Equity LifeStyle Properties Inc (ELS) 2015 Q1 法說會逐字稿

Good day, everyone, and thank you all for joining us to discuss Equity Lifestyle Properties' first-quarter 2015 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. 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 risk and uncertainty. The Company assumes no obligation to update or supplement any statements that become untrue because of subsequent events.

At this time, I would like to turn the call over to Marguerite Nader, our President and CEO.

Good morning, and thank you for joining us today. Our first-quarter results show strong growth with core NOI up 6%. I want to take a few minutes to discuss the key factors in our strong NOI growth.

First and foremost, we own quality real estate locations. Our properties have attractive natural amenities and are located near popular tourist attractions. We market our locations and encourage our customers to take advantage of the local culture.

With respect to our customers, our Sun Belt locations appeal to the baby boomer who wants to get out of the cold weather. This year, the country set records that our customer base will not soon forget, including consecutive days and weeks of temperatures below freezing and triple the average snowfall.

In our age-restricted MH communities, our customer is a younger retiree buying a home with an average sale price of $70,000 and a FICO of 750. In Florida, our customer base can be divided between the East and West Coast. The properties on the East Coast draw from Massachusetts, New York, Pennsylvania, and Canada, and the properties on the West Coast generally draw from the Midwest.

In Arizona, we see a majority of our customers coming from the Midwest and Canada. We see an increased willingness of these customers to begin to make long-distance decisions to commit to us.

Of the 23 new homes that were sold in Florida in this quarter, about half of the buyers were making their first move from the north and committed to an ELS community. The remaining homes sold to customers who had moved to Florida over the last couple of years and were searching for the right location to fit their lifestyle. Our marketing efforts are targeted to capture both types of customers.

Our operating group is focused on building off the momentum they have created by continuing to increase homeowners. In the first quarter, homeowner-occupied sites increased by 169, while sites occupied by home renters decreased by 73. Our operating group employs a market-by-market approach to determine the most opportune occupancy mix.

We sold 86 new homes in the quarter, compared to 45 last year. And we've seen an increase in activity on third-party listing sites.

With respect to our RV portfolio, we had the highest revenue growth rate since we began investing in the RV business 10 years ago. Our overall growth rate for the quarter was almost 9%. The strong seasonal and transient growth rate of 11% and 17% was fueled by customers coming down from the north earlier and staying longer, mainly due to the weather.

Looking ahead, we are focused on our summer season properties, including the summer campaign to get our customer out to enjoy our lifestyle offerings. Our reservation pace for the second quarter is up in all three categories of revenue -- annual, seasonal, and transient. Our customers are booking early so they can secure their sites.

With respect to our balance sheet, we have completed our previously [disclosed] financings and are pleased to say they came in slightly better than we anticipated. With these financings complete, our cost of debt is 4.9%, with an average maturity of 11 years. Additionally, approximately 27% of our debt maturities are 20-plus years in duration and fully amortizing, thus eliminating the refinance risk on these assets.

Turning to transaction activity, in the quarter, we purchased two properties in North Carolina with a total of 429 sites. These properties will complement our existing properties in the area.

We have a great business model, and we will continue to look for growth opportunities that allow us to increase shareholder value. We had a very solid quarter, and I'd like to acknowledging all of the hard work of all of our team members. We have a top quality team, from the field to regional to corporate, and I'm proud of the results the team has achieved.

I will now turn it over to Paul to walk through the numbers in detail.

Thanks, Marguerite, and good morning, everyone. I will discuss our first-quarter results, detailed guidance for the second quarter, and updated guidance for the remainder of 2015. I will also provide an overview of our balance sheet, including an update on our refinancing activity.

For the first quarter, we reported $0.83 of normalized FFO per share, $0.02 ahead of guidance. Overall, core income from property operations was better than expected as a result of increased rental revenues and lower-than-anticipated utility expenses across our MH and RV platform.

Core MH rent came in better than we had projected and was 3% higher than last year. The base rental income increase includes 2.7% in rate growth and approximately 30 basis points related to occupancy gains.

We had core occupancy gains of 96 MH sites in the quarter. Our occupancy increase includes an increase of 169 homeowners in the quarter and a 73 site reduction in home renters. We sold 86 new homes, including 39 through our Echo joint venture, and during the first quarter, 22 Echo homes became occupied rentals.

Our RV business generated core resort base rental income growth of 8.8%. Our annual growth rate was 5.7%, resulting from rate in Florida as well as occupancy increases in the Thousand Trails portfolio. Growth in seasonal revenues of 10 1/2% and growth of 16.6% in transient income was driven by rate and occupancy, primarily in Florida.

Demand for our Florida Keys properties contributed to the transient income growth. We also continued to see strong demand for our cabin rental program across the portfolio.

First quarter membership dues revenue was in-line with our guidance. During the quarter, we sold and activated approximately 4,200 memberships. The $300,000 net contribution from membership upgrade sales activity was less than expected, as a result of lower upgrade sales volume as well as higher-than-expected commission expense, related to increased sales volume of our low-cost product.

Core property operating maintenance and real estate tax expense growth was approximately 80 basis points lower than expected in the quarter. The increased energy costs we experienced in the first quarter of 2014 reversed trend this year.

Our overall utility expenses declined to 2 1/2% compared to last year, primarily driven by lower natural gas and propane gas costs. In summary, first-quarter core property revenues were up 4.1%, and core property operating expenses were up 1.3%, resulting in an increase in core NOI before property management of 6%.

The acquisition portfolio performed better than expected. This is mainly the result of higher-than-expected revenues from Mesa Spirit as well as a modest contribution of the properties acquired during the quarter.

Property management and corporate G&A were just over $18.2 million -- in-line with guidance. Other income and expenses generated a net contribution of $4.9 million. The positive variance from our guidance comes from better-than-expected sales operations.

Moving on to guidance, the press release and supplemental package provide 2015 full-year and second-quarter guidance in detail. As I discuss guidance, keep in mind my remarks are intended to provide our current estimate of future results. All growth rates and revenue and expense projections represent midpoints in our guidance range.

We have increased our full-year 2015 normalized FFO per share guidance $0.04. Our range for the year is now $2.95 to $3.05. We expect second-quarter normalized FFO at the midpoint of our range of approximately $62.6 million, with a range of $0.65 to $0.71 per share.

We assume no change in our MH occupancy from the end of the first quarter. Second quarter core community-based rent revenue is projected to be $109.7 million, a growth rate of 3%.

For the second, quarter we anticipate $38.5 million of rental revenue from our core RV properties, growth of 6.9% over last year. We expect continued strong performance from all revenue streams, with annuals increasing 5.7%, seasonals increasing 8%, and transients increasing 10%.

Our second quarter reservation pace shows we are currently 84% reserve for our expected seasonal revenues and 55% reserve for our expected transient revenues, ahead of this time last year. Membership dues income is expected to be $11.1 million, and we expect a net contribution from membership sales and upgrades of $500,000 in the second quarter. On a combined basis, these lines are expected to generate approximately $11.5 million of income, down slightly from the second quarter of 2014.

Core operating expense growth in the second quarter is projected to be 3.8%. Property operating, maintenance, and real estate taxes are the largest contributors to the increase.

Our utility expense increase reflects our best estimate of gas expense for the coming quarter. We have not projected a decrease in utility expenses similar to our experience in the first quarter.

In addition to utilities, R&M, payroll, and insurance expenses reflect changes from our prior guidance. Increases in R&M and payroll, which are mainly related to preparing our properties for a summer season that is already showing strong demand, are somewhat offset by savings associated with our recently completed property and casualty insurance renewal.

For the second quarter, core property operating revenues are expected to be up 3.9% and core operating expenses up 3.8%, resulting in an increase in core NOI of 4%. We anticipate that the acquisition properties will contribute approximately $1.3 million of property NOI in the second quarter.

I'll now comment on guidance for the remainder of 2015. For quarters two through four, we assume no change in our MH occupancy from the end of the first quarter and expect to show core community-based rent revenues of $330.9 million, which is a growth rate of 3.1% for the remainder of the year.

In our RV business, we anticipate core RV revenues of $121.6 million for the rest of the year, which is a growth rate of 5.2% over the same period last year. We expect annuals to continue showing strong performance, with 5.9% growth projected.

As we look ahead to the full summer season, we project combined second- and third-quarter transient revenue of $23.8 million, compared to $22.6 million in 2014, a growth rate of 5.1%. At this time last year, we estimated 3.2% growth for the same time period. It is anticipated that just over 40% of the full-year transient income will come in the third quarter.

Total core revenue from dues and net contributions from membership sales in quarters two through four are expected to be $35.3 million, up 2% from 2014. We expect to generate 21,500 new memberships this year through sales of low-cost products and activations from our RV dealer program.

Property operating expense growth is projected to be 1.3% for the remainder of the year. We have reduced our expected utility expense growth rate from our prior guidance; however, we expect to see growth in utility expense rather than the decrease we experienced in the first quarter.

Our growth in R&M for the remainder of the year is expected to be flat. As a reminder, our guidance model assumes R&M will not be impacted by one-time events such as storms. We also have some year-over-year savings included in current guidance as a result of our insurance renewal.

For the rest of the year, property operating revenues are anticipated to be up 3.3% with expenses growing at 1.3%, resulting in an increase in core property NOI of 4.7%. We expect the acquisition properties will contribute about $4.2 million in income from property operations for the remainder of the year, for a total of $6.5 million for the full year.

Property management and corporate G&A is expected to be $55.1 million for the remainder of the year. Our full-year guidance of $73.3 million is up $1 million from prior guidance, mainly related to our increased stock price and its impact on stock-based compensation expense.

Other income and expense items are expected to be approximately $11.2 million for the rest of the year and approximately $16.1 million for the full year. Interest and amortization expense for the full year 2015 is expected to be approximately $105.6 million. We expect our average debt balance will be $2.17 billion, and our preferred distribution is $9.2 million.

Our 2015 normalized FFO per share estimate at the midpoint is $3, and our share count is expected to average $91.9 million in 2015. Aside from the debt payoff assumption I mentioned on previous calls, we've made no assumption related to the use of future free cash flow in our earnings model.

Now, I'll provide a refinancing update, discuss secured debt market conditions, and end with some comments on our balance sheet. In December, we announced a plan to raise $395 million from mortgage loans with weighted average maturities of 21 years at an estimated rate of 4.1%. In January, I provided an update on the closing of a portion of the planned mortgage loans, totaling $199 million.

We have completed our refinancing and are pleased to have close on the full $395 million with a 21-year term and a rate of 3.9%. Proceeds were used to retire debt maturing in 2015 and 2016.

We incurred early debt retirement costs of $17 million, significantly less than our original estimate of $21 million. The favorable variance to our original estimate is the result of timing and estimated cost of defeasance, as well as the successful negotiation of a reduced pre-payment penalty on one loan.

During the quarter, we closed our first loans with Freddie Mac. The portfolio of properties financed includes MH and RV park model assets. We are pleased to establish a relationship with this new lending source.

To date in 2015, including activity during April, we have used available cash to repay maturing mortgages totaling $48.7 million with a weighted average rate of 5.7%.

The availability of debt capital to the MH RV asset class has reached unprecedented levels. We believe this was the result of the combination of the following factors -- the entrance of Freddie Mac into the space, the expansion of Fannie Mae's capacity to include RV park model communities, and the continued strong interest from life companies and CMBS lenders.

Current secured financing terms available for MH and RV assets range from 60% to 75% [LTD], with rates from 3.5% to 4% for 10-year money. High quality age-qualified MH will command preferred terms from all lending sources. Fannie and Freddie, CMBS lenders, and certain life companies are currently offering debt to finance RV assets.

Our current unrestricted cash balance is approximately $30 million after funding our first-quarter dividend and repaying maturing loans earlier this month. We have no debt maturing before the end of the year. We have a $400 million undrawn line of credit with over three years remaining and a one-year extension option.

Now, we would like to open it up for questions.

Thank you.

(Operator Instructions)

Please stand by for your first question, which comes from the line of Nick Joseph at Citigroup. Go ahead, please.

Great, thanks. I'm wondering, what was the cap rate on the acquisitions this quarter? And can you talk about the pipeline today?

Sure. The assets that we closed -- we closed two assets in North Carolina. I think the press release mentioned, and I mentioned that one was MH and one was RV. The pricing was about $29,000 per site at about 6 1/2% cap rate.

And then, just with respect to the broader acquisition pipeline, it's kind of the same as we've always said. We're working with interested buyers, but it's difficult to judge timing as to when closings would happen.

Thanks.

And then, I guess just big picture, given where the stock is trading relative to consensus NAV and the debt environment that Paul just spoke about, how do you balance this attractive cost to capital and the ability to make accretive acquisitions versus diluting the quality of your existing portfolio?

Yes. I mean, I think that we're always looking for new acquisition and new opportunities. But I think, as we've often said, that getting bigger just to get bigger doesn't make sense for us. We are concentrating our efforts on both external growth and internal growth as we look to expansion sites and expanding our customer reach.

Some of the returns that we've seen inside of some of the expansions that we've done, specifically the one that we've done in Mesa, Arizona, is very attractive to us, where we've got $6,000 rents and cost of $17,000 to fill the site -- or to build the site. So that's very interesting for us.

I think, as it relates to looking at the opportunity to use our OP units and use our equity, I think you'd see more of those transactions as we get into the rest of the year.

And how large is that expansion opportunity across the portfolio?

Right now we have -- right now we're working on a viewpoint, as we discussed, and also, there's a few other properties that we're working on -- one in Houston, Lake Conroe, and another one in Mesa. So right now, we have three or four that are going. In total, we have 5,000 expansion -- we have 5,000 vacant acres adjacent to our properties.

Great.

And do you have the breakdown for that 5,000 acres between the RV and the MH?

I don't have it. It's in our K. I don't have it ready at the hand here, but we can send that along to you.

Great. Thanks so much.

Thanks, Nick.

Thank you. The next question comes from the line of Jana Galan of Bank of America Merrill Lynch. Go ahead, please.

Thank you. Good morning.

Good morning, Jana.

I was wondering if you could update us on the RV dealer program and where you think this greater RV demand is coming from, outside the horrible weather, whether it's the online marketing efforts or a combination of that with the RV dealer program.

Sure. On the RV dealer program, we've increased our dealer program so that now we cover 100 different dealer locations at 65 different unique dealers. And those dealers sell about 20,000 RVs each year.

Right now, our membership base includes about 10,000 members who have come to us through this RV dealer program. We really like the program because it exposes us to new customer base. I think around 40% of these RV sales are to first-time buyers, so that's a great opportunity for us to get exposure into our properties from these new buyers.

So I think we're seeing new people come to us from, certainly, the RV dealer program. On the marketing side, we're seeing some -- we're looking at travel websites, trying to book additional revenue through new sources online, new online partnerships, and it's really just bringing new customers to us and then securing them for next year on a repeat business.

Thank you.

And then, just on the conversion of renters to owners, you've been very successful thus far this year -- just kind of your outlook there. If you expect that to continue through the spring, summer selling season.

Yes, it's Patrick. I'll answer that question for you.

We do expect the trend in renter conversions to continue as we focus on taking existing customers and giving them the opportunity to buy homes. The trend over the last couple years showed improvement from about 5% home sales being renter conversions in 2013 up to 10% in 2014, and that trend really continued through the first quarter -- about 9%. And just to clarify, that 9% to 10% is the current renter buying the home that they're in.

We've started to really focus on all renters and making sure that we're giving them the opportunity to buy homes across the platform. If we include existing renters that buy any ELS home, whether or not that's a new or used home, that conversion goes up to 12% of new and used home sales for the first quarter. So we're focused on and we'd expect that trend to continue.

Great. Thank you very much.

Thanks. The next question comes from the line of Paul Adornato at BMO Capital Markets. Go ahead, please.

Yes, thanks. I was wondering if you could comment on the systems -- the back end systems -- specifically the booking, the telephone, and the internet marketing efforts? I know it's been a focus in the past, and so I was wondering if you could just tell us where you stand on those items.

Sure. Just from -- really, from a marketing perspective, we have our online initiatives. We work with industry websites; we have micro-sites that we develop for properties that we feel need some additional marketing and are able to call it out by its name rather than under Equity LifeStyle or RVontheGo. So we work with that to improve our booking.

I think this year we had -- or this quarter, we had a 40% increase in revenue from online booking. What we're seeing is people are able to look at our website, look at the pictures on our website, and are able to commit to us and book that reservation.

We also have a very active call center. And I think, roughly between the call center and the online, about 40% of our transient business is booked through those two different sources. And that's just a matter of having the call center trained so that they're able to speak about the different properties, able to speak about which property makes the most sense for a different -- for a customer, and able to show them kind of -- talk to them on the phone and also look at the website as they're talking.

Great. Thanks for that.

And I was wondering if you could help us think through the increased interest in Freddie and Fannie in the sector. In terms of the transaction market, does their increased interest help the legacy owners kind of hang onto their properties, or does it help buyers pay more? What are some of the implications?

I guess, the way that we look at it is, overall, of course, it's beneficial to have another lending source to the industry, especially a lending source that provides capital for RV park model communities. Just in our history, those assets have been some of them more challenging to finance in difficult times.

And the teams at both Fannie and Freddie are certainly knowledgeable in RV and MH assets, which I think makes the underwriting process a quality one because they understand the time of properties that they're looking at. I think that the trickle-down effect, so to speak, that you're referring to -- definitely, their entrance provides an opportunity and a source of capital to those owners today. They are financing at competitive levels. And certainly, that can have an impact on acquisition transactions.

Okay. Great. Thank you.

Thank you. The next question comes from the line of Phil DeFelice at Wells Fargo Securities. Go ahead, please.

Thank you. How have you thought about the potential impact of lower gas prices in coming up with the projections for transient users this upcoming busy season?

For us, I think the summer is really a person that's traveling 60 to 90 miles to get to us. So the price of gas really isn't an issue, whether or not they're going to come and visit us. It certainly helps for them to fill up their tank, and it used to cost $200 to $400. And now it costs $100 to $200. That's certainly helpful for us.

But, really, when we look at -- we have three really big transient weekends in the summer. It's difficult for us to get a lot of visibility into then until we get a little bit closer to those timeframes.

And a lot of that is a function of how is the weather and whether or not 4th of July falls on the right day, which I believe it does this year. It falls on a Friday. So you're really able to get a three-day weekend out of that. So those are the things that we kind of concentrate on and don't really see gas as a factor, other than it's definitely a plus for us.

Okay. That's helpful.

And then, you mentioned that 55% of transient revenues is currently booked, as of now. Do you happen to have what percentage would have been booked at this time period last year?

I think that was -- that's for the second quarter specifically. And I think last year it was around 50%.

Okay, great. Thank you, guys.

Sure.

Thanks. Next question comes from the line of Drew Babin at Robert W Baird. Please go ahead.

Good morning. Just wanted to ask -- kind of looking at the guidance for second quarter on the resort-based rental income number, as well as the actual results from the first quarter and the full-year guidance. It would seem to me like the third- and fourth-quarter numbers would look to be flat or down year-over-year, based on that guidance. So I was just hoping you could marry that with what you're seeing on the ground. And given that the comps from last year and that year-over year growth are pretty clean, I'm just wondering what the story is for the second half of the year.

Sure. Our guidance model, overall, projects RV revenue based on our visibility into future quarters, as Marguerite just said. Annual revenue growth doesn't have -- isn't subject to as much seasonal volatility, and it's generally locked in by the end of the first quarter. More than 50% of the seasonal revenue is recognized during the first quarter. So our second quarter guidance is set after we take a look at our reservation pace, which we talked about a moment ago.

Visibility in the third- and fourth-quarter reservation activity is limited, so we don't make an assumption regarding revenue growth in those periods. Our approach to transients has been, for 2015, to have a modest increase assumption in quarters three and quarters four.

Okay. That's helpful.

And secondly, just looking at leasing for next year, your headline CPI is, obviously, a little weaker lately. And in the case that persists throughout the rest of the year, what other factors kind of go into lease negotiations with tenant organizations and different customers with regards to leasing?

Obviously there's other factors, other forms of inflation, like apartment rents and local housing costs. But what are those discussions like and what -- sort of describe your pitch back to the clients on why -- call it -- a 4%, 3% rent increase is reasonable?

Yes, sure. This is Patrick. Our discussions with homeowners -- and they really occur throughout the year -- you're referencing the rent increase negotiations that usually occur later in the year and then lion's share effective earlier in the first part of the upcoming year. We look at alternative costs of housing in particular markets. We look at multi-family. We look at the communities and resorts that we compete against.

Certainly, we have discussions around CPI. That's a conversation that we'll have with our owner base, including their focus on the overall operation of the community, but also the place that they've chosen to call home and set up their roots for retirement. So we also have a lot of conversations around improvements to the properties, what priorities will be with respect to things like landscaping, upgrades for the property, et cetera.

And Drew, as it relates to just the CPI component of our leases, it's really about 1/3 of our leases have -- are tied to a form of CPI. And roughly half of those have a floor, a CPI floor, generally a 3% number. So that's when you see some of the differences between how we track on a rate bases versus CPI, you'll see some of that come through.

Great. Thank you for the color. I appreciate it.

Thank you. The next question comes from the line of Gaurav Mehta at Cantor Fitzgerald. Please go ahead.

Thank you. A couple of questions on your rental program. So if I look at your rental inventory, it seems like you're burning off the used inventory at a faster rate than the new home inventory. Can you expand upon that? And is that something you expect to continue?

What we're seeing is, we're able to sell some of those used homes. I think in the year-over-year, we're down about 300 used homes. We are seeing a decrease in the new -- down about 50, year-over-year.

But it's really a function of price point and the ability for that existing renter who's interested and says, this just makes sense; I'll just buy this, rather than continuing to rent it. The new home conversion, or the new home change from a renter to an owner, takes a little bit more time. And also, you have to deal with just the getting the right customer who can afford to pay for that higher-priced home.

Okay. That's helpful. And I think, in the prepared park remarks, you mentioned that you're seeing strong demand for a cabin rental program. Can you expand on that? What's driving it?

Sure. I think the cabin rental program, for us, is really a way to bring a new customer in that doesn't have an RV, is maybe, not understanding the lifestyle, doesn't want a tent, but, gee, that's pretty interesting to be able to go in and stay in a cabin.

So we're able to -- our marketing department has gone in and listed our cabins on travel websites, just like you would do to find a hotel type of thing. So that's added a new customer base, which we will be tracking as we see how we can get that person to engage with us for a longer time period, rather than just a seven-day stay in a cabin.

Okay. And lastly, as you think about the long-term future of your rental program -- and you have been burning off your rental inventory -- would you always have some component of your rental program or [the plan is to] get rid of the whole thing?

Even four or five years ago, before we really started increasing the rental program, we had roughly 2% -- 2% to 3% -- of our occupancy was in the rental program. And I see the rental program continuing inside of ELS. I like the direction that we're headed in the last few quarters, where we're able to take some of those units offline and sell them.

But I also like this conversion rate that we've been seeing lately and being able to increase that. So you bring a new customer in who isn't -- who doesn't know whether or not they're ready to commit right now -- able to get them into a rental, and then convert them to an owner. So I really like the way we're increasing that conversion ratio.

Okay. That's all I have. Thank you.

Thanks, Gaurav.

(Operator Instructions)

Your next question comes from the line of Ryan Burke at Green Street Advisors. Please go ahead.

Thanks and good morning.

Good morning.

Core portfolio occupancy sits at 2%, which is the highest it's been in over a decade. I think the previous high-water mark was about 95% occupancy, set back in the early 2000s. Do you see the portfolio reaching that mark again, and if so, what does it take?

Sure. It's Patrick. I'll take that.

Yes, I think the 95% high-water mark is within reach. In order to get there, the market is going to have to hold up. Clearly, we've seen a firming up in the economy, an increase in consumer confidence, and we've got more of our marginal customers are coming in the door and deciding to purchase a home and set up residency for their retirement in our communities.

Homeowners in our properties stay with us for 10 years or more, so it's a very stable revenue stream for us and just a very stable occupancy. The key for us is going to be to continue to get new home inventory into our communities and then offer it to that customer who's coming down to set up retirement in the Sun Belt locations that we offer.

Okay. So it sounds like it's fair to say that the -- that retirement or potential retiree cohort is starting to feel much more comfortable with the decision to, A, retire; and, B, financially sound; and, C, be able to sell out of their existing condo or single-family home to make the move.

I think, yes. I mean, all of those points.

I'd also would just touch on 10,000 baby boomers are turning 65 everyday for about the next 15 years. And the baby boomers make up a little bit more than 20% of the US population. So we've got a huge cohort of the US population coming towards us for the next couple of decades.

Great. Separate question, in regards to demand from Canada. What percentage of your MH and RV demand does come from Canada, and are you seeing any signs that indicate that the stronger US dollar is affecting demand?

Yes. The largest portion of our Canadian business is really in Florida on the RV side. And I think that we're not seeing any change with the change in the dollar.

I think that, maybe more likely, might see something in our Bar Harbor properties, but that's a very small piece of the business where maybe they wouldn't be as willing to kind of come across the border to go to Bar Harbor -- again, a very small piece. But there's no -- you can't replicate Florida in January in Canada, so I think we're protected there.

Okay. And the last question -- I'd be curious to hear your view on cap rates, moving forward. We have Freddie entering the space, which obviously, has positive indications from the lending side.

Do you continue to see new entrants to the space trying to get involved on the transaction side, whether it be private equity or otherwise? And what does that generally tell you about the trajectory of cap rates, moving forward?

Yes. I mean, we definitely see some of the new entrants showing up at some of the -- some of the auctions or some of the bidding processes that we're in. And I think that there is cap rate compression as a result of -- an owner who used to just talk to us or maybe a couple other people is seeing four or five people show up, is starting to think that they're pretty attractive. So I think that's definitely having an effect. And then, the fact that financing is becoming easier is also going to have an effect on cap rates.

Great. Thank you very much.

Thanks, Ryan.

Since we have no more questions on the line, at this time, I would like to turn it back over to Marguerite Nader for closing comments.

Thank you very much. Paul will be around for any followup questions.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.