Equity Lifestyle Properties, Inc.

Good day, everyone, and thank you all for joining us to discuss Equity Lifestyle Properties' first quarter 2025 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 Release 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 meanings of the federal securities laws. Our forward-looking statements are subject to certain economic risks and uncertainties. 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'd 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 results for the first quarter of 2025. The quality of our cash flow, our in-demand locations, the lack of new supply, and the strength of our balance sheet allow us to report impressive results. We continued our long-term record of strong core operations and FFO growth, with growth in NOI of 3.8% and a 6.7% increase in normalized FFO per share in the first quarter. We are pleased with our outlook for the remainder of 2025. We have maintained our strong full-year FFO guidance of $3.06 per share. 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 terrific shape with an average term to maturity of more than eight years. Nineteen percent 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 30%. During uncertain times, it's helpful to appreciate the stability of our business and the reasons it will continue to be stable. Our MH portfolio comprises approximately 60% of our total revenue and our properties are 94% occupied. Our properties stand out due to their ability to maintain high occupancy levels once achieved. This is driven by the unique composition of our resident base. Homeowners occupy 97% of our MH portfolio, creating long-term stability and reducing turnover. A high percentage of homeowners play the key role of maintaining consistent cash flow. Our communities foster a strong sense of connection where residents are focused on building relationships and contributing to an engaged neighborhood environment. Within our RV footprint, our annual revenue grew 4.1% in the quarter. Our annual customers stay with us in park models, resort cottages, and RVs. We welcome many multi-generational customers who consider our properties as part of their family history. Our transient stays serve as an important entry point for introducing new customers to our properties, laying the foundation for long-term revenue growth. Turning to demand, our offerings across our portfolio are unique. We offer great long-term experiences in sought-after locations at a fraction of the cost in those locations. We are engaging with our customers through traditional email campaigns, social media outreach, digital advertising, and ambassador programs. For the quarter, our websites attracted a combined 1.7 million unique visitors and generated 72,000 online leads, reflecting strong engagement. The drivers of the lead generation are from our RV annual site lease campaign and trip planning lead generation. Our social media strategy seeks to engage both customers and prospects in a wide variety of platforms. We have over 2.2 million fans and followers across the social media networks. Over the past 10 years, we have grown our social media fans and followers by an average of 30% annually. I want to thank our team members for a great start of the year. They've done an excellent job supporting our snowbird guests, and now we're getting ready to welcome our customers for the upcoming spring and summer seasons. Our REIT leading performance is made possible because of the efforts of our 4,000 team members across the country. I will now turn it over to Patrick to provide more details about property operations.

Thanks, Marguerite. Our business is currently in its spring seasonal shift. With snowbirds in our Sunbelt locations, beginning to head north, and our northern locations preparing for the summer rush. This shoulder season is an opportunity to look at the elements that shaped our first quarter results, as well as what we see ahead for the summer season. The fundamentals of our business remain strong. New supply of manufactured home communities and RV resorts continues to be limited, with MH entitlements remaining the most challenging. Our portfolio of MH and RV properties offer prime locations and meet demand from homebuyers and RV vacationers. First, I'll focus on our MH business. Our MH occupancy is at historically high levels, and on average, ELS homeowners pay $80,000 to $100,000 for a new home, and renters pay $1,500 per month. Our high homeowner count results in stable occupancy, with homeowners in our communities remaining an average of 10 years. For perspective on the relative value of homes in our MH communities, I'll highlight three states, Florida, California, and Arizona, that comprise the largest share of our major business. In our primary submarkets in Florida, the average single family home price ranges from over 370,000 in Tampa, St. Pete, to nearly 460,000 in the Fort Lauderdale, West Palm Beach submarket. Homes in Northern California, around San Francisco and San Jose, average over 1.4 million, and in Southern California, in Los Angeles and San Diego, it's just over 1 million, while homes in the Phoenix and Mesa sub-market average more than 425,000. In each sub-market, our communities offer great value to residents, both homeowners and renters. Our largest market is Florida, and last quarter we discussed the impact of recent hurricanes on MH occupancy. The result of last season's hurricanes, we lost approximately 170 occupied sites in in addition to more than 90 occupied sites in Q4. We are ordering replacement homes, and we will see the positive impact on the community and cash flow in coming quarters. On the RV side of our business, we continue to see strength from our annual sites, where we saw 4.1% revenue growth in the quarter. Customers are leveraging annual sites for their RV or park model as an attractive and affordable path to a vacation home or lake house. The annual site rent on one of our properties is a fraction of the cost of a mortgage on a second home, particularly on a home offering amenities like water access, a swimming pool, and a clubhouse with sports courts, among others. For many customers, their annual site rent, ranging from $5,000 to $6,000 in the north and averaging about $8,000 in the Sunbelt, is equivalent to the cost of their annual week-long vacation, considering travel expenses and accommodations. Annual customers typically purchase a PERC model for $25,000 to $100,000, which compares favorably to vacation homes that often exceed $500,000 in some markets where our properties are located. These annual sites provide a stable revenue base for our RV portfolio, accounting for more than 75% of our core RV revenue. While transient sites are an important element of our business, including serving a pipeline for annual sites and membership sales, We have less visibility into this revenue line as the time between booking and travel continues to be short. More than half of our transient reservations are booked within 30 days of arrival. A majority of our full-year transient revenue comes to us in Q2 and Q3 when we see historically high holiday demand. We are looking forward to our annual 100 Days of Camping promotion, spanning from Memorial Day to Labor Day. This will be our 11th season celebrating the 100 Days of Camping. We see very high engagement levels with this promotion. We saw more than 38 million impressions for the campaign last summer. Now I'll turn it over to Paul.

Thanks, Patrick, and good morning, everyone. I will review our first quarter 2025 results and provide an overview of our second quarter and full year 2025 guidance. First quarter normalized FFO was 83 cents per share in line with our guidance. Core portfolio NOI growth of 3.8% compared to prior year was in line with our expectations for the quarter. Core community-based rental income increased 5.5% for the quarter compared to the same quarter in 2024. Rate growth of 5.7% was in line with our guidance, primarily as a result of noticed increases to renewing residents and market rent paid by new residents after resident turnover. Our high-quality resident base consists of more than 97% homeowners with very low levels of bad debts written off, currently below 40 basis points on average. First quarter core, resort, and marina-based rental income performed in line with our budget. Rent growth from annuals increased 4.1% for the quarter compared to prior year and was slightly higher than our guidance. Transient rent was down 9.1% compared to first quarter 2024. For the first quarter, the net contribution from our total membership business, which consists of annual subscription and upgrade revenues offset by sales and marketing expenses, was $15.5 million, an increase of 4% compared to the prior year. Core utility and other income increased 3.9% compared to first quarter 2024. Our utility income recovery percentage was 47.6%, about 110 basis points higher than first quarter 2024. First quarter core operating expenses increased 1.5% compared to the same period in 2024. Property operating and maintenance and real estate tax expenses increased 2.6%. Membership sales and marketing expenses were in line with our budget and lower than prior year. We renewed our property and casualty insurance programs April 1st, and the premium decrease year over year was approximately 6%. We are pleased with the result, which reflects no change in our property insurance program deductibles or coverage. Core property operating revenues increased 2.9%, while core property operating expenses increased 1.5%, resulting in growth in core NOI before property management of 3.8%. Our non-core properties contributed $4 million in the quarter, slightly higher than our expectations as a result of expense savings. JV income includes income recognition related to an expected distribution from one of our joint ventures. The press release and supplemental package provide an overview of 2025 second quarter and full year earnings guidance. The following remarks are intended to provide context for our current estimate of future results. All growth rate ranges and revenue and expense projections are qualified by the risk factors included in our press release and supplemental package. Our guidance for 2025 full-year normalized FFO is $3.06 per share at the midpoint of our guidance range of $3.01 to $3.11. We project core property operating income growth of 5% at the midpoint of our range of 4.5% to 5.5%. We project the non-core properties will generate between $8.2 million and $12.2 million of NOI during 2025. Our property management and G&A expense guidance range is $119 million to $125 million. In the core portfolio, we project the following full-year growth rate ranges, 3.2% to 4.2% for core revenues, 1.5% to 2.5% for core expenses, and 4.5% to 5.5% for core NOI. Full-year guidance assumes core MH rent growth in the range of 4.8% to 5.8%. Full year guidance for combined RV and marina rent growth is 2.2% to 3.2%. Annual RV and marina rent represents approximately 70% of the full year RV and marina rent, and we expect 5% growth in rental income from annuals at the midpoint of our guidance range. Our full year expense growth assumption includes the impact of our April 1st insurance renewal for the rest of 2025. Our second quarter guidance assumes normalized FFO per share in the range of 66 cents to 72 cents. That represents approximately 23% of full year normalized FFO per share. Core property operating income growth is projected to be in the range of 5.4% to 6% for the second quarter. Second quarter growth in MH rent is 5.3% at the midpoint of our guidance range. We project second quarter annual RV and marina rent growth to be approximately 4.6% at the midpoint of our guidance range. Our guidance assumes second quarter seasonal and transient RV revenues perform in line with our current reservation pacing. Second quarter growth in core property operating expenses is projected to be in the range of 1.6% to 2.2% and includes the impact of our April 1st insurance renewal. I'll now provide some comments on our balance sheet and the financing market. Our balance sheet is well positioned to execute on capital allocation opportunities. As of the end of March, we have only $87 million scheduled to mature before 2028 and our weighted average maturity for all debt is 8.4 years. Our debt to EBITDA RE is 4.4 times and interest coverage is 5.4 times. We have access to approximately $1 billion of capital from our combined line of credit and ATM programs. We continue to place high importance on balance sheet flexibility and we believe we have multiple sources of capital available to us. Current secured debt terms vary depending on many factors, including lender, borrower, sponsor, and asset type and quality. Current 10-year loans are quoted between 5.5% and 6.25%, 60% to 75% loan-to-value, and 1.4% to 1.6% debt service coverage. We continue to see solid interest from life companies and GSEs to lend for 10-year terms. High-quality, age-qualified MH assets continue to command best financing terms. Now, we would like to open it up for questions.

Certainly. We'd like to remind everyone to please limit yourselves to two questions each. One moment for our first question. And our first question comes from the line of Jamie Feldman from Wells Fargo. Your question, please.

Hey, this is Cooper Clark on for Jamie today. Thank you for taking the question. On the MH top line guidance cut and full year reduction, was there anything outside of the hurricane impact that drove this number lower? And also just wondering if you've seen any material changes in the MH mark to market on new leases recently. I believe it was roughly 14% last year.

Good morning, Cooper. Patrick, maybe you could walk through that.

Yeah, sure. Let me just start by taking a step back. to last October when we set our initial expectation for rate in the MH space, and we were at 5%. Our rate growth is now 5.6%, so I think that shows strong demand across the resident base, good consistent demand from our in-place residents, and for the mark-to-market, it's running in the mid-teens, about 14% year-to-date. The occupancy headwind, as you noted, is the result of the hurricanes. We experienced a loss of 176 sites in the quarter as a result of the hurricanes. And just to put that in perspective, the Q1 occupancy is down 171. So if you control for the hurricanes, so take that out of the basic math, the occupancy for the portfolio was flat to slightly up. which, again, I think underscores the consistency of the demand part.

Thank you. And then earlier on the call, you mentioned the average length of stay in the MH portfolio is 10 years. Just wondering what that figure was pre-COVID.

That was around 10 years. It's been pretty consistent.

And that number, I would say, Cooper, has been consistent over the last 30 years, is that 10-year mark.

Thank you. And our next question comes from the line of Eric Wolf from Citi. Your question, please.

Hey, thanks. Just to follow up on the MH question a second ago, I guess at the time you gave guidance, you probably would have known about the storm damage. So I was just curious, you know, is it normally that the people stay through the storm damage and this time they decided not to? Like what changed versus the original guidance process? And why? Because I think the guidance you gave was sort of at the end of January, hurricanes were in 4Q. So just trying to understand, like, if the behavior among storm-impacted tenants changed a bit versus what normally happens.

Yeah, I don't know that I'd say that the behavior changed. And as you work your way through the aftermath of a hurricane, there are some homes that are significantly impacted, and that's clear. And then there's a significant number of homes where the individuals who own those homes either haven't come down from up north yet, so they come down over some period of time and evaluate any damage, or they are living at the property and they're evaluating what their options are. They're reviewing what their options are to complete any repairs and if their home is repairable. That tends to play out over several months after we work our way through the initial assessment. So it can be difficult to get that visibility until the residents are actually making their final decision on whether or not they're going to repair their home or move on to whatever their next housing choice is going to be.

And Eric, a clear indicator for us is certainly if they're paying us rent, which they were prior to making the decision. to move their home or no longer stay in the community. So that's the difference between January and now.

Got it. Makes sense. And I know you've given some of this information out on calls a couple years ago, but could you just help us understand sort of what your exposure is to the Canadian customer and whether you sort of factored in any changes to that customer's behavior into your guidance or if you think it's probably unlikely to materially impact your guidance this year?

Yeah, I think for just as a reminder, what we've talked about in the past is roughly 10% of the RV revenue comes from Canadian customers. Half of that roughly is annual rent and then the remaining 50% is split between seasonal and transient. The first quarter obviously is behind us and So the seasonal impact is really in the first quarter of the year. And so we didn't make any change to guidance as a result of that. I think the next kind of meaningful impact that we would see would be into the first quarter of 2026. And just to circle back on the annual for a moment, those customers primarily have a park model or an owned unit in place. And so if they decide not to return, there's a transfer of ownership that occurs, and our revenue stream remains uninterrupted, as typically happens on turnover of customers.

Thank you. Thank you.

Thank you. And our next question comes to the line of Yana Gallin from Bank of America Securities. Your question, please.

Thank you. Good morning. Good morning, Yana. Just curious, any chance that you could discuss the MH occupancy trends that you have embedded in the guidance for the second quarter through year end?

Generally, we have an assumption for a modest increase in occupancy for the remainder of the year. Typically, we don't. forecast forward significant uptick in occupancy, and we've kept that consistent in 2025.

Thank you. And then maybe just if you could provide some color on trends in MH home sales, kind of the mix of new and used and what you're seeing in the early spring selling season.

Yeah, sure. Well, we're in a bit of a shoulder season here, so Let me just touch on Q1, where we saw some headwinds in Florida that's basically hangover from the hurricanes that occurred late in the quarter. And as we're moving through the shoulder season, we're seeing consistent demand, including applications for new home sales. And as I referenced, that consistent mark the market as people are choosing to purchase a home on our property and accepting a you know, 14% increase in the in-place rent. With respect to the used home sales, I mean, it's a very small part of the business, and we see, you know, consistent demand there as well, but the larger driver of our overall occupancy is the new home sales.

Great. Thank you so much. Thanks, John.

Thank you. And our next question comes from the line of Steve Sakwa from Evercore ISR. Your question, please.

Yeah, great. Thanks. Can you maybe just talk a little bit more about the seasonal and transient RV? If I did my math right, I think you did reduce the revenue growth a little bit. So just curious, is that sort of an expectation that international travel may come down? Is that just a little more cautiousness about the U.S. consumer? You know, maybe what drove that?

Well, maybe, Steve, I'll start by just reminding everybody of how we forecast our seasonal and transient, and then Patrick can step in with some more color. But in terms of our process, if you think about the first quarter, we earned about 50% of that seasonal rent and about 20% of the transient rent. And then by the end of quarter two, we've earned about two-thirds of our full-year seasonal and almost 45% of the full-year transient rent. And then in the third quarter, 40% of our transient rent comes in. Because of the short booking window, we've adopted a practice, and I think I mentioned it during the call in January. We used it when we prepared our budget. We focus on reservation pacing at the time for rent we anticipate earning in the coming quarter. and then we left our budget assumption alone. So the change in the forecast that you see is really our reservation pacing for the second quarter. Patrick, you can address some comments.

Yes, and Steve, I'd also just touch on for transients, as I mentioned in my opening comments, it's a short booking window and continues to be. But just looking forward to the summer season, And we have over 200 RV properties and 85% of them are pacing in line with the same time last year. So it's a smaller subset of the portfolio that is experiencing some headwinds when we're reviewing pacing. In the northern markets around the Wisconsin Dells, coastal New Jersey, somewhat in Bar Harbor, Maine, we see lagging at a small number of properties. A common trend I would characterize as a normalizing of demand. And just for further perspective, in the case of Bar Harbor, we're seeing commentary around service level changes at Acadia National Park, potentially leading to fewer visits there, and that would have a marginal impact on our properties in that sub-market.

Okay, great. Thanks. Um, maybe could you just touch on home sales? I think they were down. I know it's not a large number and not a huge revenue contributor, but home sales were down in the quarter. Anything that you noticed there and I guess any just sort of broad changes in your expectation about home sales over the balance of the year?

No, I think the, um, you know, I touched on this last quarter and there's a little bit of carryover, uh, into Q1. Um, The hurricanes in Florida were an impact. We feel that the demand profile in Florida is still very strong, but we've seen a recovery along the Gulf Coast that was impacted. And as we moved into the winter season, the winter up north was not particularly cold, so that hampered some of our velocity in the western sunbelt for us. As we look forward to the summer season, I think we feel pretty good about the demand that we're seeing. I've touched on this frequently, just that we've been through a period of elevated new home sales. A good year pre-COVID would be called 5 to 600. Last year, we were, for the full year, about 750 new home sales. We were 117 for Q1, which, as you pointed out, is down. 74 year-over-year. That's a lot of color, but overarching, I think we feel pretty good about the demand profile for the MH portfolio.

Thank you.

And our next question comes from the line of Michael Goldsmith from UBS. Your question, please.

Good morning. Thanks a lot for taking my question. My question is on the insurance renewal. What were you assuming in your guidance prior to it coming down 6%? And just what was the conversation with the insurance providers just given, you know, you've had a couple of incidents or storms over the last couple of years which has taken things offline. So how are you able to drive a decrease of 6%? Thanks.

Sure, Michael. As I mentioned, excuse me, our core expense growth assumptions include the impact of the renewal we disclosed in our earnings release, as well as other changes to expense assumptions based on actual first quarter experience and insight into the remainder of the year. Our insurance premiums were down 6% compared to prior year. Negotiating insurance programs for our portfolio is a fairly complex endeavor with multiple parties involved. Consistent with past practice, we do not share our budget assumptions in order to help us secure the most favorable renewal terms for the current and future programs. Then with regard to the conversation with the carriers, I think there was certainly discussion of the events that you mentioned. There were two storms at the end of 2024. One was a far more modest storm. that did not result in a claim. So there was one storm that did result in a claim.

And then I think the other thing, Paul, you mentioned in your comments that there was no change in the deductibles or the coverage, which I think is an important point, Michael, to note.

And then just as a follow-up,

Can you talk on the guidance, right, that you took down the MH guidance, the annual MH guidance by 40 basis points, RV down by 50 basis points, but then the total seems to revenue was down by 20 basis points. So, can you talk about some of the offsetting factors? I assume that relates to memberships and some other factors, but can you provide a little bit more color on that?

Yeah, I think that, you know, as we mentioned, we have the occupancy impact on the MH. and then discussed a little bit about the impact on the RV. We do have some adjustments to our other line items in the quarter. Some of it is timing related associated with insurance proceeds that we might recognize and just some other changes.

Thank you very much. Good luck in the second quarter.

Thank you. Thanks, Michael.

Thank you. And our next question comes from the line of Wesley Gallaudet from Baird. Your question, please.

Hey, good morning, everyone. Are you seeing more Canadians listing their homes for sale? And can you give us your overall MH exposure to Canada?

Yeah, I don't know that I have our overall exposure to Canadians in the MH space. I would say I would directionally say that it's similar to what Paul covered earlier with respect to the RV business. And we are not seeing any trends coming through with respect to Canadian demand on the MH portfolio or listings of the existing residents in our MH portfolio from Canadians. I've been on site several times through the Sunbelt season, and I can tell you that the Canadians were there, all seemed very happy to be there, and were sharing their interest in coming back next year.

Thank you.

Thank you. And our next question comes from the line of John Kim from BMO Capital Markets. Your question, please.

Thank you. How long do you think it'll take to regain the occupied sites, the 260 lost in the last two quarters due to the hurricane? Will it be this year event or will it take a couple years to fully regain those sites?

I think that as we begin to repopulate those sites with homes, I think you'd see that take place over the next couple of years as we build up the occupancy in Florida.

And so why would it take more than, I guess, 12 months?

Why would it take a couple years?

It would take into 2026, I guess, I think. So the rest of this year and into 2026.

Okay, great. And then my second question is on the casual RV user, like the seasonal transient and Thousand Trails. Why do you think it's continued to be weak? I guess you had to pull forward in 21 and 22, and now you have three straight years where it's been either weak or declining. Do you think that seasonal transient goes back to 2019 levels? And can you maybe comment on any change in demand among generations? I think during COVID you had widespread increase from baby boomers all the way to Gen Z. Have you noticed anything different as those customers have pulled back?

Yeah, I think recently our seasonal revenue has seen some pressure on the growth due to seasonal workers and displaced residents. So we're seeing that. But we think the demand remains very strong, and we look at that from the length of stay. The length of stay for a particular customer has been the same over the last few years, but it's just some of those workers just no longer have the work that they were doing, and that causes a bit of a decline in that demand. And we're seeing the most of that happen in Florida. But overall, I think the demand is very strong, as you can see on the annual side of our business, and we continue to show strength in being able to convert an annual and seasonal into – I'm sorry, a seasonal and a transient into an annual customer.

Okay. Thank you.

Thanks, John.

Thank you. And our next question comes from the line of John Pulaski from Green Street. Your question, please.

Hey, good morning. Thank you for the time. Patrick, I still don't understand the cadence of manufactured housing occupancy throughout the quarter. So you told us a few months ago occupancy was at 94.8 as of end of January, which implies you lost 80 basis points of occupancy between January end of March, and 176 sites only shakes out to like 25 deaths of occupancy. So the occupancy loss throughout the quarter seems to be more than just storms. So can you help me understand what the moving piece is here?

Sure, John. I think maybe Paul would be able to walk through that a little bit based on the guidance and the numbers.

Yeah, John. I do think there's a little bit of confusion. So at the end of the quarter, core occupancy was 94.4%. You can see on pages 8 and 9 of the earnings release that occupied sites were nearly the same for the quarter average as at quarter end. What happened during the time period when we lost those occupied sites related to the storm events that Patrick mentioned, we completed expansion sites and added those to our core site count, which impacted the occupancy percentage.

Okay, that makes some sense.

Actually, one more follow-up there. Paul, you said that you expect a modest uptick in occupancy. What's your definition of modest? Are we talking 10 to 20 bps? Is that the right ballpark to think about?

Like 25 to 50 sites. 25 to 50 sites. Okay.

And then final questions on the annual RV revenue growth. I believe it was a little over 4% in the quarter, which is below the low end of the downwardly revised range. So one, what's driving the slightly softer than expected start of the year in annual RV? And then two, what are you seeing on the ground that gives you confidence that annual RV revenue growth will reaccelerate over the balance of the year?

John, in the first quarter, we have a bit of a leap year comparison, just FYI, compared to the remainder of the year. So 2024 was a leap year, so we had an extra day. 2025, that comp is more challenging in Q1. So it's like, excuse me, about 100-ish, 110 basis points that we'll adjust for the remainder of the year, just as an FYI.

And then as it relates to just the guidance for the rest of the year, that really has to do with one property, one marina that is in the process of being brought back online, and it's taking longer than anticipated. So that's the driver of that.

Okay. Thanks for the call.

Thank you. Thank you, John.

Thank you. And our next question comes from the line of Peter Abramowitz.

from Jefferies. Your question, please. Peter, you might be on. Oh, there we go.

Yeah, thanks. Yeah, sorry about that. Thank you for taking the questions. I was just curious. You had some pretty solid results on the OpEx side and disclosed what looks like a pretty favorable result on your insurance renewal. Just curious, you know, there's been a lot of speculation about increased inflation. potentially if there is kind of an extended issue with the trade war here. Anything that gives you pause, whether it be on payroll or anything else on the inflation side when it comes to operating expenses and maybe how you're thinking about that internally as you updated your guidance assumptions?

Yeah, we've watched those very closely. Roughly two-thirds of our expenses are comprised of utilities payroll and repairs and maintenance. and the expected year-over-year growth for the rest of the year is slightly higher than the most recent headline CPI print of 2.4%. So, you know, as we looked at it, our pay increases take effect April 1st each year. And so, you know, considering where CPI is right now, anticipating that we're slightly ahead of that going forward, We note the possibility that that changes and that there could be an acceleration, but we don't see an indication of that at this time.

Okay, that's helpful. And kind of in a similar vein, I guess on conversions or possibly site additions, whether it be RV or MH, Any pause when it comes to potential just cost inflation, whether that could impact just kind of the pacing of conversions or site additions, or if you think that could impact yields on those.

Yeah, I think we're on track from a development perspective as we've indicated throughout the year. Our returns have gone down over the last couple years as a result of increased cost pressures, but we don't see any large change in that.

Got it. That's all for me. Thank you. Thank you. Thank you. One moment for our next question.

Our next question comes in the line of Tama Asakiana from Deutsche Bank. Your question, please.

Yes, good morning, everyone. Good morning. Good morning, Margie. Could we just follow up on Peter's question there around OpEx? On the recurring CapEx side, is there anything we should be thinking about as it relates to tariffs, not just kind of regular OpEx?

On the recurring CapEx side, excuse me, our budget is approximately $90 million for the year. We had about $85 million in recurring CapEx last year, anticipate about $90 million this year. And, you know, similar to what we're seeing on the OpEx side, we're watching that very closely and aren't yet seeing any signs of pressure. I think that as the team manages through that, certainly as it relates to labor and projects, we're already into April, so contracts are already being signed for that type of work. So don't anticipate a significant increase and would expect to manage to that budget number for the year.

Great. That's helpful. And then a question on the RV side. On the Marina side, sorry, seeing, again, your peers exit from that business, could you just talk about kind of implications, you know, for your own business, whether it validates valuation or how you kind of think about it, and also just from a competitive perspective, how do you see their exit kind of changing anything in regards to the competitive landscape?

Sure. I'll pick the first half of it, or the last half of it first, which is the competitive landscape. These marinas, the marinas that are in place right now have been around for a long time. So from a local, on-the-ground perspective, there's really no change. But relative to just what does it mean in general in the marina portfolio, we bought the loggerhead portfolio in, I think it was 2017. And subsequently, we've added a couple of portfolios. We ordered a portfolio a few years later to our Marina portfolio. And those properties have performed in line with expectations, and we've really been able to seamlessly integrate them into our MH and RV portfolio. The assets that we've chosen are primarily annual leases with limited ancillary revenue. You know, they're in strong markets with high demand for our slips. You know, it's always good to see price points in the marketplace that support and enforce our valuations. But the properties have been doing very well, and the team has done a great job operating them for the last five or six years.

Thank you.

Thank you.

Thank you. And our next question is a follow-up from the line of Eric Wolf from City. Your question, please.

Thanks. It's Nick Joseph here with Eric. Just want to follow up on the Canadian RV seasonal exposure. My understanding is that a certain percentage, we've talked 30% to 40% in the past, but please let me know if not typically booked for the following year when they leave this year. So curious where that reservation pace stands right now versus where it was either this year or historically.

Nick, we do have roughly that level that reserve typically. We do see a lower number this year than we've seen in the past. It's about 20% lower than it's been, but I would say that it's early and there's a fair amount of time between now and January when those customers arrive. So, we'll watch and see what happens, but we're happy to see the level of early reservations that we have to date.

Sounds good. Thank you. And then just one other question just on interest expense guidance. I think the current run rate is around $124 million, but you're guiding to $132 million. So, just trying to bridge that gap when it seems like there's only about $87 million of debt maturing in 2025.

Yeah, we have the $87 million that's maturing. We do have an assumption in the budget for some investment, some working capital investment that we plan to make in the properties, and that's really the driver of the difference between first quarter and the run rate for the year.

Nice. So that's not external growth. That's more investment in existing properties.

Yes. Great.

Thank you very much.

Thank you.

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

Thanks for joining today. We look forward to updating you on our next call. Take care.

Thank you, ladies and gentlemen, for your participation at today's conference. This does conclude the program. You may now disconnect. Good day.