70 basis points higher than guidance.
Paul: Core Community Based rental income, increased 5.5% for the second quarter and Junior to date periods compared to the same periods in 2024.
Paul: In the second quarter, we generated rate growth of 5.8% as a result of noticed increases to renewing residents and Market rent paid by new residents after resident turnover.
Paul: Core RV and Marina annual based rental income, which represents over 70% of total RV, and Marina base rental income. Increased 3.7% in the second quarter and 3.9% year to date compared to Prior year.
Paul: Year to date in the core portfolio. Seasonal rent decreased 5.6% and transient decreased 68.6%. We continue to see offsetting reductions in variable expenses.
Paul: Net for the second quarter and Junior to date periods respectively compared to the same periods last year.
Paul: Core utility and other income increased 4.4% for the junior to date period compared to Prior year. Our utility income recovery percentage was 48.2% year to date in 2025 about 100800 basis points, higher than the same period in 2024
Second quarter core operating. Expenses were flat compared to the same period in 2024.
Paul: Expense growth was 190 basis. Points, lower than guidance. Mainly resulting, from savings and utility, expense, payroll membership expenses, and real estate tax expense.
Utility and payroll expense savings. Compared to guidance demonstrate. Our continued ability to control expenses at RV properties, with variable occupancy.
Paul: June year to date expense growth was 70, basis, points, and includes the impact of our April 1st, 2025 Property and Casualty Insurance renewal.
Paul: Second quarter property, operating revenues increased 3 and a half percent while core property operating expenses were flat resulting in growth in core. Noi for property management of 6.4% for the year to date. Period. Core noi before Property Management increased 5%.
Income from property operations generated by our non-core portfolio, was 2 and a half million dollars in the quarter and 6 and a half million dollars year to date.
Paul: As I discussed 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: We are maintaining our full year, 2025 normalized. Ffo guidance of $3.66 per share at the midpoint of our range of 3.1 to 3.11 cents per share.
Paul: fully your normalized ffo per share at the midpoint represents an estimated 4.9% growth rate compared to 2024
We expect third quarter normalized, F of 4 per share in the range of 72 cents to 78 cents.
Paul: We project full year, core property, operating income growth of 5% at the midpoint of our range of 4 and a half percent to 5 and a half percent.
Paul: Full year guidance assumes Corps Base rent growth and the ranges of 4.9% to 5.9% for MH and 60 basis points to 1.6% for RV and Marina.
Paul: The midpoints of our guidance assumptions for Combined seasonal and transient show a decline of 8.4% in the third quarter and decline of 6.4% for the full year compared to the respective periods last year.
Core property, operating expenses are projected to increase 70 basis. Points to 1.7% for the full year 2025 compared to Prior year.
Paul: We project a core property, operating expense increase in the range of 1.1% to 2.1% during the second half of 2025.
Paul: Our full year expense growth. Assumption includes the benefit of savings in repairs and maintenance, and payroll expense. During the first 6 months of 2025, as well as the impact of our April 1st Insurance, renewal for 20225, consistent with our historical practice. We make no assumption for the impact of a material storm event that may occur.
Paul: Our third quarter guidance assumes core property operating income growth is projected to be 4.9% at the midpoint of our guidance range.
Paul: In our core portfolio property operating revenues are projected to increase 3.1% and expenses are projected to increase 90 basis points. Both at the midpoint of the guidance range,
I'll now provide some comments on our balance sheet and the financing Market.
Our balance sheet is well positioned to execute on Capital allocation opportunities. As of the end of June, we have no secured debt, scheduled to mature before 2028. And our weighted average maturity for all debt is almost 8 years.
Paul: Our debt to Eva Dari is 4 and a half times. And interest coverage is 5.6 times.
Paul: We have access to over 1 billion dollars of capital from our combined line of credit and ATM programs.
We continue to Place High importance on balance sheet, flexibility. And we believe we have multiple sources of capital available to us.
Paul: During the quarter, we closed on an unsecured Term Loan with a total balance of 240 million.
The loan funded in 2 drawers, 150 million in the second quarter and 90 million in July.
Paul: Term, Loan, proceeds, repaid, the 87 million of secured debt that matured in April along with repayment of the balance on our line of credit, which was 90 million at the end of June.
Paul: During the second quarter, we also used Term Loan proceeds to fund a 56 million loan to 1 of our joint ventures of which we own 80%
Paul: this loan appears as a note receivable on our balance sheet as of June 30th,
Paul: The JV used the proceeds to repay outstanding secured debt at maturity.
Paul: On many factors, including lender borrower sponsor and asset type and quality. Current 10 year loans are quoted between 5 and a quarter percent and 6% 60 to 705% loan to value and 1.4 to 1.6 times, debt service coverage.
We continue to see solid interest from Life companies and gsc's to lend for tenure terms. High-quality age qualified, MH assets, continue to command, best financing terms.
Paul: Now, we would like to open it up for questions.
Speaker Change: Thank you to ask a question. You will need to press star 1 1 on your telephone and wait for a name to be announced to withdraw your question. Please, press star 1 1 1, again please, stand by while we compile the Q&A roster,
Paul: 1 moment for our first question.
Paul: Our first question will come off the line of Jana gallon from Bank of America Securities. Your line is open.
Thank you. Good morning, and congrats on the many travel Choice Awards. Um, I had a question on the revised. Oh, very welcome. Um, question on the revised outlook for the core RV, Marina.
Speaker Change: The annual revenue guidance, um, move down a bit and just kind of curious what our current in the second quarter. The kind of whether it be the 2 key results or looking forward, was it kind of driven by lower renewals, or is there a specific geography or cluster of assets? If you could provide some color around that?
Sure. Um, Patrick can kind of give you some color, I think, as to the, you know, on the, on the portfolio basis, but kind of, before we do that, maybe it would be helpful to put it into context. Um, I think I, I touched that on my opening comments, our annual customer base is split between the winter and the summer seasons. Um, important to note that these customers pay, an average of about 6,600 per year or uh roughly $50 per month to stay at our properties.
Speaker Change: These are really second home or vacation properties for our customers. Um, and we, you know, we consistently see multi-generations of families stay with us, with these properties. Um, the annual Revan Street Revenue stream is a proven, um, you know, proven and resilient in all cycles for us and over the last 5 years. We've seen that income stream grow about 7%. Um, we have been able to increase rate, um, at our RV parks because we we focus on our capital projects and Patrick and touch on that a little bit and on a customer focused amenities and they continue to be uh attractive for second homeowners. Um but with respect to the um respect of the quarter, maybe Patrick, you could walk through that a little bit please.
Patrick: Yeah, so for the quarter, the um, the RV and Marina annual uh, was up 3.7% and that was, that was unfavorable about 90 basis points, um, or about 700,000 dollars. Um, as Margaret mentioned, we had strong rate growth, uh, around 6% for both the RV, and the marina portfolio, uh, and occupancy was the driver of the Miss. Uh, if you look to the, the guidance, for the balance of the year, uh, that reflects, um, roughly 1.2 million dollar reduction, um, and that's driven by, um, by the occupancy, uh, and its impact on the balance of the year, uh, just real real quickly on both the, the RV, uh, and the marina on the RV side. Uh, those largely driven by higher rates of attrition in the north and Northeast. Um, I spoke a little bit to that uh, on the last earnings call and we were we were moving into a renewal uh period. Um much of which occurs in the second quarter and
Patrick: Uh, didn't have great visibility and we experience more turnover, that was largely focused on 20 properties.
Patrick: On the Mirena side, uh, while there was uh, some elevated turnover at uh, at 2 marinaside.
Speaker Change: Thank you. That's very helpful.
Shana: Thanks Shana.
Thank you. 1 moment for our next question.
Our next question will come for line of Jamie Feldman from Wells, Fargo. Your line is open.
Jamie Feldman: Great. Uh thanks for taking the question. So you typically start to send out renewal rate increases during 3, Q for the following year. I'm wondering if the weakness in RV growth, specifically in annual in addition to Transit and seasonal impacts your pricing power for 26,
Jamie Feldman: And what's the right way to think about the setup for RV and also mAh.
Jamie Feldman: Any early color on renewals being sent out, would be very helpful.
Jamie Feldman: Yeah, let me let me touch on the on the Mah and then I'll I'll touch on the RV side. So so we're um,
Jamie Feldman: To our annual review, uh, of rates to establish. Um, you know, our budget, uh, for 2026 and, uh, as you pointed out those, uh, those increases occur, um, in the late third, and, and in the fourth quarter for the most part, for the Mah portfolio. Um, so we'll, we'll work through that, uh, over the next, uh, couple of months and have more to, uh, more to share on future earnings calls. But we've been, we, we've seen consistent demand across the Mah portfolio. Um, so I, you know, I think we'll, we'll be in a good position, um, on the RV side, with respect to the emails. We've, we've Margaret highlighted as did I that, uh, we're seeing pretty consistent rate growth, uh, in the 6% range. Uh, and we've seen consistent demand. I I think it's, uh, as I talked about on, uh, on last, uh, last quarter's earnings call. Uh, well, we've seen consistent demand, uh, and we've been able to achieve rates, uh, coming off of kind of Co Peak demand.
Jamie Feldman: And the tenure that we typically see with our annuals, we're going through a cycle uh, of attrition that just resulted in, uh, from that um, from that higher growth in previous periods. And Jamie, that that time period is April of next year, where we would be, uh, increasing the rates.
Jamie Feldman: Okay, thank you for that. Um,
Speaker Change: And then I guess, you know, just kind of tying some pieces together as we were going through the press release and even talking to some investors about it. I think people got a little spooked, by the the increase in notes receivable, which of course you just explained as the JV loan. Um, but you did have some occupancy loss. Um, so can you maybe just tie together what you're seeing in terms of like bad debt, the occupancy loss and, you know, your expectations on occupancy getting better. And when, and whether you think or is there maybe something more structural, uh, that we should expect to see a slightly lower occupancy rate going forward,
Speaker Change: Well, I'd like to, I'd like to just clarify something, the occupancy change in the quarter was essentially flat. I think there's a little bit of confusion because we do have a table that shows, occupancy percentages. But those occupancy percentages include an increase to the denominator as we as we add expansion sites. So we were not down 60 basis points. Um, I think as as maybe some may have interpreted from reading the reviews we had a we had a loss of 40 sites of occupancy in the quarter, so negligible um with respect to the payment patterns of our customers. We've historically talked about our very low levels of delinquency that that uh low rate of delinquency. We're talking basis points, you know, uh uh, 30 to 40 basis points um remain consistent throughout the pandemic and is consistent today.
Speaker Change: Um, and we continue to see customers who are paying cash for their homes, rather than being interested in financing, their homes are are rate of purchasing homes for cash is higher than 95%.
Thank you. Okay. And then
Speaker Change: 1 moment for our next question.
Speaker Change: Next question was on the line. Uh Brad Heffron, from RBC Capital markets. Your line is open.
Brad Heffron: Yeah. Hi everybody thanks. Um do you have any updated views on the impact uh from potential reduced travel from Canadian customers and then kind of along the same lines. There's this $50 Visa Integrity fee in the Triple B. Um would that apply to your customers and do you think that that could potentially impact demand as well?
Brad Heffron: Yeah. Um well I'll speak first to the uh Canadian demand to take the the seasonal first that we talked about.
Brad Heffron: On on last quarter's call. Um, we mentioned that we had a, a lower take rate on our early bird, which is a
Brad Heffron: A program for Canadians when they're down in the Sun Belt, uh, during this, uh, during the winter season to make a reservation for the following year, uh, that was off about 20%. Um, and as we said at that time, uh, you know, now that we're going through the summer season, we don't really expect that to move and it and it really hasn't uh, and as we move towards uh the Sun Belt season, again, we would expect
Brad Heffron: Uh reservation Pace to uh to pick up again. I mean, it's going to be it's going to be cold in Canada and it's going to be warm in the Sun Belt.
Speaker Change: All of these changes are are enforced and how the rules are established. Um, it seems there may be some implication for Canadian customers. Um, however, uh, many of our customers, We Believe come and don't require, um, a Visa, um, to do so, to, to come and visit the properties for short-term stays. So, there may be some modest impact but we don't anticipate it impacting, all of the Canadian visits.
Speaker Change: Okay, got it. Thank you. Um, and then just looking at the site counts year, over year annuals down 500, seasonals down. 600 transients up by 12200. Um, is there a dynamic there where, you know, people don't renew and then those sites just get pushed into the transient bucket? Or is there, you know, some other Dynamic that's driving those changes.
Brad Heffron: That's that's exactly how we manage that chart. Uh, Brad to the extent that a site is not occupied by an annual or or a seasonal. It's available for a transient and reported as such
Speaker Change: thank you.
Brad Heffron: Thank you, Brad.
Speaker Change: 1 moment for our next question.
Speaker Change: Our next question will come from the line of Eric wolf from City Elan is open.
Eric Wolf: Hey thanks. Um, for the expense um, guidance reduction. Could you just tell us how much of that, uh, was due to flexing labor and other variable expenses lower, um, due to the lower transient business, or like how much you can kind of bring down expenses, um, when you're not seeing the transit business and then how much of it was from just other expense categories? Um, maybe another way to ask it is is is the 80 bit reduction that you had an expense growth, how much of that was just a flexing transient expenses lower?
Eric Wolf: Well I guess the way I think about it Eric is I mean generally we've we've guided to expense growth that tracks to CPI but we do have realized and anticipated savings from a few sources. So if I take the utility payroll and r&m which we talked about at fair amount that's about 2/3 of our core expenses. Um and the expectation for 2025 is that those will increase about 2.4%. Um the assumptions are impacted by uh
Eric Wolf: You know, the variable savings at the transient RV properties. So when you think about the remaining third of our expenses, we have real estate, taxes, insurance and membership sales and marketing expenses. And the Assumption for that third, is that we'll be down 1% to Prior year. So that includes the effect of I talked about the insurance renewal and then we have expectations for savings associated with the membership, upgrade product.
Speaker Change: Got it, that's helpful. And then, um, maybe getting back to the annual RV. Um, I guess is there anything that you can point to that would sort of explain that the higher turnover? Um, I think you said there was like, 2 properties that had storm damage, but is there anything else that you can sort of pinpoint in it possible? Is it can you quantify sort of, you know what the turnover is? You know, you can typically you see, 10% turnover in this year, you saw 15%. Um, just trying to understand the magnitude.
Speaker Change: Yep. So um just with respect to the comments on the 2 properties that suffered some damage. Those are those are um in the marina portfolio. So this is as our Marina annuals
Speaker Change: Um, and we've seen some uh, just some turnover at uh, 2 properties where we're building back. That inventory or those that that annual occupancy. Um, and then Marina portfolio, we've seen consistent demand, uh,
Speaker Change: Customer in a portfolio, uh, including launches, uh, year-over-year. So, uh, and we feel good about how that business is shaping up. Um, with respect to the turnover in the uh, RV annuals, uh, historically that that number's been around 5%. And as I, as I mentioned, in an earlier, comment, um, at about 20 properties through the predominantly the Northeast. Uh, we've seen some, um, some elevated turnover, uh, but you, I would expect that to normalize over time because that had been a pretty consistent Trend, uh, but we're moving through
Speaker Change: Through, you know, and the period of peak demand that that led to um and more people coming to our properties. And and therefore there are more people to turn over and Eric that that turnover happens uh, in June typically. And so that's what we saw, the the kind of the June effect there.
Speaker Change: Got it that that's helpful. Thank you.
Speaker Change: Thanks Eric.
Speaker Change: Thank you. 1 moment for our next question.
Speaker Change: Our next question, will come from the line of Wesley, Holiday from beard Eline is open.
Speaker Change: Hey good morning everyone I just a quick follow up on that last question. Was that turnover? That was a little bit more elevated was that specific to maybe?
Speaker Change: For the annual.
Speaker Change: With your breaking up a little bit, but I think I I think I got it. Um, but know that it was uh consistent with what we've done in the past, there's no change, um, to the, the renewal process.
I'm hoping to clear was it uh due to Canadian residents is what I was asking as far as the uh
Speaker Change: Okay, I think you said Canadian residents and it was not, it was not due to Canadian residents now.
Speaker Change: Okay, thank you for that. And then when you look at the um, you know, immigration policy has been in in place for you know, a few months now. Are you seeing any impact to demand or cost pressure?
Speaker Change: You know what we look at um, is uh, you know, from a Canadian, from the Canadian perspective. Um, the majority of our, uh, our MH annual customers are in the Phoenix Market. Um, and we've seen continued demand, we look to see whether or not we would see increased home sale activity and we haven't seen that. Um, so uh, no reason to think that there will be a change uh, at this point.
Speaker Change: Okay, thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. 1 moment for our next question.
John Kim: Our next question will come from the line of John Kim from BMO Capital markets, your line is open.
John Kim: Thank you. Um, I know, uh, home sales is viewed more as, as a loss leader for you, uh, in terms of FFL impact. But the revenue was down pretty meaningfully. This quarter
John Kim: And the average sales price was was pretty low too, both on, on the new and the used home sales. Um, so I was wondering if you could comment on that and your outlook for home sales for the rest of the year.
John Kim: Yeah, like, I guess John, um, you know, first I I'd say at, uh, you know, basically 117, uh, about 120 for the quarter. Um,
John Kim: You know, the the annual, uh, new home sales that we would experience preco was typically in that, call it 500, 500 to 600 range. Um, so while we're low on the lower end of that band, we're we're pretty much in line with what we experienced. Uh, prior to some, you know, some periods of peak demand uh, with respect to the, uh, the the average price, uh, that's really driven. Um, by 2 factors, I mean, 1 is, uh, and I mentioned this on previous calls that we, you know, we've seen some moderation in demand, and that's, that's really come mostly at the
John Kim: Higher price points of our houses, uh, which is a small part of our inventory, but nevertheless can have an impact on a relatively small number of sales. Um, and then to another extent, it's been, um, just the mix of inventory over the course of any particular quarter um and as we go through, replenishing inventory that that we've sold down in uh, locations that that would trade at higher prices. Uh, we, you know, you're going to see that. You're going to see that number move around from time to time quarter to quarter.
Speaker Change: Um, on the acquisition fronts, I know it's been quiet for you. Um, but you have at least you know, 1, major owner looking to buy MH products. Uh, I was wondering if you could talk about sellers in the markets where you think cap, rates are for, MH that you look at uh if there are other buyers in the market that you've heard of and just to follow up on my last question, on the used home sales, it was down to like 9,000, uh, this past quarter. So I don't know if that calculation is correct, but maybe if you could follow up on that as well.
Speaker Change: yeah, and the used home sales, I mean,
Speaker Change: Again that's largely driven by mix and some of that um likely driven by some uh lower price inventory that we would own for a short period of time and uh sell to a a new Homer, a homeowner, some of whom are going to make improvements to those homes.
Speaker Change: All, uh, all deals. Um, and, uh, in terms of cap rates, it's difficult to point to a cap rate when there haven't been a lot of transactions. So I guess I would, I would wait for some transactions to happen to be starting, uh, to quote cap rates.
Speaker Change: Great. Thank you.
John Kim: Thanks John.
Speaker Change: 1 moment for next question.
Speaker Change: Our next question comes from the line of Jason Wayne from Barclays open.
Hi, good morning. Um, good morning, uh, Campground, uh, membership count, uh stabilizing. Now um sales volume has picked up for the the past few Quarters here. I'm just wondering if you could walk through the sales strategy around the the the uh 2 to 4 year membership subscriptions that you've uh been doing recently.
Speaker Change: Sure, sure. It might be helpful. I think you give a little bit of background on the Thousand Trails system. Um, as you can tell from our supplemental, it's got 24,000 sites and 80 properties, um, because, you know, our customers are really focused on these natural resources in the surroundings in our properties. Um, and there's a couple things that you mentioned in terms of the, the member count um, uh in the quarter you, we saw we've seen basically for the last, I think 10ish quarters negative growth and this quarter. We saw a slight increase. Um and that was really attributed to um the paid origination sales of about 5600, um, which is in
Speaker Change: Excess of what we would see from our, uh, our historical coid, uh, Q2 sales, which I think we're about, north of 4,000. Um, and then you also saw an increase for the second sequential quarter in the promotional membership originations. So that is another, uh, nice green shoot because, uh, you're able to see additional activity at the RV dealer, uh, at the RV dealer level. Um, with respect to, uh, the the dues based upgrade product, uh, last year, you know, based on customer feedback, we launched a new product, um, that product it, it provides for an upgrade. And but it's an increase in the dues program as opposed to a 1-time payment. Uh, the new program has uh, increased dues of about 1500 to 3500 per year depending on the product. Um, and it the upgrade gives you, you know, Advanced booking Windows ability to increase length of stay. Um,
Speaker Change: Discounts to rental cabins Cottages, Etc, and and access to other uh vacation options.
Speaker Change: Got it. Thank you.
Thank you.
Speaker Change: Thank you. 1 moment for our next question.
Speaker Change: Our next question comes from the line of David Sagal from Green Street. Ulan is open.
David Sagal: Hi, thank you with regards to the occupancy loss, within the annual RV segment. It seems the guidance for the rest of the year. Does not imply re you know, back filling, um that last occupancy. So I'm curious what you think the timeline would be for uh you know Recon converting those uh spots from transient back to annual paying
Yeah, the the impact that we saw on the quarter was for the summer focused properties. So that's that's um, occupancy that we would get back next year. Those, those are customers who have left and we would we would be uh marketing uh to bring them back next year. So that's the that's the impact for the rest of the year.
Great. And then, with regards to the guidance for property management and GNA looks like that was reduced. Um, I'm curious if you could provide, uh, some color on, uh, what's driving that and whether it's more on the property management or GNA side.
David Sagal: Yeah, excuse me. Um, the the expense change is primarily from, um, compensation expense savings, uh, from open positions in 2025 and then expected savings from legal and some other administrative items. You know, there's timing of resolution and spend on some of these matters and it can change over time. So, we've adjusted our guidance to reflect our current view, uh, on expenses for 25.
David Sagal: Great. Thank you.
1 moment for our next question.
Speaker Change: Our next question will come from the line of Michael Goldsmith from UBS. Your line is open.
Speaker Change: Implied 51 and in the fourth quarter. So can you just kind of talk about what gives you confidence in in the re acceleration of the on the annual RV business? Thank you.
Speaker Change: Yeah, I think that, um, there's some excuse me. Michael. Um, there are some assumptions for, uh, increases in rates that just happen in the ordinary course. We talked earlier about the timing of the rate increases, there is some, uh, impact that comes in the third and the fourth quarter. And that's primarily, what's driving that
Speaker Change: Got it and and then maybe my follow-up question relates to the Mah occupancy, right? Like you're you're adding sites which seems to be uh, I guess that there's a little bit of a lag before they get filled and so that that is the headwind on occupancy. So I guess the question is, maybe, you know, how long does it take to fill a site? How long does it take to go from entering the pool and being a drag on occupancy to getting someone in and and being additive to occupancy of just trying to get a sense of kind of like the, the Glide path here of, of the negative impact. And when the, when the positive impact can be felt and and, uh, support the business and, and drive revenues
Speaker Change: Um, before I think, Patrick's gonna walk through that before he does. I I just want to point out. We do provide intentionally for this reason, we do provide the disclosure, specifically of the number of sites that are occupied at the end of each period. And so I can understand the occupancy percentage is something that people are focused on. But the the growth in the occupied sites is the driver of Revenue. And that's why we provide that but Patrick can talk about how how uh, development sites are stabilized. Yeah. And and on the Mah side, it's it's um uh leash up rates can be in the call it 25 to 50 sites on an annual basis. Um you know we tend to scale our developments to so that they're in line with occupying uh the sites in uh you know, call it a a 3 or 4 year period. Uh, so that I mean that's the basic math. And then, you know, depending on the project, uh, it could very slowly.
Thank you very much. Good luck in the back half.
Speaker Change: Thanks Michael.
Speaker Change: 1 moment for our next question.
Speaker Change: Next question, will come from the line of Steve sakoa from evercore isi. Your line is open.
Steve sakoa: Uh yeah thanks. Uh, most of my questions have been asked and answered but just as I think about the transient, you know, RV Marina business, I guess, preco you know, that business was running, maybe in the high 40s to maybe low 50s, uh, in terms of millions of dollars during Co it got up into the 70s, and it's kind of coming back down to earth. And is it your expectation that that business settles back in and around the fionn dollar, Mark, or is there something structural about that business? Uh, whether you've added more sites, that kids, that kind of, uh, gives it a higher floor. If you will
Steve sakoa: Yeah, I mean I think that the the transient business we've always talked about that. The transient business is a a is a volatile income stream. Um I think that's going to continue. It is the feeder for our annual business. So difficult to point to what the numbers going to be, because we'll be bringing, um, new new properties into the portfolio. We'll be converting, um, transients to annual. Um, but I think that the, the strength of the transient on a good on a good weather weekend, that's we we see the strength of the transient, uh, continue and we continue to, um, be able to convert those transient customers to annual which is our primary, our primary goal.
Okay. And maybe just, I guess 1 quick follow-up on expenses, I mean obviously this year, you've done a really good job. Uh, you know, containing expense growth. So some of the things you talked about, plus the insurance renewal was uh, very favorable just as we think about kind of the comp into next year. Um, you know, is there anything else to think about, you know, just kind of the mix of of expense growth thinking about 26 at this point?
Steve sakoa: Yeah, I think um, you know, kind of that the 2/3 of our expense base that is uh utilities, payroll and repairs and maintenance.
Steve sakoa: Um there those are certainly uh expense line items that
Steve sakoa: Have experienced pressure, um, over time, I think in an era of uncertainty, with respect to um, increases in costs resulting from uh, tariffs and and other drivers and potentially how CPI might impact, uh, wages. But those are absolutely considerations that we're focused on.
Steve sakoa: Great. Thank you.
Steve sakoa: Thank you.
Speaker Change: And since we have no more questions on the line at this time, I would like to try to call back or to Margaret nater for closing remarks.
Speaker Change: Thank you for participating. In today's call. We look forward to updating you next quarter, take care.
Thank you for your participation in today's conference call.
Speaker Change: This, this concludes the program you may now disconnect everyone have a great day.