Welcome to Citi's 2025 Global Property CEO Conference. I'm Eric Wolfe with Citi Research, and we are pleased to have with us Equity LifeStyle CEO Marguerite Nader. The session is for Citi clients only, and disclosures have been made available at the Corporate Access Desk. To ask a question, you can raise your hand or go to live.qa.com and enter code GPC25 to submit questions. Marguerite, I'll turn it over to you for some intro remarks to introduce your team, and please provide the top three reasons to buy your stock today.
Wonderful. Thank you very much, and thank you for having us here to present. With me here today are Paul Seavey, our Chief Financial Officer, and Patrick Waite, our Chief Operating Officer. I think there are many reasons to buy our stock, and our investor presentation, I think, does a good job of making the case for owning ELS. First, I would point to our historical performance. Page two, you can see that we've had a 14% annualized total return since our IPO, which was over 30 years ago. These results come from strength in our NOI and our same-store NOI growth, and translating that into FFO growth. ELS has averaged 4.4% NOI growth over 25 years compared to the REIT average of about 3.3%.
As I mentioned, we have translated that NOI growth into FFO growth of 8% since 2006, and our dividend has grown on average 19% during that time period. These results on a standalone basis, I think, are impressive, but it's helpful to put those results in context, and we've done that in our investor presentation. On page five, you can see how we compare to the REIT industry as well as residential REITs. For normalized FFO growth, dividend growth, and balance sheet metrics, we screen very well in comparison. We continue that positive comparison when we issue guidance this year with a growth rate in NOI and normalized FFO in the top quartile of reporting companies. I think our history is important to look at. The next I would focus on is that we expect that success to continue.
We have high-quality locations, strong demographic trends, and our supply-constrained industry is an important factor. On page 20 of our presentation highlights the positive supply characteristics, I think it's important to look at. There's been limited MH development over time, and we think that will continue. So I think in total, we've got a great long track record, geographically diverse property, base in attractive markets, and no new supply.
I wanted to start maybe talking about portfolio acquisitions, and I know we've talked about this a lot over the last 10 years, but it does seem like there's sort of two potential acquisition candidates out there right now. Obviously, you have YES Communities, which is sort of figuring out what they're trying to do. I was just curious, is anything that's on the market today of interest to you? And then specifically for all-age assets, I know there's a very wide range of sort of quality there. What are the specific types of all-age assets that are interesting to you and why?
Sure. So right now, our portfolio is 70% age-qualified and 30% all-age. And we have developed our strategy over time and focused on what we want our portfolio to look like based on our experience. And what we have seen is that the age-qualified properties perform very well in all environments and that all-age properties have some amount of variability inside different operating and economic environments. We have sold out of all-age properties in the Midwest and purchased Florida assets, Arizona, California, et cetera. I think it was about seven years ago that we traded out of a Midwest portfolio and at the same time was able to trade effectively into a Florida portfolio, and we're very pleased at that execution. Additionally, I think just in terms of the operations of a family portfolio versus an age-restricted portfolio, maybe Patrick, you could touch on that a little bit.
Eric, as you know, Patrick ran a company that had all-age assets. So maybe Patrick, you could give us a little bit of flavor.
Yeah, I guess I'd highlight the trends that you see in those two respective business platforms. Our core customer is empty-nested retiree. They may have sold their house up north or they may continue to own it and move back and forth seasonally, but eventually they set up their roots for retirement in one of our communities in the Sunbelt. They typically rely on savings, Social Security, pensions, 401(k), et cetera. It's a very stable customer base. With respect to the family communities, those are typically a starter home, young families looking to be in a good school district, a professionally managed property, and they rely on their monthly paycheck in order to pay for their housing.
So if you experience a shock in the economy, the disruption that can come in the employment market is more disruptive to the all-age properties as opposed to the stability that we see in our age-qualified platform.
So think about why you still hold that sort of 30%. Is there just something specific about that 30% that you think makes it more attractive than the dynamic that you just referenced a second ago?
Yeah, for our all-age portfolio, it skews more towards more like an age-qualified customer base. We have a portfolio in rural Bethel where that's a good example, number of all-age properties. That tends to be seasonal housing where people are enjoying it as a vacation house during the summer as opposed to the primary housing that I described earlier, and that profile is similar across a majority of our all-age properties and lends itself to a more durable revenue stream, more like our core customer base in the age-qualified.
So it seems like in the near term, the best investment opportunities where we should expect you to spend your free cash flow is really going to be on that sort of pipeline of 3,000 expansions that you have?
Yeah, I think that's fair. I mean, I'll walk through that just briefly. Over the last five years, we've delivered about 5,000 sites, so roughly 1,000 sites annually. We view that as real opportunity. Expansions adjacent to our properties carry a really attractive risk-reward profile because we have an existing property, existing core amenities, name recognition, and a core resident or customer base that also acts as a referral base for our new customers, both MH and RV. About 20% of our new MH and RV customers come to us through a referral pipeline.
One of the things that we've been focused on, Eric, during our time here is certainly those available sites, but also the fact that we have 6,000 vacant acres adjacent to our property. There's a long timeline for us to continue to be able to invest in our properties and build and develop on our properties.
Gotcha. So the pipeline that you referenced, I think, on the call, does that include that acreage that's next door or it doesn't? That's a separate future type of...
It does. It includes. It's part of it. But there's just much more, just as it's 6,000 acres, and a lot of that, I think, not 85% of it is adjacent to our RV parks versus manufactured home communities.
I think about that 3,000 sites as something that's an ongoing pipeline, right? Completed projects are going to drop off, and then new entitlements that we're working on are going to work their way through that roughly 3,000, which is somewhere around 20 or 30 projects on a run rate basis for us. We'll continue to replenish over time, and a good chunk of that's going to be that adjacent land that we already own, and we're always looking to acquire additional land adjacent to our properties.
Got it. And this is a simple question, but when you're expanding just land that's adjacent to your site, I mean, you're basically, are you building out just the roads, the utilities, and then are you usually just putting sort of like a marketing trip, like a transient customer at first to try to get them in, and then eventually you convert them to a park model or figure out a way to have a mobile home site? I'm just trying to understand the process that you go through when you're building these things out, how much it costs, the timeline to get someone in, and how that changes over time.
Right, and it depends, obviously, if it's RV or MH, but if it's RV and we have the ability to start making that site revenue-generating as soon as possible with a transient, we will do that, and then that will grow into an annual over time. That's different than what you see on the MH space because on the MH space, you need to put a home on the site and either sell it or rent it in order for it to become revenue-producing, and maybe, Patrick, you could walk through a little bit of the timeline associated with some of the developments.
Yeah. I'll just start briefly on getting entitlements to the point where we call it shovel in ground. Even in the investor presentation on the development slide, there's a reference to a property in North Fort Myers, so Gulf Coast of Florida. We own that property for decades. It's called Buccaneer Estates, and it had the adjacent land the entire time. It was part of the existing footprint, part of the base entitlements that came with the zoning. It took us the better part of two years to work our way through a site plan, the entitlements, water retention, wetlands. In Florida, there's also a small tortoise that you need to be very thoughtful about identifying and then locating and relocating in order to proceed down the path of development.
There are different versions of that with every type of development that we seek to get the final entitlements to get a shovel-ready ground and begin development. The development timeline usually for us, it's going to be dependent on the scale of the overall development, but usually we'll take it in manageable chunks, so we'll call it 50-150 sites, and that's going to take less than a year with respect to the development process, and then we'll work our way through lease-up on the RV side. As Marguerite mentioned, you can start tapping the transient pretty quickly. Seasonals as well in the Sunbelt, as long as you're coming into season. We have another property in that submarket that performed very well with respect to that dynamic.
And then on the MH footprint, we're really going to start pre-marketing as soon as we're working on the project so that we can start building that referral base. We'll give people an idea of what home inventory is coming, get some models sited early, and then we'll get to the point on MH where if you achieve a lease-up rate of 25- 35 sites on an annual basis, you're maintaining a pretty good workflow. We'll fill the existing expansion and we'll move on to the next project.
I guess with respect to MH development, you said that you expect supply to stay very low. I mean, I look at the compound rate of growth that you've had. On the rate side, it's like over 5%. Why aren't we seeing more MH development just given the great trends, which no longer seem to be a secret? It's just that there's less sophisticated operators, that zoning entitlement. I know it's not necessarily the most popular product type always in certain municipalities, but why aren't we seeing more when we've had such good rate of growth in your industry?
Right. I think it still continues to be the NIMBY problem and getting entitlements. So we have tried in instances where we have a property right next door and we buy the land, and before we purchase the land, we want to get it entitled so that we're not just land banking. And there have been instances where we weren't able to get the entitlements for a land that was right next door to us. And it's just this at the city council level, they can say no or yes or no to the ability for us to get the entitlements. And so that's been difficult. And I think that at the city level, there isn't anyone that they're held accountable to. So it's not as if they're reporting up to the state or the federal level to say whether or not they're granting access to more manufactured housing spaces.
They're just kind of insulated into their own city council. And so that's what we've been dealing with. And we haven't seen a change in that over the years. Now, maybe there will be a change at the federal level that could transcend down into the cities, but not quite sure if that's going to happen.
What would that look like?
I think that what could happen is that the cities could, if at the federal level there was funding that was either withheld or they were given funding if they were to do X, Y, or Z on the manufactured housing sites, I think something could happen there. But right now, there's nothing. So I think it just makes it difficult. And you're dealing with a city council who lives in the community and is very focused on what their neighbors are thinking and how their neighbors are thinking of what we are planning and doing in a given location.
Gotcha. Yeah. I mean, it's just a little bit surprising to me because the look of the product obviously has gotten a lot better over time, and there's a desperate need for more affordable type of housing, not affordable housing, but housing that people can actually afford. So it's interesting that that dynamic is still in place in spite of.
Absolutely. I mean, we meet a need, and there is a demand for what we have to offer, and it's just kind of working through the regulations of that, and it'll just take more time, I guess.
And then just the federal that you were talking about before, just so I haven't seen anything. Is there actually something that's being proposed?
No, no. I'm just saying what would it take? That's something it would take if something were to happen at that level, but I haven't heard anything.
Obviously, we saw your peer or competitor, however you look at it, sell big marina portfolio. It's only, call it 3% of your business right now. Doesn't seem like something that, I guess when we kind of bring it up and talk about it, it always seems like something we're like, well, look, it's not a big part of our business. Can you maybe just help us think about whether you want to grow that business, shrink it? If at this point, it's not you thought you're going to be bigger in it than you actually ended up getting, just long-term plans for the marina business.
Sure. So we got into the marina business in 2017 when we bought the Loggerhead portfolio. And at that time, we owned marinas that were adjacent to our RV parks and manufactured home communities. So we had an idea of how to operate smaller marinas, not anything of the size that's in the Loggerhead portfolio. But we did the due diligence. We looked through it. We had an ability to actually grow inside a larger company in the marina space, but we decided we really liked this Loggerhead portfolio, and there were specific reasons why we liked it and why we didn't want to go into a greater portfolio. And that was the cash flow characteristics of the Loggerhead portfolio, which included highly annualized base, not a lot of ancillary revenue, a focus on fee simple assets versus a ground lease.
Once we wrapped our heads around the underwriting on it, we looked at it and said, this looks an awful lot like the RV annual space that we have come to love and really appreciate. At that time, in 2017, I think we went out and we said, we're buying this asset, and we don't think that this is going to be bigger than at the time it was 3%, 4% of our overall site count, and we don't anticipate that it will grow. As we grow, maybe we'll buy a couple of marinas, but it was because of what our opportunity set that we saw, because we didn't want to be part of a transient base or high ancillary revenue. We knew that a lot of the assets that were out there were going to be taken off of our target list as a result of that.
So now, fast forward a few years, we bought another portfolio that looked an awful lot like the Loggerhead portfolio and has operated in line with the Loggerhead portfolio, and so now we have these two portfolios that sit side by side and that Patrick's team does a very good job operating, and they are integrated into our portfolio just like any other asset, and they've performed very well for us.
So it sounds like if you could find more of those types of assets, you would. It's just very challenging to find.
Right. It's challenging, and we're very particular about kind of duplicating the cash flow characteristics that we have already.
Gotcha. So no desire to sell based on the great or bad valuation that was just shown there.
Right. I mean, I think that as oftentimes in our space, particular properties, we get calls about people are very interested in buying particular assets, but we're in a good place with our marina portfolio, and our team does a very good job operating it.
Got it. And maybe last one on it, and I probably hate it because again, it's a small part of your business, but what percentage of marinas look like your Loggerhead portfolio or the other portfolio bought in terms of having that high annual customer base, low ancillary revenue?
So there's about 4,000 marinas across the country, and I would say about 500 marinas would kind of fit the same qualifications as inside of our portfolio.
Maybe switching. Well, we did have one question kind of come in. It says, "How many potential sites does the 6,000 acres yield? Is that 3,000? Is that?" No. Okay.
It's a difficult question to answer in a nice box. The way I kind of craft the opportunity is we're going to continue to replenish that 3,000 sites, give or take on a run rate basis. That's going to come from our existing footprint as well as acquisitions that are adjacent to our existing properties. So that range of, call it 600- 1,200 sites that we've been developing over the last five years is something that we see being able to maintain for several years to come. And I consider it to be an increasingly just kind of a core run rate component of the business. That, of course, is subject to if there's a shock to the economy and some disruption in demand, we would pull back and wait until we have a demand profile to warrant that continued investment.
Switching over to your annual RV business, you mentioned that you were seeing a little bit higher turnover. I know there were some questions on the call. It did sound like you said part of it was due to some of the recent hurricane activity. I guess my question would be, why would you be seeing that sort of higher turnover now on your annual customer base instead of seeing it after Ian, which was theoretically a worse hurricane?
Right, so after Ian, we had some hurricane, either hurricane response workers or FEMA had some sites that they purchased on an annual basis from us, and some of those sites have worn off or that opportunity where the customer or somebody had an impact to their home, they stayed with us for a while, and then their home is fixed and they've moved back to their home.
So that's the only reason for the higher turnover. It's just that you had workers in there that were part of the annual customer. They fixed the home, so now they're leaving.
Right. I would say that's about 70% of it, and the 30% of it is just some other activity that's happening. But the lion's share of it is that.
Okay. Yeah. Because I mean, one of the questions we've been asked recently, and I think we talked about it a little bit yesterday on the great tour that you did, but it's just given this rhetoric between the U.S. and Canada, if you start to see some of those customers potentially question whether they want to be annual or seasonal customers, it doesn't sound like you've seen much impact from that yet. But I guess the question would be then, are we going to see that next year a bit? Because presumably some of them already put down deposits and made a commitment for this year. Just your thoughts on whether that could impact the annual or seasonal business at all.
Sure. So our Canadian customers, and you saw many of them yesterday, are down here for the season now, and their season is basically the first quarter. They tend to leave as the rest of our seasonals do in the middle of April. So the next season will start slowly after Thanksgiving, but then pick up again next year. And I think that the driver of the activity of the Canadian activity has always been the cold weather in Canada. And I think that you saw yesterday how much fun everyone's having in the sun in Florida. I think that those are great memory makers, and I think that memory will stick when they're deciding to make their move in December of next year. We also have a program where we get people and ask our customers to sign up for next year before they leave.
So we'll have an idea of that in April and May of this year.
Gotcha. So you'll be able to track versus what you normally see in a year versus what ends up happening this year.
Exactly.
I guess at what point does the seasonal customer decide to extend their stay or not? Is it around this time? Meaning, I know they stay for sort of the colder months. They're here because it's warm. It's fun. When do they decide, well, I want to extend my stay by a month? I know that's sometimes a swing factor in how your seasonal revenues end up being in the first quarter, which I think is an important quarter for you from a seasonal perspective.
Right. And there's certainly sometimes it's as easy as when Easter falls, and we like it to fall as late as possible to get as much of the season as possible. And oftentimes, our seasonal customers want to go back and get their taxes done. So they tend to go back before April 15th to get their taxes done. That's what historically has happened. But we do have a lot of campaigns, and Patrick's group is focused on a lot of campaigns of extending that seasonal customer. And our luck around extending the seasonal customer is all about the weather again, and that's the weather up north. So if you're having a bad April, we have a better chance of keeping people and our customers happy and enjoying life in Florida, as opposed to if you have a really strong spring up north.
And then, looking at your presentation, it did look like all I do is really compare sort of the growth rate that you've done so far versus your guidance. The growth rate you've performed thus far for RV specifically seems a little bit higher than your guidance. Maybe you could just say if there's certain things that are trending a little bit better than you thought, or if that's just how you figured the guidance would go, the first two months would be a little bit better, and then March would be a little bit worse.
Yeah. The update that we provided was for January alone, and we did anticipate a bit of variability in January. Last year, February was leap year, so we have a little bit of a funny comp for the month of February, so.
Okay. And then I think earlier you said that 20% of your customers come from referrals. What was that for? Was that just for MH, or was that specifically for across your businesses? What does the 20% refer to?
It's predominantly the MH and the RV annuals. You see a similar type number on the transient and the seasonal. Roughly 15%-20% of our seasonals previously stayed with us as a transient, and that number holds as you go from seasonal or transient up to annual. That's more of a customer conversion as opposed to a concept with respect to the pipeline of referrals of family and friends.
Got it, and I guess where does the other sort of 80% come from, and I guess for both pieces, what are you trying to do to drive increased customer eyeballs, conversion rates to your properties?
Sure. Our marketing department is really focused on social media. That's been a big driver of our RV and MH results. And it's focused on getting in front of as many people, and in many instances on the RV side, getting in front of the younger audience who then tells their parents, and then all of a sudden that becomes a reservation, which then ends up being a longer-term stay. So there's those efforts we have underway. And then we have a very strong email campaign that has a very high open rate and has always had that, which has been very helpful for us. And we are able to track our customers from where they kind of start out at the beginning interested, but they're 18 months away from making a decision. And so we continue to track them until they're closer to making a decision.
Gotcha. And so, I mean, I guess maybe just try to get some perspective. With either email campaigns or social media, have you been able to drive more eyeballs? How would social media impressions, say, this year versus two years ago, or number of emails open? Just trying to understand how that has trended.
Yep. So our social media campaign right now, we have fans and followers in excess of two million, which has been something that we've really focused on over the years of building those campaigns and making it so that the information we're putting out is informative, relevant. It does not just feel like a 10% off coupon. It's something that people find interesting. And so that's the focus there. And so we've seen an increase in our social media followers. And then in terms of our email campaigns, we continue to see an increased number of referrals coming from that business and from people opening up their email.
And what we were doing before it was just an email, and now it's focused on driving them to our website where they can see the 3D tours, and they're able to communicate with the property sometimes directly on their first time that they're out wanting to explore a particular location. And I think that's been very helpful. And people really want to get a feel for the property as much as possible through these 3D tours, and that's been very popular for us.
In terms of RV dealer activations, obviously those have been down a bit. I mean, is that effectively just because the cost of an RV, including higher interest rates and other things, has grown so much? I was looking at the data the other week, and it seems like sort of like motor homes are down year- over- year, but towables are up year- over- year. I don't know if that's consistent with what you're seeing, but trying to understand, do you think that sort of the RV activation is from some kind of change in how people are viewing it, or is it just like RVs have become pretty expensive and therefore more difficult to buy right now?
I think that the RV activations, which is activating a Thousand Trails membership through the purchase of an RV, we've seen that go up and down with the RV sales at the particular location. So if a particular location where we have this marketing campaign sees a decline in sales, we're going to see a decline in the activations. And then conversely, as it goes up, we see an increase. And this product is a trial membership for a year. So they get to explore and appreciate the Thousand Trails platform and with the hope that the next year they would convert to a paying member. So it is that new customer coming in, and we have seen a decline in overall RV sales, and that's contributing to those RV activations.
Yeah, but the decline in sales, I mean, would you view it as a function of demand or just price? Meaning, I went to buy a used car the other day. I need a bigger one because it can't fit all the kids in there. It was just shocking in how expensive things have become. I'm assuming that the same is true on the RV side.
Certainly. It's expensive, and I think that there was demand. There was COVID demand. So you saw a spike up in RV sales, and you see some of that is coming down to pre-COVID levels.
Got it. And then on the MH side, I think you've been talking for a little while about Florida and Arizona. I've been at this sort of 95% occupied level. It seems like there's incredibly strong demand there. I guess when do you think occupancy could turn higher there, and why hasn't it done that yet?
Sure. One thing I'd encourage is follow the total site count, total occupied site count, because that development pipeline that I mentioned, I think we're roughly 1,500 MH sites that have been developed over the last four or five years. They're now in the denominator, and we'll continue to fill those. So that component from a percentage perspective is going to continue to be a mix of the overall math. But with respect to continuing to grow occupancy, highly focused on getting home inventory into those places where we have opportunities to continue to grow. I touched on in the last earnings call that we did have some moderate impact relative to the hurricane that came through late last season. That was a down of about 90 for the quarter. And with a hurricane like that, we'd expect to see some number over the next few months.
As referenced back in the end, that number was around 150, so we'll get through that. That's a temporary impact to our overall occupancy, and to your point, we have a very consistent demand profile, so we have an opportunity to continue to sell new homes and grow occupancy.
And I think it's also important to note that we have a large percentage of our communities that are 99% or 100% occupied and have been for 10 years, 15 years, 20 years. So once you get up there, they can really stick and stay at that level for prolonged periods of time.
Got it. And then last question I had was just if there's anything that's happened, say in the last, call it five, 10 years in terms of increasing storm events, impact from those storm events, what's happening in the insurance market that's sort of changed either your capital allocation or changed how you view insurance or changed anything in terms of how you think about your business?
Sure. I think that with each storm event, we certainly learn more. The manufacturers learn more about how to harden the assets, harden the homes, and harden the assets at our properties. And I think our team, our asset management team, has done a very good job of looking around in the summer and trying to figure out what do we do to protect ourselves in the event that we have a windstorm here. Florida is a high concentration of our assets. It's also a state that's in very high demand, and the population is growing. And Florida has outperformed our portfolio over the last 25+ years. So we would anticipate that it would continue to do that. But it's just a matter of focusing on what we can do to make things better for the assets prior to the storm.
Two rapid-fire questions. What will same-store NOI growth be for your property sectors in 2026?
4.5%-5%.
Will there be the same, more or less publicly traded companies in your sector? I guess there's only two at this time next year.
Yes. Same.
Okay. Thank you.
Thank you.