ELS - Earnings call transcript Q1 2018 | Equity LifeStyle Properties, Inc.

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Operator

Good day everyone and thank you for joining us to discuss Equity LifeStyle Properties' First Quarter 2018 Results.

Our featured speakers today are Marguerite Nader, our President and CEO; Paul Seavey, our Executive Vice President and CFO; and Patrick Waite, our Executive Vice President and 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.

As a reminder, this call is being recorded. this the contain Federal during the statements discussed of meanings Securities matters conference forward-looking may in Certain Laws.

or no Our certain forward-looking subsequent to events. assumes because economic to statements update obligation risk and become statements uncertainty. The of are untrue supplement any subject that company

release, measures GAAP in of In CEO. financial these call today's financial measures will supplemental our financial Nader, SEC included by our to discuss we during President defined our to earnings over I'd Regulation filings. comparable measures and non-GAAP our are this addition, At and Marguerite non-GAAP the like the historical call, as information, G. Reconciliations turn to SEC time,

Marguerite Nader

for you joining pleased and the today. thank quarter morning Good of for XXXX. the us I'm first results to report

statistics to MH of XXX Occupancy in operating XX with key strength. continue an our sites show homeowners. increase increased portfolio Our

in-place XX% new used of with New in performed the home us the for sales had of season We seasonal, category year. year Year-to-date, in in our are start well overall transient. strength conversion. off resident home the result sales and increase with strong this revenue sales an The RV were a annual, for each of new XXX to quarter. home of an X.X% and snowbird

as We as are to possible on transaction making with us. seamless complete focused it for a a customer

focus off revenue year, opportunity paid spring, activity on we XX%. season In given portfolio. saw camping season. our an and in continues the Each time completing is South by Arizona, online of book before public. of have next at commitments increase by guests online winter as an for channels through sales Texas This across general Florida, snowbird the properties the for year X% in we and next digital the are year This to RV efforts increased quarter, increased bookings Our strong passes to of our finishing our escalate. the where the XX%

we have on in employees summer job season. of XXX,XXX our where great our and over our season and now days this host we'll focus done accommodating members start guests of busy and during at and properties our guests XXX will campaign camping a Our season winter the members we

Walker. Turning a earnings two Chief will ELS RV the many. of properties The Howard acknowledge well-located and and ELS prior a mentor Chairman take a Park call, He was last with to over to million. be that to acquisitions, great XXXX home $XX role. missed. moment leader passing final total assets since want I and communities purchased Florida price manufactured was served of to note, we ELS' sites. Chairman, Howard a in On His presence of a to one as X,XXX total Vice purchase since Co-Vice our for are of Executive Officer assuming around

this thoughts are I to time. to detail. turn in Our with his now walk family through will difficult numbers over during the Paul it

Paul Seavey

walk first finish XXXX through you, full Marguerite quarter overview guidance remarks second morning also I good focus sheet. of quarter balance with guidance on to results operations. our everyone. for related Thank and My will an our and will property and detailed year

from better markets our X.X% contributor rent Core points MH X.X%, Northern share the normalized growth Thousand certain related rents occupancy from Revenue turnover guidance approximately and quarter, than throughout operations. increased transient RV and resulting growth and Florida, income property includes annuals from gains. portfolios. Northeast. in growth during than seasonal, XX quarter. higher $X.XX. outperformance than per Core the and Trails Rate reported rate from For to income of the was the X% basis core we first was revenue rental Core California, performed expected primary and rent mainly RV Encore in annual, FFO increased higher expected from customers of to better

first the our in revenue Florida, seasonal Demand Encore were growth. portfolio. Arizona, in stays occupancy and X% of for gained also the we During seasonal drivers annual the quarter, Texas properties

Our quarter. Arizona. customer strong the We growth experienced in Florida our for properties was X.X% revenue transient in and demand

First revenue as the from net quarter membership dues higher upgrade were than well sales contribution guidance. as

higher we X,XXX to insurance in guidance target. variance recovery. of during quarter, related first offset the remaining the as We maintenance During The than the the our X% is increase favorable income trails sold of camping XXX in We Core recovery XXXX. over recognized of an $X.X and and passes, other expenses XX% offset members repairs million quarter, hurricane revenue a to guidance XXXX. result revenue to quarter more from the expenses. than approximately was of utility upgraded

First year. We experienced quarter summary, higher and management X.X%. XXXX revenues real In X.X% to increased property exclude quarter of and up property taxes $X.X related to from expenses maintenance last to increase the X.X%, operating estate adjusted property expenses of first hurricane compared core up gas property were in in million operating core operating rates planned core resulting first core X.X% were and the before quarter NOI west. higher utility expenses an south in than

the rates variance. and the the the release the Keys XXXX, revenue during assets as two NOI business guidance. RV quarter assuming no second recovery parks we from Property year XXXX as than in package respectively. The were we and assets While effect, includes had higher non-core X.X% provide revenues the hurricane-related on full no adjusted XXXX X% offset and portfolio, insurance NOI acquired was our and growth and in quarter, expenses guidance press as as from growth well detail. proceeds hurricane the for identified which income well supplemental as quarter in the caused during favorable acquired interruption operating impact and expense, Florida

guidance midpoints current guidance, As future of projections in our range. results. our discuss mind, growth revenue provide in intended are remarks in to expense I rates keep and All my estimate represent

$X.XX X.X% growth before our normalized FFO project growth for We X.X% NOI is XXXX core management midpoint for and in normalized per or guidance of at property Our the year. $XXX.X share range. full million the per FFO share

our normalized to the at range approximately per quarter a of million midpoint with FFO of second $XX.X $X.XX expect We share. $X.XX range of

We expect contribute assume million of quarter our increase year almost MH FFO. based of $XXX.X XX% rate the core to rent occupancy full to We end quarter. the growth second subsequent the no community X.X%. revenue of normalized of quarter second reflects the first Projected

This be home income revenue base core year program flat projecting we rental full is rental last XX% our of core occupancy. reserve expected and to We and million Our quarter. of rental core in X.X% over the our compared current of to reflects of income year last RV anticipate $XX.X net expenses are rental represents second year. growth

gained shoulder X% with we X.X% of to We for expect to the rate a season the our rates our annual transition We for summer in project revenue growth anticipate seasonals northern rest transients. in at driving and periods increase X% season resorts. as We prior at our strong from X.X% almost of occupancy annuals. growth

membership last second combined income. dues to net reservation ahead are seasonal revenues sales we time currently XX% for be revenues, Membership expected is shows basis, to approximately our Our this of reserved million On $XX.X pace are expected of and generate and for upgrade reserved a quarter transient XX% million. dues year. expected revenue revenue membership our expected $XX.X

expensive $XXX operating for most shows guidance that growth tax quarter estimated core in property includes Guidance was estate quarter the Industry year year real expenses. insured losses maintenance the of and billion. XXXX property state the second third of the casualty insurance remainder the our and losses X.X% renewal. update impact with recent Our of and reports global for

As recover a a losses cover as result, reinsurance market from challenging we saw April for increases own as premium Carriers increases XXXX. to to first negotiation of encountered our renewal. well premium their

of Our coverage XXXX. million increase in for period the negotiations approximately nine-month resulted a premium in $X of

up For expected guidance operating the up the and property resulting core are NOI detailed year I'll in expenses our X.X%. increase operating be now an full core XXXX. property discuss X.X%, revenues for in core X.X% second quarter, of to

end our the subsequent Our not a of rent core in quarter. first base do MH change occupancy, to assumptions MH the include

X.X% revenue a of in revenues community growth full rent anticipate year. -- We core rate in growth for the full X%. RV core expect We growth based year

continue to that rate. X% growth projected, growth from of showing with performance annuals expect We X.X% is strong

season, a growth million, continue ahead the combined we look to $XX.X transient XXXX. of over to summer project second we X.X% and full As rate of third revenue quarter

for approximately XXXX be expect projected dues are of operating XX% transient sales full to the to contribution revenue expense core the for come in We the is income Total expected full Core third be membership growth from to X.X% year. and property million. $XX.X net year from quarter.

Xst renewal. earlier, we completion have of following increased mentioned our I insurance April As expense our

increase. have our may related Our to types during guidance affected such impact and rates are year may XXXX expenses. expense To unplanned the of properties our events, full from an the if on these as events, we related events XXXX XXXX that assumptions growth extent To results. no are remainder excluded all the unplanned impact model of X.X%, be will growth expenses XXXX, by approximately events expense storms, estimate of illustrate to unplanned includes

up property NOI full with X.X%, revenues in expenses core anticipated an the core to at be growing of year, resulting are X.X% property in For operating increase X.X%.

will non-core operations in full year. We property $XX.X expect properties for the the income from about million contribute

approximately technology million. Interest loan and property year in in Our our year XXXX reflects Guidance I'll be acquisitions to Kingswood, for as for our internal includes of on the are dedicated $XXX.X management a Serendipity, $XX.X included and is Holiday impact management minute. marketing the and asset corporate Full Travel to oversight and well is opportunities the Park expected million expansion and updated resources of G&A guidance. full focus initiatives. expense as guidance amortization discuss

approximately $X.X events debt guidance in We average balance our capital no our will expect future We model. make regarding be assumptions billion.

per XX.X shares FFO expected the our at is share to count is and average XXXX. normalized XXXX in share Our $X.XX, midpoint estimate million

use made have future flow free related earnings our of the to model. in cash assumption no We

for sheet. call conditions the up provide secured and balance discuss our on questions, comments opening Before debt some I'll market

the X.X% a loan with XX-year we $XX million, During closed coupon. a quarter,

our cash Park. and $XX Travel funding Our balance Holiday RV acquisition million the quarter was at before dividend end of April

sources. of CMBS one have quoting are high X.X% RV line occupancy to LTV balance ATM credit percentage of lending maturing At from assets for maturities. deals to to had XXXX. had Life companies. available from have $XXX rates Current loan for a X% our in XX-year preferred XX and end, lenders MH XX-year from annual High outstanding quarter capacity. and with our from life terms and unsecured million financing financing certain million $XXX We age-qualified no with companies still terms RV quality, access of range command money. with to all will XX% secured MH XX% assets

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

X.X times. Our debt around The is average coverage debt is maturity weighted years. of X.X is our to secured EBITDA interest times XX outstanding and our

up Now, we it to like for would open questions.

Operator

Citi. Instructions] comes Our Nick you. from first [Operator Thank Joseph question with

now line Your open. is

Nick Joseph

Thanks. the RV MH What are cap rates second the acquisitions first deals in quarter the the deal and on then quarter? the on both

Marguerite Nader

was a that about X.X The blend deals cap. three

Nick Joseph

a there RV? was the And the MH difference between and

Marguerite Nader

Yes, home communities. six, two five other think I the the closer were and was MH. the was to manufactured -- RV They roughly two age-qualified

Nick Joseph

you mix? the of adjust current continue RV of there an that then And or the the mix Thanks. optimized mentioned transient opportunity annual portfolio. strength to is seasonal Is to

Marguerite Nader

there's adjust always mix. quarter, frankly, We every adjust every the day, properties. in think our opportunity I to an it

new we effort note throughout an then And as to seasonal and in, there's throughout see encourage customers the our local national our that that a opportunity. system at level kind also system have the and to think we an and of annual. that's to And that marketing move I new So, are we become we become coming they them then transient efforts.

Nick Joseph

the Thanks. portfolio, to of Costa-Hawkins finally, rent of impact of currently to could And potential what then are just your California the communities? your communities any percentage control? PO And subject

Marguerite Nader

about would think that and are have properties don't We to XX have us. I rent control an that subject on impact

Nick Joseph

Thanks.

Marguerite Nader

Nick. Thanks

Operator

Thank you.

Babin with next Baird. comes Our for question Drew

now is open. line Your

Drew Babin

Hey morning. good

Marguerite Nader

Good morning Drew.

Drew Babin

transaction the rates. and the the appreciate market, on question on detail I General cap

your in it expectations transaction the to of is year, your of a thought maybe the surpassed the In overall quiet this for would for year to what of you and relative activity Or type year, going environment terms similarly product? a of has relative [Indiscernible] rest market of kind of last selective quality look kind the like?

Marguerite Nader

market, I very in -- acquisition the similar think think the broader it's as past. it's I

to and a under now contract properties been have is LOI that LOI closed on; under We actually when a we the there and right seller under close. these to matter It time while. the of want for right was they've for properties just

see a really don't difference in So, the I transaction market.

long-term I is sellers that are have team the or relationships that opportunities think some our with. they with -- acquisition these working seller

Drew Babin

in the higher interest balance And RV the on XX-year portfolio. quarter collateral of Is attributable it or Okay. I'm the rates guess, money in RV million rates on benchmark XX the was a RV. to year, the on be sure first facility was questions little couple versus a quarter, Thanks rate for $XXX the the in for to in that MH I of kind X%. difference rate for a Or first did whether this the fourth quarter? a an Mae And that. that difference close in would all, or that obviously, an then, fourth that not on existed higher of sheet. MH otherwise? Fannie

Paul Seavey

financing the bit a just locked XXXX in that and of to related life towards availability timing companies the we the and the for that pretty used company on primarily that well it's end by been think a allocations point. of that I life the of

a just in that relatively of bit modest there's coupon drove then So, general up little a conditions that bit. uptick market scarcity and

Drew Babin

kind your Okay. has far EBITDA where product quite I there stock go in obviously, the acquisitions is, I declined need Or equity relative are as point [ph] issue in pretty to where -- to ratio, willing more as where more getting well generally, price to of, be into is leverage my a would deals years numbers, sort ratio take are your is And the the just down of kind is bringing given those on ratio significantly. guess over lower? by leverage bit potentially accretive? out minimum not force leverage of to continue and, you you can pencil the it a And of I could see long the net just debt ATM? into guess guess, as you as much a your

Paul Seavey

positioning I mean, Yes, to I time. financial of talk kind and the about is. -- think enterprise mix be what's right execution flexibility to equity act the the opportunities themselves at debt We in goes I what and think of to when lot that it the and best ready present a point

So, what we use have historically depending I the opportunity us had and is. and don't not think targets just you'll and on debt have see equity,

Drew Babin

all very you. That's All Thank right. helpful.

Marguerite Nader

Thanks Drew.

Operator

you. Thank

BMO from next Our comes Markets. Capital question John with Kim

Your line is now open.

John Kim

your mentioned the RV to you flat Thank a commitments that's and other just you. increase they warm that? Marguerite of states. did comment lower Can you what promotional in at last some Are X% winter? on rate they locked in

Marguerite Nader

to it's lower -- And rate. sign to an the fresh, coming together do its to and all up No, built they're year, than is but parties we year we customers. have in get what's next a essentially about we're the talk opportunity what going that and they doing for next not in rate. have we person lower -- their the what increase -- to It's be

that And think a growth as all an as positive we of year theme that's down increase that and a come rate, expect so they for people to back as see next deposit. we we X% look in put those very we at

John Kim

growth So, to you you attribute last would versus year? did that rate what

Marguerite Nader

before knowing Well, some an focus I a There person calling they're they up with just that you're very to important, it think to when commit when can it's of has big you operational. if than get was north. do rather a that on them from leave,

-- that effort operating from I the team it on So, the was a think was concerted operating -- a team.

John Kim

this, announced? acquisitions apologize opportunities I there acquisitions, expansion your you are I on then the missed on but if And three any Okay.

Marguerite Nader

are on there those three. expansion opportunities no No,

John Kim

was [Indiscernible] to view use any as the whether is I Journal alternative market you going need for finally, comments on reported week, the don't that van of if an or have on you? campgrounds necessarily And forward. rate RVs. implication growth as luxury then Wall this this, competition The think Street you the to I article last And of wondering And opportunity Okay. the

Marguerite Nader

an it's Well, certainly I opportunity. think

ever which XXXX being in that year the progress the kept of XX% last The from this XXX,XXX, industry past XXXX. were think records. RV increase shipment is since XX I a records was they've years,

staying particular I So, to and excited want campground, in someone go in minority see think to being you'll the seeing interested maybe that of a to the majority increase that in the something an don't campgrounds. that. extent -- the in you're just And what lifestyle I than continue we'll continue to think a and people that's they we outside buys see people about -- rather our for RV

John Kim

you? users, of So, are customers current van our luxury they

Marguerite Nader

on some will check transient They They may properties may of our transient certainly. into mean, component. that They be. I a basis. part in be cases,

John Kim

Okay, great. you. Thank

Marguerite Nader

Thanks.

Operator

Thank you.

Our next with Todd Fargo. from Stender Wells question comes

Your line is now open.

Todd Stender

about new about Marguerite, new talk I a Hey your It's increase guess. case? home there saw used. not quarter? with you be may salespeople in conversation that's talk can thanks. in sales the of any the to homes for the an sales, renters but We dynamic, home also the and you Can new incentives more in push kind new if

Marguerite Nader

Sure.

I talk very bit and rental that a think been the little also, conversion, positive the cover conversions, have maybe Patrick which quarter. have I'll over about the

Todd Stender

Thanks.

Patrick Waite

Sure.

two MH in as our home that XX% front, mentioned, driven conversions sales and XX% expansion for new existing the have renters. in Arizona. So, for by above XXX. largely markets our sales Marguerite home year-over-year. sales On the were Arizona That's in used the home California and That's almost were as new as well new of quarter, conversion properties we that overall quarter

that existing were ELS the home purchasing renters it's renting. So, our they

that they that with weren't smaller or conversion with XX%. that include either in renting the community, that residents or the of to increases you home, If our up down all homeowners rate other trading home buy are engagement trading renters so

more really incentive with managing our do customer-facing, perspective, has to their it So, from process. engagements in an

offering Our our does very sales homes. compensated renters industry the to they're respect to a reaching a thorough salespeople, standard job to commission of team purchase And with them schedule. out and opportunity with

Todd Stender

That's financing How cash? before That will don't helpful. Are these generalize, In be renting one with could folks are I purchase? if they generally and general, purchases? are they paying they long know two. part I part

Marguerite Nader

on really that the sales the So, for finance deals no home are we quarter. there new did

cash So, seen transactions, what that's all the in those similar past. we've are to and

to it's savings personal from three So, spending up of giving and that the two between about $XX,XXX, people term, terms years. that are renter of $XX,XXX and their committing and in cash --

Todd Stender

Okay, with last to you price there conversation? sellers often And how guys, part the unit you good is How the is that's year-to-date. to of communities helpful. might their hung question, OP to performer. the of in be them a share a with able just So, your It's private is sellers? often been offer conversation that

Marguerite Nader

it's not a and is liquidity for every you part a a of Todd, get unit. their conversation, and they're or to desire what there's need closing because whole OP Well, the fully with of just period it's whether as matter is what certainly

past the weren't to we we've done the to But ATM. that then the turn perhaps, where units a happen, in going what something each was conversation with So, OP it's seller. certainly

Todd Stender

Okay. Thank you.

Marguerite Nader

Todd. Thanks

Operator

Instructions] from John comes question Thank next Green with Street. you. [Operator Our Pawlowski

open. Your line is now

John Pawlowski

year granularity hoping tax operating can Paul What's to kind do that? I expect? of growth give X.X% individual rates Thanks. and What was maintenance bucket? you within each guidance. you property in some What's full the

Paul Seavey

Yes.

everybody is year. just does that be to the last back circle and from include confusing this just I I'll on that, impact thing do rate of what hurricanes view first remind to that the of somewhat kind So, growth

it, area, growth a the basis, the seen in an level couple that insurance a there, of So, the In on adjust pressure talked that's really, X.X% wage and the when normalized that areas, call driving main we that have expenses. properties. I the core a, be of increase in previously also would then about those for you at

increases. driver related just and retain statutes properties cost growth to So, in the across attract minimum have that in a we've expense we country, addition the at of talked changes to increases the in the the is wage property level the the past just to about well. employees as But at then

John Pawlowski

what do curious, expect taxes property be in to up just And you Okay. XXXX?

Paul Seavey

property XXXX, Notices kind We I visibility increase impact of similar that in relatively we in expect will in We process. won't of early until and modest us, a something a last have Florida, for increase for the taxes. year but in August anticipate the quite into significant to which a State mid-single-digit say saw it's September. and is later low

John Pawlowski

are if an pretty our firm Okay. And a understand pricing the XX% you X% across you for you asset pick lowest seeing south footing. cap expect any and quality last on the do were But as and me, I portfolio, or you weakness you see question of the rates? number, to of values portfolio look to bottom chunk expansion go in or are

Marguerite Nader

don't on We the or in terms any lower our see evaluation higher properties. of the and end issues with

a from so rates. they're performance Just well, don't cap see an we both standpoint, very performing expansion in

John Pawlowski

Thank Great. you.

Marguerite Nader

Thanks.

Operator

you. Thank

next Our comes Samir question Evercore. Khanal with from

now line is open. Your

Samir Khanal

kind months? that the we've a side, any next of get close guess, X% potential More Good early if mean, follow-up the at the XX-year going kind I I to seen mean, couple of sort diligence over morning. signs any provide. on question sense acquire and higher. of of you on of of on now as sort through rate a kind I'm assets cap you kind which to can changes rising trying I color going seen potentially have to just yields the of of you're before. of transaction due of just

Marguerite Nader

just would we're Sure. change any the really right market to what months I now. I That's sellers over change to say that seeing we doesn't in not actively mean, really seen but future, last say. we're the the and actively in that's talking that haven't XX

Samir Khanal

to talk assets, or that maybe due go that the looking diligence about further bit you on you can encounter? I you're little when mix just of same little acquire a mean, these buyer or of topic. through maybe the extend a And pool kind to

Marguerite Nader

that we've known son that and for them time owners in negotiated with existing a that been owners with Sure. we father discussing, now the we've and time a communities is then are the long I the maybe the for long negotiating mean of charge.

families is the pool a there's discussions lot -- of this really there's -- around but timing. there. they lot is communities of them lot to at from build the A so are some I So, these point want that what is And history sell, own center right that and the mean just of scratch, know the timing. communities. -- a they

Sometimes detail not conversations times, a own we a life or of focus but level on to that's of get about tax-driven their reason. of you Other what's as more as majority own stop personal we're really circumstances a it's happening the they working, to in it's and the set pretty when whether of having. get reason. But to down that kind conversations, of the and granular want

Samir Khanal

Thanks. Okay.

Marguerite Nader

Thank you.

Operator

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

Marguerite Nader

look We forward quarter's updating you joining today. next on call. for us to you Thank

Operator

today's much you Thank conclude much conference. you participation. for That Thank very very ladies gentlemen. does and your

You Have day. disconnect. may a wonderful all

Equity LifeStyle Properties (ELS) 24 Apr 182018 Q1 Earnings call transcript