Equity Lifestyle Raises Guidance as Pricing Offsets Occupancy Slip
Equity Lifestyle Properties posted normalized funds from operations of $0.74 a share in the second quarter, up 7.7% from a year earlier and above the midpoint of its prior guidance range.
Equity Lifestyle Properties (ELS), the owner and operator of manufactured-home communities, RV resorts and marinas, reported normalized funds from operations of $0.74 a share for the second quarter, up 7.7% from $0.69 a year earlier and above the midpoint of the company's $0.69-to-$0.75 guidance range. Net income rose 19.1% to $0.50 a share from $0.42.
Both measures declined from the first quarter, when normalized FFO reached $0.84 a share and net income was $0.56. Total revenue was roughly flat sequentially at $397.8 million versus $397.6 million in the first quarter, while adjusted EBITDAre fell to $182.6 million from $201.1 million even as it remained above the $170.0 million reported in the second quarter of 2024.
Core income from property operations, excluding property management, grew 6.5% year over year in the quarter, ahead of the 5.7% pace for the first six months of 2024. The gain came almost entirely from manufactured-home communities, where base rental income grew 5.8% on a 5.8% increase in average monthly rent to $956 from $904 a site. Occupancy moved the other way, slipping to 93.8% from 94.3% a year earlier, and the number of occupied sites added in the quarter alone was just 13, compared with 67 for the full six-month period, indicating that rent increases rather than fuller communities are carrying the segment.
The RV and marina portfolio slowed more sharply. Base rental income there grew 1.8% in the quarter, decelerating from a flatter 0.1% pace for the six-month period, as seasonal base rental income fell 11.2% and transient income fell 8.9%. Annual RV and marina leases, the higher-quality segment ELS has been steering customers toward, grew 5.4% in the quarter, ahead of the 4.8% six-month rate, underscoring a mix shift away from short-stay guests.
Core property operating expenses, excluding property management, grew 2.9% in the quarter, faster than the 2.3% six-month rate, a reversal from the expense discipline that had supported earlier results. Home sales showed a similar mix shift on the sales side of the business: new home sales volume fell 16% to 98 units from 117, while used home sales rose 61% to 137 units from 85.
Equity Lifestyle raised its full-year 2024 normalized FFO guidance midpoint to $3.18 a share from $3.17, issued in April. Within that guidance, the company lowered its full-year RV and marina base rental income growth outlook to a 1.6% midpoint from 2.4%, while nudging manufactured-home base rental income guidance up to 5.7% from 5.6%. Full-year expense growth guidance was cut to a 2.1% midpoint from 2.7%, and full-year core property operations income growth guidance was raised to 6.0% from 5.7%.
The quarter also included a new disclosure: on April 30, 2024, ELS consolidated the remaining 20% ownership it did not already hold in certain RV joint ventures for $4.4 million, adding seven RV properties and one land parcel and increasing net real estate investment by $102.9 million while reducing notes receivable and joint-venture investment by $56.1 million and $42.5 million, respectively, versus year-end 2023. The company also booked a $7.1 million net casualty-related recovery tied to an insurance reimbursement for capital expenditures, up from $0.5 million a year earlier.
Total debt to adjusted EBITDAre improved to 4.4 times in the quarter from 4.5 times in each of the prior four quarters.