Equity LifeStyle Properties Inc (ELS) 2016 Q3 法說會逐字稿

Good day, everyone, and thank you all for joining us to discuss Equity LifeStyle Properties' third-quarter 2016 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 a 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. Today we will be focused on a detailed review of the third quarter, our initial 2017 guidance, and our rationale for the recommended 2017 dividend increase.

Our third-quarter results show the strength in our real estate footprint and the benefits that our portfolio has from the positive demographic trend from the Baby Boomers. In the third quarter we had our 28th successive quarter of occupancy growth, and our occupancy at our MH properties is 94%. The occupancy growth in the quarter was 180 sites.

The quarter continued to show the positive trends that we've been seeing throughout the recent past, including an ability to grow both the absolute number of occupied sites as well as improve the quality of our occupancy through increased homeowners and a reduction in renters.

We are pleased with the trend in our new home sales. In the quarter, we sold 207 homes, a 60% increase from 2015. Our average new home sale price for the quarter was $61,000, and over 60% of our new home sales were in Florida and Colorado.

Our sales platform incorporates the use of open houses, referral programs, and targeted Internet marketing. Our customers are focused on the activities available at our properties, and they have a strong desire to be part of the ELS community.

From a marketing perspective, we have now completed our summer marketing campaign. As we did last year, we focused on the 100 days of camping between Memorial Day and Labor Day and ran a social media promotion, which had a social media reach of 3.7 million over the summer as we encouraged customers to post pictures of themselves enjoying our properties. This campaign leveraged our over 315,000 fans and followers across multiple social media platforms. Based on the previous success of this campaign, we expanded 100 days of camping to include a multimedia marketing campaign across channels including web banners, digital adds, email, promotional video, and property marketing.

The transient component, which is the most difficult to predict, has performed well for us this year. Our transient business is concentrated in the summer months, with over 50% of the full-year revenue coming in from Memorial Day through Labor Day. These three key holiday weekends performed 13% better than last year.

Turning to 2017, each year we finish our budget process in October and provide detailed projections for the following year. We have issued guidance of $3.50 for next year, which is a 6.6% growth in FFO per share.

Certain line items, like seasonal and transient activity, require more visibility to be able to forecast with more accuracy. As is our practice, we will update guidance each quarter as we have more knowledge about reservations at the property level.

Demand for our product is strong. The demographic trend is in our favor. We anticipate that we will continue to see the same positive trends from 2016 coming into 2017, including strength in our RV footprint and increased MH ownership transactions.

I would like to update you on our proposed 2017 dividend policy. The ultimate decision for this dividend policy is a Board-level decision that is typically done at our November Board of Directors meeting. We feel it is helpful to highlight management's recommendations and rationale with respect to the dividend.

Each year, to arrive at a recommendation, we review our projected growth in FFO and our outstanding obligations with a goal of ensuring our underlying financial flexibility. In addition, we stress test our future obligations, including factoring in an increased interest rate environment, to ensure that we can continue to meet our obligations.

The stress test revealed the strength of our balance sheet, which has been fortified over the years with longer-term maturities. Currently, our average term to maturity is 10 years, which is almost double the REIT sector average. This compares to five years ago, when our average term to maturity was five years.

The stability and growth of our cash flow, our solid balance sheet, and the strong underlying trends in our business have led our management team to recommend a $0.25 increase in our dividend to $1.95 for 2017. We have increased our dividend significantly over the last few years.

To give a little history, over the past five years we have increased our dividend 95%. Going back in history even further shows that this is our 13th consecutive year of dividend growth. Please note: while this is management's recommendation, the Board has not yet met to discuss it.

Now I'd like to comment on the recent hurricane that impacted the East Coast. We are thankful that our residents, guests, and employees did not suffer any fatalities were injuries. Our response time in the field to this storm was impressive. We prepared in advance and had crews ready to begin the cleanup effort shortly after the storm passed.

I'd like to express my gratitude to the teams, who have worked tirelessly to make sure that the ELS properties impacted by the storm were back in operation as quickly as possible. The relatively minor damage caused by the storm is a testament to the stability of the homes in our communities.

Over the years, there have been improved building standards for manufactured homes, which significantly mitigated the damage at our communities. I will now turn it over to Paul to walk through the numbers in detail.

Thanks, Marguerite, and good morning, everyone. I will review our third-quarter results, walk through our detailed guidance and assumptions for the remainder of 2016, and discuss our preliminary guidance for 2017.

We reported $0.83 normalized FFO per share for the third quarter, $0.01 ahead of our guidance. Overall, a slight miss in core property operations was offset by lower than expected property management and G&A expenses. During the quarter we recognized approximately $800,000 of income from settlement of a note receivable that was issued when we sold our Michigan portfolio in 2013.

Core base rental income was up 4.7% compared to last year, slightly higher than forecast, with 3.8% coming from rates and 90 basis points coming from occupancy. Our year-to-date occupancy gain of 450 sites is the result of increasing our homeowner count by 628 and reducing rental occupancy by 178.

Year to date, we have sold 508 new homes, including 162 through our ECHO joint venture. Our core RV revenues were higher than guidance as a result of better than expected annual and transient revenues. 5.8% growth in annuals is the result of rate increases in our Encore portfolio and occupancy growth in the Thousand Trails properties.

Our transient revenues increased 11.3% for the quarter compared to last year. Growth drivers include increased rate in our summer season properties and occupancy gains in California and the West.

Membership dues revenue was higher than guidance in the quarter. During the quarter, we sold 4,100 Thousand Trails camping pass memberships. Year to date we have sold approximately 10,800 camping passes. Upgrade sales volume in the quarter was 740 units at an average price of approximately $5,000.

The net contribution from membership sales and expenses was higher than guidance, mainly as a result of lower commission expense.

Utility and other income is higher than guidance, mainly from increased utility recovery related to higher electric and water usage during the quarter. In the quarter, core property operating expenses were higher than forecast. This is primarily the result of increased utility, repair and maintenance, and administrative expenses.

Our utility expense, net of recovery, was in line with forecasts for the quarter. The variance in repair and maintenance expenses was caused in part by events that we don't include in guidance. These include expenses related to insured losses, such as the fire at one of our locations, and modest cleanup expenses following Hurricane Hermine in early September.

In addition, we incurred higher than expected R&M expenses at certain locations related to the temporary interruption of water and sewer service. Legal fees and advertising expenses were the main drivers of the variance in administrative expenses.

Overall, core NOI before property management grew 5.3% in the quarter. Year to date core NOI increased 5.8%. Core revenues were up 4.5%, and core expenses have increased 2.7%.

NOI from acquisition properties was $1.7 million in the quarter. Year to date the acquisition properties have performed as expected and have contributed $3.2 million of NOI.

Property management and corporate G&A expenses of $19.2 million were approximately $0.5 million lower than guidance because of lower than expected travel expenses and payroll savings related to some open positions.

Other income and expenses were higher than guidance as a result of the note receivable settlement I mentioned earlier. Financing costs of $27.7 million were in line with guidance. Year to date normalized FFO was $2.50 per share, a growth rate of 8.7% over 2015.

The press release and supplemental package provide fourth-quarter and full-year 2016 guidance in detail as well as preliminary 2017 guidance. 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.

Our fourth-quarter normalized FFO guidance is approximately $72.8 million or $0.78 per share at the midpoint of our guidance range. We expect core NOI growth of 4.6% in the fourth quarter to contribute to 5.5% core NOI growth for the full year. We assume no core MH occupancy gain during the quarter.

Looking ahead to the fourth quarter and our RV business, our current annual, seasonal and transient reservation pace is in line with our expectations. Our fourth-quarter core property operating expense growth assumptions don't anticipate a material impact as we finalize our assessment of damage caused by Hurricane Matthew. Our current expectation of total restoration cost is in line with our initial assessment.

For the full year, we expect core revenue growth of 4.3%, core expense growth of 2.8%, and core NOI growth of 5.5%. Normalized FFO at the midpoint of our guidance range is about $304 million or $3.29 per share, a growth rate of 8.2%.

The midpoint of our preliminary guidance range for full-year 2017 normalized FFO is approximately $325.8 million or $3.50 per share. This represents a 6.6% increase over [2016] normalized FFO per share. Growth in core NOI before property management is expected to be approximately 4.4%.

Our projections of core NOI and normalized FFO growth for 2017 assume fourth-quarter 2016 results will be consistent with our stated guidance. Consistent with our past practice, we plan to update guidance on our January call, and we may adjust growth rates of certain line items after we finalize results for 2016.

We assume no growth from incremental occupancy we may gain in our core MH properties during 2017. Base rent is expected to grow 4%, with 3.5% coming from rate and 50 basis points from occupancy as a result of sites we filled in 2016.

In our core RV resort business, we expect 4.4% growth in 2017. Our annual revenues represent almost two-thirds of our total RV revenues. And we expect 5% growth, mainly as result of increases in rate across our portfolio. We project 2% growth in seasonal revenues and 4.5% transient revenue growth.

Our first quarter generates a bit more than 50% of our seasonal revenue for the year and 20% of our transient revenue. Though the winter season is still weeks away, we incorporated our seasonal and transient reservation pace for the first-quarter 2017 into our guidance assumption.

In total, our right to use annual payments revenue, right to use contract sales, and sales and marketing expenses are expected to contribute approximately $46.3 million in 2017 compared to $45.6 million in 2016. We assume sales and activations of 29,800 Thousand Trails camping passes next year. In 2017, we expect to sell approximately 13,100 camping passes, and we expect the RV dealer program to generate 16,700 additional memberships.

Core property operating maintenance and real estate tax expenses are assumed sent to increase 1.8% in 2017. As we built our budget for repairs and maintenance expenses, we assume normal run rate of operations. Historically, we have not assumed expenses related to property damage or other one-time items in our guidance. Adjusted for our experience in 2016, the 2017 core property maintenance and real estate tax expense growth rate would be approximately 2.5%.

Our guidance for financing costs does not include assumptions related to secured debt that matures or is eligible for prepayment without penalty after January of 2017. Our guidance for acquisition properties include the expected contribution from the Riverside RV property we recently closed. We assume no other acquisition activity in our 2017 guidance model.

I will now provide some comments on our balance sheet. Our debt maturity schedule includes approximately $57 million maturing in 2017. In the next few weeks, we expect to complete our previously announced 2016 refinancing activity. This is expected to include the early payoff without penalty of approximately $23 million in 2017 maturities.

Current secure debt terms are 10 years at coupons in the 3.5% to 4% range, 60% to 75% loan to value, and 1.35 to 1.5 times debt service coverage. The GSEs and life companies continue to quote MH/RV deals at rates well inside CMBS. We continue to see interest in long-term financing options from life insurance companies. High quality age-qualified MH assets continue to command best financing terms.

And we continue to place high importance on balance sheet flexibility. Our interest coverage is 4.1 times, and our line of credit has $400 million of availability.

Now we would like to open it up to your questions.

(Operator Instructions) Juan Sanabria, Bank of America.

I was hoping you could speak a little bit about your revenue same-store or core revenue guidance assumption for 2017? It's down a little bit year-over-year. I think it's because maybe you're -- if I understood correctly, you are not assuming any occupancy upside.

But how should we think about occupancy from here and kind of the levers to go higher or lower, or the sensitivities around same-store revenue? Because I think you started last year around a similar number and ended up outperforming.

Right. So our guidance is -- on the MH -- 3.5% coming from rate and 50 basis points coming from occupancy. And again, that is the occupancy that we expect from sites that we are filling in 2016.

Our long historical practice is not to make assumptions related to the use of free cash flow, which includes the purchase of homes to gain occupancy throughout the portfolio. So as you look at our experience in 2016, as I mentioned, we've gained 450 sites year-to-date. You could potentially look at that and consider the environment and the occupancy gains over time, but we haven't dialed that type of growth into our assumptions.

And what do you see as peak occupancy at this point?

This is Patrick. I'll answer that question. As Marguerite mentioned in her opening comments, we are at 94% occupancy on the MH platform. Our historical high-water mark is 95%.

And just to put it into context, Paul framing our occupancy growth recently, over the trailing seven quarters, we've added 900 occupied sites. That's about 130 basis points. And that's comprised of an increase of 1,400 owners and a decrease of 500 renters.

So that's a relatively reasonable assumption that we'll continue down that path of increasing occupancy in the 80, 90 basis points annually. All of that, of course, assumes that the market continues to hold up and there's demand to buy homes.

And then just lastly, I was hoping you could comment on what you're seeing for acquisition opportunities, whether single asset or maybe some portfolios -- I know you guys have been, I think, a little bit more conservative than some of your peers -- and just how you're thinking about the opportunity set?

Sure. So in the quarter, we closed the one property, an RV property located outside of Tampa. That was a deal -- just to give you specifics of that deal, that was a deal that our acquisition team has been working on for two or three years, just working with the seller. So that's not unlike what we see throughout our portfolio of opportunities, where we are just working with interested sellers in what is the right timing.

As to the broader market, there's a strong demand for our product type. And we are working with interested sellers, but not quite sure when the timing would be.

Thank you very much.

Gwen Clark, Evercore ISI.

On the acquisition front, I saw you guys acquired a vacant land plot near Colony Cove. Can you talk about your plans for that space?

Sure.

And how many sites you think it could hold?

Sure. So just a little bit of background. We bought Colony Cove and Ridgewood in 2011. These properties are located adjacent to each other, and they are located on the Manatee River in Ellenton, Florida. Combined they have about 2,500 sites.

When we bought the property, they were at 89% occupancy. Today that occupancy at those properties is 97% as a result of selling new homes over the last few years. So that property is in high demand just from the property perspective and the location.

And we had been negotiating with the buyer, who owns this 25 acres of land -- piece of land in between these assets. And the land was already zoned MH, so it was easy for us to make that decision to buy the land and then incorporate it into the properties.

We anticipate that we would probably get 120 sites after you take out the wetlands in that area. And we would anticipate starting that work in 2017.

And what would the lease-up of those sites be like from a timing perspective?

You know, I think we could give you a little bit more clarity on that as we develop them. But just to give you the sense -- that kind of gives you the broad sense of occupancy increased in that area pretty significantly over the last few years. So there is high demand.

Okay, great. And then one other quick question. Can you just talk about the performance of all-age this quarter versus the age-restricted assets?

Sure. The all-age portfolio performed similarly to the age-qualified portfolio. What we see sometimes in the all-age is some amount of volatility if there's a shakeup in the local economy, but we haven't seen that. So it performed in line with age-qualified.

Okay, that's great. Thank you very much.

Nicholas Joseph, Citi.

Marguerite, you just mentioned the strong demand for MH as a product type. Is there an opportunity or expectation 2017 to dispose of any communities that maybe don't fit with your long-term plans?

Yes, you know, I would say that we have maybe a handful or less than a handful of properties that we wouldn't mind not owning just because they are a little bit more remote; they're out -- you know, there is a onesie-twosie asset that we bought in a portfolio transaction. And so there might be some opportunity there, but nothing of any great scale.

Thanks. And then in terms of the 2017 rate growth assumes, and putting the occupancy gains that have already occurred aside, what percentage of the properties are dictated by prospectuses, and which -- or what percent, I guess, are market rate?

We have -- when you look at -- if I broaden it slightly to say that the prospectuses in Florida, they can be market, or they can be fixed increase or tied to CPI. So the way that we look at it and think about it is to say that a third of them are tied to CPI and some fashion -- and this is the leases across the portfolio. Half of those have floors in place, and the floors are right around 3%.

I will say that California rent control tends to be based on a Western or California CPI, so there's an uptick there relative to the national CPI over the past couple of years. And then the remaining two-thirds are market-based.

Thanks.

Gaurav Mehta, Cantor Fitzgerald.

A couple of questions. First, on the resort-based income side, your seasonal revenues came in lower than your guidance. I was wondering if you could comment on what you saw there?

Sure. Our seasonal revenue represents about, I think, 15% of our overall RV revenue. So it's the smallest piece. And the seasonal revenue is really concentrated in the first quarter of the year, with 50% coming in in that time from Florida and Arizona.

So as we look, then, we have built up our 2017 budget, and we looked at our experience in 2016 and reviewed our reservation trend, we determined where we thought we would end up. And then that's what we kind of came up with in guidance.

In the seasonal bucket, we are really focused on the return of our Canadian customer and a few other key markets in Florida and Arizona to drive additional reservations. The weather will play a role in this as it gets cold up in the north, which we anticipate it doing soon, and then the migration to the south will follow.

Okay. And then on the rental home income side, you lowered your 2016 growth expectations. I was hoping you could provide some more color on what you're seeing?

Yes. In the quarter the net rental activity was about $200,000 unfavorable to our guidance. That's really driven by lower occupancy, as Patrick talked about -- the conversion of renters to owners.

There was a little bit of a timing difference on some expenses. The full-year guidance for 2016 shows the net contribution is down slightly, and that's really just the occupancy level in the rental program.

All right, great. Thank you.

Paul Adornato, BMO Capital Markets.

Marguerite, I think you said that new homes are at the $61,000 price point. I was wondering how that compares historically? I remember going into the recession, you were emphasizing more upscale homes and then during the recession went a little bit more downscale. So where are we today in the new home sales?

Sure. So in 2008 -- 2007, I guess I'd say -- we had homes that were selling on average about $75,000 to $80,000, and in some cases going all the way up to $200,000. Then we had a period of time where we didn't sell any homes. I think we sold two or three homes a year for several years.

And when we kind of came back online and started to see a pickup in new home sales, we really looked at what was the customer looking for and trying to have an understanding of that. And it's really the age-qualified side looking for a two-bedroom, two-bath model. And the pricing on that ended up being in that $60,000 to maybe $70,000 range.

And that seems to be sweet spot for our customers for what they are looking for. In most cases, they still have their home up north, so there really covering -- handling two homes. So it's a good price point for us, and we think that would continue into 2017.

Okay, great. And on the resort side, the transient -- the outlook for the transient business: you're not making any occupancy gain assumptions, I believe, in 2017 guidance. Is that to be conservative, or do you feel like you are close to maxing out on the resort occupancy?

I think, Paul, as we go through the year through guidance, you see us increase our -- you know, we increased our visibility into the transient business. And then we adjust our guidance.

But right now -- you know, I know our operations team feel like we just finished summer, and to talk about next summer with that amount of specificity is difficult. So that's really what it is. It is really not having that visibility into how the holiday weekends are going to turn out next year.

Not really a comment, then, on anything other than we're not quite there yet. We've got to get past Christmas.

And there was a big emphasis on converting transient to seasonal, seasonal to annual. Is there more juice left in that effort?

Yes, I think there always is from the standpoint of bringing a new customer in, which is what we're doing a lot of the -- our social media campaign. You bring a new customer in; they are kind of -- they're coming on a trial basis. They want to understand what we have to offer.

And then when we recognize and kind of flag them as a new customer, it's then that we try to start the conversion process of working them through the seasonal and an annual.

Thank you.

Drew Babin, Robert W. Baird.

Most of my questions have been answered, but I just had one on the dividend increase. Was that conversation more along the lines of, hey, our FFO payout ratio is very low compared to most REITs; given where our balance sheet is and our liquidity, we can let it pick up a little bit? Or was it -- how much does taxable income accounting possibly factor into that, where the payout ratio kind of needs to go up, and more of your income over time needs to be paid out? Was that part of the conversation as well?

Yes, just in terms of the conversation, as we talked about it in the past, on an annual basis we develop this recommendation after preparing our budget, considering what our obligations are, thinking about principal amortization that we need to pay, recurring capital expenditures, and then just the opportunity set as it relates to investment, either in acquisitions or inside the portfolio with expansion opportunities and so forth. We don't target a payout ratio when developing the recommendation. It's really more about meeting those obligations and then having free cash flow to be able to execute on those opportunities.

Finally, on the taxable income fronts, we do -- as a result of some tax planning back into 2005 and 2006, we do have net operating losses that give us flexibility with respect to the dividend. So as we sit here today we don't have pressure coming from that.

Okay, that's helpful. Thank you.

Todd Stender, Wells Fargo.

Thanks for the details on the vacant land that you acquired. But just to get a sense of maybe a cost per site or a total budget, can you guys disclose maybe what your cost per site assumptions are?

And then since we have seen most of the acquisitions this year on the RV side, maybe just to get a good sense of what you would buy at right now for MH price per site?

Sure. So on that land, we would anticipate just the cost to develop the sites -- and these would be MH sites -- would be about $35,000 per site to develop that land. And we would get -- I think the starting site renter that rents in that area right now is about $8,000 a year. And so it's a matter of getting those sites built, and then -- and you know, we see it as just -- not so much as a development, but an expansion of those existing properties.

With respect to pricing in the marketplace right now, it's difficult to say. I mean, we can certainly talk about what -- you've seen what we've done this year. There hasn't been a whole lot of other data points and transactions that are out there. Still having conversations with sellers, including conversations including OP units and that type of thing. But it's difficult to quote a per site; it really runs the gamut across the country.

But higher than RV, right? I mean, if you look at your RV price per sites, it looks like a range of about $24,000 up to maybe $43,000?

Yes. It's definitely -- it is higher, and it's really -- that's really just a function of the revenue. And it depends -- even within the RV, it runs the gamut of whether or not you've got a highly transient RV park versus a highly annualized RV park. And that would set the pricing parameters.

Okay, thanks, Marguerite. And just for our benefit, as we talk to investors about the RV side, we are seeing more transactions. Can you just talk about --do you guys look at it on a cap rate basis? Are you an IRR buyer? Can you talk about maybe your return expectations in RV?

Sure.

And maybe if that is trending higher or lower in the next year?

It's similar to what we do on the MH side, which is we'll look at what's the initial yield and what is the growth. And we look at a yield-plus-growth kind of calculation. We don't deal with reversionary cap rates, because this isn't a -- so the IRR model doesn't necessarily work for us, because we're not sellers.

So we look at that. And then in doing that, in coming up with those kind of going-in yields, we tried to determine: what are we adding -- what kind of value are we adding? Is ELS coming to the property, adding to the equation, such that we think we can either raise rents or we can reduce expenses? In a lot of instances, there's a heavy payroll load at some of the properties that we are looking at, and we have opportunities to downsize those.

So it's similar on the MH and the RV side. And it's really -- if MH and RV are located in similar locations, you're going to see cap rate trade at about the same. The price per site will change just because of that revenue component.

Can you talk about the cap rate for the Riverside? Maybe what the occupancy is? And then any CapEx that you'll need to put into it?

Sure. The Riverside cap rate was a 5 cap. And that was -- it's an RV park, so in terms of occupancy, it's highly annualized RV park.

And in terms of capital, not a lot of capital. The owner was -- did a very good job of keeping up this property. He built the property from scratch, expanded the property. And he's actually going to continue to consult with us on the property, because he has done a very good job of operating it over the years.

Thanks. And then, finally, you have been tapping insurance company debt lately. Can you just speak about their competitive nature right now compared to maybe where agency debt is, loan to values? And just get a general sense of the appetite for all secured lenders right now.

Sure. Overall, life companies -- actually, at this moment in time life companies have essentially exhausted their capacity in 2016. So they are waiting for the new year, when they reset their allocations.

But the quotes that we were seeing in the third quarter were, call it, 75 basis points or maybe even a little bit more inside of CMBS lenders for 10-year financing. Those life companies do continue to have interest in long-term debt that we have tapped over the last couple of years.

The LTV from the life company is lower than you see from CMBS -- call it 60% or 65% max from the life companies versus CMBS potentially going up to 75%.

Great. Thank you, Paul.

(Operator Instructions) Ryan Burke, Green Street Advisors.

This question kind of goes hand-in-hand with Todd's last question. Paul, I do believe the range in just overall lending rates that you quoted this quarter was about 25 basis points above what it was last quarter. Is there anything that -- beyond what you just described in the last answer that is causing that?

No. The uptick in treasuries that we saw in the last quarter -- there were kind of floors that were embedded in rates prior to that. So some amount of movement. On a forward basis I would anticipate that rates will start to move more in lockstep with treasuries, but not much more than what I've described already.

Okay. And then on the September refi and the October new loan that closed, what was the approximate LTV on those?

That was life company debt, so it was right in that 60% range.

Okay. And then one operating question: looking at your number of used rental homes, that decreased nicely for the quarter -- something like 15%, which is a nice, positive sign. But the new rental homes increased by about 10%. What exactly is at play there?

Well, yes, as you noted, compared to the same time last year, that's an increase of -- your percentages translate to about 240 ups in new rentals and a decrease of about 400 used rentals. There's a couple of driving factors, though. One is a focus on selling off used inventory over time, which just makes sense with respect to running the rental business. On new home side, it's exposing more customers to our platform and the lifestyle, then focusing on converting those customers.

Okay. And are those new homes primarily coming out of the ECHO JV?

There is a mix. I don't have that front of mind, but I'd say it's representative of the overall transaction mix.

Got it. Okay, thank you.

Thanks, Ryan.

Thank you. 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 all. And Paul Seavey will be around for any further questions.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Everyone have a great day.