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Edited Transcript of ELS earnings conference call or presentation 24-Jul-18 3:00pm GMT

Q2 2018 Equity LifeStyle Properties Inc Earnings Call

NEW YORK Aug 3, 2018 (Thomson StreetEvents) -- Edited Transcript of Equity LifeStyle Properties Inc earnings conference call or presentation Tuesday, July 24, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Marguerite M. Nader

Equity LifeStyle Properties, Inc. - President, CEO & Director

* Patrick Waite

Equity LifeStyle Properties, Inc. - Executive VP & COO

* Paul Seavey

Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO

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Conference Call Participants

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* Andrew T. Babin

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* John Joseph Pawlowski

Green Street Advisors, LLC, Research Division - Senior Associate

* John P. Kim

BMO Capital Markets Equity Research - Senior Real Estate Analyst

* Nicholas Gregory Joseph

Citigroup Inc, Research Division - VP and Senior Analyst

* Samir Upadhyay Khanal

Evercore ISI Institutional Equities, Research Division - MD & Equity Research Analyst

* Todd Jakobsen Stender

Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst

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Presentation

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Operator [1]

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Good day, everyone, and thank you all for joining us to discuss Equity LifeStyle Properties' Second 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. Certain matters discussed during this conference call may contain forward-looking statements in the meanings of the federal securities laws.

Our forward-looking statements are subject to certain economic risk and uncertainty. The company assumes no obligation to update or supplement any statements that become untrue because of subsequent events. In addition, during today's call, we will discuss non-GAAP financial measures as defined by the SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information and our historical SEC filings.

At this time, I would like to turn the call over to Marguerite Nader, our President and CEO.

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [2]

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Good morning, and thank you for joining us today. Our second quarter results released yesterday, show strong quarter and year-to-date trends. Year-to-date, we increased occupancy by 128 sites, and this quarter marks our 35th consecutive quarter of occupancy growth.

In the quarter, we increased new home sales volumes by 22%, over 40% of our home sales in the quarter were in Colorado and Arizona. Year-to-date, 29% of our new and used home sales were the result of an in-place resident conversion. This quarter, we had increased activity in new home conversions as we strengthen the sales effort geared towards converting renters who have experienced our lifestyle offering.

Our new home buyer was generally an all-cash buyer. Over 40% of the new residents are moving from a site-built home and 30% are moving from a manufactured home. We have had success filling our communities while continuing to increase rents for in-place residents.

Year-to-date, our MH revenue, which accounts for 70% of our total revenue, had a growth rate of 4.6% comprised of 4% rate and 60 basis points of occupancy. Our RV revenue growth of 7.6% year-to-date has been fueled by growth in our annual income. The annual growth of 6.9% is comprised of 5.4% rate and 1.5% occupancy. This increase in annual growth comes from our key markets of Orlando and Phoenix. Our online transaction activity continued to escalate.

In the quarter, our RV revenue through digital channels increased 15%, and our sales of online camping passes increased by 42%. Our summer marketing campaigns are aimed at strengthening our commitment to our customers. Using pictures and videos, our customers are providing us feedback and referrals that help to build our new customer base. We have increased the awareness of our product offerings, and year-over-year, we have seen an increase in social media fans of 20%. We currently have over 480,000 fans and followers.

Turning to acquisitions. Since last earnings call, we purchased one senior manufactured home community in Florida for a total purchase price of $72 million. The property is located in Fort Lauderdale with a total of 612 sites. I'd like to thank our employees for their efforts in delivering another strong quarter at ELS.

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Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [3]

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Good morning, everyone. I will discuss our second quarter results and update guidance for the remainder of 2018. For the second quarter, we reported FFO per share and normalized FFO per share of $0.90 and $0.89 respectively. Normalized FFO was higher than guidance and reflects the impact of business interruption insurance proceeds received related to our properties in the Florida Keys. Our core MH rent growth of 4.6% consists of approximately 4% rate growth and 60 basis points related to occupancy gains.

Our second quarter core RV resort-based rental income growth was 7.7%, ahead of our guidance, mainly as a result of outperformance in our seasonal and transient businesses. Growth in annual revenues was in line with expectations and increased approximately 5.2% as a result of increased rate. The remainder of our annual growth was the result of increased occupancy, including annuals added as a result of our development efforts.

Almost half of the seasonal growth in the quarter came from increased occupancy at our properties in California and Florida. Strong demand for transient stays drove increased rates and occupancy, particularly at properties in Texas, New York and California.

Core utility and other income was higher than guidance as a result of increased utility recovery, offsetting higher-than-expected expense as well as insurance recovery to offset R&M expenses following a flood event in California.

Membership dues revenue was higher than guidance for the quarter. During the quarter, we sold approximately 5,800 Thousand Trails camping pass memberships. Year-to-date, we have sold approximately 8,900 camping passes, a 23% increase over the first 6 months of 2017.

The net contribution for membership upgrade sales was higher than expected during the second quarter. Of our 2 upgrade sales channels, our community sales effort continues to increase its share, which results in lower commission expenses compared to our third-party sales agents.

We also noted a continued increase in sales volume of our higher price upgrade products. During the quarter, we sold 625 upgrades at an average price of approximately $6,300. Core property operating expenses were higher than expected in the quarter. Repairs and maintenance expenses include the impact of California storm events that resulted in flood damage. These expenses were partially offset by insurance recovery.

Higher-than-expected utility expenses mainly caused by increased gas usage in the West and South and higher trash rates in California and the Northeast were partially offset by the utility recovery. The other main contributor to our expense variance relates to legal and compliance matters at certain properties in our portfolio.

In summary, second quarter core property operating revenues increased 5.6%, and core property operating expenses increased 6%, resulting in an increase in core NOI before property management of 5.2%.

Income from property operations generated by our noncore properties performed better than guidance, mainly as a result of business interruption insurance proceeds received during the quarter. This represents a progress payment on our business interruption claim related to our RV properties in the Florida Keys.

The properties we owned prior to the beginning of the quarter performed in line with guidance during the quarter. Property management and corporate G&A expenses were higher than guidance as a result of higher-than-expected legal and compliance costs. In addition, we realized higher-than-expected compensation expenses from filling open positions more quickly and at higher-than-expected rates. Other income and expenses as well as financing costs and other were in line with our guidance for the quarter.

Turning to our guidance update, the press release and supplemental package provide third quarter and full year guidance in detail. Please note, the following remarks are intended to provide our current estimate of future results. All growth rates and revenue and expense projections represent midpoints in our guidance range.

We've increased our full year 2018 normalized FFO per share guidance, $0.01. Our range for the year is now $3.82 to $3.92. The midpoint of our third quarter normalized FFO guidance is approximately $93.7 million with a range of $0.96 to $1.02 per share.

We expect the third quarter to contribute approximately 25% of our full year normalized FFO. For the remainder of 2018, we assume no change in our core MH occupancy from the end of the second quarter, and expect community-based rent revenues of $257.4 million, a growth rate of 4.4% for the remainder of the year.

In our RV business, we anticipate core RV revenues of $111.4 million for the rest of the year, a 5.8% increase over the second half of 2017. This projection is based on expected revenue growth of 5.9% from our annual customers, 5.4% from seasonals, and 5.7% from transient customers. We expect approximately 40% of the full year transient income will come in the third quarter.

Based on our review of current reservation pace and overall expectations for activity in August and September, we are projecting 4.6% growth in transient revenue for the third quarter.

Dues and membership sales revenues for the second half of the year are expected to be $30.7 million. The associated sales and marketing expenses are anticipated to be approximately $5.8 million for a net contribution of $24.9 million. Core operating expense growth is projected to be 3.1% for the full year.

Our current guidance for the second half of 2018 does not include any assumptions regarding unplanned storm events. During the second half of 2017, we incurred $6.7 million of expenses related to Hurricane Irma.

Adjusted for the 2017 activity, our normalized core operating expense growth rate would be 3.3% for the remainder of the year.

For the rest of the year, core property operating revenues are anticipated to be up 2.4% with an increase in core property NOI of 4.5%. We expect the noncore properties will contribute about $8.3 million in income from property operations for the remainder of the year. This includes an assumption for business interruption proceeds related to our Florida Keys properties.

We are actively engaged in discussions with our insurance carriers regarding resolution of our Hurricane Irma claim, including business interruption. While we have included an assumption for anticipated proceeds and guidance, we can't accurately predict the anticipated timing or amounts of future progress payments.

For the full year, we project $14.1 million in income from property operations from our noncore assets. Property management and corporate G&A is expected to be $42.9 million for the remainder of the year and $87.7 million for the full year.

Other income and expense items are expected to be approximately $7.3 million for the rest of the year and approximately $15.4 million for the full year. Financing costs and other in the second half of the year are expected to be $52.3 million.

Now some comments on our balance sheet. Following the end of the quarter, we raised approximately $23 million in cash from sales of stock from our ATM program. Year-to-date, we have closed an approximately $145 million in acquisitions and have funded approximately $105 million from debt and equity. We continue to see strong interest from various lending sources to finance our MH and RV assets.

Current secured debt terms available for MH and RV assets range from 60% to 75% LTV with rates from 4% to 4.5% for 10-year money. High-quality, age-qualified MH will command preferred terms from our lending sources. Fannie and Freddie, CMBS lenders and certain life companies are currently offering debt to finance RV assets.

The current lender underwriting model for MH and RV assets places high value on strong sponsorship. Our interest coverage ratio is 4.4x and our debt to adjusted EBITDA is 5x.

Now we would like to open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Nick Joseph with Citi.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [2]

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What was the cap rate on the $72 million Florida MH acquisition this week?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [3]

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So the going-in yield was a 5 cap with an expectation of yield expansion over time, as we kind of upgrade the community and institutionalize some of the management practice -- practices. This property was developed by a family 40 years ago, and has really stayed in the family until this point. And it's a well-located asset in Fort Lauderdale, a couple of miles from the beach. So we anticipate being able to get some expansion over time -- expansion in the cap rate.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [4]

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How long does it typically take to get that NOI uplift?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [5]

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Yes, I think that I would say in the next 2 to 3 years to get that to increase.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [6]

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And you've been more active with acquisitions over the last 1.5 years, so just curious how the acquisition pipeline looks today.

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [7]

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Sure. I think the pipeline is similar to what we've said in the past. I think, as to the broader acquisition market, as an industry, as a whole, the investment activity, this year, has roughly been half MH and half RV. We have seen some new entrants into the market, but there's really no change in the process of getting deals completed, mainly through long-term relationships with sellers and brokers, and right now we have properties under contract in LOI that we really discuss once we get the deals closed.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [8]

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And just finally, with July 4 being on a Wednesday, how was transient revenue growth this year versus last?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [9]

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As it looks for July 4, and we talked about this a lot, that falling on a Wednesday is not a good thing for us, so it's basically flat for year-over-year. But what we see -- as you saw in the quarter, we made up a lot of ground on the weekends before that. We're happy to say that July 4 is going to be on Thursday next year, so that's a positive for us.

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Operator [10]

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And our next question comes from the line of Samir Khanal with Evercore ISI.

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Samir Upadhyay Khanal, Evercore ISI Institutional Equities, Research Division - MD & Equity Research Analyst [11]

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So look, when you look at the revenue growth, it continues to be robust, but one line that's sort of hard to predict is sort of property taxes. And how should we think about sort of real estate taxes in the near future? Maybe any early reads from sort of property tax assessments and how that's trending as we think about NOI growth.

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Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [12]

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Yes, I think that, for us, the significant event on real estate taxes comes in the next 60 days as we receive early notifications from the state of Florida. The TRIM notices that they send that provides some insight into the current-year taxes, start to come in in August and September. Across the country, aside from Florida, we haven't seen, in the past, I'd say, 12 months, we haven't seen significant pressure on real estate taxes. Prior to that, we had seen some pressure in both Texas and Colorado, and we conducted appeals in those states and did see some relief coming from that. But I think for the rest of the year, aside from the uncertainty related to Florida, we're not seeing meaningful indications of significant pressure on real estate taxes.

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Samir Upadhyay Khanal, Evercore ISI Institutional Equities, Research Division - MD & Equity Research Analyst [13]

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Okay. And I guess, my second question is on kind of the acquisition that you did. Can you just generally talk about sort of the bidding process for these types of acquisition? I mean, who's showing up -- which parties are showing up in the process in terms of private institution? Or even -- do you have foreign capital that's coming in? Just trying to get a sense of how competitive the bidding process is for sort of MH product out there?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [14]

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Yes, I think it certainly depends on -- it's on a deal-by-deal basis. In some instances, we're negotiating with a seller that didn't know he was a seller until the last couple of years, it's just the relationship that we had. And that may be an opportunity where there aren't a lot of bidders, and then in other instances, you may see a lot more people at the table, at the kind of the auction table. So it really varies.

There have been, as I mentioned I think in the previous question, there have been some new entrants coming into the market of people -- new capital coming in, interested in investing in the space, and that's really happened over the last 4 or 5 years. There's a lot of names that weren't around 4 or 5 years ago, and I think that has changed the process in some of the deals, where you may see more people showing up, but a lot of the deals are relationship based where you're talking to the seller for a long time before an actual transaction takes place.

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Operator [15]

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And our next question comes from the line of John Kim with BMO Capital Markets.

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John P. Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [16]

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As part of your guidance, you assumed there was no change in your MH occupancy, which is consistent with what you saw last quarter. But I was wondering, if there were any structural reasons why occupancy could not go higher, like 95% to 96%.

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Patrick Waite, Equity LifeStyle Properties, Inc. - Executive VP & COO [17]

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Yes, this is Patrick. I don't see any structural reasons why we can't eclipse the previous high-water mark of 95%, that we're 150 OPs away from around 95% on the current portfolio. About half of our portfolio is less than 98% occupied, so we have some room to continue to grow occupancy. I'd say that structural vacancy starts to affect occupancy growth in the 98% to 99% range. So as long as the housing market holds up, that's our core customer, who tends to be an empty nester or a baby boomer who sells their single-family home up north or believes they can sell their single-family home up north, continues to feel that way. Consumer confidence remains high, we should be able to continue the current occupancy growth you've been seeing.

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [18]

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And I think we're also seeing that these are sustainable levels in the MH business, where the customer is putting down a considerable amount of capital to live at the property. So that's why you're able to see that -- the high percentage of occupancy and it's sticking for a long time.

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John P. Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [19]

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And are the communities that are below 98% occupied, are they typically all-age communities? Or are there any other characteristics either geographically or otherwise that are the commonality?

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Patrick Waite, Equity LifeStyle Properties, Inc. - Executive VP & COO [20]

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No, they're representative of our portfolio. If anything, it's overweight to our kind of our core, which is age qualified in Sunbelt locations, particularly Florida, about half of our current vacancy is in Florida.

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John P. Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [21]

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Okay. I think, Paul mentioned, cost of financing, secured debt of 4% to 4.5% for 10-year money, which is similar to what you said last quarter. But I was wondering if you had noticed any widening of spreads in that figure?

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Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [22]

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No, we haven't seen much movement as rates have ticked up. Spreads have moved a little bit to hold the rates relatively flat throughout the year so far.

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John P. Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [23]

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And the $23 million you raised in your ATM, is that enough equity to fund Everglades Lakes? Or will you be opportunistically tapping the ATM market for more?

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Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [24]

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I think we take a broader view of that. I mean, we look at overall funding sources. When you think about our year-to-date acquisition activity, we had roughly $180 million of FFO just in general, and then we have new and assumed debt of $80 million so far this year as well as repayment of a note receivable. When you think about our dividend of $55 million, about $220 million cash left for opportunities and obligations.

As I mentioned, our acquisition volume was around $145 million, CapEx of $60 million, and then the debt repayment of around $25 million. So as we think about all of that activity and then we look at kind of the opportunities in front of us and we look ahead to the maturities that we have, $200 million coming due in 2019. We take all of that into consideration when we determine what our capital plan is and our funding sources and execute accordingly.

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Operator [25]

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And our next question comes from the line of Drew Babin with RW Baird.

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Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [26]

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In my reading, I've seen that the RV industry association is calling for 2019 shipments to decelerate quite a bit from this year's pace in terms of motor homes, so from about 96.5% down to about 1% next year. Basically saying, unemployment seems to be bottoming, more inflation, higher interest rates, higher interest prices, or higher energy prices, I should say.

So I guess, within the RV segment, you've made it clear you target a very specific customer within the RV business and the incremental customer might not matter as much. But I guess, if you think about was Thousand Trails membership and the rate that that's growing at this year, do you have any concerns that maybe it gets a bit tougher to kind of get that incremental customer? Or do you not really -- or do you just see this forecast as something that might just be kind of conservative until reality might prove it is so?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [27]

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Yes, I mean, I think certainly as we look to the numbers, I think in 2018, they're predicting RV shipments of 539,000, which is a very high number. But as -- what we've always concentrated and we talk a lot about is really the installed base of RV-ers, and that's who we're marketing to and that's 8 million to 9 million. And so there's new ones that are obviously coming in, when they buy the new RV, and in some cases they're trading up. But I don't see a slowing of the demand. In fact, what we're seeing is people are really -- really have a desire to have an experience, kind of an outdoor experience, be outside with their family and we don't see that slowing down right now.

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Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [28]

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Okay, then just one follow-up question on the acquisition post the end of the second quarter. You mentioned there was a development from about 40 years ago, family owned. And so it seems to me like this deal is probably more of an off-the-market type of relationship deal. And I guess, over the last couple of years, what has made more owners consider selling? Is it just the pricing that's out there? Are you kind of actively pitching that to potential sellers? Or have -- has kind of this recent uptick in acquisitions has just coincided with more owners deciding to sell just because of life circumstances or events?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [29]

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I think it's a little bit of a mixed bag, but really what you point out at the end there, there's life events that are happening, that are causing people to consider whether or not they really want to own and operate, really, it's the operating part that they're maybe getting tired of.

So they're making those decisions to say, "I think, it's time to kind of move and actually retire rather than just watch everybody as they're retiring." So I think that's what we're seeing a lot of, and that's just a matter of timing, because we may have been talking to them for the last 10 years and they were fine 10 years ago, but now they are a little bit tired. So that's what I think you're seeing and you're seeing that in our deal flow.

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Operator [30]

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And our next question comes from the line of Todd Stender with Wells Fargo.

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Todd Jakobsen Stender, Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst [31]

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Just looking at home sales, they continued to be weighted towards the new side, which expanded in the quarter. Can you just show -- just share maybe what your internal sales initiatives are positioned? Maybe how you're talking internally, just maybe that dialogue versus used homes?

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Patrick Waite, Equity LifeStyle Properties, Inc. - Executive VP & COO [32]

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Sure. I guess, let me first take used homes and then I'll talk about the trend in new. Used is just basically settled into a range of 250 to 300 a quarter and that's just based on inventory, existing inventory in our properties kind of cycling through our inventory pipeline as well as a focus on renter conversions and reducing our used inventory. You can see those trends in the year-over-year trends of our rental portfolio up in new and down in used.

With respect to new home sales, it's a consistent focus for us, obviously, it's the key driver of occupancy growth in an MH portfolio, so bringing that new inventory in is the key driver of our occupancy year-over-year. I've made the point that both the MH and the RV properties are contributing. MH is up 14% year-over-year. We've seen strength throughout the Sunbelt, but also some strength in the Northern and Northeast markets, that's good to see and favorable for the balance of this year before we enter the winter season. And on the RV properties, we're up more than 60% year-over-year in home sales. A lot of that is driven -- almost all of it is driven by our RV expansions in Arizona, MH sections of our RV properties, Monte Vista and ViewPoint.

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Todd Jakobsen Stender, Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst [33]

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Okay, that's helpful. And kind of just to dovetail off of Drew's question about the seller profile. With the Fort Lauderdale community, was there any assumed debt that you took on from that property? And then can you kind of just expand on your ability and willingness to issue OP units? Because when I look at the competitive landscape, perhaps from private equity entering the space, they may not have that tax efficient currency, like you guys do.

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Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [34]

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Right, right. We didn't have any debt assumed as part of that deal, and certainly, OP unit discussions happen frequently in this type of transaction. Often the interest on the sellers is expressed and it just depends on their personal circumstances whether they choose to execute with OP units or not. We have identified the ATM as an attractive opportunity for us, obviously, to issue equity in the event that the seller chooses not to take advantage of OP units.

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [35]

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And Todd, what we've also seen is that it's really just having the OP units as a tool in our toolbox is a reason in the door, in some instances that maybe others don't have. Now in the end, maybe they chose not to take the OP units, but it's a way to start the conversation.

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Todd Jakobsen Stender, Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst [36]

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Okay. And then just finally, what -- if I missed this, I'm sorry, any expansion opportunities at the Fort Lauderdale MH community? And then also at the RV community in Holiday?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [37]

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No, there are no expansion opportunities at either of those assets.

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Operator [38]

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And our final question comes from the line of John Pawlowski with Green Street Advisors.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Senior Associate [39]

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First question relates to affordable housing. I know that the social and political outcry seems to be rising, particularly on the coast. So curious, in any municipalities you operate in, is the tone from elected or unelected officials with power changing at all in terms of barriers to supply and willingness to increase zoning for manufactured housing changing at all across your markets?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [40]

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We haven't seen a change. Now as we look to all the markets that we operate in, where we are doing developments and this is add-ons to our existing, we've been able to work with municipalities and able to get the necessary permits. But we haven't seen a change writ large to starting a ground-up development in the middle of a city, that would be attractive to us. Not to say that that wouldn't change in the future, but that's not something that we've seen right now.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Senior Associate [41]

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But the, for lack of a better word, barriers to expansion are easing a little bit?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [42]

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No, I think it's consistent with what it's been in the past. In the past the demand really wasn't always there, so we had land and we chose not to develop it, so -- but it was entitled, it was permitted, it was just a matter of kind of going down to the city and making certain that we were -- that the site plan was approved. So I think that that supply characteristic has been in place for a long time, but there isn't a change to the supply characteristic of all the assets or of all the possibilities.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Senior Associate [43]

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Okay. And then last one, just hoping for more color on the transaction market. We're seeing, across the residential sectors, pretty good quality compression in terms of people getting more aggressive, whether it's secondary markets or submarket quality, age of asset, seems to be compression versus b assets versus a's. Wondering if you're -- what type of compression you're seeing, RV versus MH, secondary markets versus primary markets, any color you can provide on the competitiveness of the bid across the quality spectrum would be great.

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [44]

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Sure. So when you consider RV and MH, we're seeing in areas that we would want to be focused in, we're seeing that they're really trading right on top of each other in terms of a cap rate. Obviously, it changes on a per-site basis, but from a cap-rate basis, they are very similar, and that's not a new story, that's consistent with what we've seen over the last 10 years. And so I think that that's generally what we're seeing. We're certainly, as we see, and I had mentioned it earlier, there's some new entrants coming into the market that's generating some amount of activity and some desire for the -- sellers are looking and they're seeing maybe there's another guy showing up to the door, but there has been no real change, I would say, in cap rate compression.

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John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Senior Associate [45]

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So today you don't have any more issues competing with the private equity, the deep private equity pockets that are entering the space?

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [46]

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No, I mean, certainly, there has been instances where there is a particular market that somebody may not have a toehold in at all and they're going to pay a lot for that and that's a place where we just step away and we have the confidence to be able to step away, and if it doesn't make sense, it doesn't make sense for us. So -- but that's not new. I would say that's something we've experienced in the last 5 or 6 years.

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Operator [47]

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And since we have no more questions on the line, at this time, I would like to turn it back over to Marguerite Nader for closing comments.

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Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [48]

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

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Operator [49]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.