Q4 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- Strong growth in Camp Pass membership sales, indicating robust demand for ELS's products. In 2013, they sold 4,600 passes, and last year, they sold almost 20,000, demonstrating significant growth in their subscription offerings.
- Effective cost management with anticipated savings in expenses, as ELS guides expense growth to generally track CPI with savings in administrative expenses and membership commissions. This reflects management's ability to control costs and enhance profitability.
- Ongoing expansion projects with expectations to deliver 400 to 600 expansion sites in 2025, particularly in high-demand areas like Florida. This supports future growth prospects and revenue generation.
- Impact of Hurricanes on Operations: Hurricanes Helene, Milton, and Ian negatively impacted ELS's business in Florida, leading to attrition, delays in home sales, and disruptions in operations. Home sales were down over 30% year-over-year in the fourth quarter due to these disruptions. Additionally, the hurricanes have caused slowdowns in expansion projects due to increased permitting timelines and blockages in county and city offices.
- Decline in Memberships and RV Demand: There has been a sequential decrease in total memberships, which was higher than expected beyond normal seasonality. The 1,000 Trails membership count in 2024 declined year-over-year and is now lower than 2020 levels, despite an increase in sites from 24,800 in 2020 to 26,000 in 2024. This suggests a potential softening in RV demand, impacting revenue growth prospects in the Thousand Trails portfolio.
- Reduced Guidance and Uncertainty in Revenue Streams: ELS's guidance assumes lower non-core NOI for 2025 at $10.8 million compared to $16 million in 2024, partly due to the timing of insurance recoveries and non-stabilized operations of properties affected by hurricanes. Furthermore, there's limited visibility into transient and seasonal revenues due to short booking windows, with assumptions of revenues being flat to slightly up, indicating uncertainty and potential risk in these revenue streams.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +8.6% (from $342.91M to $372.36M) | Revenue growth was driven by improvements in core rental income and other revenue streams. Compared to Q4 2023, the increase indicates enhanced operational performance and a recovery in essential rental and utility income components, contributing to a higher topline. |
Property Operations | +6.4% (from $332.18M to $353.37M) | Property operations improved despite a 3.5% decline in Rental Income (from $297.94M to $287.64M) because Other Income surged nearly 69% to $27.22M, reflecting a significant shift in the revenue mix. This suggests that enhanced pass-through recoveries and operational efficiencies helped offset lower rental growth. |
Home Sales and Rentals | -37% (from $24.24M to $15.26M; Gross Revenues from Home Sales from $70.7M to -$25.96M) | The sharp decline is attributed to lower sales volumes and a dramatic reversal in home sales profitability. The previous period's positive performance was not sustained, likely due to reduced market demand and a recalibration of sales strategies that resulted in negative gross revenues from home sales. |
Investments | Interest Income: -9.1% (from $2.42M to $2.18M); Income from Other Investments: -20% (from $1.81M to $1.44M) | Investment income contracted due to a tougher interest rate environment and market volatility. Compared to the previous year, both Interest Income and Income from Other Investments declined, reflecting broader trends in investment return conditions that negatively impacted overall investment performance. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Core property operating income growth | Q4 2024 | no prior guidance | 6.7% | no prior guidance |
Core property operating revenues | Q4 2024 | no prior guidance | 4.5% | no prior guidance |
Core property operating expenses | Q4 2024 | no prior guidance | 1.4% | no prior guidance |
Normalized FFO per share | Q4 2024 | no prior guidance | $0.73–$0.79 | no prior guidance |
Debt-to-EBITDAre | Q4 2024 | no prior guidance | 4.6x | no prior guidance |
Interest coverage | Q4 2024 | no prior guidance | 5.5x | no prior guidance |
Weighted average interest rate | Q4 2024 | no prior guidance | 4.05% | no prior guidance |
Weighted average debt maturity | Q4 2024 | no prior guidance | 9 years | no prior guidance |
Liquidity position | Q4 2024 | no prior guidance | $450 million | no prior guidance |
ATM program capacity | Q4 2024 | no prior guidance | $185 million | no prior guidance |
Core property operating income growth | FY 2024 | no prior guidance | 6.3% | no prior guidance |
Core MH base rent growth | FY 2024 | no prior guidance | 5.8%–6.4% | no prior guidance |
RV & marina base rent growth | FY 2024 | no prior guidance | 2.7%–3.3% | no prior guidance |
Seasonal & transient revenue | FY 2024 | no prior guidance | –4.7% year-over-year | no prior guidance |
Core property operating expenses | FY 2024 | no prior guidance | 2.6%–3.2% | no prior guidance |
Normalized FFO per share | FY 2024 | no prior guidance | $2.89–$2.95 | no prior guidance |
Normalized FFO per share | Q1 2025 | no prior guidance | $0.80–$0.86 | no prior guidance |
Core property operating income growth | Q1 2025 | no prior guidance | 3.6%–4.2% | no prior guidance |
MH rent growth | Q1 2025 | no prior guidance | 5.8% | no prior guidance |
Annual RV & marina rent growth | Q1 2025 | no prior guidance | 3.8% | no prior guidance |
Normalized FFO | FY 2025 | no prior guidance | $3.01–$3.11 | no prior guidance |
Core property operating income growth | FY 2025 | no prior guidance | 4.4%–5.4% | no prior guidance |
Noncore properties NOI | FY 2025 | no prior guidance | $8.8M–$12.8M | no prior guidance |
Property mgmt & G&A expenses | FY 2025 | no prior guidance | $120M–$126M | no prior guidance |
Core portfolio revenue growth | FY 2025 | no prior guidance | 3.4%–4.4% | no prior guidance |
Core portfolio expenses growth | FY 2025 | no prior guidance | 2%–3% | no prior guidance |
Core portfolio NOI growth | FY 2025 | no prior guidance | 4.4%–5.4% | no prior guidance |
Core MH rent growth | FY 2025 | no prior guidance | 5.2%–6.2% | no prior guidance |
Combined RV & marina rent growth | FY 2025 | no prior guidance | 2.7%–3.7% | no prior guidance |
Annual RV & marina rent growth | FY 2025 | no prior guidance | 5.2% | no prior guidance |
Dividend policy | FY 2025 | no prior guidance | $2.06 per share (8% increase) | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Membership Dynamics | In Q1–Q3, discussions touched on cyclical declines due to seasonality, traditional membership churn, higher attrition in legacy segments, and notable upgrades alongside early signs of strong Camp Pass performance. | In Q4, there is an explicit focus on robust Camp Pass growth contrasted with traditional membership declines, along with strategies to convert transient and RV dealer memberships into more stable, higher‐tier members. | Consistent focus but shifted emphasis toward subscription-based recurring revenue as a counterbalance to churn. |
RV Demand and Seasonal Revenue Trends | Across Q1–Q3, RV demand was noted as steady with strong occupancy and rate growth, while seasonal revenue trends were impacted by weather and normalization post‐COVID; regional performance and transient vs. annual segmentation were key themes. | In Q4, while annual RV performance remains solid, there are concerns about lower starting occupancy for 2025 and further seasonal revenue declines driven by weather disruptions such as hurricanes. | A persistent topic with mixed sentiment: demand remains fundamentally steady, yet seasonal revenue is increasingly challenged by adverse weather. |
Weather Disruptions and Natural Event Impacts | Q1 through Q3 consistently highlighted weather influences—from above‐average precipitation to hurricanes—that affected transient and seasonal performance, with early recovery signals post-hurricanes. | In Q4, weather disruptions remain prominent with detailed accounts of hurricanes (Milton and lingering effects of Ian) and natural events affecting home sales, transient RV demand, and insurance outlooks. | Steady and increasingly detailed negative sentiment, indicating that weather continues to be a significant operational headwind. |
Expansion Pipeline and Development Project Execution | Q1 mentioned targets to deliver 700–800 expansion sites (down from the typical 1,000 due to permitting delays) and anticipated future normalization. Q2 and Q3 had no specific updates on this topic. | Q4 introduces detailed project-level information (e.g., 3,000 sites in the pipeline, specific projects in Florida and Arizona, and planned investments of $400–$600 million) that build on prior discussions. | Emerging with greater detail and emphasis in Q4, suggesting a heightened focus on growth initiatives despite earlier delays. |
Cost Management and Insurance Expense Control | Q1 highlighted effective cost management with lower increases in repairs & maintenance and favorable insurance renewals (9% increase), while Q2 and Q3 reaffirmed controlled expense growth and efficient payroll management. | Q4 continues the emphasis on aligning expenses with CPI, maintaining a disciplined approach to repairs, payroll, and insurance renewals (with a 2.5% expense guidance that now factors in uncertain renewal impacts). | Consistently positive, with a stable and controlled cost framework that reassures investors despite external pressures. |
Home Sales Growth and Rental-to-Ownership Conversion | Q1–Q3 showed strong home sales growth (with increases of 8.5%–13%), a clear trend toward converting rentals to ownership (reducing rental occupancy to low single digits), and high homeowner percentages bolstering stability. | In Q4, while rental-to-ownership conversion remains robust (97% homeowner occupancy), new home sales suffered a 30% decline, primarily due to hurricanes and seasonal factors. | Long-term positive conversion trends persist, but near-term home sales face headwinds from weather disruptions. |
Financial Flexibility and Debt Reduction | Q1 emphasized a strong balance sheet with solid liquidity and favorable debt maturities; Q2 reaffirmed liquidity with credit facility modifications; Q3 described active debt reduction through refinancing transactions. | Q4 maintains the narrative of financial strength—demonstrating a low debt maturity profile (only 9% maturing through 2027), extensive access to capital, and emphasis on flexibility. | Consistent strength with continuous efforts in debt reduction and balance sheet management enhancing financial resilience. |
Tenant Rent Growth and Lease Renewal Trends | Across Q1–Q3, rent increases for renewing residents averaged around 5–6%, while mark-to-market increases for new tenants were significantly higher (up to 13–16%), reflecting strong demand despite adjusted renewal terms. | Q4 guidance continues to support robust core MH rent growth (5.2%–6.2%) and emphasizes both renewal and annual rental income improvements, though some moderation is noted for new tenant rate growth in certain segments. | A consistently strong contributor to revenue, with stable long-term increases offset slightly by moderation amid market pressures. |
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Expense Guidance Drivers
Q: What are the key drivers of expense guidance?
A: Expenses are guided to grow generally tracking CPI, with anticipated savings in administrative expenses and membership commissions. Real estate taxes are expected to grow at mid-single-digit rates, consistent with past experience. -
Other Income Increase
Q: What's causing the $4 million increase in other income?
A: The primary driver of the $4 million increase year-over-year is our expectation for sales and ancillary activity. We periodically receive joint venture distributions and anticipate a similar $5 million distribution in the first quarter of 2025. -
Transient RV Softness
Q: What's causing the softness in Q1 RV bookings, and outlook?
A: First-quarter guidance reflects current reservation pacing, showing softness due to disruptions from hurricanes impacting demand in Florida and a lag in our Canadian business. We expect trends to improve throughout the year as these factors abate and presidential election uncertainty is behind us. -
Hurricane Impact on Home Sales
Q: How are hurricanes affecting financials and home sales?
A: New home sales for the quarter were down over 30% year-over-year, significantly due to disruptions from hurricanes. A mild start to the Sunbelt season and sold-out inventory in some locations also contributed. However, demand remains stable, and we're returning to a normal run rate for the MH business. All our properties are operational. -
Thousand Trails Membership
Q: What's causing the decline in Thousand Trails memberships?
A: Membership numbers fluctuated with a spike during COVID and current attrition as activities normalize. Over the last five years, membership subscription revenue has increased an average of over 5%, focusing on growing recurring stable revenue. -
Revenue Growth Discrepancy
Q: What's causing the gap between base rental income growth and total core revenue guidance?
A: The gap is primarily due to lower growth in utility and other income. Specifically, the timing of recognizing business interruption insurance proceeds from prior storms impacts other income. -
Insurance Renewal Impact
Q: How will insurance renewals affect expenses?
A: An expense growth assumption for insurance is included in our guidance, but we're in the middle of renewals and negotiations, so specifics aren't disclosed. We'll provide updates on the next call. -
Expansion Sites Outlook
Q: Will expansion sites return to previous levels?
A: Due to timing and longer timelines for entitlements and completion, we expect to deliver 400 to 600 expansion sites in 2025, below the five-year average of over 1,000. Approximately half of our expansion projects are in Florida, where increased permitting activity slows down the process. -
Annual RV Site Attrition
Q: Is churn returning to historical levels?
A: We experienced higher attrition in annual RV sites due to hurricanes and post-COVID normalization, particularly in the North and Northeast. We expect churn levels in 2025 to return to the historical 5% level and to rebuild the business as we did pre-COVID. -
Non-Core NOI Guidance
Q: Why is non-core NOI guidance lower than last year?
A: Non-core NOI is guided at $10.8 million for 2025, down from $16 million in 2024. The decrease is due to properties moving from non-core to core, timing of insurance recoveries received in 2024, and assumptions for 2025 NOI as certain non-core properties return to stabilized operations. -
Business Interruption Income
Q: What's assumed for business interruption income in 2025?
A: We collected around $10 million in business interruption income in 2024. For 2025, this is embedded in our assumptions but depends on the timing of returning to normal operations. As operations improve and generate NOI, we receive less business interruption income.