Good day, everyone, and thank you for joining us to discuss Equity Lifestyle's Property Second Quarter 2020 Results. Our featured speakers today are Marguerite Nader, our President and CEO Paul Sievey, 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 meaning of the federal securities law. Our Forward looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or to supplement any statements that become untrue because of subsequent events. In addition, during today's call, We will discuss non GAAP financial measures as identified by the SEC Regulation G. Reconciliations of these non GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information and our historical SEC filings.
At this time, I'd like to turn the call over to Marguerite Nader, our President and CEO.
Good morning, and thank you for joining us today. Our Q2 results show the continued strength of our business. We continue to be able to safely and efficiently operate our properties under new operating conditions. Paul will provide more details on collections, but across our organization, we have seen payment patterns consistent with last year. We have put in place a rent deferral program for residents facing the hardship due to the impact of COVID-nineteen.
Approximately 500 residents are enrolled in this program. We saw strong demand on the MH side of the business with a 4.6% increase in rental revenue. In the quarter, we saw a decrease in residents moving out of our communities. We increased new home sales volume by 14% and the average purchase price increased by 10%. Our MH properties are currently 95% occupied.
Our residents are homeowners who have generally paid cash for their home. This capital commitment to our communities is an important differentiator in difficult times. Our overall occupancy consists of less than 6% renters. Moving to our RV business, we have had an position strategy over the years of buying RV resorts that are heavily focused on annual and seasonal revenue streams. 80% of our RV revenue is longer term in nature and 20% comes from our transient customers.
In the Q2, our properties were impacted by local shelter in place orders, which called for reduced or eliminated travel activity inside the jurisdiction. Our RV annual customer generally has developed roots community. For the Q2, the annual revenue, which historically accounts for approximately 70% of our total revenue, grew by 4.7%. In the quarter, we were primarily closed to transient traffic until the beginning of June. We followed shelter in place orders and reduced activity to protect our employees and customers from potential risks associated with transient traffic.
We saw a significant increase in reservation activity and revenue in the month of June. The demand is high for customers to travel in a controlled environment. I would like to close by thanking the entire ELS family. They have continued to react the evolving climate in an impressive manner. The team has successfully adapted to new regulatory protocols and changes in the operating environment with a primary focus on the safety and well-being of our employees, residents and guests.
I will now turn it over to Paul to walk through the numbers in detail.
Thank you, Marguerite, and good morning, everyone. I will review our Q2 results, highlight some of the topics mentioned in the COVID-nineteen update included with our earnings release and supplemental financial information and discuss our balance sheet and liquidity position. For the Q2, we reported $0.47 normalized FFO per share. As disclosed in our earnings release, we incurred approximately $1,400,000 in non recurring COVID-nineteen related expenses during the quarter. We have added these expenses back in our calculation of NFFO.
Our core MH rent growth of 4 point 6% consists of approximately 4.1% rate growth and 50 basis points related to occupancy gain. We have increased occupancy at 103 sites since December with an increase in owners of 156, while renters decreased by 53. Core RV resort base rental income from annuals increased 4.7% for the 2nd quarter and 6.1% year to date compared to the same period last year. The driver of rent growth from annuals in the quarter was rate with occupancy essentially flat compared to the prior period. Year to date core resort base rent from seasonals increased 3.7% compared to 2019.
Core base rent from transients decreased 47.7% in the quarter as a result of the closures Marguerite mentioned in her remarks. Membership dues revenue increased 3% compared to the prior year. During the quarter, we sold approximately 5,800,000 Trails Camping Pass memberships. This represents a 12% decrease for the quarter, which we attribute to the impact of COVID-nineteen. We experienced significant recovery in sales volume in June, which showed an increase of 43% over June 2019.
The net contribution from membership upgrade sales in the quarter was flat compared to last year. Sales volumes increased almost 12%, while the mix of products sold changed, resulting in a lower average sales price. Core utility and other income was about $400,000 lower than Q2 2019. Increases in pass through and utility Primarily resulting from pass throughs of real estate tax increases that were effective in late 2019 were by reduced revenue resulting from our suspension of late fees as well as fees related to transient RV stays. More property operating expenses were flat compared to Q2 2019.
The footnote disclosure included in our supplemental financial information package states that our core income from property operation includes approximately $1,000,000 of non recurring COVID-nineteen related expenses. Excluding these expenses, we realized a 90 basis point decline in core property operating expenses in the quarter compared to last year. In summary, 2nd quarter core property operating revenues increased 60 basis points and core property operating expenses increased 10 basis points, resulting in an increase in core NOI before property management of 1%. Core NOI before property management, excluding COVID-nineteen related expenses, increased 1.8%. Income from property operations generated by our non core portfolio, which includes our Marina assets, was $3,000,000 in the quarter.
Revenues from annual customers at the marinas and other properties in the non core portfolio generated more than 90% of total non core revenues in the quarter year to date periods. Property management and corporate G and A expenses were $25,400,000 for the Q2 of 2020 $51,300,000 for the year to date period. Other income and expenses generated a net contribution of $1,700,000 for the quarter. Ancillary retail and restaurant operations were impacted by COVID-nineteen and generated approximately $1,200,000 less NOI during the quarter than last year. In addition, our joint venture income was approximately $2,400,000 lower because of the refinancing distribution we recognized in 2019.
Interest and related loan cost amortization expense was $26,200,000 for the quarter and $53,200,000 for the year to date period. We included a COVID-nineteen update with our earnings release and supplemental financial information. All of our MH, RV and Marina locations are open, so some have limited access to certain amenities pursuant to state and local guidelines. Our rent deferral program was in place from April through June. Through that program, we assisted 5.40 residents with a deferral of approximately $500,000 of rent.
We also provided assistance in the form of rent credits to annual customers at certain of our RV resorts where openings were delayed because of shelter in place orders. Those credits will be applied to future charges and total approximately $900,000 We have also continued suspension of late fees in the month of July. Since the outset of the COVID-nineteen pandemic, we have not experienced meaningful negative impact to our rate of rent collections. For the Q2, our overall collection rate for our MHRV and TT properties was 99% consistent with the Q2 of 2019. Our months of state collections in July are consistent with at this time in April, May June 2020.
Now some comments on debt markets and our balance sheet. Market conditions have stabilized somewhat since our April call. Current secured financing terms available for MH and RV assets range from 55% to 75% LTV with rates from 2.75% to 3.5% 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 after funding our July dividend is more than $50,000,000 We have available capacity of $350,000,000 from our unsecured line of credit. We have approximately $141,000,000 of capacity under our ATM program and we have no scheduled debt maturities for the next 12 months. 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 ratio is 4.9 times and our debt to adjusted EBITDAre is 5 times. The weighted average maturity of our outstanding secured debt is 12.5 years.
Now we would like to open it up for questions.
If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of John Kim from BMO Capital Markets. Your question please.
Thanks. Good morning.
You
had a strong quarter as far as the collection rate and The RV parks are now almost fully open. Can you just discuss why you didn't reinstitute earnings guidance for the year?
Sure, John. So every year, as you know, we issue guidance well in advance of the start of the year. I think we've historically been among the first to release guidance. And we're really focused on making certain that the investors appreciate the assumptions that go into the range we provide. We feel very good about our business going forward.
It really has shown the true strengths during this pandemic. But we did feel that with the uncertainty in the regulatory and specifically the health environment, it was prudent to wait to reissue guidance and provide it at a time when there is more clarity with respect to that environment. Our MH and RV annual revenue line items have performed remarkably well, during these tough into our decision to wait on reissuing guidance.
How much of this decision
was based on concerns of the unemployment benefits expiring and the additional government stimulus as well. Did that factor into your decision at all?
No. I mean, I think what I just what I kind of covered there at the end with the Seasonal and transient was really the drivers of the decision. As you've seen in our MH platform, really good collections, High occupancy rates, great sales. So that wasn't really a
Factor. Okay. And then last quarter, you suspended notice of rent increases in MH. I'm just wondering if that has if that's continued or if you know you are increasing rent?
Yes. John, if you refer to our June investor presentation, we had talked about the fact that we were reinstating them in June. And in fact, we did do that at the end of June. So there was a very brief Suspension for the months of April May on those rent increases, but we effectively had a catch up of those notices in June.
Okay, Great. Thank
you. Thanks, Jeff.
Thank you. Our next question comes from the line of Samir Khanal from Evercore. Your question, please.
Yes. Hi, good morning, Marguerite. Good morning. I guess, can you talk about the changes you're seeing, maybe trends in the properties in Florida, Arizona, even California, we've seen some news reports of sort of flare ups in the virus there. Any notable changes in those properties?
I mean those properties right now for us are in the not as busy season. So you really we have our annual Our RV annuals there and our RV and our MH there. So it's not as busy of a season. So it's not impacting us currently. We're certainly looking towards how that changes and How the virus changes over time and how that impacts and that's why I touched on, impacts our transient and seasonal reservations Into the 3rd Q4.
Okay. And I guess my second question is just on kind of Just a general market in terms of opportunities that you're seeing, the acquisition side, portfolios, one off, whether it's RVs or MH, I guess, What is out there today and kind of in our expectation sort of on the other side of the virus here in the next sort of 6 to 12 months?
Yes. I mean, I think there is we didn't close on any new communities in the quarter. We are in due diligence on deals and we'll update you on the kind of the timing of the closing. There are certainly transactions that are happening. Some transactions are happening in kind of the all age MH space, which We have expressed that we're not necessarily interested in.
But I see that there's I think there are some deals that are coming To market now where people are interested in selling, I think that's consistent with the years past where it's just kind of the timing is right, Not necessarily having anything to do with the pandemic.
Got it. Okay. Thanks so much.
Thanks, Sameer.
Thank you. Our next question comes from the line of John Plaski from Green Street Advisors. Your question please.
Hey, thanks for taking my question. Just curious on the uncertainty around the U. S.-Canada border being closed or the closure being extended. Is that impacting kind of your early indications of snowbird traffic being able to come down into The Southern Stage are intent to come down. Any risk to the seasonal RV demand in the back end of this year?
Sure. So Let me give you a little just overview of our Canadian customers. I think our overall Canadian revenue is $1,000,000 and a little more than half of that is annual. And the largest Portion of those Canadian customers stay with us in Florida, Arizona and Texas. It's basically about 7% of our total revenue.
And the first half of the year, I think, represents about 60% of the full year revenue. So that's kind of already collected and accrued. We do have approximately, I think it's 98% of the annual RV customer is already has their park model or RV on-site in the south. So then now we're just kind of dealing with the seasonal and the uncertainty around that travel. And so it's something that we're watching.
I don't think it's something that we'll have clarity on The border closure was extended to, I believe, August 22 or the end of August. So we'll see and we're watching that closely, but it's something that we're paying attention to and it affects really December and into next year, January February.
Right. But if the border is closed On the annual side, I understand the individual's homes are still in place. But in terms of rent refunds and prorated rent, that would be a risk To the annual bucket as well, right?
We haven't kind of gotten there yet. I mean, at this point, in some cases, the customer It was in Florida right now. We're in Arizona right now. So, it's not something that we've discussed, certainly not something we've discussed with our customers yet. And unlike and as you remember, John, in the north, there was we were not able to open the properties And so people couldn't have access to properties.
This is not the same people can have access certainly to these properties.
Okay. And then last one for me. I apologize if I missed this in your opening remarks, but could you share how the July transient RV reservation Pace is shaking out versus a year ago?
Sure. I didn't share it, so happy to. So our July and I think just I'm not providing guidance, but I want to kind of touch on a couple items relative to what we've seen already, not what we're seeing in the future, which is July month to date transient results, and to put some parameters around that, which in 2019, I think that represented about 40% The Q3, it's in line with last year. So we're tracking last year. Our online camping pass sales in June, They increased 100%.
And then since the beginning of June, we've seen an increase in leads from our RV dealer program of about 71% and then our RV dealer activations increased 20%. So some pretty Significant kind of demand indicators that we've seen really since the start of June.
Okay. Thank you.
Thanks, John.
Thank you. Our next question comes from the line of Joseph Dennerlein from Bank of America. Your question, please.
Hey, Marguerite. Hey, Paul. Maybe just a follow-up on John's question there on the transient. Any color you can provide us on maybe Forward indicators on the RV side, like bookings that you're seeing come through on the Internet?
Sure. I mean, we've seen, I think, over the last 4 or 5 weeks, we've seen significant increases to our booking Channels, I think, in some cases, 100% increase over the last, I think, 3 or 4 weeks. Now, Along with those records, we also are also seeing some cancellations that is offsetting some of that new revenue. In some locations where we're able to operate at full capacity, but the surrounding area and attractions are Problematic. We're seeing some issues there.
But so those are the kind of the Demand indicators that we're seeing.
Okay. Thanks. And then, in the 2nd quarter, you had elevated costs from COVID of
I think it was $1,000,000
Is that past us now or is that kind of going to travel through into the Q3 and kind of continue at that run rate until the pandemic
is over or does it throttle down?
Yes, I think what we highlighted the total of $2,400,000 of which impacted the core expense base. Those really represent the non recurring expenses related to COVID. We focus very closely on the SEC guidance around COVID disclosure and the team worked very hard to differentiate between Really what are onetime costs related to development of the protocols around Operations of the properties at this time as well as the employee time off program, the property employee appreciation bonuses. So That's not really indicative of excuse me, of run rate. Now the incremental costs that we incurred associated with cleaning, meaning Supplies and so forth, those are included in our expenses and weren't separated or excluded as COVID related expenses.
It's a little bit difficult at the moment to kind of project what those will be on a go forward basis, Primarily because a lot of it is driven by the experience of the property, the timing of the opening of the amenities and so forth.
Okay. Did you disclose that somewhere, the level of kind of the increased supplies? I didn't see a
footnote, I might have missed the bill.
We did not separately disclose that. It's not a significant amount. It was a couple
of $100,000 in the quarter.
Okay. All right. Thank you. Thank you both.
Sure. Thanks, Josh.
Thank you. Our next question comes from the line of RJ Milligan from Baird. Your question please.
Hey, good morning. I wanted a little bit more color, if you could, on the rent increases. You guys mentioned that you reinstated them at the end of June and that there would be a catch up. So does that imply that Q3 you're going to see outsized growth from the increases?
We won't see outsized growth. I think the way that we framed it on the call in April was the suspension to the extent said it continued through the end of the year, the impact would be about 50 basis points, just doing the math. The impact would have been about 50 basis points in rent growth. I think the brief suspension for those couple of months That changes that impact to being just about 10 basis points on growth.
Okay. That's helpful. That's all I had. Thanks.
Thanks RJ.
Thank you. Our next question comes from the line of Nick Joseph from Citi. Your question please.
Thanks. Just a question on the amenities that are not open due to some of the state local guidelines. Does that impact either pricing or refunds at all in terms of if some of the amenities just won't be open for use?
Let me this is Patrick, Nika. Let me touch first on MH and then we'll get to RV. On the MH front, that's not impacted any sort of Concession on rents, we have managed through the process of first closing those amenities and then reopening and Predominantly across our portfolio, amenities are open, particularly on the MH side of the portfolio. We have protocols in place to ensure that our employees are safe and safely interact with one another and our customers. All of our employees are required wear masks when in proximity to one another, our offices by appointment only, and we have cleaning protocols in place.
And as I Mentioned on the last call, we have a relationship with a national vendor that has specialists in industrial hygiene to ensure that we're following CDC guidelines. On the RV side of the world, I mean, just on the with respect to the previous quarter, The amenities that were closed were really part of properties that were closed and that was the driver of the refunds in those instances for annuals in the northern campgrounds across the south. We are out of season right now, so it's a lower demand. And at this point, it's not impacting Any sort of rent payments for any of the annual seasonal and transients.
Okay, great. Thanks. And then just back to the acquisition environment. I was wondering specific to RVs, Has there been any disruption or kind of increased opportunities given what happened in the second quarter? Or on the private Have many owners been able to weather that storm?
I think that most have been able to weather the storm. There may be some opportunities, just people, like I said, I think it's just the time is right in their lifetime, in their cycle. But I don't see a lot of opportunities coming as a result of people seeing the effects because I think The effects were really good, both on the MH and the RV business, save for the transient for a couple of months. And I think We saw that as a once in a lifetime kind of thing and not to be repeated. And so I don't know that there will be opportunities come as a result of that.
It's more of a Personal kind of preference and people willingness to sell now.
Thank you.
Thanks, Nick.
Thank you. Our next question is a follow-up from the line of John Pulaski from Green Street Advisors. Your question please.
Thanks. Paul, curious how municipalities are approaching property taxes this year, less about The impact to EOS in 2020 and just more from a real estate lens, any color from on the ground conversations with the municipalities?
No direct color. I don't think for us it translates into Delays in timing, although there could be extensions of time for payments, but not seeing that happen yet. And not seeing we're not seeing just it's a little bit hard The timeframe, though it feels like this has been going on for such a long time, the timeframe really isn't that long. And so when you think about The typical assessment cycle and so forth that results in the bills that any impact on Income that may drive evaluations for purposes of the assessors that's not had time to make its way through the system.
Okay. There's no chatter over the next, call it, 12 months where municipalities have to fill a bigger hole in their budgets to Kind of come after residential a little harder and particularly when other property types really can't carry the weight? I
There's chatter, there's been that type of chatter for some time now. I don't hear it on the ground being Louder than it's been before. I will say, obviously, California has the issues that they're working through. I'm Kind of setting that aside and thinking about the rest of the country.
And then John, we also have our at the level of Florida, for instance, where we have the ability to pass Through real estate taxes, we have a lot more kind of help in front of local municipalities Did not do that. So that it's not just a big kind of corporate transaction. It's at the level of the property.
Okay. Thank you.
Thanks, John.
Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Marguerite Nader for any further remarks.
Great. Thank you for joining us today. We look forward to updating you on the next quarter's call.