Good day, everyone, and thank you for joining us to discuss Equity LifeStyle Properties' Third Quarter 2022 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 risks and uncertainties. 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 the SEC regulations. 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'd like to turn the call over to Marguerite Nader, our President and CEO.

Good morning and thank you for joining us today. Yesterday afternoon, we issued our supplemental and provided additional information about the impact of Hurricane Ian, which made landfall in Florida 20 days ago. Our team members, some of whom suffered personal losses from the storm, have worked tirelessly to restore our properties and assist our residents and guests. The results of the cleanup and restoration efforts over the last 20 days are nothing less than extraordinary. We have prioritized the safety of employees, residents, and guests as we began the cleanup efforts, in some cases hampered by a lack of utility service. The strength of our infrastructure and the homes in our communities, particularly the newer homes, was evident in Florida after the storm. Over the years, we have developed a detailed hurricane preparation plan, which includes significant advanced planning. As soon as the storm passed, our property cleanup and restoration efforts commenced. We have a coordinated program including having vendors on call to arrive at communities as soon as the storm passes to mitigate additional damage and return to normal operations as quickly as possible. In just 20 days, we have made significant progress towards cleaning up and restoring our communities. We see the best in our homeowners with neighbors helping neighbors. After the storm, we have seen an increase in customer traffic driven by displaced residents as well as emergency workers looking for a location to spend the winter months. Our teams will continue to work with those impacted to accommodate those customers at our RV parks across Florida. We believe we have adequate insurance, subject to applicable deductible, to cover the expenses associated with Hurricane Ian, including business interruption insurance. The timing of payment under business interruption insurance may result in revenue recognized in subsequent periods; we will have a better estimate of the timing of the proceeds in the coming months. I want to thank the Florida team for protecting our communities and supporting our residents during this time. Patrick will provide additional details on restoration efforts at the conclusion of my comments. Turning to the results for the third quarter, we delivered strong normalized FFO growth of 8.5%. Our MH revenue grew by 5.9%. Over the last several years, we have seen increased demand for owning a home in our property. Our rental pool is at the lowest point since 2010 with 4.3% of our occupancy comprised of rental homes. Our portfolio is comprised of 96% homeowners. This quality of our resident base is important. Following storm events, we see our resident base quickly addressing any damage to their homes caused by the storm. Our RV revenue performed in line with our expectations, with a growth of 8.6% seen in annual revenue and a decline of 2% in seasonal and transient RV revenue. This decline is a result of the decreased number of available transient sites after being converted to an annual site over the last year. Our first-time transient customer returning from last year showed a desire to strengthen their relationship with us, with nearly 20% of those returning coming in as annual seasonal or members. Inflationary pressures, specifically with respect to utility costs, negatively impacted our performance in the quarter. Paul will provide more detail on the specific drivers for the increase in our expenses. During the quarter, we sold 331 new homes. Over 95% of these new homebuyers were cash buyers. This investment is consistent with our entire portfolio as the vast majority of our residents have made a capital commitment to live in our communities. The commitment from our homeowners results in pride of ownership and a long-term resident base. Turning to 2023, we anticipate continued demand into next year within our MH portfolio. By the end of October, we anticipate sending 2023 rent increase notices to approximately 51% of our MH residents. These rent increase notices have an average growth rate in the range of 6.2% to 6.6%. For our RV portfolio, we have set annual rates for 95% of our annual sites. The RV annual rate increases have an average growth rate of 7.6% to 8%. Our Snowbird residents and guests are anxious to head back to Florida and Arizona for the season. Our teams are prepared for their arrival and will continue to focus on providing outstanding customer service. I will now turn it over to Patrick to provide an operational update.

Thank you, Marguerite, and good morning, everyone. During the two weeks following Hurricane Ian’s landfall, we leveraged our Florida properties impacted by the storm. Our ELS team members are extraordinarily committed to cleanup and restoration efforts to return the properties to their pre-storm conditions. The majority of our properties suffered limited damage, and to the extent they were closed for the storm, they reopened shortly after the storm passed. Several properties that were closer to the center of the storm suffered damage from high winds and flooding from storm surge. After a storm event, the primary cleanup efforts are focused on debris removal, and we have pre-staged vendors to move in as soon as possible after the storm. Property level responses were quickly underway at all accessible properties. Our restoration efforts at properties were hampered by road or bridge access, which has not yet been restored to full capacity, and in some cases, partial power or the lack of power at the property. We have six properties where we need additional time to estimate the timeframe for reopening. Two of those properties are located in areas only accessible by bridges, and damage caused by the hurricane delayed access to those properties until we had access again from the mainland over restored bridges. Our storm response included ELS teams providing assistance to residents and guests. Bottled water and food were prepared and served by our ELS team while coordinating with local restaurants, food trucks, and resident groups. Through our Make a Difference program, we made donations to groups and organizations supporting our communities. We also worked to coordinate with local county and state responses on the ground wherever necessary. For residents who suffered hardship as a result of the storm, our charity, Consider Others, provides financial grants for residents and guests during difficult times. We are focused on restoring our properties and, in the process, assisting members of our ELS team, residents, and guests of our communities who experienced losses from this storm. I'd like to take this opportunity to thank all of the ELS team members, especially the property support staff, for supporting residents, guests, and each other through the challenges of the hurricane. I'll turn it over to Paul to offer our results.

Thanks, Patrick. Good morning, everyone. I'll provide a summary of our operating results for the third quarter and year-to-date periods, including the drivers of our core operating expense growth during the third quarter. I'll also provide some information about the assumptions we use to build our updated guidance model for the full year 2022. I'll close with some comments on our balance sheet and debt market conditions. In our earnings release, we've reported a third quarter and year-to-date normalized FFO per share of $0.70 and $2.07, respectively. These represent growth rates of 8.5% and 9% for the quarter and year-to-date periods, respectively. Core property operating revenue increased 5.3% and 6.5% in the quarter and year-to-date periods, respectively, compared to the prior year. Growth drivers for MH and RV rents were discussed by Marguerite. I'll touch on the drivers for the remaining 20% of our revenue. Membership dues revenue for the third quarter increased 6.1% compared to the prior year. During the quarter, we sold approximately 7,200,000 Trails Camping pass memberships. While membership upgrade sales volume in the third quarter was lower than last year, the average sale was more profitable primarily as a result of an average 20% increase in the upgrade sale price. Core utility and other income was higher than expected during the quarter in part as a result of utility income that offset higher than expected utility expenses. In a moment, I'll discuss the elevated increases in utility rates, particularly related to electricity. Year-to-date, our utility recovery is approximately 44%, the same rate we experienced in the first nine months of last year. Property operating expenses were higher than expected during the third quarter. I'll note that given the timing of Hurricane Ian making landfall at the quarter's end, we were not able to estimate probable costs to restore affected properties. Therefore, we did not accrue expenses in the third quarter related to cleanup or restoration efforts. Utility expenses were the primary driver of increased expenses in the quarter compared to the prior year. Electric expenses increased almost 17% compared to last year. The expense increase is comprised of average electric rate increases of 14%, with the remainder of the increase caused by increased usage. RV Communities in the South and Northeast experienced rate increases ranging from 16% to almost 30%. These elevated rate increases have been implemented by electric utilities with little or no advance notice, making it challenging to predict the impact on our expenses. Our year-to-date core property operating revenue growth of 6.5% and core property operating expense growth of 8.3% has attributed to an increase in core NOI for property management of 5.3%. I’ll now discuss our full year 2022 guidance updates. As a result of the potential impact of the hurricane on our fourth quarter results, we provided updated guidance for full year 2022 per share, net income FFO, normalized FFO, and we withdrew guidance for core revenue expense and operating income growth rates for the remainder of 2022. The full year guidance ranges we provided include various assumptions related to the impact from the hurricane. These include possible loss of occupancy, an increase in bad debt expense, costs to remove damaged homes held for sale or rental in impacted communities across Florida. We've also made assumptions related to the temporary interruption of operations at certainly impacted properties, including the six that are currently closed. As we stated in our earnings release, we believe we have adequate insurance coverage, subject to deductibles, for business interruption, but we are unable to predict the timing or amount of insurance recovery. We're still determining the gap elements of insurance recovery, including business interruption that are to be recognized as revenue upon receipt. Before we open the call for questions, I'll discuss debt markets and our balance sheets. In this period of volatility and broad economic uncertainty, ELS is well-positioned with a debt maturity schedule that shows less than 6% of our outstanding debt matures over the next three years, and around 20% of our outstanding total debt matures over the next five years. This compares to an average total debt maturity for REITs of approximately 45% over the last five years. In addition, 23% of our outstanding secured debt is fully amortizing, eliminating refinancing risk. We have no year in our schedule when more than $300 million of outstanding debt matures. Current secured debt terms available for MH and RV assets range from 50% to 75% LTV based from 5.5% to 6% for 10-year maturities. High-quality, age-qualified MH will command the best financing terms. RV assets with a high percentage of annual occupancy have access to financing from certain life companies as well as CMBS lenders. Life companies continue to express interest in high-quality communities, though some have set limits on capacity and pricing. We continue to place high importance on balance sheet flexibility and we believe we have multiple sources of capital available to us. Our debt-to-EBITDA is 5.2 times and our interest coverage is 5.7 times. The weighted average maturity of our outstanding secured debt is almost 11.5 years. Now, we would like to open it up for questions.

First question comes from Michael Goldsmith with UBS. Your line is open.

Good morning. Thanks for taking my question. Can you discuss the reasoning behind the MH rent increases of 6.2% to 6.6%? This appears to be below the inflation trends we've seen throughout the year, especially recently, so what factors are leading to rent growth that falls short of inflation at this time?

Sure, Michael. I think Patrick can walk you through our methodology. It’s a process that we go through every year and then arrive at a number in September and October. So maybe Patrick can take you through that.

Yes, so as we move towards the back half of the year and are preparing for our annual budgets, we work through market surveys that include comparable MH properties as well as alternative housing in the sub-markets around each one of our properties and we come up with a recommended rate increase. I'll speak to Florida as about half of the portfolio. There is a statutory process in place where the owners of the community sit down with the HOA and the community. They come with their view of the process that I just described, and we walk through it and discuss the respective views on the market and settle on a rent increase going forward. That also includes ongoing conversations about our properties with respect to our homeowners' priorities, where they want to see improvements, changes in things like activities, so that we're all on the same page with respect to the long-term operations of the property. Just with respect to the overall mix of the rate increases, we have market rate increases across the portfolio, that's about half of our overall rate increases. To your point, I would expect that to approximate CPI, although it's going to be driven by market forces across the portfolio. Our CPI rate increases are about 25% of the overall portfolio. Depending on how CPI trends month-over-month and quarter-over-quarter, that's going to drive exactly what that number works out to for the full year. And in Florida, we typically have two to three-year long-term agreements. As I mentioned that process earlier, we may land at a view towards a two or three-year rate increases for an HOA, and that may lag the CPI expectations. So that could be easily in the 4%, 4.5% range. Over time, those will trend toward market including the recognition of CPI impacts. And just as a reminder, also, in Florida, when a current homeowner sells to a new homeowner, that new homeowner will pay the market rate upon renewal of that lease on an anniversary date. That kind of touches on all the buckets. I hope that answers your question.

Maybe just a related follow-up on that. As you have your conversations with your customers or your tenants, are they looking to maybe push back certain capital projects in order to keep kind of rent growth lower in the near term, given that the rent increases or rent growth, are higher than usual with the expectation that maybe some of these projects are done in future years? And that would kind of raise rents in future years?

I think what we're seeing, Michael, is that the in-place residents where there's been some mark-to-market. So some of those rent increases have already occurred, and we've seen that about 11% for the year. So that type of increase, and new customers coming in, are very willing to pay that. We do have the discussion about what the capital needs of the property are. But I think people are cognizant of what's happening with CPI. The discussions have been going well, very well so far, being able to talk about where we should spend capital and what the rent increases should be.

Got it. And then for my second question, the gap between the expected 2023 MH rent increase of 6.2% to 6.6% and the RV annual rent increase of 7.6% to 8% is 140 basis points. Last year, at this time, the gap was 30 basis points. So what's kind of the difference in the pricing power that you're seeing on the RV side relative to MH? And how sustainable is that?

I mean, I think we see real demand on the RV side, specifically on the annual side, with people wanting to spend the season or come down and stay with us on an annual basis. So that's really driving it. It's really market forces. We look at our market survey. We look around and see what's happening in and around our communities. That's what’s formed that rent increase.

Thank you very much.

One moment for our next question. Our next question comes from Nick Joseph with Citi. Your line is open.

Thank you. It's obviously a quiet quarter for transaction volume this most recent quarter. But what are you seeing more broadly across the transaction market as cap rates adjust to higher interest rates and capital costs?

Yes, Good morning Nick. I think in the quarter, you're right, we required relatively quiet. We purchased two pieces of vacant land that were adjacent to one of our manufactured home communities in Florida, and then one near one of our manufactured home communities in Chicago. Those are properties that we put under contract over the last year, and then we intend to develop over the next couple of years. So that's kind of what happened in the quarter. And then relative to the pipeline, what we're seeing is similar to the past. There has not been a notable change in cap rates. However, I think that tends to take a little bit of time; owners are seeing fewer buyers, but they still have many interested parties. Brokers do a great job of marketing deals. I think fear of continued rising interest rates may present an incentive for owners to become sellers, especially when there's a refinancing term on the horizon. So I think some of those opportunities may come up in the near future.

Thank you. That's helpful. And then just on the insurance recoveries. I recognize it's very hard to forecast, but just historically with other storms, what was the timing and percentage recovery associated with damages or cleanup?

Yes, Nick. Our best example for recovery is looking back to Hurricane Irma from 2017. Based on our experience from that storm, we think about the business interruption which is a key component, as I mentioned in my remarks, that is recognized upon receipt. The storm occurred earlier in September of 2017, and it was the first quarter of 2018 when we started to recognize those business interruption proceeds. It continued to be a process, and it was about an 18-month timeframe that we collected those proceeds on a quarterly basis.

Thank you.

Thank you. One moment for our next question. Our next question comes from John Kim with BMO. Your line is open.

Thank you. Good morning. The reduction in guidance for the year surprised the market negatively, especially considering that just a couple of weeks ago, you assessed that the hurricane would not have a significant impact on your operations. I'm curious about what changed in the last couple of weeks. Was the assessment more negative than initially thought? Or are you indicating that there are other factors contributing to the reduction in guidance besides Hurricane Ian?

I think John potentially we have a timing issue. I think there's an expectation on our side that we'll have a recovery of insurance proceeds to offset the impact. Overall, when you think about our financial condition, our view is that there's not a significant impact. There is, however, a timing impact in the fourth quarter as it relates to the expenses we incur, or the experience that we will have relative to the closure of certain properties. And as I just discussed, the timing of the receipt of business interruption proceeds.

Okay. Regarding the fourth quarter guidance, how much of the reduction is due to the timing impact compared to rising interest rates? The transient RV came in lower than expected. What other factors contributed to this? I'm curious about how much of the utility expense is a one-time rate increase versus something that will normalize over time. What were the other factors, aside from Hurricane Ian, that influenced the fourth quarter guidance?

Sure. I appreciate it. I mean, there's a lot that goes into a forecast model. Every quarter, our team conducts a review to identify potential changes to the prior model. It's almost like we prepare a mini-budget every three months. As I think about our third quarter results and the potential influence they may have had on assumptions we might have made for the fourth quarter, but for the hurricane, in the hypothetical we're talking about, I'll say we would have had adjustments to revenues and expenses, likely both of them increasing. That likely would have resulted in a potential decrease in our core NOI compared to prior guidance. I'll also say, though, that we would have adjusted our expectations for other line items. Based on trends we saw in the quarter and that we've seen year-to-date, it may have offset the decline in NOI. All of this is hypothetical because of the impact of the hurricane. At the end of the day, based on our model, we find ourselves in a situation where the potential impact of the hurricane is equivalent to the reduction in our guidance for the rest of the year.

So just to clarify, and I realize there's a lot of moving parts, is the majority of the reduction due to Hurricane Ian, or can you ballpark what percentage that is?

The reduction, when I think about potential lost occupancy, when I think about the closure of the properties and the impact of those lost revenues, the potential for us, too, as I said during my opening remarks, incurs bad debt and so forth. All of that rolled together is the reduction to our guidance.

That's right. So John, the reduction to FFO is because of the hurricane.

It's very helpful. Thank you.

One moment for our next question. Our next question comes from Samir Khanal with Evercore ISI. Your line is open.

Hey, good morning, everybody. Marguerite, Paul, my question is around expense growth. I guess putting the hurricane aside, how should we think about expense growth, maybe into next year? I mean, you've guided to 5.7% and you're clearly above that sort of range for the year, I'm trying to figure out how sticky these higher expenses are as we think about 2023 next year?

So year-to-date, our expense growth is 8.3% in the core. The reported increase in CPI averaged 8.3% for both the quarter and year-to-date. So all in, we're essentially in line with CPI. Now utilities, payroll, and repairs and maintenance are about two-thirds of our expenses. Those categories have increased about 10.5% in the year-to-date period. It's really utilities and repairs and maintenance that have been elevated while payroll has increased in line with CPI. For utility expense, it's almost 30% of our core expenses, and electric expense is the largest component of our utilities representing somewhere between 35% and 40% of the total annual year-to-date electric expenses, which increased 16% driven by outsized rates. The increases that we've seen are in line with increases in the electric component of CPI. The September CPI report showed electricity, year-over-year, was up more than 15%. As I mentioned in my remarks, these rate increases occur suddenly, with little or no advance notice before the bill arrives. We have not experienced such rapid and significant increases in utility expenses this year compared to past years. Overall, we recover somewhere in the 44% to 45% range in terms of expenses on an annual basis. You'll see some fluctuation quarter-to-quarter because the RV properties don't recover the utilities from transient customers. The long-term strategy that we have to mitigate utility costs is to unbundle and charge residents and guests for their usage, but that is challenging with the transient RV guests. With respect to R&M, I note that about 15% of our core expenses include expenses related to unplanned events, local storms, and related cleanup costs. But over time, those do not rise to the level of uninsured loss. As we look at it, we see that representing about 5% of our R&M expense on an annual basis. Long-term mitigation plans affecting those expenses include investment in infrastructure that reduces our exposure to costs following those significant rain events, as well as landscaping, tree trimming, and so forth to mitigate wind-related damage.

And I think Samir, as you've seen in 2022, we've really provided additional detail about the composition of our core expenses and Paul has gone through a lot of that, which we think is very helpful to create an earnings model so you can see the components of the expenses.

Right. No, I understand that. We're just finding it a little bit difficult to model expenses. I mean, you started the year with 4.8%, I think was your guidance, and then you get to 5.7% and now you're tracking close to 8%, so we're just trying to figure out for 2023, how to kind of model that. As a follow-up, how are you thinking about electricity rates in the next year? As we think about it, is this another year where you can model another 7% to 8% for next year, and that's kind of the reason for the question?

I think it's early for us to talk too much about 2023. Our call in January, where we'll certainly talk about our budget, will be the appropriate time. The pressures in the areas where our properties are located, especially in the Northeast and South, in particular, the spot pricing for natural gas that drives electric energy prices continues to be elevated. We are watching closely the monthly CPI reports, particularly for the energy components, especially electric and natural gas. I think that'll be a key factor as we develop our budgets for 2023. Again, given how quickly and significantly these rates have changed, we are subject to that volatility on a go-forward basis.

I understand. As a follow-up, I noticed that your FFO guidance has decreased by $0.06 at the midpoint, primarily due to the impact of the hurricane, which accounts for around a $12 million loss. Can you provide some guidance on Hurricane Irma? Specifically, how much of the $12 million impact do you believe you have fully recovered? Was it 90% or 80%? What do you expect to recover over time?

Yes. If you review our public filings, you'll find that the total estimate for the overall claim is in the range of about $35 million to $36 million, and the recovery we mentioned was approximately $31 million. Regarding the impact on the profit and loss statement, I mean cash spend and recovery, the majority of the expense we recognized—over 95%—was recovered.

Got it. That’s very helpful. Thank you.

One moment for our next question. Our next question comes from Brad Heffern with RBC. Your line is open.

Hey, good morning, everyone. Thanks for taking my question. You talked about the timing mismatch from the hurricane. So just to clarify, once the business interruption insurance kicks in, would you expect any meaningful ongoing financial impact?

Well, I guess the way I'll answer that, Brad, is the business interruption will likely be recovered on a lag, so it won't necessarily be a perfect match in the timeframe that we receive it. But over time, the expectation is we would recover proceeds equivalent to the loss.

But the focus is on getting the properties back up and running, so that we don't rely on the business interruption insurance. That's the plan.

Yes. Okay. Got it. And then, I guess broadly, are you seeing any signs of stress in the portfolio? You can kind of take that where you want to take it, but I'm sort of thinking about things like bad debt, maybe unusual levels of cancellations on the RV side, anything like that?

No, we’re seeing strong demand for home sales, particularly from our recent rent increases in both the annual RV and MH sides. This is very encouraging as we enter our peak seasonal period, which is strongest in the first quarter, and we’re experiencing solid demand for seasonal stays. While we do monitor for any signs of weakness, we remain confident overall. There’s a waiting list for people wanting to buy our homes, but meeting demand quickly is challenging. Overall, we are optimistic about the demand for our portfolio.

Okay. Thank you.

One moment for our next question. Our next question comes from Joshua Dennerlein with Bank of America. Your line is open.

Hey Marguerite, hey Paul, hey Patrick. Hope you guys are doing well. I guess I was just curious on the expense side. Is there anything you can do to kind of control the expenses in the near term, I guess, in particular maybe on the labor front? I know some of the resi peers have kind of implemented changes during COVID and post-COVID to kind of help on that front. Anything that you can do on that platform?

Yes. I think, Josh, we have talked about some technology initiatives. I will say that the decentralized nature of some of our operations hasn't resulted in some efficiencies compared to maybe the resi peers that have shared service centers and are able to automate a function and reduce labor costs as a result, because ours is spread across all of our properties in terms of their responsibility for things like administration, oversight of expenses, and so on. But I do think that we've implemented a focus on improving the resident and guest experience. Over time, as we're able to leverage that, I think you should see some savings in our overall cost structure.

And then we're also focused on that utility recovery piece of the business. So maximizing that and making certain that we're doing whatever we can from a sub-metering standpoint and from just a billing standpoint to collect that revenue, which will offset the expense on the utility side.

Is there any way on the utility side to put a surcharge on when you like to see the right volatility spiking, just to try to get it more near-term?

There are regulations concerning what can be charged and how it's categorized. However, we do utilize sub-meters when possible and charge the appropriate rates based on those readings. We can also adjust rates through transient revenue to account for any increased utility expenses.

Have you considered hedging utilities at all to smooth out the price swings, even if it might be too costly?

I guess our focus has been more on deregulated markets where we can enter into contracts to fix those costs. That's certainly relevant in Texas. It is relevant in the Northeast, although it has been somewhat challenging to find opportunities that have worked in terms of the economics.

Thanks, guys.

One moment for our next question. Our next question comes from Robin Lu with Green Street. Your line is open.

Hi, morning. I just want to ask about the MH rent increases again. So based on current trends, do you expect the next half or the next batch of MH residents to see rate increases above or below the mid-6% average that you disclosed in the stock?

Yes, it's Patrick. I would expect it to continue to trend in a similar fashion. Just one point I'll make with respect to the next batch. I addressed it earlier that a new resident coming in, to the extent that there is a gap to market as the incoming market rate, that has been trending 10% plus year-over-year.

So just to give some context around that, so it's 11%, what would that have been, say, a few months ago?

It's pretty much been 11% throughout the year, what we've seen on the mark-to-market.

So Robin, we have about 10% turnover. We've noticed an increase of about 100 basis points related to those market increases.

Got it. So just wanted to shift towards the transaction market. So is there any widening cap rates in the seasonal and transient RV properties relative to annual RVs in recent months?

There haven't been many transactions recently, making it challenging to gather those data points. Generally, I've suggested that transient RV parks should have a higher cap rate due to the volatility in their income stream. However, I don't have specific examples of transactions from the past six months or year-to-date to reference concerning that.

Great. Thank you.

Thank you, Robin.

One moment for our next question. Our next question comes from Anthony Powell with Barclays. Your line is open.

Hi, good morning. I have a question on home sales. I think you mentioned that it was hard to get homes to sell to the prospective new customers. Could you maybe talk about the availability of the homes to sell and maybe just trends in that market, given what you're seeing elsewhere in the for-sale residential market across the country?

Sure, it's Patrick. What we've seen, and this has been pretty consistent in the post-COVID new normal, is we have been able to acquire homes from manufacturers to maintain occupancy growth in that 30 to 60 a quarter range on a net basis. We could be growing our occupancy more than that if we could get more homes. There have been challenges on the manufacturing side with respect to labor and supply chain, as we've seen in many other industries. So I would expect that the pace that we're currently moving at will continue until there are some structural ways or some structural shifts to pick up the volume of manufacturing.

Got it. Thanks. And maybe one more, just maybe on the guidance on the FFO numbers for this year next. When you provide guidance for full year 2023 in January, will you be including prospective BI insurance receipts in that guidance? Or is that something that you would kind of let happen and report as it comes in?

It's a little early to determine what we would be including. We will certainly be receiving proceeds in 2023, but we'll probably have a better update certainly by NAREIT and then as we head into the first quarter in the January call.

Great. Thank you.

Thank you, Anthony.

One moment for our next question. Our next question comes from Mason with R.W. Baird. Your line is open.

Hey, good morning everyone. Thanks for taking my question. Have you seen any change to seasonal bookings for next year following Hurricane Ian? I guess do you expect guests to be more unsure of how the surrounding area will be doing with all the rebuilding?

Yes. We've seen an increase in seasonal reservations in general, but that’s what we generally see when the storm passes. After hurricane season, which concludes in November, we get through hurricane season. The phones start ringing, it gets really cold in Chicago and New York, and people tend to forget about the hurricane and they come on down. If there are impacted areas where they can no longer stay because of storm damage, that has impacted those areas specifically. They tend to go to another area just focused on getting out of the winter—the cold winter months—and stay with us in Florida and Arizona, where the sun is going to be for January, February, and March.

That’s all from me. Thank you.

One moment for our next question. Our next question comes from John Kim with BMO. Your line is open.

Thanks for taking the follow up. You had a footnote about not taking an impairment charge this quarter, but you reduced the carrying value by $3.7 million. I know that's not a huge amount, but I thought those two items were just anonymous. So I was wondering if you could clarify that.

Yes. I think maybe I might fall into the category of learning too much or knowing too much, John, but let me just walk you through. So our accounting policy for impairment identifies natural disasters as a potential indicator. Consequently, we took a look at the impacted properties and there's an exercise we have to test the recoverability of net book value through estimated future cash flows. All of those tests show that the net book values are recoverable. So from that perspective, there was no impairment of the long-lived assets based on recoverability. Then there's a second part to the impairment analysis, which we conducted over the past 20 days, an extensive review of the condition of the properties impacted by the hurricane. Our internal operations and asset management teams, along with third parties, were visiting the properties, and during that review, the team identified assets that suffered significant damage from the storm. Based on their informed opinions of the extent of the damage and other relevant information we currently have, we reduced the carrying value of those damaged assets to match the current condition. That is the expense, the impairment, effectively that you see from the damages to the assets on that line item in our income statements.

And are those damages on homes that you had planned to sell or on the new rent? Or is it wider than that?

Yes. There is a portion of the assets that were damaged. Some of the homes that we held for sale and rent in our properties.

So we're in the process of repairing those homes and getting them ready for sale and for rental if rental is appropriate.

Okay. My second question is there's been some estimates out there on homeowner insurance in Florida increasing by as much as 50% next year. And I'm wondering how that impacts ELS? Do you expect to have a similar increase in your insurance in Florida? Or are you insured more on an entity level? And if you could remind us how your tenants are insured if they typically have homeowners insurance?

Sure. So why don't I take the last half of that first, just in terms of the homeowners. I think I mentioned in my opening remarks that 96% of our residents are homeowners; they own the home versus renting. For the vast majority of that group, they pay for their homes with cash, and therefore, they have equity and pride of ownership in those homes. We don't track or require insurance for our homeowners. We have seen in prior storms a lot of insurance adjusters come out and provide activity at the properties as they work through their claims. There right now, as you drive through the properties over the last couple of weeks, there are still an awful lot of people out there repairing their homes and going through the normal things they go through as the storm passes. With respect to our insurance, our current program expires in April of next year. Lloyd's of London has led our MH-RV property insurance program since 2009. We believe we have a really mutually beneficial relationship. Some markets will assess the impact of the hurricane and other loss events. Although I think the 2023 market, which is a long way off, April is a long way away and a lot of things can happen, will depend on the 2022 hurricane season. Our real experience is that the underwriters assess the risks by the portfolio and each insured portfolio composition and then the loss experience. That kind of determines their pricing for 2023. Following Hurricane Irma, the markets adjusted and we renewed our program, and it wasn't an issue. So more to come on that as we start the New Year.

Do you recall what the increase was after Irma?

Yes. We've seen 20% increases in our insurance expense. When you look back over the past five years since Irma, it's been about a 20% increase per year.

Got it. Great.

Thank you, John.

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

Thank you for joining us today. We look forward to updating you at our next call. Take care.

Well, ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.