Equity Lifestyle Properties, Inc.

good day everyone and thank you all for joining us to discuss equity lifestyle properties third quarter 2021 results our featured speakers today are marguerite nader our president and ceo paul sieve our executive vice president and cfo and patrick waite our executive vice president and coo in advance of today's call management released earnings Today's call will consist of opening remarks and a question and answer session with management relating to the company's earnings release. For those who would like to participate in the question and answer session, management asks that you limit yourselves to two questions, so everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded. Certain matters discussed during this conference call may contain forward-looking statements in the meetings 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.

Thank you. Good morning, and thank you for joining us today. I am pleased to report the results for the third quarter of 2021. The third quarter represents our most active camping season, and our results show the demand for our product offerings. For the second quarter in a row, we have achieved high watermarks for our new home sales and profits. Our normalized FFO growth was 18% in the quarter and 21% when compared to the third quarter of 2019. New customer growth in both MH and RV contributed to the positive results in the quarter. Year-to-date, new home sales grew by 75%, contributing to the high quality of occupancy at our MH communities. Homeowners grew by 268 in the quarter, driven by a record number of new home sales. Our MH communities have maintained an occupancy level of over 95%. We have seen a heightened interest in owning new and resale homes in our communities. The quality of the community and the elevated home ownership base contributes to the demand for our properties. Home ownership transfers were 28% higher than last year, indicating strong demand for the homes owned by our residents. Our digital marketing efforts contributed to the growth of the home sales pipeline. The unique traffic to our website has grown over 24% compared to the same time prior to the pandemic. The growth in our website traffic is being fueled by our digital marketing efforts, including search engine optimization, partnerships with home listing websites, and digital advertising. We added virtual home tours in 2020 as a response to the pandemic, and we have seen a 38% increase in views on our online home tours this quarter compared to last year. Our RV property saw an increase in revenue of 14% as compared to last year. The revenue growth was strong across annual, seasonal, and transient customers. Our midweek activity continued to pick up with a 12% increase in nights from 2020. Our subscription-based Thousand Trails camping revenue showed continued growth in the quarter. Our dues base, which is the largest portion of the revenue base, increased 12%. The dues growth was driven by strong new member sign-ups throughout 2021, combined with improvements in member retention. Our upgrade volume increased 34% as we saw more members focus on increasing their commitment to us and enjoying additional benefits. Based on a recent survey we conducted among our customers and prospects, two-thirds plan to camp more next year than they did in 2021. More than half of the respondents who are working remotely said that they would consider an extended stay in the Sun Belt due to their flexible work arrangements. Turning to capital deployment, year-to-date we have completed over $500 million of acquisitions. In the quarter, we closed on an 800-site parcel within a high-quality RV park in Myrtle Beach, South Carolina for $111 million. Additionally, we purchased our joint venture partners' interest in an 1,800-site high-quality RV park in Tucson and achieved efficient execution through an exchange of ELS operating partnership units. Turning to 2022, we anticipate continued demand into next year. Within our MH portfolio, By the end of October, we will have noticed 48% of our residents for rent increases and anticipate a 4.7% rate growth in core MH revenue. We anticipate our track record of increasing occupancy will continue and our new expansion sites will provide additional growth. Based on rates we have set for 95% of our RV annual customers for the 2022 season, our core annual RV rental rate is anticipated to grow 5%. These two line items have historically represented over 71% of our overall revenue. Our primary camping season is now behind us. We welcomed over 350,000 guests and members during our 100 days of camping. I'd like to thank our team members for continuing to deliver excellent service as we have seen from our positive feedback scores. We are now turning our attention to the winter season where we will welcome our snowbirds as they escape the winter. I will now turn it to Paul to walk through the numbers in detail.

Thank you, Marguerite, and good morning, everyone. I will review our third quarter and year-to-date results and highlight our guidance assumptions for the fourth quarter and full year of 2021. I will close with some comments on our balance sheet and debt market condition. In our earnings release, we reported third quarter and year-to-date normalized FFO per share of $0.65 and $1.90, respectively. Our core MH rent growth of 4.7% consists of approximately 4.2% rate growth and 50 basis points related to occupancy gain. We've increased occupancy 213 sites since December with an increase in owners of 551, while renters decreased by 338. Core RV and marina-based rental income increased 14.1% for the third quarter and 11.9% year-to-date compared to the same periods last year. Strong growth in rent from annuals of 7.8% and 6.5% for the quarter and year-to-date periods, respectively, reflects the demand for our properties and the outdoor recreation opportunities they provide. For the third quarter, rate growth of 5% was slightly higher than our guidance, and we realized 280 basis points of growth from occupancy. Annual rent from our marina business represents less than 10% of total core annual rent and the year-to-date growth rate is 8%. As a reminder, more than 95% of our marina rent is generated from annual customers. Core rent growth from seasonals increased 37.5% in the quarter. While the third quarter has not historically been a meaningful contributor to our full-year seasonal rent, we saw an increase in customer demand for stays of a month or more driving the uptick in seasonal rent. Our core RV transient business delivered growth for the quarter of 21.1%. This is approximately $2 million higher than our July guidance, which we based on reservation pays at that time. Despite smoke from wildfires in western states that impacted transient stays at certain properties, transient demand continued to build throughout the quarter. Membership dues revenue for the third quarter increased 12.5% compared to the prior year. Year to date, we have sold approximately 20,000 200,000 Trails Camping Pass memberships, an increase of 23% compared to the same period last year. The net contribution from membership upgrade sales in the quarter was almost 130% higher than last year. Core utility and other income was slightly higher than third quarter 2020 and includes utility and pass-through income that offset some of our expenses as well as late fees that we reinstated in late 2020 after suspending them earlier in the year. Third quarter core property operating and real estate tax expenses increased 4.9% compared to the prior year period. Drivers of the increase include utilities and real estate taxes. Electric expense in California and the West was a large contributor to the increase, with some of the increase partially offset by utility recovery. The increase in real estate tax expense is the result of Florida trim notices received in September that reflect increased assessments at certain properties. In addition, payroll expense increased almost 5% compared to the same quarter last year. This comparison is impacted by the timing of hiring in 2020 as our RV properties started to experience increased demand during the third quarter, and in 2021, our efforts to retain employees and fill open positions. In summary, year-to-date core property operating revenues have increased 8.5% and core property operating expenses have increased 7.8%, resulting in an increase in core NOI before property management of 9%. Income from property operations generated by our non-core portfolio, which consists primarily of the assets we've acquired in the trailing four quarters, was $5.9 million in the quarter. Property management and corporate G&A expenses were $27.4 million for the third quarter of 2021 and $80.1 million for the year-to-date period. Other income and expenses generated a net contribution of $6.5 million for the quarter and $16.7 million year-to-date. Interest and related loan cost amortization expense was $27.4 million in the quarter and $80.8 million year-to-date. The press release provides an overview of fourth quarter and full year July 2021 earnings guidance. As I provide some context for the information we've provided, 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 and are qualified by the risk factors included in our press release and supplemental financial information. We provide no assurance that our actual results will be consistent with our guidance, and we assume no obligation to update guidance as conditions change. We expect fourth quarter normalized FFO at the midpoint of our range of approximately $115.7 million with a per share range of $0.57 to $0.63. We project a core NOI growth rate range of 6.5% to 7.1%. MH and RV annual rate growth assumptions for the fourth quarter and full year remain consistent with our prior guidance. Significant factors in our guidance assumptions for the remainder of 2021 include the recent announcement opening the Canadian border and its impact on seasonal RV occupancy, the overall level of demand for transient RV stays as indicated by current customer reservation trends, and a moderation of the growth in upgrade sales we've experienced year-to-date. Our full year 2021 normalized FFO is $2.50 per share at the midpoint of our range of $2.47 to $2.53. Normalized FFO per share at the midpoint represents an estimated 14.8% growth rate compared to 2020. Core NOI is projected to increase 8.4% at the midpoint of our range of 8.1 to 8.7%. The core NOI growth rate increase from our prior guidance is the result of our third quarter outperformance, as well as updates to our expectations for the fourth quarter. We have updated our guidance to include MH occupancy gains in the third quarter, current RV reservation trends, and expense adjustments based on the year-to-date activity. As a reminder, we make no assumptions for storm events or other uninsured property losses we may incur. Our guidance for the full year and fourth quarter includes the impact of the acquisition activity we've closed including the October investment activity announced in our earnings release. We make no assumptions for additional acquisitions during the remainder of the year. Before we open the call up for questions, I'll discuss debt markets and our balance sheet. Current secured financing terms available for MH&RV assets range from 55% to 75% LTV, with rates from 2.5% to 3.25% for 10-year money. We continue to see lenders place high value on sponsor strength and ELS continues to be highly regarded. High quality age qualified MH assets will command preferred terms from participating lenders. Our cash balance at quarter end was more than $40 million. We have available capacity of $280 million from our unsecured line of credit. We have $200 million of capacity under our ATM program and we have only $80 million of debt maturing in 2022. We continue to place high importance on balance sheet flexibility, and we believe we have multiple sources of capital available to us. Our interest coverage and debt to adjusted EBITDA RE ratio are five and a half times. Now we would like to open it up for questions.