Equity LifeStyle Properties, Inc. (ELS) Earnings Call Transcript & Summary

Good afternoon. Welcome to Bank of America's 2026 Global Real Estate Conference. I'm Yana Gallen, BofA's residential REIT analyst. We're pleased to have with us Equity Lifestyle's CEO, Marguerite Nader; President and COO, Patrick Waite; CFO, Paul Seavey. Marguerite will start with a few opening remarks, and then we can jump into Q&A.

Sure. Thank you very much, Jana. Thank you for the opportunity to present today. So at this conference, we've been focused on a couple of highlights that are in our investor presentation. One on Page 5, our performance update, which shows that we're tracking in line with our guidance for the quarter and for the year. And Page 4 of our presentation shows our core NOI and normalized FFO, both significantly outpacing the REIT industry average. We think that's important to highlight and continue to show you that as it grows. And then Page 6 of our presentation shows that ELS significantly outpaces the REIT industry in normalized FFO growth, dividend growth and exposure to floating rate debt. So those are some of the key items that we're talking about and making sure that investors are focused on during this conference.

Great. Maybe starting very big picture. How do you view the long-term demand outlook for manufactured housing given the ongoing affordability challenges and then also the demographic tailwinds for your portfolio?

We've been talking about the baby boomers since we went public in February of 1993. We're at the tail end next 5 years or so of the baby boomers, 10,000 of them turning 65 every day. We get a question a lot about what comes after. Well, what comes after is Gen X and the millennials. Just to put those in perspective, baby boomers are about 70 million, Gen X is about 65 million, millennials are 75 million. So relatively consistent trend, and millennials are going to start retiring in about 20 or 25 years. As we see these cohorts age into our core demographic, this early mid-60s, they tend to behave very similarly. And I'd like to put in context, not too long ago, we were talking about millennials always wanting to be in a 24-hour city, not moving into suburbs, not buying single-family homes. While the millennials are moving into suburbs, they are buying single-family homes. You are seeing family formation, household formation. It's just that it was delayed a few years behind the cohorts that came before them. So we feel very good about the long-term demographic trends and the tailwinds with respect to our portfolio and particularly with respect to where our portfolio is located, our high-quality locations, predominantly in the Sunbelt and coastal locations, highly correlated with retirement destinations. The value proposition that we have, the lifestyle that we offer at our properties is really unmatched in each one of the submarkets where we do business. So I think if you look at the demographics and then the locations of our portfolio, we're very well positioned to deliver results for decades to come.

Great. And then you touched on some of your operational updates. Can you maybe talk a little bit more about the trends across your MH and RV communities you saw this summer and kind of your visibility into fall? It looked like from the August update that both MH and annual RV are exceeding the midpoint of guidance.

Yes. So as we think about the rental revenue streams, MH rent and RV and marina annual -- they represent about 85% of our overall revenue. And the core MH rent year-to-date through August is showing 5.8% growth. RV and marina annual is a 5% growth. Both of those on a year-to-date basis are slightly ahead of our guidance for the third quarter. Everything is performing in line with our expectations in the quarter. So...

Is there anything you can maybe share on the summer season for RV, Labor Day weekend wrap up and kind of the outlook for the fall?

Yes. Just broadly, we -- when we provided our guidance update in July, we adjusted our expectations for transient based on the reservation pacing that we saw at that time, and the season has developed as expected. So it's right in line with our expectations. No surprises from the seasonal transient business based on what we've seen.

And then maybe just touching on the Canadian customer that kind of passed on some of the vacations in the snowbird season last year. Just kind of thoughts around lapping those comps and maybe the marketing and outreach effort to either that cohort or other groups?

Sure, sure. Since the end of the winter season, kind of those that made their early bird reservations in the summer season, we haven't seen a lot of activity, and we didn't really expect a lot of activity. The customers over the summer months aren't -- they're not thinking yet about their reservations for the winter. What we've seen in the past is that booking window for that seasonal customer is about 60 days in advance. During this time, we have been contacting our customers. Our employees at the properties are reaching out to those that have visited the properties in the past, engaging with them. We have marketing campaigns that remind them of the memories that they made at the properties in past winter seasons. And anecdotally, the sentiment has been favorable. People remember the good times. They want to come back to Florida and enjoy the time with their friends in the warmth and the sunshine of the [indiscernible].

I just ask a high-level question, thinking about, again, the demographics, the changing demographics. And I asked the question on the last call. I could have asked it better. But I was -- the intent of the question was that you have this tremendous expertise in managing, operating, leasing to the 55-year-old plus. You have this great brand within that community. How can you grow -- are there other avenues of growth outside of the age-restricted MH? Or is that still the path? I think I had something around like -- because you kept mentioning the 55-plus expertise and every -- all these articles around housing from the homebuilders, right, that 55-plus community, the demand is super strong. So I wasn't sure if there was something that you guys could lean into or do to leverage all that you've created for the last 30 years.

Right. Well, when you think about like the single-family rental portfolios, we've had a single-family rental portfolio inside of our portfolio for 25, 30 years. So that already exists. And we do that, and you'll see us lean into that program sometimes and sometimes we'll focus on the sales a little bit more. So that opportunity, I think, is inside of our portfolio at any given point in time. We have -- our occupancy level is 95%. We have an additional 5% that we have flex to be able to increase that "single-family rental" inside of our community. I think the other thing that you're seeing in the industry is the build-to-rent. We also effectively do that in that we put manufactured homes in our communities with -- we will decide that we want to rent them and then convert them to an owner. So we essentially are building them, although we're not the builder, but we have those inside of our communities already. And I think the thing that is important to note about our communities is what happens at the community. It's a home that a person has in the community, but it's about what happens. It's about all the social interactions. And that is really what we focus on. And we haven't been able to figure out how to duplicate that in another setting. Difficult to do that in the multifamily setting when you go through the door, you close the door and you're in your apartment and you don't see other people in the way you do in our communities. It's really different, and it's a really unique kind of magic that we have that we haven't really been able to figure out a way to replicate.

Okay. So it will stay within the MH. And while I think as a team, we kind of think of rentals for all ages as a bit of a risk, the rentals with the 55-plus is strong.

Right. And the rentals on the 55-plus, you've seen us grow from sub-2%, 3% before the great financial crisis, then we started to increase our rental pool. We got up to about 8% to 9%. And then we said, we think we have an opportunity here where we can do more sales. So we did that, and we drove the rentals down, and now we're at 3%. That's just a nice thing to have for a rainy day. It's a nice thing to be able to flex that up and be able to take advantage of that as just another lever to increase occupancy. It's difficult to do if you hadn't made the cuts along the way because then you're going from a 9% up to 15% plus. So I think we're in a really good position to be able to do that. Additionally, what we've seen during these times is our ability to convert a renter to an owner is really, really good because of our lifestyle. And people come to our properties they like the ability to come in and try it for a year because that doesn't seem like a really big obstacle for them. They come in, they try it for a year, and they still have their home up north. And then all of a sudden, they realize this is pretty neat, and they will either buy the home they're in or maybe just buy the home across the street or down the street, but they want to be part of that community. So that conversion program has been really good for us and good for us to experience and see it and then be able to build off that as we go into the future.

How does the rents for SFR, if you will, compared to an MHC rent and compare to the cost of the home that they're in

Sure. So maybe, Patrick, you could walk through just how we set rates because that's all part of it.

Yes. As we go through our annual budgeting process, we have about 40 regional managers. They all meet with their general managers in the MH properties. They review the comp set, obviously focused on competitive manufactured housing, but we also look at trends in multifamily and in single-family as well because it's indicative of the housing market in each one of our properties. We then review that. My team, the revenue management team and our FP&A team review the recommendations from the property operations teams and we set rates for the upcoming year. The comparison to single-family rental, it's not unusual for us to be renting what Marguerite referenced is renting a home in one of our communities. That's typically in the $1,500 to $1,700 a month range. And if you look at single-family rental in the same submarkets, it's not unusual for it to be double that. So just one follow-up on the build-to-rent. Again, I know your expertise is a 55 plus. A lot of the banks have come out with goals to spend on future development. Maybe that's more entry-level homes, I'm not sure. But I guess, has anything come out of that, that is something that ELS could lean into and do or...

We've certainly looked at those opportunities. I think, again, it's about that community that we're not seeing in some of those -- in a lot of the build-to-rent communities. You're not seeing that club house, the features that we have and the things that are driving our customers to those properties, it's more about just a place to live, which is not what we have. That's not what we really offer. That's not what we focus on. And it's not what drives people back to the property. It's about that sense of community. And we're not -- we don't really see that inside of the build-to-rent currently.

So does it mean though that then you could push harder on the expansions, like I don't know how hard you're already pushing but...

I think that as you know, there are about 90% of our expansion opportunities are on the RV side. So to the extent we have opportunities on the MHI, we are pushing hard at those. And the great thing about those opportunities are, we're able to expand sites and use our existing amenity footprint. So it is really cost efficient. The customers -- the residents like if you bring in new homes. It has a little bit of something new in the community. And to the extent that it makes sense, we may put a smaller amenity package depending on how large the expansion is, but we will definitely continue to lean into those expansion efforts on the MH side. They've been very good to us over the years. We have a couple of slides in our presentation that highlight that.

Maybe just on the sensor just more, maybe more broadly, could you elucidate your strategic priorities? What's taking up management time and attention and overlay that with the fact that maybe compared to expectations, things are progressing in line, maybe slightly better. How might execution on those priorities accelerate that trajectory, not just this year, but kind of next year and beyond?

Sure. So at the -- in October, we generally release our increases -- our rate increases for the year. And I think consistent with past practice, we will be doing that. So that will give you an insight into where we are for '27 for rates, both for RV annual and MH annual. And that's a really good marker, I would say, as to what that means for '27 -- for the rest of '27. I think you've seen us do a really good job of controlling expenses. Where we see anything where we see some volatility in revenue, we are adjusting, we are operating really efficiently to be able to to reduce expenses where we see any shortfalls in revenue. I think one of the main drivers, as I look into 27, maybe Patrick can talk about it a little bit is just the MH occupancy number and growing that number. It's our largest line item and the ability to grow that number is very important.

Yes. So year-to-date, our occupancy has increased 70 occupied sites. Now we came off of the prior year with some hurricane impacts that are behind us, and we're rebuilding occupancy in those properties as well. As [indiscernible] touched on both home renter and home buyer demand. We see good demand on both fronts. And leaning into some rental, particularly when we're looking at expansion sites, we have an expansion, it was recently completed in Florida. It's 200 sites. It's an expansion on a 900-site base. As Marguerite mentioned, there's an additional satellite amenity section in that expansion to help not only provide a level of service to the customers who have been with us a long time, but to drive traffic into the new expansion. I think about leasing up that section, we'll focus on both rentals and sales. It wouldn't be unusual for us to have something like 20% or 30% of the original touches those sites being occupied to be renters, which is relatively high compared to the balance of the portfolio, particularly when you consider that we're maintaining occupancy now with our rental load at about 3%. Then over time, we'll convert those renters to homeowners. And that's something that I think as we move into 2027, we'll be focused on, particularly with our expansion sections, so alongside of the rate growth that Margaret highlighted, occupancy growth is a place where -- to your question, where management is spending its time.

Yes. Just kind of switching gears to next year. What -- where do you anticipate sending out renewal letters for the core MH in the fall?

We're in the process of doing that right now. And so we'll be releasing those numbers at the end of October. But as you can see in our presentation, we show how we've compared to colo increases over time. And so we're waiting for some of the colo CPI numbers to come out to be able to have some more definitive numbers.

Can I ask one more follow-up on the expansions. I guess, tying into some of the government initiatives, are you seeing any municipalities changed their view on expanding your MH communities like where they're now looking to do more MH?

So there's been a lot of discussion on the road to housing at the national level. But it really hasn't made its way down to the states and the local municipalities. We haven't seen any changes on their views on whether or not they want a manufactured home community next door to them or not. It just hasn't changed. Patrick is the Chair of the Manufactured Housing Institute. So it's been a good year for him to be part of that as the road to housing has taken place. We're very pleased that he was he was at the helm during this because there's a lot going on. Maybe Patrick, you could touch a little bit on that. Again, it's not translating down to the state level, but I think it's helpful to talk about.

Yes. I'd say it's also early in the process. It was just with respect to the impact of road housing. I'll focus. We had a lot of questions on chassis removal and the spec of homes. So I'll just touch on that briefly. The typical manufactured home is built on a chassis, the home is then transported by the equivalent of a semi-tractor trailer. So the tractor part is transporting this home section to a community. Our communities are full of multi-section homes, so it ends up being 2 trucks in 2 sections. That home is really only mobile in the sense that it's built in a factory. It's transported to a site. Construction is completed and it's there for the rest of its useful life. The useful life to today's standards, a well-maintained home, 50, 60, 70 years and maintain the home, it will be there for decades and decades. At the level of the consumer, and I'll focus on [indiscernible] manufactured housing, we don't expect a significant change with respect to the spec of the home. There will be an aesthetic, where it's much more like a traditional site-built single-family home. And that's really driven by the fact that it's not supported on a chassis. When it's supported on a chassis, the home is set at a higher grade. If you're going to set it without a chassis, you can set at lower grade. There'll be typically some sort of a perimeter support. And we think that aesthetic will be better received by the local planning commission, zoning boards who we speak to with respect to expanding certain of our properties. I think Marguerite touched on it in addition to the land that we already own adjacent to our properties, we frequently are looking for opportunities to expand by acquiring adjacent land. And that's when we come into situations where we're seeking to change zoning and achieve the entitlements to expand the property. We have a development slide, I think it's Slide 27. But the picture of the property that was expanded there, it's about an 800 site property. We did 2 expansions. We acquired 2 individual single-family lots or zone single-family lots on different sides of the property, went through the process of securing new entitlements, developed. One filled it up. That was about 40 sites, developed the second 1 and we're in the middle of filling it up. That's the picture in the slide deck. And in both those instances, we were successful with traditional hut housing, but it's an example of us acquiring adjacently and getting the entitlements. We're pretty good at working our way through that process. We think the additional spec, the changes with respect to the removal of the chassis, connect as a tailwind for us to have the conversations about how this housing is very, very similar to the site build single-family housing in the immediate neighborhoods. There's also an effort as inroad for states to recognize the need for more affordable housing, particularly factory built housing. And we've seen 4, maybe 5 states now go through the process of updating their laws in order to comply with the Rod To Housing Bill. That's a process that's going to play out across the country. Simple things like licensing, titling, how transactions occur in a home without a chassis needs to be clarified at the state level. Several of those states also include a requirement that factory built housing, HUD, manufactured housing be considered adjacent to traditional site-built single-family housing and just as a construct in the zoning code. Now that still has to translate down to the local jurisdictions where those decisions are made. But just with respect to the spec and the aesthetics of the home, we think that's helpful. And with respect to the the dialogue, including manufactured housing on addressing affordability, we think that's helpful for us to continue to expand our properties.

Besides the adjacent land expansion that we've been discussing, how is the team thinking about net new land developments?

Net new land development to be broadly in the market?

Yes.

I think that many of the challenges remain. And in the context of demand coming to our properties and what the competitive set looks like for our portfolio, in our locations -- maybe I'll start here. Our portfolio, very high-quality age-qualified properties, predominantly in the Sunbelt and coastal locations, developed in the 70s, 80s, 90s. Economic development has occurred around our portfolio for decades. There really aren't large parcels in order to develop competing housing stock at the value proposition that we have. So we're in a unique position where competitive supply is limited in the submarkets where we own our typical property. Might there be an opportunity with some of the elements that I described earlier to address affordable housing in broader markets where they're not competing directly against us given the quality of our locations. Yes, I mean, that's a very real prospect for the factory built housing industry.

And if you look at Page 18 of our presentation, it just highlights that it is a supply-constrained asset class. And I think that we'll continue to be able to have this in our presentation for a long period of time because there's just not a lot of activity. You're talking about 1 to 2 kind of manufactured home communities being built. So that will continue.

The RV and the core RV and the marine business, arguably very different demand drivers and significantly different operating expertise required. From a governance perspective, why is there this ongoing reluctance to [indiscernible] disclosure between...

the 2 segments of RV...

In RV and Marina together.

Right. Well, the Marina segment is such a small piece of our business. We've highlighted that it is -- it acts very similar to the RV annual piece the marina slips are all annual. So it's basically -- it's very similar to it. We have highlighted over the last couple of calls about a marina in our core portfolio that was offline. And what we've been discussing during this conference is to let everyone let those -- that marinas back online. So that created a little bit of noise earlier in the year, but we're back on track on that. But that's the reality is that it's a very small piece of our business.

So it's small, but doesn't really address my question?

Well, that's the reason that we have broken out like that. It's very similar to the RV annual. It acts exactly like the RV annual, and so that's why we group them together.