Equity LifeStyle Properties, Inc (ELS) Q2 2025 Earnings Call Transcript

Equity LifeStyle Properties, Inc (NYSE: ELS) Q2 2025 Earnings Call dated Jul. 22, 2025

Corporate Participants:

Marguerite Nader — Vice Chairman and Chief Executive Officer

Patrick Waite — President and Chief Operating Officer

Paul Seavey — Executive Vice President and Chief Financial Officer

Analysts:

Yana Gallen — Analyst

Jamie Feldman — Analyst

Brad Heffern — Analyst

Eric Wolfe — Analyst

Wesley Golladay — Analyst

John Kim — Analyst

Jason Wayne — Analyst

David Segall — Analyst

Michael Goldsmith — Analyst

Steve Sakwa — Analyst

Presentation:

Operator

Good day, everyone, and thank you all for joining us to discuss Equity LifeStyle Properties Second Quarter 2025 Results. Our featured speakers today Marguerite Nader, our CEO; Patrick Waite, our President and COO; Paul Seavey, our Executive Vice President and CFO.

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. For those who would like to participate in a question-answer-session, management asks that you limit yourself to two questions so everyone who would like to participate has ample opportunity. 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 risks and uncertainty. The Company assumes no obligation to update or supplement any statements that become untrue because of subsequent events. In addition, during today’s call, we will discuss non-GAAP financial measures as defined by section — by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information and our historical SEC filings.

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

Marguerite Nader — Vice Chairman and Chief Executive Officer

Good morning, and thank you for joining us today. I am pleased to report year to date and second quarter results. For the first six months of 2025, our NOI increased 5% as compared to last year. We focus on translating NOI growth to normalized FFO growth driven by continued strength in our annual revenue streams and reduced expenses throughout our portfolio. Our normalized per share FFO growth year to date is 5.7%. The strength of our portfolio results and our balance sheet allow us to maintain our full year guidance for FFO per share. The demographics of the US Population support the demand for our MH and RV portfolio, with 70% of our MH portfolio catering to seniors and the strong interest in RV travel among older adults.

During periods of broader market uncertainty, it’s important to highlight the core strengths that drive the stability of our business and our outlook for continued performance. Our MH portfolio represents about approximately 60% of total revenue with portfolio wide occupancy over 94%. These metrics reflect not only strong operational execution, but also the resilience of our asset base. A key driver of this stability is the unique composition of our resident base as 97% of our residents in our MH portfolio are homeowners. This high proportion of owner occupied units contributes meaningfully to reduced turnover and increased length of stay. The result is a more consistent cash flow and lower operating volatility.

Our communities foster a sense of belonging and engagement. This engagement reinforces retention, promotes neighborhood stability and supports long term value creation. Our communities offer our residents the chance to build connections that directly contribute to their quality of life. Within our RV footprint, annual RV revenue grew 3.9% year to date, driven by retention across our park models, resort cottages and RV accommodations. Our RV annual customer base is split between winter and summer seasons. Approximately 70% of our annual revenue comes from Sunbelt locations. These customers are typically active adults who are retired or semi-retired. These customers closely resemble our manufactured housing customers seeking a warm community oriented destination during the colder months.

The remaining 30% of our annual revenue is generated for summer focused properties representing families with children. They value seasonal recreation and return to us for the activities, amenities and sense of community our properties provide. This seasonal balance allows us to serve a diverse range of long term annual customers and support stable recurring revenue throughout the year. We are proud to share that 55 of our RV resorts and campgrounds have received the recently announced 2025 Tripadvisor Traveller’s Choice Award. Each year, this award is given to approximately 10% of businesses listed on Tripadvisor.

Our property teams provide guests with positive experiences when they stay with us and referrals from our guests are a top source of new customers. I want to thank our team members for their outstanding efforts for this quarter, their dedication to our customers is the foundation of our success and their work is greatly appreciated.

I will now turn the call over to Patrick to provide further details on our financial performance.

Patrick Waite — President and Chief Operating Officer

Thanks, Marguerite. Our core MH portfolio continues to see high occupancy and generated revenue growth of 5.5% in the quarter. Constrained supply of new MH sites supports the value of our communities and their product offerings. We are strategically investing our communities to ensure their continued success for the long term. We are actively adding new home inventory in key markets, an investment that improves the quality of our communities over time. The new inventory revitalizes the communities, encourages other homeowners to invest in their own homes, and helps maintain property values for all. As homeowners in our community stay with us an average of 10 years, this new inventory brings stable occupancy and a steady revenue stream.

I’d like to highlight our MH communities in Florida, California and Arizona, which together represent approximately two-thirds of our MH revenue. In Florida, we are focused on bringing new home inventory to meet strong demand. In the Tampa St. Pete submarket, for example, we’ve sold nearly 700 new homes over the last five years, as Florida continues to be a hub of in migration. Our California communities continue to be highly occupied and in demand as they provide outstanding value with in their respective markets where alternative housing costs are among the highest in the country. In Arizona’s Phoenix and Mesa submarkets, we have sold 800 homes over the last five years.

Like Florida, Arizona benefits from demographics as the aging population looks for affordable, low maintenance housing options in a warm climate. To leverage this demand, we have added 700 development sites in Arizona over the last five years. Our home offerings are attractive in any economy and they are well positioned with new homes that are appreciated by customers seeking value in a challenging economic environment. Plus, with approximately 90% of our customers in communities paying cash for their homes, our home buyers are less sensitive to interest rates.

Shifting over to the RV Business. Annual sites account for more than 70% of our core RV revenue, providing a stable base of revenue and occupancy. Our annual site offerings continue to provide outstanding value for customers who want affordable second homes or a lake house or those who want a home away from home in the Sunbelt. An annual RV site puts this luxury within reach for these customers. For the transient business, we continue to experience a short booking window. And for the second quarter, the weather was cool to start the camping season and rain impacted weekend weather particularly in the northern and south central US. Throughout the second quarter, our teams focused on their operations playbook which includes growing revenue and strategically planning and executing on expenses.

Our teams carefully manage their expenses as they maintain high levels of services to continue to meet customer service, our customer expectations. One of the ways this is accomplished is through the use of technology. For example, using a scheduling platform to manage our team members schedules on site to reduce overtime. As I touched on in my discussion about the Arizona market, we continue to develop sites in our MH and RV portfolios. Over the last five years, we’ve delivered 1500 MH sites and 2900 RV sites across the portfolio. While we’ve seen an increase in the cost of development over time, we are also seeing an increase in revenue from developed sites over time.

I’d now like to turn it over to Paul.

Paul Seavey — Executive Vice President and Chief Financial Officer

Thanks, Patrick. Good morning, everyone. I’ll highlight some takeaways from our second quarter and June year to date results, review our guidance assumptions for the third quarter and full year 2025 and close with a discussion of our balance sheet. Second quarter normalized FFO was $0.69 per share in line with the midpoint of our guidance range. Year to date in 2025, we have successfully executed on our overall operating plan as evidenced by achievement of normalized FFO per share at the midpoint of our guidance range for the six month period. Strong core portfolio performance generated 6.4% NOI growth in the quarter compared to the same quarter last year, 70 basis points higher than guidance.

Core community based rental income increased 5.5% for the second quarter and June year to date periods compared to the same periods in 2024. In the second quarter, we generated rate growth of 5.8% as a result of noticed increases to renewing residents and market rent paid by new residents after resident turnover. Core RV and marina annual base rental income, which represents over 70% of total RV and marina base rental income increased 3.7% in the second quarter and 3.9% year to date, compared to prior year. Year to date in the core portfolio, seasonal rent decreased 5.6% and transient decreased 8.6%.

We continue to see offsetting reductions in variable expenses. The net contribution from our total membership business consists of annual subscription and upgrade revenues offset by sales and marketing expenses. The membership business contributed $16 million and $31.4 million net for the second quarter and June year to date periods respectively compared to the same periods last year. Core utility and other income increased 4.4% for the June year to date period compared to prior year. Our utility income recovery percentage was 48.2% year to date in 2025, about 180 basis points higher than the same period in 2024. Second quarter core operating expenses were flat compared to the same period in 2024.

Expense growth was 190 basis points lower than guidance, mainly resulting from savings in utility expense, payroll, membership expenses and real estate tax expenses. Utility and payroll expense savings compared to guidance demonstrate our continued ability to control expenses at RV properties with variable occupancy. June year to date expense growth was 70 basis points and includes the impact of our April 1, 2025 property and casualty insurance renewal. Second quarter property operating revenues increased 3.5% while core property operating expenses were flat resulting in growth in core NOI before property management of 6.4%. For the year to date period, core NOI before property management increased 5%.

Income from property operations generated by our non-core portfolio was $2.5 million in the quarter and $6.5 million year to date. As I discuss guidance, the following remarks are intended to provide context for our current estimate of future results. All growth rate ranges and revenue and expense projections are qualified by the risk factors included in our press release and supplemental package. We are maintaining our full year 2025 normalized FFO guidance of $3.06 per share at the midpoint of our range of $3.01 to $3.11 per share. Full year normalized FFO per share at the midpoint represents an estimated 4.9% growth rate compared to 2024.

We expect third quarter normalized FFO per share in the range of $0.72 to $0.78. We project full year core property operating income growth of 5% at the midpoint of our range of 4.5% to 5.5%. Full year guidance assumes core base rent growth in the ranges of 4.9% to 5.9% for MH and 60 basis points to 1.6% for RV and marina. The midpoints of our guidance assumptions for combined seasonal and transient show a decline of 8.4% in the third quarter and decline of 6.4% for the full year compared to the respective periods last year.

Core property operating expenses are projected to increase 70 basis points to 1.7% for the full year 2025 compared to prior year. We project a core property operating expense increase in the range of 1.1% to 2.1% during the second half of 2025. Our full year expense growth assumption includes the benefit of savings in repairs and maintenance and payroll expense during the first six months of 2025 as well as the impact of our April 1st insurance renewal for 2025. Consistent with our historical practice, we make no assumption for the impact of a material storm event that may occur. Our third quarter guidance assumes core property operating income growth is projected to be 4.9% at the midpoint of our guidance range. In our core portfolio, property operating revenues are projected to increase 3.1% and expenses are projected to increase 90 basis points both at the midpoint of the guidance range.

I’ll now provide some comments on our balance sheet and the financing market. Our balance sheet is well positioned to execute on capital allocation opportunities. As of the end of June, we have no secured debt scheduled to mature before 2028 and our weighted average maturity for all debt is almost eight years. Our debt to EBITDAre is 4.5 times and interest coverage is 5.6 times. We have access to over $1 billion of capital from our combined line of credit and ATM programs. We continue to place high importance on balance sheet flexibility and we believe we have multiple sources of capital available to us.

During the quarter, we closed on an unsecured term loan with a total balance of $240 million. The loan funded in two draws, $150 million in the second quarter and $90 million in July. Term loan proceeds repaid the $87 million of secured debt that matured in April along with repayment of the balance on our line of credit, which was $90 million at the end of June. During the second quarter, we also used term loan proceeds to fund a $56 million loan to one of our joint ventures of which we own 80%. This loan appears as a note receivable on our balance sheet as of June 30. The JV used the proceeds to repay outstanding secured debt at maturity.

Current secured debt terms vary depending on many factors including lender, borrower, sponsor and asset type and quality. Current 10-year loans are quoted between 5.25% and 6%, 60% to 75% loan to value and 1.4 times to 1.6 times debt service coverage. We continue to see solid interest from life companies and GSEs to lend for 10-year terms. High quality age qualified MH assets continue to command best financing terms.

Now we would like to open it up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question will come from the line of Yana Gallen from Bank of America securities. Your line is open.

Yana Gallen

Thank you. Good morning and congrats on the many Travel Choice awards. I had a question on the revised — oh very welcome — question on the revised outlook for the core RV marina. The annual revenue guidance moved down a bit and just kind of curious what occurred in the second quarter that kind of whether it be the 2Q results or looking forward, was it kind of driven by lower renewals or is there a specific geography or cluster of assets? If you could provide some color around that.

Marguerite Nader

Sure, Patrick can kind of give you some color I think as to the — on the portfolio basis. But kind of before we do that maybe it would be helpful to put it into context. I think, I touched on my opening comments. Our annual customer base is split between the winter and the summer seasons. Important to note that these customers pay an average of about $6,600 per year or roughly $550 per month to stay at our properties. These are really second home or vacation properties for our customers and we consistently see multi generations of families stay with us at these properties.

The annual revenue stream is a proven and resilient in all cycles for us. And over the last five years, we’ve seen that income stream grow about 7%. We have been able to increase rate at our RV parks because we focus on our capital projects. And Patrick can touch on that a little bit and on customer focused amenities and they continue to be attractive for second homeowners. But with respect to the quarter, maybe Patrick, you could walk through that a little bit, please.

Patrick Waite

Yeah. So, for the quarter, the RV and Marina annual was up 3.7% and that was unfavorable about 90 basis points or about $700,000. As Marguerite mentioned, we had strong rate growth, around 6% for both the RV and the marina portfolio. And occupancy was the driver of the mess. As you look to the guidance for the balance of the year, that reflects roughly a $1.2 million reduction. And that’s driven by the occupancy and its impact on the balance of the year.

Just real quickly, on both the RV and the marina. On the RV side, that was largely driven by higher rates of attrition in the north and northeast. I spoke a little bit to that on the last earnings call, and we were moving into a renewal period, much of which occurs in the second quarter and didn’t have great visibility. And we experienced more turnover that was largely focused on 20 properties.

On the marina side, while there was some elevated turnover at two marinas and we’re backfilling that turnover, we had two properties that were impacted by storm damage and we have some slips offline that need to be improved. And those will come back online in coming quarters.

Yana Gallen

Thank you, that’s very helpful.

Marguerite Nader

Thanks, Yana.

Operator

Thank you. One moment for our next question. Our next question will come from the line of Jamie Feldman from Wells Fargo. Your line is open.

Jamie Feldman

Great. Thanks for taking the question. So, you typically start to send out renewal rate increases during 3Q for the following year. I’m wondering if the weakness in RV growth, specifically in annual, in addition to transient and seasonal impacts, your pricing power for ’26 and what’s the right way to think about the setup for RV and also MH. Any early color on renewals being sent out would be very helpful.

Patrick Waite

Yeah, let me touch on the MH and then I’ll touch on the RV side. So, we’re actually going to be moving into our annual review of rates to establish our budget for 2026. And as you pointed out, those increases occur in the late third and in the fourth quarter for the most part, for the MH portfolio. So, we’ll work through that over the next couple of months and have more to share on future earnings calls. But we’ve seen consistent demand across the MH portfolio. So, I think, we’ll be in a good position.

On the RV side, with respect to the annuals, we’ve — Marguerite, highlighted, as did I, that we’re seeing pretty consistent rate growth in the 6% range and we’ve seen consistent demand. I think it’s — as I talked about on last quarter’s earnings call, while we’ve seen consistent demand and we’ve been able to achieve rates coming off of COVID peak demand and the tenure that we typically see with our annuals, we’re going through a cycle of attrition that just resulted in from that higher growth in previous periods.

Marguerite Nader

And Jamie, that time period is April of next year, where we would be increasing the rates.

Jamie Feldman

Okay, thank you for that. And then, I guess, just kind of tying some pieces together as we were going through the press release and even talking to some investors about it. I think people got a little spooked by the increase in notes receivable, which of course you just explained as the JV loan. You did have some occupancy loss. So, can you maybe just tie together what you’re seeing in terms of like bad debt, the occupancy loss, and your expectations on occupancy getting better and when. And whether you think or is there maybe something more structural that we should expect to see a slightly lower occupancy rate going forward?

Paul Seavey

I’d like to just clarify something. The occupancy change in the quarter was essentially flat. I think, there’s a little bit of confusion because we do have a table that shows occupancy percentages, but those occupancy percentages include an increase to the denominator as we add expansion sites. So, we were not down 60 basis points. I think, as maybe some may have interpreted from reading the reviews, we had a loss of 40 sites of occupancy in the quarter. So, negligible.

With respect to the payment patterns of our customers, we’ve historically talked about our very low levels of delinquency. That low rate of delinquency, we’re talking basis points 30 basis points to 40 basis points remain consistent throughout the pandemic and is consistent today. And we continue to see customers who are paying cash for their homes rather than being interested in financing their homes. Our rate of purchasing homes for cash is higher than 95%.

Operator

Thank you.

Jamie Feldman

Okay. And then…

Operator

One moment for our next question. Next question comes from Brad Heffern from RBC Capital Markets. Your line is open.

Brad Heffern

Yeah. Hi, everybody. Thanks. Do you have any updated views on the impact from potential reduced travel from Canadian customers? And then, kind of along the same lines, there’s this $250 visa integrity fee in the BBB. Would that apply to your customers and do you think that that could potentially impact demand as well?

Patrick Waite

Yeah. Well, I’ll speak first to the Canadian demand to take the seasonal first that we talked about on last quarter’s call. We mentioned that we had a lower take rate on our Early Bird, which is a program for Canadians when they’re down in the Sunbelt during the winter season to make a reservation for the following year. That was off about 20%. And as we said at that time, now that we’re going through the summer season, we don’t really expect that to move and it really hasn’t.

And as we move towards the Sunbelt season again, we would expect reservation pace to pick up again. It’s going to be cold in Canada and it’s going to be warm in the Sunbelt. So, that’s kind of a high level on the seasonal. With respect to transients, it’s a relatively small part. Canadians are relatively small part of the summer season for us. We have seen some pullback in Canadian transients in the Northeast and the Pacific Northwest, but it’s not large dollars.

Marguerite Nader

I think we’ll just have a better update for you on our next quarter call on that topic. And then Paul?

Paul Seavey

And then with respect to the Visa Integrity fee, while it remains to be seen kind of how all of these changes are enforced and how the rules are established, it seems there may be some implication for Canadian customers. However, many of our customers we believe come and don’t require a visa to do so to come and visit the properties for short term stays. So, there may be some modest impact, but we don’t anticipate it impacting all of the Canadian visits.

Brad Heffern

Okay, got it, thank you. And then just looking at the site counts year-over-year, annual is down 500, seasonal’s down 600, transients up by 1200. Is there a dynamic there where people don’T renew and then those sites just get pushed into the transient bucket? Or is there some other dynamic that’s driving those changes?

Patrick Waite

That’s exactly how we manage that chart, Brad. To the extent that a site is not occupied by an annual or a seasonal, it’s available for a transient and reported as such.

Brad Heffern

Okay, thank You.

Marguerite Nader

Thank you, Brad.

Operator

One moment for our next question. Our next question will come from the line of Eric Wolfe from Citi. Your line is open.

Eric Wolfe

Hey, thanks for the expense guidance reduction. Could you just tell us how much of that was due to flexing labor and other variable expenses lower due to the lower transient business? Sort of like how much you can kind of bring down expenses when you’re not seeing the transient business and then how much of it was from just other expense categories? Maybe another way to ask it is the 80 bps reduction that you had an expense growth, how much of that was just flexing transient expenses lower?

Paul Seavey

Well, I guess the way I think about it, Eric, is, I mean, generally we’ve guided to expense growth that tracks to CPI, but we do have realized and anticipated savings from a few sources. So, if I take the utility payroll and R&M, which we talk about a fair amount, that’s about two thirds of our core expenses. And the expectation for 2025 is that those will increase about 2.4%. The assumptions are impacted by the variable savings at the transient RV properties. So, when you think about the remaining third of our expenses, we have real estate taxes, insurance and membership, sales and marketing expenses. And the assumption for that third is that we’ll be down 1% to prior year. So, that includes the effect of — I talked about the insurance renewal and then we have expectations for savings associated with the membership upgrade product.

Eric Wolfe

Got it. That’s helpful. And then maybe getting back to the annual RV, I guess, is there anything that you can point to that would sort of explain the higher turnover? I think, you said there was like two properties that had storm damage, but is there anything else that you can sort of pinpoint in it possible? Is it — can you quantify sort of what the turnover is? Typically you see 10% turnover. And this year, you saw 15%. Just trying to understand the magnitude.

Patrick Waite

Yep. So, just with respect to the comments on the two properties that suffered some damage, those are in the Marina portfolio. So, those are Marina annuals. And we’ve seen some system turnover at two properties where we’re building back that inventory or that annual occupancy in the Marina portfolio, we’ve seen consistent demand across the Marina portfolio, including launches year-over-year. So, and we feel good about how that business is shaping up.

With respect to the turnover in RV annuals, historically that number has been around 5%. And as I mentioned in an earlier comment, at about 20 properties, predominantly the Northeast, we’ve seen some elevated turnover. I would expect that to normalize over time, because that had been a pretty consistent trend. But we’re moving through the period of peak demand that led to more people coming to our properties, and therefore there are more people to turn over.

Marguerite Nader

And, Eric, that turnover happens in June, typically. And so, that’s what we saw kind of the June effect there.

Eric Wolfe

Got it. That’s helpful. Thank you.

Marguerite Nader

Thanks, Eric.

Operator

Thank you. One moment for our next question. Our next question will come from line of Wesley Golladay from Baird. Your line is open.

Wesley Golladay

Hey, good morning, everyone. Just a quick follow up on that last question. Was that turnover that was a little bit more elevated. Was that specific to Navy and is there any more left? I guess, was there a bulk renewal in June. And then we don’t have any — is that the majority for the annual.

Marguerite Nader

Wes, you’re breaking up a little bit, but I think I got it. But, no, it was consistent with what we’ve done in the past. There was no change to the renewal process.

Wesley Golladay

I’m hoping to clear. Was it due to Canadian residents is what I was asking. As far as the…

Marguerite Nader

Sorry.

Wesley Golladay

Okay.

Marguerite Nader

I think you said Canadian residents. It was not due to Canadian residents. No.

Wesley Golladay

Okay. Thank you for that. And then, when you look at the immigration policy has been in place for a few months now, are you seeing any impact to demand or cost pressure?

Marguerite Nader

What we look at is from the Canadian perspective, the majority of our MH annual customers are in the Phoenix market. And we’ve seen continued demand. We look to see whether or not we would see increased home sale activity. And we haven’t seen that. So, no reason to think that there will be a change at this point.

Wesley Golladay

Okay, thank you.

Marguerite Nader

Thank you, Wes.

Operator

Thank you. One moment for our next question. Our next question will come from the line of John Kim from BMO Capital Markets. Your line is open.

John Kim

Thank you. I know home sales is viewed more as a loss leader for you in terms of FFO impact, but the revenue was down pretty meaningfully this quarter. And the average sales price was pretty low too, both on the new and the used home sales. So, I was wondering if you could comment on that and your outlook for home sales for the rest of the year.

Patrick Waite

Yeah, I guess. John, first I’d say at basically 117, call it 120 for the quarter. The annual new home sales that we would experience pre-Covid was typically in that, call it 500 to 600 range. So, we’re on the lower end of that band. We’re pretty much in line with what we experienced prior to some periods of peak demand. With respect to the average price, that’s really driven by two factors.

One is, I mentioned this on previous calls that we’ve seen some moderation in demand and that’s really come mostly at the higher price points of our houses, which is a small part of our inventory, but nevertheless can have an impact on a relatively small number of sales. And then, to another extent, it’s been just the mix of inventory over the course of any particular quarter. And as we go through replenishing inventory that we’ve sold down in locations that would trade at higher prices, you’re going to see that number move around from time to time, quarter to quarter.

John Kim

On the acquisition front, I know it’s been quiet for you, but you have at least one major owner looking to buy MH product. I was wondering if you talk about. Sellers in the markets where you think Cap rates are for MH that you look at, if there are other buyers in the market that you’ve heard of. And just to follow up on my. Last question, on the used home sales, it was down to like 9,000 this past quarter. So I don’t know if that calculation. Is correct, but maybe if you could follow up on that as well.

Marguerite Nader

Sure. So, Patrick, why don’t you touch on the used homes?

Patrick Waite

Yeah, on the used home sales, I mean, it’s again, that’s largely driven by mix and some of that likely driven by some lower price inventory that we would own for a short period of time and sell to a new homeowner, some of whom are going to make improvements to those homes.

Marguerite Nader

And then John, with respect to acquisitions, as you know, we haven’t seen a lot of deals in our space over the last couple of years. But as I look back over the years, there have been probably three or four times in the last 30 years where we’ve seen this type of reduced deal volume and then that transaction market generally improves. And that’s when you see us participate. The MH and RV space really has continues to have a really highly fragmented ownership base and that will allow for future opportunities as property owners begin to make their ownership decisions. The industry is very small, as you know, and the brokerage community is very active. So, we look at all deals and in terms of cap rates, it’s difficult to point to a cap rate when there haven’t been a lot of transactions. So, I guess I would wait for some transactions to happen to be starting to quote cap rates.

John Kim

Great, thank you.

Marguerite Nader

Thanks, John.

Operator

One moment for our next question. Our next question will come from line of Jason Wayne from Barclays. Your line is open.

Jason Wayne

Hi, good morning.

Marguerite Nader

Good morning.

Jason Wayne

Just on the campground membership count, it’s stabilizing now. Sales volume has picked up for the past few quarters here. I’m just wondering if you could walk through the sales strategy around the 2 to 4 year membership subscriptions that you’ve been doing recently.

Marguerite Nader

Sure, sure. It might be helpful, I think to give a little bit of background on the thousand trails system. As you can tell from our supplemental, it’s got 24,000 sites and 80 properties because our customers are really focused on these natural resources in the surroundings in our properties. And there’s a couple of things, as you mentioned in terms of the member count in the quarter, we’ve seen basically for the last, I think 10-ish quarters negative growth. And this quarter we saw a slight increase and that was really attributed to the paid origination sales of about 5,600, which is in excess of what we would see from our historical Covid Q2 sales which I think were about north of 4,000.

And then you also saw an increase for the second sequential quarter in the promotional membership originations. So, that is another nice green shoot because you’re able to see additional activity at the RV dealer level. With respect to the dues based upgrade product, last year, based on customer feedback, we launched a new product. That product — it provides for an upgrade, but it’s an increase in the dues program as opposed to a one-time payment. The new program has increased dues of about $1,500 to $3,500 per year depending on the product. And the upgrade gives you advanced booking windows, ability to increase length of stay, discounts to rental cabins, cottages, et cetera and access to other vacation options.

Jason Wayne

Got it. Thank you.

Marguerite Nader

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes to the line of David Segall from Green Street. Your line is open.

David Segall

Hi, thank you. With regard to the occupancy loss within the annual RV segment, it seems the guidance for the rest of the year does not imply backfilling that lost occupancy. So, I’m curious what you think the timeline would be for reconverting those spots from transient back to annual paying.

Marguerite Nader

Yeah, the impact that we saw in the quarter was for the summer focused properties. So, that’s occupancy that we would get back next year. Those are customers who have left and we would be marketing to bring them back next year. So, that’s the impact for the rest of the year.

David Segall

Great. And then, with regards to the guidance for property management and G&A, it looks like that was reduced. I’m curious if you could provide some color on what’s driving that and whether it’s more on the property management or G&A side.

Patrick Waite

Yeah. Excuse me. The expense change is primarily from compensation expense savings from open positions in 2025 and then expected savings from legal and some other administrative items. There’s timing of resolution and spend on some of these matters and it can change over time. So, we’ve adjusted our guidance to reflect our current view on expenses for ’25.

David Segall

Great, thank you.

Operator

Thanks. One moment for our next question. Our next question will come from the line of Michael Goldsmith from UBS. Your line is open.

Michael Goldsmith

Good morning. Thanks a lot for taking my question. First question is on the annual RV and kind of what’s implied for the back half? Annual RV was up in the first quarter by 4.1%. And then it slowed to 3.7% in the second quarter. But it seems like the guidance is implying that it accelerates to 4.3% in the third quarter and implied 5.1% in the fourth quarter. So, can you just kind of talk about what gives you confidence in the re-acceleration on the annual RV business? Thank you.

Paul Seavey

Yeah, I think that there’s some — excuse me, Michael. There are some assumptions for increases in rate that just happen in the ordinary course. We talked earlier about the timing of the rate increases. There is some impact that comes in the third and the fourth quarter and that’s primarily what’s driving that.

Michael Goldsmith

Got it. And then, maybe my follow up question relates to the MH occupancy, right? Like you’re adding sites, which seems to be, I guess, there’s a little bit of a lag before they get filled. And so, that is the headwind on occupancy. So, I guess, the question is maybe, how long does it take to fill a site? How long does it take to go from entering the pool and being a drag on occupancy to getting someone in and being additive to occupancy. I’m just trying to get a sense of kind of like the glide path here of the negative impact and when the positive impact can be felt and support the business and drive revenues

Paul Seavey

Before — I think, Patrick’s going to walk through that before he does, I just want to point out we do provide intentionally for this reason. We do provide the disclosure specifically of the number of sites that are occupied at the end of each period. And so, I can understand the occupancy percentage is something that people are focused on. But growth in the occupied sites is the driver of revenue and that’s why we provide that. But Patrick can talk about how development sites are stabilized.

Patrick Waite

Yeah. And on the MH side, it’s lease up rates can be in the call it 25 to 50 sites on an annual basis. We tend to scale our developments so that they’re in line with occupying the sites and call it a three or four-year period. So, that, I mean that’s the basic math. And then, depending on the project it could vary slightly.

Michael Goldsmith

Thank you very much. Good luck in the back half.

Marguerite Nader

Thanks, Michael.

Operator

One moment for our next question. Next question will come from the line of Steve Sakwa from Evercore ISI. Your line is open.

Steve Sakwa

Yes, thanks. Most of my questions have been asked and answered. But just as I think about the transient RV marina business, I guess, pre Covid that business was running maybe in the high-40s to maybe low-50s in terms of millions of dollars. During COVID, it got up into the 70s and it’s kind of coming back down to earth. Is it your expectation that that business settles back in and around the $50 million mark or is there something structural about that business, whether you’ve added more sites that gives it a higher floor, if you will?

Marguerite Nader

Yeah, I mean, I think that the transient business, we’ve always talked about that the transient business is a volatile income stream. I think, that’s going to continue. It is the feeder for our annual business. So, difficult to point to what the number is going to be because we’ll be bringing new properties into the portfolio. We’ll be converting transients to annual. But, I think that the strength of the transient on a good weather weekend, we see the strength of the transient continue and we continue to be able to convert those transient customers to annual, which is our primary goal.

Steve Sakwa

Okay. And maybe just I guess one quick follow up on expenses. I mean obviously, this year you’ve done a really good job containing expenses growth. Some of the things you talked about, plus the insurance renewal was very favorable. Just as we think about kind of the comp into next year, is there anything else to think about? Just kind of the mix of expense growth, thinking about ’26 at this point.

Paul Seavey

I think kind of the two-thirds of our expense base, i.e. utilities, payroll and repairs and maintenance, those are certainly expense line items that have experienced pressure over time. I think, in an era of uncertainty with respect to increases in costs resulting from tariffs and other drivers and potentially how CPI might impact wages, those are absolutely considerations that we’re focused on.

Steve Sakwa

Great. Thank you.

Marguerite Nader

Thanks, Steve.

Operator

Thank you. And since we have no more questions on the line, at this time, I would like to turn the call back over to Marguerite Nader for closing remarks.

Marguerite Nader

Thank you for participating in today’s call. We look forward to updating you next quarter. Take care.

Operator

[Operator Closing Remarks]