Equity Lifestyle Properties, Inc.

Good day, everyone, and thank you all for joining us to discuss Equity Lifestyle Properties' fourth quarter and full year 2024 results. Our featured speakers today are Marguerite Nader, our president and CEO, Paul Seavey, our executive vice president and CFO, and Patrick White, our executive vice president and COO. In advance of today's call, management release earnings, today's call will consist of open remarks and a question and answer session with management relating to the company's earnings release. For those who would like to participate in a question and answer session, management asks that you limit yourself 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 and the meanings of the federal securities laws. Our forward-looking statements are subject to certain economic risks and uncertainty. The company assumes no obligation to update or supplement any statements that become unsure because of subsequent events. In addition, during today's call, we will discuss non-GAAP financial measures As defined by SEC Regulations 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.

Good morning, and thank you for joining us today. I am pleased to report the final results for 2024. The strength of ELS can be seen in all facets of our business. We continued our record of strong core operations and FFO growth with full year growth in NOI of 6.5% and a 5.9% increase in normalized FFO per share. Our year-end report is a good time to reflect on our business and our industry. Over the last 10 years, our average core NOI grew 5.3% and normalized FFO grew nearly 8%. both outpacing the REIT industry average over that time. Our balance sheet is in great shape with an average term and maturity of nine years, 20% of our debt is fully amortizing and not subject to refinance risk, and our debt maturity schedule through 2027 shows only 9% of our debt coming due compared to the REIT average of 36%. Last night, we issued initial guidance for 2025. Our guidance is built based on the operating environment of each property, including a robust market survey process and communication with our residents. The results show strength in both top-line revenue and NOI. Importantly, we have continued our focus on translating NOI growth into FFO growth. For the full year 2025, we anticipate normalized FFO growth of 5%. This strong growth rate is possible because of the strength of our properties as well as the overall industry landscape. The MH industry has evolved impressively over the last 20 years. The current homes that we are purchasing for our communities are generally two bedrooms, two bath homes with contemporary floor plans configurations. The homes are energy efficient with centerpiece kitchens and bathrooms. The changes to the homes over time have increased our prospective customer base and have strengthened our communities. Just like in any neighborhood in the U.S., we operate in an environment where the resale activity in our communities is important. We focus our efforts on maintaining our high-quality communities, and the residents' pride of ownership results in a robust home sale market for our existing customers. 97% of our occupancy is from residents who own their home. This high level of homeowner occupancy results in the impressive neighborhoods that our residents have helped us create. This year, we saw 9% of our residents sell their homes in our communities. The primary reasons our residents choose to sell their homes to another resident continues to be a life event. Within our RV footprint, we have nearly 70% of our revenue derived from annual customers. These customers stay with us in park models, resort cottages, and RVs. Similar to our MH customer, our RV annual customer develops roots and considers our property as their second home. Our properties offer the chance to have a second home near major metros at an affordable price. The average price of a park model sold in our communities in 2024 was $80,000. We continue to expose new customers to our properties through the transient stay, which is an important building block for our longer-term revenue stream. Next, I would like to update you on our 2025 dividend policy. The Board has approved setting the annual dividend rate of $2.06 per share, an 8% increase. The stability and growth of our cash flow, our solid balance sheet, and the strong underlying trends in our business are the primary drivers of the decision to increase the dividend. In 2025, we expect to have approximately $100 million of discretionary capital after meeting our obligations for dividend payments, recurring CapEx, and principal payments. Over the past 10 years, we have increased our dividend by an average of 11% per year compared to the REIT average of 4.5%. and this year's dividend marks the 21st consecutive year of annual dividend growth. I want to thank our team members for closing out another successful year. We have been able to post REIT-leading NOI growth, provide details into the strength we see in 2025, and announce an increase to our dividend because of the hard work done in the field, regional, and corporate offices by our 4,000 team members. I will now turn it over to Patrick to provide more details about property operations.

Thanks, Marguerite. In the more than 30 years since our IPO, we've made a deliberate effort to grow our portfolio in areas that provide a quality lifestyle for our customers. And those markets had experienced consistent population growth over the years. We have divestitive properties in less promising markets and recycled that capital in the coastal and sunbelt locations where our residents and guests want to live and vacation. Our three largest states are Florida, California, and Arizona. And with our winter season in full swing, I thought it would be helpful to provide some detail about our operations in these markets. Our Sunbelt locations continue to see favorable population growth trends. Over the next five years, Florida, California, and Arizona are expected to experience steady population growth, particularly among our focus demographic of those age 55 plus. During that timeframe, S&P Global estimates growth of 9.4% in Florida among this demographic, while California and Arizona are estimated at 6.4% and 6% respectively. Both our MH and RV portfolios in these Sunbelt markets have benefited from consistent demand. The CAGR for MH and RV revenue in the primary markets within these states emphasizes the strength of our portfolio. Primary markets in Florida are Tampa, St. Pete on the Gulf Coast and Fort Lauderdale, West Palm Beach on the East Coast. In California, they're in Northern California, anchored by San Francisco and San Jose, and Southern California, anchored by Los Angeles and San Diego. And in Arizona, the primary market is Phoenix, Mesa. In these core Sunbelt markets, the five-year revenue CAGR for MH was nearly 6%, supported by 900 new home sales. Florida markets Tampa, St. Pete, and Fort Lauderdale, West Palm Beach. And Arizona markets Phoenix, Mesa, led the growth with 6%. while Northern and Southern California was mid-4%, largely as a result of rent control. Note that our California portfolio is more than 98% occupied, while Florida and Arizona present opportunities to increase occupancy above our current occupancy of 95%, including ongoing expansion projects. For RV, the five-year revenue gager in these primary markets was mid-6%, largely driven by the same sub-markets in Florida and Arizona. a key driver of the consistent growth in both MH and RV in our primary submarkets, our population growth that I referenced earlier, as well as the expansion opportunities that will support future growth in these Florida and Arizona markets. Over the last five years, we've developed nearly 5,000 MH and RV sites across the portfolio, with over half of those sites in Florida and Arizona. Stabilized yields range from 7% to 10%, And we have a pipeline of projects with an additional 3,000 sites in various stages of entitlement and construction. Two projects that are good examples of our approach to expansions are Colony Cove MH with 293 expansion sites in Florida and Monta Vista Mixed Use MH RV with 513 sites in Arizona. Both projects are development of parcels that are part of the property rather than acquisition of additional land. Expansions of properties present an attractive risk-reward because we have an in-place operating business with staffing, amenities, name recognition, and an established base of residents and guests. Among the benefits of expansions are new leads generated through referrals from our core customers. Referrals represent approximately 20% of our new customers. Lease-up rates for the MH and annual RV expansions at these properties have been 30 to 40 sites per year. During the lease-up process, RV expansions also offer flexibility to book transit and reservations on vacant sites to generate revenue, as well as introducing new customers to the property, which is our best source of conversions to longer-term stays. We continue to see consistent demand for our properties, which supports the in-place business as well as our expansions. We have focused on stable, long-term occupancy, and that results in annual revenue streams for MHA, and RV representing nearly 75% of total property revenues. Demand is demonstrated by more than 100,000 new qualified leads we receive annually from potential customers who provide their contact information as part of their inquiry for a manufactured home, park model, or RV annual site at one of our properties.