U.S. Markets open in 7 hrs 6 mins

Edited Transcript of ELS earnings conference call or presentation 29-Jan-19 4:00pm GMT

Q4 2018 Equity LifeStyle Properties Inc Earnings Call

NEW YORK Jan 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Equity LifeStyle Properties Inc earnings conference call or presentation Tuesday, January 29, 2019 at 4:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* 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

================================================================================

Conference Call Participants

================================================================================

* Jason Belcher

Wells Fargo Securities, LLC, Research Division - Associate Analyst

* John Joseph Pawlowski

Green Street Advisors, LLC, Research Division - Senior Associate

* Joshua Dennerlein

BofA Merrill Lynch, Research Division - Research 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

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, everyone, and thank you all for joining us to discuss Equity LifeStyle Properties' Fourth Quarter and Year-end 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 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.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Good morning, and thank you for joining us today. I am pleased to report the final results for 2018. We continued our record of strong core operations and FFO growth with 7.5% growth in normalized FFO.

2018 was a year marked by solid demand. Quarter-over-quarter occupancy has now increased for 9 consecutive years. Our MH portfolio increased occupancy by 379 sites while increasing homeowners by 555.

We saw continued strength in our MH properties with a full year rate growth of 4%. Our customers are increasingly using the rental program as a trial prior to homeownership, and renter conversion trends are positive.

We finished the quarter with our strongest conversion rate for new and used home sales at 32% with an average of 28% for the full year. Our RV resorts performed well this year with a 6.8% overall growth in income. The demand is strong for RV sites across the country. Our RV resorts are primarily dedicated to accommodating long-term customers with 80% of our revenue coming from annual and seasonal customers.

Our guidance for 2019 reflects the strength in our business. Revenue growth is fueled by strong rate increases for in-place residents and customers. The individual market surveys provide support for our views and incorporate all housing indication options in the local area.

Our online reservation and sales activity continues to escalate. In the quarter, our RV revenue through digital channels increased 41% and our online sales of camping passes increased by 56%.

Our marketing team is focused on eliminating point-of-sale barriers for our customers. Processes have been streamlined with a focus on conversion through self-service. In 2018, we increased our social media fan base to 550,000.

Turning to transactions. In the quarter, we purchased 1 manufactured home community for approximately $70 million and 2 RV parks for a total of $28 million. The properties contained 1,600 sites. Additionally, in January, we sold 5 Midwest All Age properties for approximately $90 million. We are pleased with the execution on these transactions. Finally, I would like to thank our employees for delivering another great year in 2018.

I will now turn it over to Paul to walk through the numbers in detail.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thanks, Marguerite, and good morning, everyone. I will review our fourth quarter and full year 2018 results, update our full year 2019 guidance and discuss our detailed first quarter guidance.

Before I begin, I'll mention that our core results for 2018 include the contribution from the 5 properties we sold last week. We have revised our core 2019 guidance to exclude the contribution from these properties.

Our fourth quarter and full year core portfolio results were impacted by certain storm events that resulted in higher than expected repairs and maintenance expenses. These expenses were offset by insurance recovery from prior storm events.

Our core portfolio generated 5.2% growth in NOI for the full year. Full year normalized FFO per share was $3.87, 7.6% higher than 2017.

Full year core-based rental income growth was 4.6%, with 4% coming from rate and 60 basis points coming from occupancy. We increased core occupancy 170 sites in the quarter. At the end of the year, rental homes represented 6.3% of our core occupancy.

Fourth quarter core resort-based rental income growth was 6.2% compared to prior year. The outperformance to our expectations was driven by higher seasonal and annual revenues. Our annual revenues reflect the benefit of additional sites filled during the quarter, including sites filled at properties with expansion sites.

For the full year, net contribution from our membership business was almost $2 million higher than 2017, an increase of 4%.

Dues revenues increased 4.3% due to rate increases and an increase in our paid member count of almost 2%. We continue to see strong demand for our upgrade products.

During the fourth quarter, we sold 4.5% more upgrades than the prior year and the average sales price of our upgrades was approximately 5.6% higher than the fourth quarter of 2017.

Core utility and other income was higher than guidance, mainly because of insurance proceeds related to prior insured losses.

As we've mentioned in the past, it's difficult to predict the timing of receipt of insurance proceeds during the claim settlement process. The favorable revenue variance to guidance is partially offset in repairs and maintenance expenses.

Fourth quarter core property operating maintenance and real estate taxes increased 1.5% compared to 2017. We experienced higher than planned repairs and maintenance expenses related to storm events in the South and California. Property legal expenses and [non-alarm] real estate taxes were also higher than expected in the quarter.

In the fourth quarter, our core revenue growth was 4.5% and core NOI growth was 6.3%. Full year core revenue growth was 4.8% and core NOI increased 5.2%.

Our noncore properties contributed $5.3 million in the quarter and $16.2 million for the full year.

Our fourth quarter acquisitions were not included in prior guidance.

Property management and corporate G&A were $24.2 million for the fourth quarter. In the quarter, these expenses were higher than expected mainly as a result of settlement costs mentioned in our press release and supplemental package and an increase to our insurance reserves.

We have excluded the settlement and related legal fees from normalized FFO.

Interest and amortization expenses were higher than guidance in the quarter as a result of the loans we closed during the quarter.

The press release and supplemental package provide 2019 full year and first quarter guidance in detail.

As I discuss guidance, keep in mind my 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.

Our guidance for 2019 normalized FFO is $394 million or $4.12 per share at the midpoint of our range.

The main changes to 2019 guidance since our release in October relate to our acquisition and disposition activity, updated core MH revenues, based on truing up rate and occupancy following the end of the fourth quarter and our financing activity completed during the fourth quarter.

For the year, growth in core NOI before property management is expected to be approximately 4.8%.

We assume flat occupancy in our MH properties for 2019. Base rent is expected to grow 4.6% with 4.2% from rates and 40 basis points from occupancy as we realize the full year impact of sites filled in 2018.

In our core resort business, we project a revenue growth rate of 5%. We see continued strong demand for our RV properties, and we continue to see opportunities to increase rate as we focus on occupancy across the portfolio.

We expect 5.4% growth in our annuals for 2019. We have reviewed our first quarter reservation pace for our seasonal and transient businesses and incorporated that pacing into our guidance update.

Our membership business, which includes right to use annual payment revenue, right to use contract sales and sales and marketing expenses shows a net contribution of $51.3 million.

We've increased our upgrade sales assumptions based on the continued success of this program. Page 15 of our supplemental package shows aggregate revenue generated by our Thousand Trails properties.

We project $107 million in 2019 from dues revenue; annual, seasonal and transient stays; upgrade sales and other income. The midpoint of our core utility and other income guidance is approximately $88.2 million and is in line with prior guidance.

The growth rate change from prior guidance mainly as a result of insurance recovery we received during the fourth quarter.

Keep in mind, our guidance does not assume property loss events that may generate insurance related revenue to offset property restoration expenses.

Core expenses are approximately $382 million at the midpoint of our guidance range, consistent with our preliminary guidance. The growth rate change from prior guidance as a result of the fourth quarter actual results I mentioned earlier.

We don't make assumptions regarding expenses we may incur to recover from property damage events.

The unpredictability in terms of timing and impact in 2019 as compared to our experience in 2018 may cause some quarterly fluctuations in our expense growth rates during the year.

Our guidance includes $19.9 million of NOI from our noncore properties.

As a reminder, our properties in the Florida Keys are included with noncore properties during 2019. We expect $91 million in property management and corporate expenses in 2019 consistent with prior guidance.

We've updated our guidance for other income and expenses to reflect investment in technology, to improve our customer and employee experiences.

Financing costs and other include the debt activity I'll discuss when I walk through our balance sheet.

The full year guidance model makes no assumptions regarding the use of free cash flow we expect to generate in 2019.

Our first quarter normalized FFO guidance is approximately $105.7 million or $1.11 per share at the midpoint of our guidance range.

We expect our core to generate revenue growth of 3.4%, expense growth of 1.6% and NOI growth of 4.5% in the first quarter.

Our first quarter core base rent growth of 4.9% assumes a 4.3% rate increase and 60 basis points related to occupancy gains we achieved in 2018.

We do not assume incremental first quarter occupancy gains in our guidance. With the first month of the quarter almost complete, we expect growth of 4.6% from our core RV business in the first quarter. Revenues from annuals are expected to grow 5.9% in the quarter. As previously mentioned, our current reservation pace is driving our expectation of 3% growth in both seasonal and transient revenue in the first quarter.

Utility and other income is lower than last year as a result of insurance recovery recorded in the first quarter of 2018. We are projecting first quarter core expense growth of 1.6%. The expense comparison to prior year reflects elevated expenses in 2018 related to Hurricane Irma.

We expect our noncore properties to contribute approximately $7.1 million of NOI in the first quarter.

I'll now discuss our balance sheet. I think it's helpful to provide a summary of our 2018 capital activity.

During 2018, we purchased 8 communities for approximately $250 million and repaid debt of approximately $275 million, including scheduled principal amortization.

In addition, we invested approximately $49 million to fund development activity including acquisition of vacant land parcel adjacent to our properties.

Our funding sources for this activity included financing proceeds of approximately $425 million, ATM proceeds of approximately $78 million as well as cash flow from operations.

As we executed on our capital markets activity during 2018, we remained focused on best possible execution, debt or equity, depending on our investment opportunity.

Our financing objectives continue to focus on accessing long-term low-cost secured debt. The result of our 2018 efforts included increase in our weighted average debt maturity from 12 to 13 years and a reduction of our weighted average rate by almost 10 basis points to 4.45%.

Comparing our metrics to REITs on average shows our term to maturity is more than double there, almost 6-year term, while our average rate is modestly higher than the average 4.1%. We have no scheduled debt maturities during 2019.

Current secured debt terms are 10 years at coupons between 4% and 4.5%, 60% to 75% loan to value and 1.4 to 1.6x debt service coverage.

As treasuries have moved lower over the past quarter, spreads have gotten wider so pricing is essentially the same.

We continue to see strong interest from life companies, GSEs and CMBS lenders to lend at historically low rates for terms 10 years and longer. High quality H-qualified MH assets continue to command best financing terms.

The press release shows a year-end cash balance of $60.5 million. Our $400 million line of credit has 0 outstanding and our ATM program is available to provide additional liquidity.

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

Our debt to adjusted EBITDA is around 5.1x and our interest coverage is 4.5x.

Now we would like to open it up for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

What was the cap rate on the acquisitions in the fourth quarter both on the MH as well as the RV?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

So the acquisitions were a 5 cap with really some upside in the form of occupancy increases. The MH community that we bought, which is located in Riviera Beach Florida, it's really a large active adult community. It has 915 sites, and there is a significant amount of vacancy. This is an asset that we've been looking at for the past 9 months, and we're looking forward to taking over operations and beginning to see some of that upside potential.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

And was there much of a difference for that the 5% of the blend between MH and RV, was there a difference between the MH and the 2 RVs?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

No, it was about the same.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Okay. And then same question on the disposition of the Midwest assets in January?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Sure. The cap rate on that was about 5.5 to 6 cap.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Okay. And then just in terms of occupancy, you're up to 95%, which I think was your previous high watermark. So what's the opportunity from here to push occupancy, and would you expect MH revenue growth to be more rate driven or could occupancy still play a factor?

--------------------------------------------------------------------------------

Patrick Waite, Equity LifeStyle Properties, Inc. - Executive VP & COO [9]

--------------------------------------------------------------------------------

Nick, it's Patrick. I think we're going to continue to see both rate and occupancy play a factor in our MH occupancy growth go forward. As you plan it out, we're at 95.1% so we eclipsed the 95% that we've been talking about since the Great Recession and the economy stabilized, single-family market stabilized and the fundamentals of our business strengthened. I think it's important to note that across the portfolio, 41% of our properties are currently 99% to 100% occupancy. You look overall at the portfolio, that leaves a lot of opportunity for us to grow occupancy across the portfolio and expect to see structural vacancy start to play a role in 98%, 99% range. So that leaves some runway as well as focusing on Florida where the fundamentals are strong, it's about 1/2 of our portfolio and it represents about 1/2 of our current occupancy opportunity with 1,700 vacant sites of our current 3,500 site total.

--------------------------------------------------------------------------------

Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [10]

--------------------------------------------------------------------------------

And Nick, it's also really sustainable due to the investment the customer is making when deciding to live in our property. As you know, they're basically all cash transactions. They're making a long-term commitment for themselves and for the home and the community.

--------------------------------------------------------------------------------

Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [11]

--------------------------------------------------------------------------------

Makes sense. And then just put that 95.1% that you quoted on occupancy. Does that exclude the assets that you sold in January?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

That includes those assets. So there's about a 30 basis point pickup as a result of the sale of those. So it'd be closer to 95.4% occupancy.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

Our next question comes from the line of Joshua Dennerlein with Bank of America Merrill Lynch.

--------------------------------------------------------------------------------

Joshua Dennerlein, BofA Merrill Lynch, Research Division - Research Analyst [14]

--------------------------------------------------------------------------------

My question relates to core guidance assumptions. How much did those move just by kind of updating the fundamental outlook, first, maybe just selling the Midwestern portfolio?

--------------------------------------------------------------------------------

Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [15]

--------------------------------------------------------------------------------

Yes. So the removal of those 5 properties that we sold from our core really didn't have any -- it really had no impact on the change in guidance for our core revenue growth, and the NOI growth essentially was even as well. You do see a reduction -- a modest 10 basis points reduction when you compare what our prior guidance was and our current guidance is, that's really a function of the higher-than-expected Q4 revenue growth. When you ignore the 5 properties altogether, our guidance is actually reflecting an increase in 2019 core revenues on higher MH rate and occupancy and the expectations for our TT membership business.

--------------------------------------------------------------------------------

Joshua Dennerlein, BofA Merrill Lynch, Research Division - Research Analyst [16]

--------------------------------------------------------------------------------

Okay. And the annual resort-based rental income, looks like it fell 40 basis points from the preliminary guidance down to 5.4%. What kind of drove that downward revision?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes. Sure. It's Patrick. The driver of that revision is really a couple of secondary markets like Yuma, Arizona; South Texas, that reflects some seasonality and renewals in the annual bucket and we included our current expectation in our guidance update. The total change is about $500,000 for the full year. So putting that in perspective, as we get greater visibility in coming months, we're going to update guidance accordingly.

--------------------------------------------------------------------------------

Joshua Dennerlein, BofA Merrill Lynch, Research Division - Research Analyst [18]

--------------------------------------------------------------------------------

Okay. And then for the noncore properties, looks like it's now -- you're forecasting $19.9 million, up about like $8.5 million. You mentioned like the acquisitions were like a 5 cap. What's kind of driving the differential there, between like that, maybe like roughly $5 million of NOI from the acquisitions in 4Q versus like the prior guidance.

--------------------------------------------------------------------------------

Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [19]

--------------------------------------------------------------------------------

Yes. So I appreciate it. It's a bit confusing because of the activity. Essentially, we purchased the 3 assets for approximately $100 million, sold the 5 for approximately $90 million. The guidance impact from those transactions was roughly neutral in terms of the impact on NOI. So as we presented it in Q4 and at year-end, the contribution from the properties we sold is in core. But when you look at total NOI across the portfolio, it's roughly flat.

--------------------------------------------------------------------------------

Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [20]

--------------------------------------------------------------------------------

And then there was some pickup, Josh, in the core -- the noncore properties that we had purchased earlier in the year, right?

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

And our next question comes from the line of Jason Belcher with Wells Fargo.

--------------------------------------------------------------------------------

Jason Belcher, Wells Fargo Securities, LLC, Research Division - Associate Analyst [22]

--------------------------------------------------------------------------------

I saw a report or a news story in mid December that referenced an MH acquisition in Florida for about $49 million, I think it was the Palm Lake Mobile Home Park. Just didn't see that mentioned in the release and was wondering if you could give us an update on that?

--------------------------------------------------------------------------------

Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [23]

--------------------------------------------------------------------------------

That is the one that was mentioned in the release. I'm not certain why that got reported as that in terms of the pricing, but that is -- it's the same one.

--------------------------------------------------------------------------------

Jason Belcher, Wells Fargo Securities, LLC, Research Division - Associate Analyst [24]

--------------------------------------------------------------------------------

Okay, so the pricing was just off. I got it.

--------------------------------------------------------------------------------

Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [25]

--------------------------------------------------------------------------------

Yes, exactly.

--------------------------------------------------------------------------------

Jason Belcher, Wells Fargo Securities, LLC, Research Division - Associate Analyst [26]

--------------------------------------------------------------------------------

Okay. And it's pretty rare to see you guys sell assets. Just wondering if you could talk about the drivers behind why you sold those 5 MH assets in the quarter.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Sure. I think you've actually asked me if there are properties we would want to sell, and my answer has historically been that there's only a handful of properties we would want to sell and these happen to be the properties. We started a process in the fourth quarter with the intention to gauge what type of interest we would get out of potential disposition package. The overall interest was very high and we were pleased with the -- to be able to execute on it. These are All Age properties with low occupancy rate and a high percentage of rental homes. Generally, you're right, our assets are tight. It's tough to get our hands on, so we're reluctant sellers. But we looked at it as a great opportunity to trade out of the Midwest and into the -- into Florida and the Northeast. And just as a reminder, Jason, 4 of the 5 of these assets were purchased as part of the Hometown portfolio a few years ago. And these were assets that we own because they were part of a portfolio, not really assets that we would have purchased on a one-off basis.

--------------------------------------------------------------------------------

Operator [28]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Senior Associate [29]

--------------------------------------------------------------------------------

Marguerite, do you have any additional dispositions teed up for 2019?

--------------------------------------------------------------------------------

Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [30]

--------------------------------------------------------------------------------

No, there are none. No additional dispositions teed up.

--------------------------------------------------------------------------------

John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Senior Associate [31]

--------------------------------------------------------------------------------

Okay. And then, Paul, on the 1.5% 2019 full year expense guidance, could you provide breakouts for a few of the big line items within that, like property taxes and what growth rate you're expecting this year?

--------------------------------------------------------------------------------

Paul Seavey, Equity LifeStyle Properties, Inc. - Executive VP, Treasurer & CFO [32]

--------------------------------------------------------------------------------

Yes. I think the biggest challenge in that growth rate is adjusting for the impact of the storm events that I talked about last year. When you adjust for that, you get to a number overall, let's call it, 3.5% to 4-ish percent. When we look at utility expense, real estate taxes and insurance, our guidance -- our embedded assumptions and guidance are a little bit north of that and then the R&M and so forth there are closer to a CPI number. But not really in a place to provide detail on the individual line items.

--------------------------------------------------------------------------------

John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Senior Associate [33]

--------------------------------------------------------------------------------

Okay. And then just last one for me on the dispositions. You mentioned the growth rate, the guidance wasn't really impacted, and then occupancy rates were lower. So I guess what was the 2018 revenue growth rate of those 5 disposition assets. And how low was occupancy at these All Age communities?

--------------------------------------------------------------------------------

Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [34]

--------------------------------------------------------------------------------

The occupancy was, I think, about 85%, 86% with about 20% of high percentage of rentals about 20%. As to the growth rate of those in the quarter where -- I don't think we have -- we have to get back to you on that, John.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from the line of Samir Khanal with Evercore ISI.

--------------------------------------------------------------------------------

Samir Upadhyay Khanal, Evercore ISI Institutional Equities, Research Division - MD & Equity Research Analyst [36]

--------------------------------------------------------------------------------

Most of my questions were on transaction and that seems to -- you've provided color on that. But I guess a second for me is maybe just kind of on the industry as a whole, if you could take a step back, NOI growth in the sector is still strong and it feels like the sector can do no wrong here. I mean are there any issues or -- that we or investors sort of need to think about over the next sort of 12 to 24 months, sort of that could arise as potential concerns, I don't know if it's sort of like on the expense side or maybe on -- maybe a slower home sales, just want to get your views around that.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Sure. I mean when you look at -- when you think about just the MH industry in general, it's -- still continues to be strong, shipments are up, 6% for the year. You've probably seen some news on the RV industry that shipments are down, down for -- from '18 to -- from '17 to '18, still at a high rate. So I think the demand is still high for RVs and the industry is really benefiting from the aging Boomer population. And the renewed popularity among millennials, although they do show some excess inventories in the RV space. So we're seeing strength both in the MH side and the RV, and there's really nothing that's stopping us or preventing us from kind of being able to execute on our 2019 guidance.

--------------------------------------------------------------------------------

Samir Upadhyay Khanal, Evercore ISI Institutional Equities, Research Division - MD & Equity Research Analyst [38]

--------------------------------------------------------------------------------

What about from a sort of a slower home sales kind of a scenario if you look back, kind of the late 2000. I mean how did that sort of play out for you guys?

--------------------------------------------------------------------------------

Marguerite M. Nader, Equity LifeStyle Properties, Inc. - President, CEO & Director [39]

--------------------------------------------------------------------------------

Sure. I mean we look at -- the home sales are down for us for the quarter, and that's really a function of our properties filling up. So in 2008, when it was difficult to sell homes, we really were able to rotate towards rental programs that we didn't see as you see in our investor presentation, we had -- continue to have strong growth in NOI. And I -- we see us doing that also in any other kind of environment where you'd see a decline in home sale such that we weren't able to sell homes anymore. So I think we have and have often said that we have a plan -- a plan B in case there's a slowdown and that would be using the rental program to a larger extent.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

And we have a follow-up question from the line of Joshua Dennerlein with Bank of America Merrill Lynch.

--------------------------------------------------------------------------------

Joshua Dennerlein, BofA Merrill Lynch, Research Division - Research Analyst [41]

--------------------------------------------------------------------------------

Are you able to disclose who or what type of buyer purchased the Midwest assets?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

I believe -- I mean, yes, we are able to disclose it, YES! Communities was the buyer.

--------------------------------------------------------------------------------

Joshua Dennerlein, BofA Merrill Lynch, Research Division - Research Analyst [43]

--------------------------------------------------------------------------------

YES! Communities, oh, okay. And they bought it as a portfolio?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

They bought it as a portfolio. They were great to work with.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you all very much, and we look forward to updating you on our next earnings call.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

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.