Equity LifeStyle Properties - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered normalized FFO per share of $0.83 (up 6.7% YoY) at the midpoint of guidance, with Core NOI growth of 3.8% and total revenues of $387.3M; net income per diluted share was $0.57.
• Versus consensus, EPS modestly beat (actual $0.571 vs S&P Global consensus $0.551*) while reported total revenues were slightly below consensus ($387.3M vs $392.9M*).
• FY25 guidance largely maintained on FFO ($3.01–$3.11), while Core MH and RV/marina growth ranges were trimmed; Q2 2025 normalized FFO guided to $0.66–$0.72, Core NOI growth 5.4%–6.0%.
• Operational catalysts: insurance premiums renewed down ~6% YoY with no change to deductibles/coverage, tight expense growth (Core opex +1.5%), and stable MH homeowner base (97% homeowners) supporting 94%+ occupancy; near-term headwinds: hurricane-related site loss in Florida, soft seasonal/transient RV demand pacing.

What Went Well and What Went Wrong

What Went Well

• Core property performance: revenues +2.9% YoY, expenses +1.5% YoY, driving Core NOI +3.8% in Q1.
• Insurance cost tailwind: property & casualty renewal decreased ~6.1% YoY, with no changes to deductibles or coverage.
• MH pricing power and mix: MH base rental income +5.5% YoY (rate +5.7%, occupancy -0.2% primarily storm-related), reinforcing durable demand; management emphasized 97% homeowner occupancy and long average length of stay.

Quoted management remarks:

• “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”.
• “Our property and casualty insurance…premium decrease of approximately 6%... no change in…deductibles or coverage”.
• “Homeowners occupy 97% of our MH portfolio creating long-term stability and reducing turnover”.

What Went Wrong

• Seasonal/transient RV softness: Core seasonal RV -5.3% and transient -9.1% YoY; reservation pacing in select northern markets lagged (e.g., Wisconsin Dells, coastal NJ, Bar Harbor).
• Hurricane impacts on occupancy: ~176 MH sites lost in Q1 plus ~90 in Q4; MH occupancy decline concentrated in Florida, with recovery expected over multiple quarters (into 2026).
• Membership upgrade revenue down 24.4% YoY; total new home sales volume lower (117 vs 191 YoY) and rental homes occupied dipped (1,918 vs 2,158 YoY).

Transcript

Operator (participant)

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 released earnings. Today's call will consist of opening remarks and a question-and-answer session with management relating to the company's earnings release. For those who would like to participate in the question-and-answer session, management asks that you limit yourselves to two questions, so everyone who would like to participate has ample opportunity. As a reminder, this call is being recorded. Certain matters discussed during this conference call may contain forward-looking statements in the 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.

Marguerite Nader (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.

19% 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 plays a key role in 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 campaigns 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 season. 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.

Patrick Waite (COO)

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 most challenging. Our portfolio of MH and RV properties offer prime locations and meet demand from home buyers 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-$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 MH 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 submarket average more than $425,000. In each submarket, 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 Q1, 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 averaging annual—I'm sorry, 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-$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 park model for $25,000-$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're 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.

Paul Seavey (CFO)

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 $0.83 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 1, 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-$3.11. We project core property operating income growth of 5% at the midpoint of our range of 4.5%-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-$125 million. In the core portfolio, we project the following full-year growth rate ranges: 3.2%-4.2% for core revenues, 1.5%-2.5% for core expenses, and 4.5%-5.5% for core NOI. Full-year guidance assumes core MH rent growth in the range of 4.8%-5.8%.

Full-year guidance for combined RV and marina rent growth is 2.2%-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 $0.66-$0.72. 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%-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%-2.2% and includes the impact of our April 1 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 EBITDAre 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%-75% loan to value, and 1.4-1.6 times 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.

Operator (participant)

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

Cooper Clark (VP of Equity Research)

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? 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.

Marguerite Nader (President and CEO)

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

Patrick Waite (COO)

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%. I think that shows strong demand across the resident base. Good consistent demand from our in-place residents. 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. Just to put that in perspective, the Q1 occupancy is down to 171. If you control for the hurricanes, to 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.

Cooper Clark (VP of Equity Research)

Thank you. 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.

Patrick Waite (COO)

That was around 10 years. It has been pretty consistent.

Marguerite Nader (President and CEO)

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

Operator (participant)

Thank you. Our next question comes from the line of Eric Wolfe from Citi. Your question, please.

Eric Wolfe (Director)

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. I was just curious, is it normally that the people stay through the storm damage, and this time they decided not to? What changed versus the original guidance and why? I think the guidance you gave was sort of at the end of January, hurricanes were in Q4. Just trying to understand if the behavior among storm-impacted tenants changed a bit versus what normally happens.

Patrick Waite (COO)

Yeah, I don't know that I'd say that the behavior changed. As you work your way through the aftermath of a hurricane, there are some homes that are significantly impacted, and that's clear. There is 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.

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.

Marguerite Nader (President and CEO)

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. That is the difference between January and now.

Eric Wolfe (Director)

Got it. Makes sense. I know you've given some of this information out on calls a couple of years ago, but could you just help us understand sort of what your exposure is to the Canadian customer and whether you've 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?

Patrick Waite (COO)

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 the seasonal impact is really in the first quarter of the year. We did not 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. Just to circle back on the annual for a moment, those customers primarily have a park model or an owned unit in place.

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.

Eric Wolfe (Director)

Thank you.

Patrick Waite (COO)

Thank you.

Marguerite Nader (President and CEO)

Thank you.

Operator (participant)

Thank you. Our next question comes to the line of Jana Galan from Bank of America Securities. Your question, please.

Jana Galan (Equity Research Analyst)

Thank you. Good morning.

Marguerite Nader (President and CEO)

Good morning, Jana.

Jana Galan (Equity Research Analyst)

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?

Patrick Waite (COO)

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

Jana Galan (Equity Research Analyst)

Thank you. 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.

Patrick Waite (COO)

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

Jana Galan (Equity Research Analyst)

Great. Thank you so much.

Marguerite Nader (President and CEO)

Thanks, Jana.

Operator (participant)

Thank you. Our next question comes from the line of Steve Sakwa from Evercore ISI. Your question, please.

Steve Sakwa (Senior Managing Director)

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. 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? Maybe what drove that?

Patrick Waite (COO)

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. 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. 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. 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've left our budget assumption alone.

The change in the forecast that you see is really our reservation pacing for the second quarter. Maybe Patrick, you can address some comments. Yes. 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. Just looking forward to the summer season, we have over 200 RV properties, and 85% of them are pacing in line with the same time last year. 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.

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 submarket.

Steve Sakwa (Senior Managing Director)

Okay, great. Thanks. 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? I guess any just sort of broad changes in your expectation about home sales over the balance of the year?

Patrick Waite (COO)

No, I think I touched on this last quarter, and there's a little bit of carryover into Q1. The hurricanes in Florida were an impact. We feel like the demand profile in Florida is still very strong, but we've seen a recovery along the Gulf Coast that was impacted. 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 500 to 600.

Last year, we were, for the full year, about 750 new home sales, and 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.

Operator (participant)

Thank you. Our next question comes from the line of Michael Goldsmith from UBS. Your question, please.

Michael Goldsmith (Analyst)

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

Paul Seavey (CFO)

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. 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.

There was one storm that did result in a claim.

Marguerite Nader (President and CEO)

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

Michael Goldsmith (Analyst)

Just as a follow-up, can you talk on the guidance? You took down the MH guidance, the annual MH guidance by 40 basis points, RV down by 50 basis points, but the total same-store revenue was down by 20 basis points. 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?

Patrick Waite (COO)

Yeah. I think that, as we mentioned, we have the occupancy impact on the MH, and then we 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.

Michael Goldsmith (Analyst)

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

Patrick Waite (COO)

Thank you.

Marguerite Nader (President and CEO)

Thanks, Michael.

Operator (participant)

Thank you. Our next question comes from the line of Wesley Golladay from Baird. Your question, please.

Wesley Golladay (Senior Research Analyst)

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

Patrick Waite (COO)

Yeah, I don't know that I have our overall exposure to Canadians in the MH space. I would directionally say that it's similar to what Paul covered earlier with respect to the RV business. 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 who were there all seemed very happy to be there and were sharing their interest in coming back next year.

Wesley Golladay (Senior Research Analyst)

Thank you.

Operator (participant)

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

John Kim (Equity Research Analyst)

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

Marguerite Nader (President and CEO)

Yeah, John, I think that as we see 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.

John Kim (Equity Research Analyst)

Why would it take more than, I guess, 12 months? Why would it take a couple of years?

Marguerite Nader (President and CEO)

It would take into 2026, I guess I'm saying. The rest of this year and into 2026.

John Kim (Equity Research Analyst)

Okay, great. My second question is on the casual RV user, the seasonal transient and Thousand Trails. Why do you think it's continued to be weak? I guess you had the pull forward in 2021 and 2022, and now you've had three straight years where it's been either weak or declining. Do you think that seasonal transient goes back to 2019 levels? 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?

Marguerite Nader (President and CEO)

Yeah, I think recently our seasonal revenue has seen some pressure on the growth due to seasonal workers and displaced residents. We are seeing that, but we think the demand remains very strong. 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 is 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. We are seeing the most of that happen in Florida. 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 a seasonal and a transient into an annual customer.

John Kim (Equity Research Analyst)

Okay. Thank you.

Marguerite Nader (President and CEO)

Thanks, John.

Operator (participant)

Thank you. Our next question comes from the line of John Pawlowski from Green Street. Your question, please.

John Pawlowski (Managing Director)

Hey, good morning. Thank you for the time. Patrick, I still do not understand the cadence of manufactured housing occupancy throughout the quarter. 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 and end of March, and 176 sites only shakes out to like 25 basis points of occupancy. The occupancy loss throughout the quarter seems to be more than just storms. Can you help me understand what are the moving pieces here?

Marguerite Nader (President and CEO)

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

Paul Seavey (CFO)

Yeah, John, I do think there's a little bit of confusion. At the end of the quarter, core occupancy was 94.4%. You can see on pages eight and nine 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.

John Pawlowski (Managing Director)

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 basis points? Is that the right ballpark to think about?

Paul Seavey (CFO)

Like 25 to 50 sites.

John Pawlowski (Managing Director)

25 to 50 sites. Okay. 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. One, what's driving the slightly softer than expected start of the year in annual RV? Two, what are you seeing on the ground that gives you confidence that annual RV revenue growth will re-accelerate over the balance of the year?

Paul Seavey (CFO)

John, we have a bit—in the first quarter, we have a bit of a leap year comparison, just FYI, compared to the remainder of the year. 2024 was a leap year, so we had an extra day. 2025, that comp is more challenging in Q1. 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.

Marguerite Nader (President and CEO)

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. That's the driver of that.

John Pawlowski (Managing Director)

Okay. Thanks for the color.

Paul Seavey (CFO)

Thank you.

Marguerite Nader (President and CEO)

Thank you, John.

Operator (participant)

Thank you. Our next question comes from the line of Peter Abramowitz from Jefferies. Your question, please. Peter, you might be on—oh, there we go.

Peter Abramowitz (SVP of Equity Research)

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, 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?

Paul Seavey (CFO)

Yeah. We watched those very closely. Roughly two-thirds of our expenses are comprised of utilities, payroll, and repairs and maintenance. 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%. As we looked at it, our pay increases take effect April 1 each year. 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 do not see an indication of that at this time.

Peter Abramowitz (SVP of Equity Research)

Okay. That's helpful. 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?

Marguerite Nader (President and CEO)

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 of years as a result of increased cost pressures, but we don't see any large change in that.

Peter Abramowitz (SVP of Equity Research)

Got it. That's all for me. Thank you.

Marguerite Nader (President and CEO)

Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Omotayo Okusanya from Deutsche Bank. Your question, please.

Omotayo Okusanya (Managing Director)

Yes. Good morning, everyone. Just wanted to follow up on—good morning, Marguerite. 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?

Paul Seavey (CFO)

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. 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. Do not anticipate a significant increase and would expect to manage to that budget number for the year.

Omotayo Okusanya (Managing Director)

Good. That's helpful. Question on the RV side, again, just seeing what—on the marina side, sorry—seeing against your peers' exit from that business, could you just talk about kind of implications for your own business, whether it validates valuation or how you kind of think about it? Also, just from a competitive perspective, how did you see their exit kind of changing anything in regards to the competitive landscape?

Marguerite Nader (President and CEO)

Sure. I'll take 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. From a local on-the-ground perspective, there's really no change. 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 added a portfolio a few years later to our marina portfolio. 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. They're in strong markets with high demand for our slips.

It's always good to see price points in the marketplace that support and enforce our valuations. The properties have been doing very well, and the team has done a great job operating them for the last five or six years.

Omotayo Okusanya (Managing Director)

Thank you.

Marguerite Nader (President and CEO)

Thank you.

Operator (participant)

Thank you. Our next question is a follow-up from the line of Eric Wolfe from Citi. Your question, please.

Nick Joseph (Analyst)

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—you've talked 30-40% in the past, but please let me know if not—typically book for the following year when they leave this year. Curious where that reservation pace stands right now versus where it was either this year or historically.

Patrick Waite (COO)

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. I would say that it's early, and there's a fair amount of time between now and January when those customers arrive. We'll watch and see what happens, but we're happy to see the level of early reservations that we have to date.

Nick Joseph (Analyst)

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

Paul Seavey (CFO)

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. That's really the driver of the difference between first quarter and the run rate for the year.

Nick Joseph (Analyst)

Thanks. That's not external growth. That's more investment in existing properties.

Paul Seavey (CFO)

Yes. Yes.

Nick Joseph (Analyst)

Great. Thank you very much.

Paul Seavey (CFO)

Thank you.

Marguerite Nader (President and CEO)

Thanks, Nick.

Operator (participant)

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.

Marguerite Nader (President and CEO)

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

Operator (participant)

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