Equity LifeStyle Properties - Q2 2024
July 23, 2024
Transcript
Operator (participant)
Good day, everyone, and thank you for joining us to discuss Equity LifeStyle Properties' second quarter 2024 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 meaning 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 such 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 (CEO)
Good morning, and thank you for joining us today. I am pleased to report the results for the second quarter of 2024. Our performance exceeded our expectations. For the first six months of 2024, we have seen an increase in NOI of 6.4% as compared to last year. We focus on translating NOI growth to normalized FFO growth. Our normalized FFO growth year to date is 5.9%, driven by continued strength in our annual revenue and reduced expenses throughout our portfolio. The strength of our portfolio results and our balance sheet allow us to increase full year guidance for the second time this year. We have raised full year guidance for normalized FFO to $2.91 at the midpoint.
The demographics of the U.S. population support the demand for our MH and RV portfolio, with 70% of our MH portfolio catering to seniors and the strong interest in RV travel among older adults. Approximately 70 million baby boomers are currently enjoying their retirement years, followed by nearly 140 million Gen Xers and millennials. We see long-term generational demand for all of our property offerings. Our MH portfolio, which comprises 60% of our overall revenue, is approximately 95% occupied. Over the last 10 years, we have sold over 5,500 new homes in our communities. These new homes contribute to the quality of housing stock in the community. Currently, less than 3% of our occupancy is comprised of rental homes.
The high level of occupancy in our portfolio is sustainable, and based on demand, we believe we can continue to increase occupancy throughout our portfolio. With respect to our RV business, our annual segment, which represents the largest portion of our RV revenue stream, performed well in the quarter, and we anticipate growth rates of 7% for the full year 2024. Since 2018, our total core RV revenue has had an annual growth rate of 5.6%. We have seen significant shifts in customer behavior as we increase the number of annuals in our core portfolio by approximately 3,000 sites. This increased stable customer base will be an important part of our future performance. We are proud to share that 50 of our RV resorts and campgrounds have received the recently announced 2024 TripAdvisor Travelers' Choice Award.
Each year, this award is given to approximately 10% of the businesses listed on TripAdvisor. Our property teams provide guests with positive experiences when they stay with us, and referrals from our guests are a top source of new customers. We continue to engage our guests, members, and prospects through our social media strategy. We have grown our fan and follower base to over 2 million across Instagram, YouTube, TikTok, Facebook, and other social platforms. We are currently in the middle of our Hundred Days of Camping campaign that focuses on the days of summer between Memorial Day and Labor Day. I want to express my gratitude to our employees for their exceptional contributions this quarter. Their hard work in serving our customers is the key reason behind our ongoing success.
I will now turn the call over to Patrick to provide further details on our financial performance.
Patrick Waite (COO)
Thanks, Marguerite. The consistency of our results over time comes from our strong property locations and the value that each of our residents and guests finds at their home property. Value is top of mind for consumers across the country, including home buyers and vacationers. Our offerings are attractive in any economy, and we are particularly well positioned to serve customers who are looking for value in a challenging economic environment. Our MH portfolio maintains high occupancy and provides consistent revenue growth. We sold 255 new homes during the second quarter, an increase of 13% year over year. Since 2018, the CAGR for total MH revenue is 5.6%. These results are driven by consistent rate growth through economic cycles, coupled with an opportunity for occupancy growth.
This long-term demand is supported by the value residents find in our communities, high-quality homes that compare favorably to alternatives in our submarkets, and an active lifestyle that is not available elsewhere at the price point offered at ELS communities. Today's home buyers are increasingly focused on value and affordability, given increases in housing costs and higher interest rates. Manufactured housing offers a value advantage compared to site-built homes. The average cost of purchasing an ELS new home is approximately $100,000, compared to $500,000 average cost of purchasing a new site-built home. That value holds true for renters in our portfolio as well. Those who rent a new ELS home pay $1,400 or approximately 35% less than the average three-bedroom apartment in the same submarkets.
Manufactured home communities offer value in any economy, but in today's housing market, marked by constrained supply and facing price pressures and increased interest rates, ELS manufactured home communities present exceptional value. The monthly payments for homebuyers in ELS communities are approximately 70% less than the buyers of single-family homes in the same submarkets. Homeowners in ELS communities enjoy comparable fixtures and finishes as site-built homeowners, as well as a resort lifestyle in a community setting, and often lower maintenance costs as well, which is another appealing factor for buyers facing higher living expenses. The combination of home affordability, inventory availability, and the resulting resort lifestyle found in our communities makes our offerings very attractive to homebuyers in today's housing market. For the RV portfolio, we are in the middle of the 2024 summer season, with two of the big three holiday weekends behind us.
Transient RV, RV revenue is less than 5.5% of our total revenue and is prone to volatility, largely driven by weather events. Similar to our other RV offerings, transient stays offer real value to our guests. Our average rolling stock nightly rate is $70. Our average rental cabin rate is $140, as compared to average hotel nightly rates of $160. Vacationers are looking for value and affordability when considering their travel options, and our RV resorts offer budget-friendly vacations in premier destinations that align with consumers focused on value this summer, including our longer-term stays. Our average annual site rent is approximately $6,000, while a seasonal site, that's typically a 4-month stay for a customer who brings their RV, is about $1,100 a month.
The combination of exceptional property locations and a variety of offerings for customers to choose from translates to consistent year-over-year revenue growth. I'll do a quick around the horn to highlight our RV performance. As Marguerite mentioned, since 2018, total RV revenue produced a CAGR of 5.6%. That growth is supported by our strong property locations, concentrated in the Sun Belt and along the coasts. Florida is our largest market, and given leading in-migration trends and a strong economy, it also leads our portfolio with a 2018 RV revenue CAGR of 6.6%.
The West region, which includes our next two largest markets, California and Arizona, produced a 2018 RV revenue CAGR of 5.1%, while our North region, ranging from the Great Lakes to the eastern coastline, produced a 2018 CAGR of 5.3%. The revenue growth CAGRs for both our MH and RV portfolios are approaching 6%. Those results come from consistently meeting resident and customer demand. In today's environment, consumers are seeking value, and we continue to provide high-quality lifestyle offerings at an attractive price. I'll now turn it over to Paul.
Paul Seavey (CFO)
Thanks, Patrick, and good morning, everyone. I will highlight some takeaways from our second quarter and June year-to-date results, review our guidance assumptions for the third quarter and full year 2024, and close with a discussion of our balance sheets. Second quarter normalized FFO was $0.66 per share, 2 cents higher than the midpoint of our guidance range. Strong core portfolio performance generated 5.5% NOI growth in the quarter, almost 100 basis points higher than guidance. FFO was $0.69 per share and includes $6.2 million of insurance recovery revenue that has been deducted from normalized FFO. Core community-based rental income increased 6.2% for the quarter compared to 2023, primarily as a result of noted increases to renewing residents and market rent paid by new residents after resident turnover.
We increased homeowners by 171 sites in the quarter. Core RV and marina annual base rental income, which represents approximately two-thirds of total RV and marina-based rental income, increased 6.6% in the quarter and 7.3% year to date compared to prior year. Year to date, in the core portfolio, seasonal rent decreased 2.4%, and transient decreased 2.7%. We continue to see offsetting reductions in variable expenses. For the June year-to-date period, the net contribution from our membership business was $29.2 million, an increase of 1.7% compared to the prior year. Membership dues revenue increased 1.3% and 2% for the second quarter and June year-to-date, respectively, compared to the prior year. Year to date, we've sold approximately 10,500 Thousand Trails Camping Pass memberships.
Also, during the year-to-date period, members purchased approximately 1,800 upgrades at an average price of approximately $9,200. Core utility and other income increased 6.1% for the June year-to-date period compared to prior year, which includes pass-through recovery of real estate tax increases from 2023. Our utility income recovery percentage was 46.4% year to date in 2024, about 100 basis points higher than the same period in 2023. Second quarter core operating expenses increased 3.4% compared to the same period in 2023. Expense growth was 200 basis points lower than guidance, mainly resulting from savings in payroll and repairs and maintenance expenses.
June year-to-date expense growth was 3.7% and includes the impact of real estate tax increases effective in late 2023, as well as our April 1, 2024 property and casualty insurance renewal. For the second quarter, core property operating revenues increased 4.6%, while core property operating expenses increased 3.4%, resulting in growth in core NOI before property management of 5.5%. For the year-to-date period, core NOI before property management increased 6.4%. Income from property operations generated by our non-core portfolio was $3.3 million in the quarter and $8.5, excuse me, million year to date. The press release and supplemental package provide an overview of 2024 third 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. We've increased our full year 2024 normalized FFO guidance $0.02 per share to $2.91 per share at the midpoint of our range of $2.86-$2.96 per share. Full year normalized FFO per share at the midpoint represents an estimated 5.7% growth rate compared to 2023. We expect third quarter normalized FFO per share in the range of $0.69-$0.75. We project full year core property operating income growth of 5.9% at the midpoint of our range of 5.4%-6.4%.
Full year guidance assumes core base rent growth in the ranges of 5.6%-6.6% for MH, and 3.3%-4.3% for RV and Marina. The midpoints of our guidance assumptions for combined, seasonal, and transient show a decline of 4.5% in the third quarter and decline of 2.5% for the full year compared to the respective periods last year. Core property operating expenses are projected to increase 3.3%-4.3%. Our full year expense growth assumption includes the benefit of savings in repairs and maintenance and payroll expense during the first six months of 2024, as well as the impact of our April 1 insurance renewal for 2024.
As a reminder, we make no assumption for the impact of a material storm event that may occur. The full year guidance model makes no assumptions regarding the use of free cash flow we expect to generate in 2024. Our third quarter guidance assumes core property operating income growth is projected to be 4.5% at the midpoint of our guidance range. In our core portfolio, property operating revenues are projected to increase 4.4%, and expenses are projected to increase 4.4%, both at the midpoint of the guidance range. I'll now provide some comments on our balance sheet and the financing market.
As noted in the earnings release and supplemental package, we closed on a modification of our $500 million unsecured line of credit that extends the maturity to July 2028, and provides a 1-year extension option related to our $300 million unsecured term loan. We're pleased with this execution, as the modification closed with no material modification of terms, and the bank group remains substantially the same. 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%, 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. In terms of our liquidity position, we have approximately $450 million available on our line of credit, and our ATM program has $500 million of capacity. Our weighted average secured debt maturity is almost 10 years. Our debt-to-Adjusted EBITDA is 5.1 times, and interest coverage is 5.1 times. We continue to place high importance on balance sheet flexibility, and we believe we have multiple sources of capital available to us. Now, we would like to open it up for questions.
Operator (participant)
Certainly. Ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. One moment for our first question. Our first question comes from the line of Joshua Dennerlein from BofA. Your question, please.
Joshua Dennerlein (Equity Research Analyst)
Yeah. Hey, guys. Saw seasonal revenue was weak during the quarter. Could you remind us how you define the seasonal customer, and then just any additional detail you could provide?
Paul Seavey (CFO)
Yeah, Josh, a seasonal customer is a customer who stays with us longer than a month, and shorter than six months.
Joshua Dennerlein (Equity Research Analyst)
Okay.
Paul Seavey (CFO)
And then-
Joshua Dennerlein (Equity Research Analyst)
Is that just-
Paul Seavey (CFO)
Go ahead. Sorry.
Joshua Dennerlein (Equity Research Analyst)
Oh, sorry. I was gonna ask, is that RV in Marina or just apply to RV just for, I guess, so?
Paul Seavey (CFO)
Well, it would apply to both, but the practical answer is that the marina customers we have are annual customers, predominantly with some, you know, very limited shorter-term day use.
Joshua Dennerlein (Equity Research Analyst)
Okay. Okay. Sorry, did I I cut you off.
Paul Seavey (CFO)
No, no.
Joshua Dennerlein (Equity Research Analyst)
Okay. And then on the RV and marina revenue outlook, I saw you lowered the annual, looks like 10 basis points at the midpoint. Any particular color on that? Like, what drove kind of the revision there? And then any kind of differences between the RV and then the marina side?
Paul Seavey (CFO)
... I think, I mean, I'll go back to a comment I made on the, on the April call. 2024 is a little bit tricky, just because of leap year and the impact of that. So we have this one-day issue that impacted the first quarter, and then it impacts the second, third, and fourth quarters in the opposite direction. So I think that's the, you know, the slight 10 basis point movement is really mostly attributed to refining that, as we're moving through the year. And then with respect to the RV and marina and any differential there, not a meaningful difference. I think that the RV rate and the marina rates are relatively close, with RV maybe being, you know, 50 basis points higher than the marina rate increases.
Joshua Dennerlein (Equity Research Analyst)
Okay. Appreciate that, Pat. Thank you.
Paul Seavey (CFO)
Thanks, Josh.
Marguerite Nader (CEO)
Thanks, Josh.
Operator (participant)
Thank you. And our next question comes from the line of Eric Wolfe from Citi. Your question, please?
Eric Wolfe (Director and Equity Research Analyst)
Hey, thanks. Maybe to follow up on that annual RV, you're guiding the 7% revenue growth. I think I remember last year you mentioned that you're gonna be increasing the rate 7% for the annual RV. Because is there like an offset that the conversion impact? Because I would think that with conversions from transient to annual, you'd see above 7% revenue growth there, but didn't know if there was some kind of offset.
Paul Seavey (CFO)
some kind of offset in the annual-
Eric Wolfe (Director and Equity Research Analyst)
In other words, if you're increasing the rate by 7%, right, that alone would get you to 7% revenue growth. And then if you're also converting customers from transient to annual, that would increase it above 7%. So I guess I'm just trying to understand how you sort of get to 7% revenue growth with the 7% rate increase, plus the incremental impact from converting customers from transient to annual.
Marguerite Nader (CEO)
There was also, Eric, there's also some offset to that for some of the workers that were with us on an annual basis, that are no longer with us, you know, from hurricane cleanup, et cetera. So you saw some of that reduction in annual count that offsets that-
Eric Wolfe (Director and Equity Research Analyst)
Okay
Marguerite Nader (CEO)
... that, rate increase.
Eric Wolfe (Director and Equity Research Analyst)
Got it. That makes sense. And then, as far as the transient performance, you've talked in the past about how weather is the main determinant. If you strip out the locations that had bad weather, either this quarter or this year, or however you want to define it, just curious how much you see the transient business growing. I'm trying to think through how things would look different if you had, you know, maybe two consecutive years of consistent weather, or if there was some way to estimate the impact that weather is having on your transient business.
Marguerite Nader (CEO)
I think what we see is that probably 10-15 of our properties are impacted by the weather and then the resulting issues that you see as a drag to the transient base. In the areas where you don't have that weather impact, we've seen an increase in transient revenue.
Eric Wolfe (Director and Equity Research Analyst)
I guess, is there a way to quantify what that is? Like, the— Is it just pricing, that, like, the, it's up 3%, 5%? Just trying to understand how much weather might be taking that growth rate down, if possible.
Marguerite Nader (CEO)
Yes. Yep, yep. I would say it's about 3% overall on those that are not impacted by the weather. And then if you're impacted by the weather, it's not a rate issue, it's a night issue. People just aren't staying with us on those nights.
Eric Wolfe (Director and Equity Research Analyst)
Okay. Thank you.
Marguerite Nader (CEO)
Thanks, Eric.
Paul Seavey (CFO)
Thanks, Eric.
Operator (participant)
Thank you. Our next question comes from the line of Brad Heffron from RBC. Your question, please.
Brad Heffron (Analyst)
Yeah. Hey, everybody. Can you give more color around the lower operating expense guidance? I think you said in the prepared comments that payroll and R&M savings, but how much of that overall is just an adjustment to lower RV expectations, and then how much of it is true, you know, savings?
Paul Seavey (CFO)
Yeah. I think when I think about the full year, Brad, if you just look at the expense growth assumptions over 3.8% at the midpoint of our range, utility, payroll, and R&M overall, that's roughly two-thirds of our expenses, and those are increasing almost 2%. Now, that's about 100 basis points lower than the July CPI print, and I'll say that that mainly results from a favorable year-over-year comp that we have in R&M. So 2023, we had some smaller scale, I'll call them, storm events, throughout the first six months of the year. And so we have that favorable impact. And then, you know, the remaining third of our expenses include real estate taxes and insurance, and those are going up over 7%. So that's kinda how we think of it.
Inside that mix is the impact of the transient business, as well, you know, to your point.
Brad Heffron (Analyst)
Okay. Got it. Thanks. And then it looks like the expectation right now for the cost of living adjustment in 2025 is in the mid-2% range. Is there any reason to think that MH rent growth, the differential of that to the COLA adjustment, would be higher or lower than normal? There's obviously a lag when it was moving higher, so I'm curious if there's also a lag when it moves down as well.
Marguerite Nader (CEO)
... I think if you look at our latest investor presentation that we put out a couple of months ago, I think it's on page 23, it highlights the, you know, the outperformance of that annual rate increases compared to COLA adjustments over the long term. So if you go back to 2000, you see an average spread of about 140 basis points. You know, our focus is really on negotiating those annual rent increases with our residents, which include an open dialogue and feedback from the residents. And we'll be able to give you an update on that later on in the year.
Patrick Waite (COO)
I would also remind you, Brad, that we have had the benefit in recent years of the increases to new residents who are coming into market. Year to date, in 2024, that increase has been about 14%.
Brad Heffron (Analyst)
Okay. Thank you.
Marguerite Nader (CEO)
Thanks, Brad.
Operator (participant)
Thank you. Our next question comes from the line of Keegan Carl from Wolfe Research. Your question, please.
Keegan Carl (SVP)
Yeah, thanks for the time, guys. Maybe first, just two-part question here. I guess one, what's your view on home sales for the balance of the year? And then how do you envision that impacting your rental homes portion of your business as it's ticked down on a year-over-year basis?
Marguerite Nader (CEO)
Sure, Patrick.
Patrick Waite (COO)
Yeah, well, the trend that we've seen with respect to... First, I'll touch on the rental homes, and Marguerite referenced it in her opening comments. We're down below 3% of our total occupied sites. You know, that number may continue to go down slightly. We'll continue to manage that overall load, but just as a reminder, that's down from a high of around 9% following the GFC. And we've managed that number down to make sure that we're in a position to be able to respond to any shocks to the broader housing market if rental becomes more of a priority than home sales.
With respect to our home sales, at you know 225 sales in the quarter, as I mentioned in my comments, you know, up 13% year-over-year. So we continue to see you know consistent demand. While we have seen some moderation at the higher price points, we still see you know consistent demand for manufactured homes in our communities. And just as a reference point, pre-COVID, a year where we're selling you know call it 500-600 new homes over the course of a full year, that would be considered a favorable outcome. So if we're in the 200 new home sales a quarter range, we consider that to be favorable.
Keegan Carl (SVP)
Got it. Then shifting gears, maybe it's a more general question, but just curious to see what you guys are seeing in the transaction market and if there's any movement at all on cap rates.
Marguerite Nader (CEO)
Sure. The transaction market, as you know, has slowed down significantly over the last few years. There are still a lot of buyers that are interested in the assets. Buyers, cap rate expectations have increased, but sellers really have been slow to adjust. Transaction volume is very low for institutional-quality assets. These assets are continue to command really strong cap rates, but there's a lack of product for sale. We're seeing smaller deals that really don't fit into our acquisition set, trading often with seller financing.
Keegan Carl (SVP)
Super helpful. Thanks for the time, guys.
Marguerite Nader (CEO)
Thank you.
Operator (participant)
Thank you. And our next question comes from the line of Samir Khanal from Evercore. Your question, please.
Samir Khanal (Real Estate Research Analyst)
Yes. Hi, good morning. Hey, Marguerite.
Marguerite Nader (CEO)
Hello.
Samir Khanal (Real Estate Research Analyst)
I just wanna ask a follow-up here. I think you said weather hurt transient growth by 3%. So I just wanna make sure when you're down roughly 5% in the quarter, that would mean you were down 2% ex weather. Is that kind of the right way to think about it?
Marguerite Nader (CEO)
No, what I was saying that ex weather, for the ones that had a good weather event, you'd be up about 3%.
Samir Khanal (Real Estate Research Analyst)
Okay. Okay, got it. Got it. Sorry about that. And then just in terms of the acquisition, as a follow-up, I know, you know, you said that there isn't much out there in terms of acquisitions, but how should we think about your opportunity set? I mean, you haven't been active sort of in the first half of the year. Trying to understand kind of what the opportunity set you're seeing right now.
Marguerite Nader (CEO)
Yeah, sure.
Samir Khanal (Real Estate Research Analyst)
on the acquisition side.
Marguerite Nader (CEO)
Sure. So, you know, we've really positioned ourself over time to find internal growth from operations and expansion when we've, you know, we've grown from 41 properties 30 years ago to 450 properties. The acquisition market has not always been conducive for us to transact, which is really why we're focused on, you know, keeping our balance sheet in great shape to be able to transact when an interesting, you know, acquisition comes to market. So we're continuing to talk with sellers who aren't quite, you know, determined whether or not they're timing on their, on their sale. And our acquisition group continues to meet with owners on a very regular basis.
We know the properties we want to own, and when a transaction we're able to report on a transaction, we'll talk about it.
Samir Khanal (Real Estate Research Analyst)
Okay. Thank you.
Marguerite Nader (CEO)
Thank you, Samir.
Operator (participant)
Thank you. Our next question comes from the line of Jamie Feldman from Wells Fargo. Your question, please?
Jamie Feldman (Managing Director and Head of REIT Research)
... Great. Thanks for taking my question. So on the-
Marguerite Nader (CEO)
Good morning.
Jamie Feldman (Managing Director and Head of REIT Research)
Morning. On the seasonal and transient segment, it seems current guide implies better growth versus 3Q. I know much of that is due to the mix of seasonal versus transient, but could you talk about the transient and seasonal fundamentals in the Northeast and Pacific Northwest for those in versus those in Florida and Arizona in a bit more detail?
Patrick Waite (COO)
Sure. I mean, I can touch on that. I mean, as you referenced, the seasonal component is largely driven by our Florida portfolio, and that's more of a Q1, Q4 and a Q1 driver. When we look to the northern markets, and we're in the middle of that season today, that's a much smaller number, and it's, and the results are driven predominantly, I guess, consistent with the balance of our portfolio, by the annual business. And if you're looking at seasonal and transient, it's gonna be largely driven by the transient business in those submarkets. And what we've seen, you know, across those markets this year is some normalization in demand. Spoken on that in the last few on the calls as well.
But you know, as Marguerite highlighted, as we move through this summer season, while we face some challenges on weather, and we continue to see you know, customer demands to come to our properties.
Jamie Feldman (Managing Director and Head of REIT Research)
Okay, thanks for that. And then I guess, just to go back to the transaction market one more time, I mean, kind of an interesting point in the cycle, you know, expectations for lower rates. We'll see what happens with the election if they stay low or not. I mean, can you just talk about the typical seller that is even out there? Is there... You know, what's the catalyst to get them to actually transact? Or is there just really nothing out there, and you just don't see anything trading regardless of where rates are, just because it's such a tough, you know, all three are just such tough assets to get a hold of, and generationally, people just wanna hold on to them?
Marguerite Nader (CEO)
Right, I mean-
Jamie Feldman (Managing Director and Head of REIT Research)
You think if, you know, if rates are really pulling back, this would be the moment if people have been waiting on the sidelines.
Marguerite Nader (CEO)
Right. Certainly, certainly, I think that, that could be, an indication that, some sellers are, are interested in transacting. What we've, we've long talked about is, the majority of the transactions that we've seen over time are a result of a life event of, of an owner. There is a, either a retirement, or a desire, for the family maybe, to, to sell, in, you know, in light of, the, the patriarch or matriarch passing away. And so we've seen that happen. So the key for us is to just keep engaged with these owners, that we're interested in, the assets that we're interested in owning. So, so that no real change to that. I mean, the thing, you, you mentioned rates.
Many of these assets that we're, that we are interested in do not have any financing on them. They're free of debt, so that isn't a driver for, you know, a driver for the owner to, you know, to have to refinance or anything like that. There is really no distress in these assets at all.
Jamie Feldman (Managing Director and Head of REIT Research)
Okay. If I could just ask, like, how many assets are you really tracking in each property type?
Marguerite Nader (CEO)
Well, when you say tracking, I mean, we have a target list that's been, you know, roughly the same target list for the last 30 years because there has been really no new supply in the marketplace. So, we have, you know, a target list that we focus on assets that we'd like to own. And then, of course, we have a smaller subset of opportunities that we're looking at right now and that our teams engage with.
Jamie Feldman (Managing Director and Head of REIT Research)
Okay, but in terms of, like, a count or dollar amount?
Marguerite Nader (CEO)
Well, we don't talk about the subset. We have never talked about the subset. The broader set is that, you know, 1,000+ opportunities that we're interested in.
Jamie Feldman (Managing Director and Head of REIT Research)
Okay. All right, thank you.
Marguerite Nader (CEO)
Thank you, Jamie.
Operator (participant)
Thank you. Our next question comes from the line of Wes Golladay from Baird. Your question, please.
Wes Golladay (Senior Research Analyst)
Hi, everyone. Can you comment-
Marguerite Nader (CEO)
Hello, Wes
Wes Golladay (Senior Research Analyst)
... on annual RV, can you comment on annual RV retention, you know, if you strip out the change in the hurricane cleanup people?
Patrick Waite (COO)
Yeah, I mean, our long-term turnover is very similar to the MH portfolio, so customers are staying with us 10 years, so it's roughly a 10% turnover number.
Wes Golladay (Senior Research Analyst)
Okay. And then on the seasonal and transient, you mentioned a night issue. Is that just fewer guests showing up, or are they just staying fewer days? And then have you seen any impact to supply on the RV side?
Patrick Waite (COO)
I think in... Well, I'll take the latter part of the question first. In certain markets, there have been new communities developed, and there's been, you know, some impact, but that's, you know, less than a handful of locations across the portfolio. So the supply question isn't one that broadly impacts the portfolio. It may impact a specific location. And then, with respect to the, excuse me, with respect to the nights, we have seen some pullback in terms of the length of those transient stays, you know, as we've progressed further from, you know, the end of kind of the pandemic period and people's ultimate flexibility.
Wes Golladay (Senior Research Analyst)
If you had to guess, would you, or estimate, would you think that we've, we've kind of burned off all that, you know, work from home pandemic benefit at this point?
Patrick Waite (COO)
... It seems like we're burning through the last of it, if we haven't already, you know, this summer season.
Wes Golladay (Senior Research Analyst)
Okay. Thanks for the time, everyone.
Marguerite Nader (CEO)
Thank you.
Operator (participant)
Thank you. Thank you. Our next question comes from the line of Michael Goldsmith from UBS. Your question, please.
Michael Goldsmith (Equity Research Analyst)
Good morning. Thanks a lot for taking my question.
Patrick Waite (COO)
Good morning.
Michael Goldsmith (Equity Research Analyst)
We've talked a little bit about the weather, but I was wondering if you've seen any incremental price sensitivity from your customer on the annual RV membership or transient RV business. I think you called out, you know, the average rental and cabin rate is $140, compared to the average hotel nightly rate of $160. Is that gap consistent of where it's been over time? I'm just trying to get a sense of, you know, the price sensitivity of the customer right now.
Patrick Waite (COO)
Yeah, Michael, it's Patrick. I guess I'll first say that the... We have seen opportunity in rate with both our transient our seasonal customers and the annual has like our MH business has continued to be very predictable. So I would say rate stability and strength across all three business lines. And just to I guess touch on a couple of the components that roll up into the total RV revenue. I mentioned the CAGRs earlier, which if you take the longer-term view have been very consistent when you combine the business lines.
But as a reminder, in Q2 for seasonal and transient, on the transient front, April, which now seems like quite some time ago, but is the beginning of our summer season, started with cool, wet weather in some very major markets for us, including throughout the North and Northeast, as well as California. On the seasonal front, where we would usually expect some benefit from a cold winter up north, we had a relatively mild winter, and where we would usually pick up some seasonal into the beginning of Q2, through extensions of people who wanted to stay in the Sun Belt, we didn't have that same level of pickup.
And as Marguerite mentioned, also, we've had a transition with respect to hurricane workers, whether or not that be construction, traveling nurses, et cetera, as we're getting further and further away from Ian, that will, you know, recede, but we still have that in the comp period.
Michael Goldsmith (Equity Research Analyst)
Got it. And as a follow-up, you know, how much of the same-store expense guidance adjustment lower was due to savings associated to lower transient RV usage? I'm just trying to get a sense of, you know, the ability... You know, I think you've done a nice job of offsetting some of the pressure on transient RV with lower expenses. I'm just trying to get a sense of how much of the expense reduction was the ability to kind of adjust lower due to some of the lower demand in transient RV.
Patrick Waite (COO)
Yeah. I think, Michael, the... What I mentioned earlier about the repairs and maintenance and the, you know, the favorable comp that we have year-over-year, from those smaller scale storm events, that's a relatively significant contributor this year as compared to, you know, what we've seen in variability on the expenses associated with the transient activity in other periods. So it's a larger piece than we've seen in the past coming from the change in transient.
Michael Goldsmith (Equity Research Analyst)
All right. If I can squeeze one more in, you know, can you talk a little bit about the trends that you saw over July Fourth weekend and maybe how that compared to Memorial Day?
Patrick Waite (COO)
Yeah. For the Fourth of July, we finished up 10%, year-over-year, on transient. A couple of drivers, and we've spoken about the weather, and, broadly, we had favorable weather for the holiday weekend. The holiday also fell on a Thursday this year, as opposed to Tuesday last year. And just from a comp perspective, the Wednesday to Sunday holiday weekend this year better fits customers', you know, time off and vacation plans than a Friday to Tuesday from last year. Overall, rolling stock performed very well. Rentals even outperformed the rolling stock, and we saw pretty consistent performance across the portfolio, with the Northeast, obviously, summer-focused, performing very well, as well as the West, including California.
Michael Goldsmith (Equity Research Analyst)
Thank you very much.
Patrick Waite (COO)
Sure.
Operator (participant)
Thank you. Our next question comes from the line of John Kim from BMO Capital Markets. Your question, please.
John Kim (Managing Director and Senior Analyst)
Thank you. So RV demand got a huge boost during COVID. It looks like now a lot of those gains have been given back when you look at seasonal and transient RV revenue and Thousand Trails membership, they're both below 2021 levels, but they're still above 2019 levels. So I'm wondering if that's the next leg where it goes. Do we retrench all the way back to 2019, both on the revenue and membership, side?
Patrick Waite (COO)
Well, yeah. It's, so it's Patrick. I'll speak to the revenue. You know, I don't see retrenching in back to 2019 as a trend coming through in our business. The fact that we're in a period of normalization off of that COVID peak, which is a fair characterization, and I appreciate the question. But if we look to the trend from 2019, 2018, we see growth across our business lines, and that comes through in both occupancy and rate.
So, you know, I would say the fundamentals of the business, you know, bear a comparison back to pre-COVID periods, and we're going through a normalization as opposed to, you know, I guess I'll use your term, a retrenchment back to a 2019 level.
Marguerite Nader (CEO)
I think the thing to also think about, John, is just as it relates to the Thousand Trails portfolio. I think the team has done a great job of focusing on growing that annual base at the properties. I think when we bought the Thousand Trails portfolio, the annual base represented about 7% of the total revenue, and today it's about 21%. So we would envision that continuing to grow and support strong fundamentals in the RV business.
John Kim (Managing Director and Senior Analyst)
At the same time, looking at your sites, the annual RV sites went down sequentially this quarter. Transient sites went up sequentially. It's now at an all-time high. Are those gonna be drivers for or leading indicators of where revenue goes on both? Or is the expectation that the transient sites get converted at some point?
Paul Seavey (CFO)
Well, I think that we'll continue to see conversion of, excuse me, transient customers to longer term customers, seasonal and annuals. So I think that, you know, there has been a shift, yes, but I don't think that that suggests, you know, any change in the long-term business and the ability to attract annual customers to the properties.
John Kim (Managing Director and Senior Analyst)
Final question for me. Can you talk about your ability or history of converting RV sites to MH? I realize some communities have both and some are integrated, but I'm wondering if that's a potential, you know, for the company going forward.
Patrick Waite (COO)
Yeah, I would say broadly across the portfolio, it's a relatively low percentage. But, you know, with respect to your question, with respect to those properties that have, you know, multiple uses, you have MH and RV on the same property, in fact, we toured Viewpoint together a few years ago. When we went through a 400-site expansion, which is now full, so it's 400 sites of MH, at that property in Phoenix, Arizona, I believe the number, at least on the front end in particular, was into the double digits with respect to the purchasers of those units. Those MH units were coming from the existing RV customers. So there's a relationship there.
The more you have proximity in the MH use is proximate to the RV property, there's more of an opportunity, particularly when we have that shared use opportunity, where, you know, you're already embedded in the community, your friends are there, your family's there, you like the location, you're familiar with the location, there's a better opportunity for us to convert that RV customer to MH.
Marguerite Nader (CEO)
And John, the entitlements are different for RV or MH. So sometimes that can be a barrier to being able to put MH on an RV. But I would envision in the future that some of those barriers may loosen up.
John Kim (Managing Director and Senior Analyst)
Got it. Thank you.
Marguerite Nader (CEO)
Thanks, John.
Operator (participant)
Thank you. Our next question comes from the line of David Segal from Green Street Advisors. Your question, please.
David Segal (Analyst)
Hi, thank you. I was wondering if you could talk about where you see MH rent increases going, as we've seen them decelerate slightly, and perhaps in the context of where CPI and cost of living adjustments are trending. Thank you.
Patrick Waite (COO)
Yeah, sure. I'll just go through the, kind of the recent history of rent increases. You know, historically, we've our rent increases have been, roughly 140 basis points higher, than the COLA increase, and that's a slide in the, in the investor presentation. As we went through COVID, and we experienced a period of high demand, and high inflation, our increases, you know, reached into the, the higher single digits, which is now normalizing as, you know, to your point. And I would expect that, you know, long term, the expectation of, of us being in the range of around 140 to 150 basis points, of inflation, or the, the COLA adjustment, is a reasonable expectation.
On that slide, you can see that in periods of higher inflation, our rent increases were more moderate, so that the peaks don't really come through in a long-term trend for us. As we've spoken to many a times, we tend to have a more moderate, long-term view of how we manage rent increases over time.
David Segal (Analyst)
Great. Thank you. And my second question, I was curious, what do you think is the typical churn level in the memberships? As we've seen that, you know, those decline, but still have very good origination volumes. Thank you.
Paul Seavey (CFO)
Sure. So when we think about attrition in that member base, we have our legacy members who've been with us, you know, 20 years or more. That attrition, it's about 7%. And then our Camping Pass customers, that attrition that we see is about 33%. So about a third of those customers turnover, but the other customers have a much higher retention rate.
Operator (participant)
Does that answer your questions?
David Segal (Analyst)
Yes. Thank you.
Operator (participant)
Thank you. 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 closing comments.
Marguerite Nader (CEO)
Thank you very much for joining us today. We look forward to updating you on our third quarter call.
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.