Equity Lifestyle Properties Inc Q1 FY2024 Earnings Call

Good day, everyone, and thank you for joining us to discuss Equity LifeStyle Properties' First Quarter 2024 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. For those who would like to participate in the question-and-answer session, management asks that you limit yourself to two questions so everybody who would like to participate has ample opportunity. As a reminder, this call is being recorded. Certain matters discussed today on 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 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 President and CEO.

Good morning and thank you for joining us today. I am pleased to report the results for the first quarter of 2024. The quality of our cash flow, our in-demand locations, the lack of new supply, and the strength of our balance sheet continue to allow us to report impressive results. In times of macroeconomic uncertainty, we continue to deliver strong revenue growth as well as maintain expense control throughout our portfolio. Our core NOI for the quarter was strong with a 7.1% increase compared to last year, supported by MH and RV rate growth and controlling expenses. Our results for the first quarter and our view for continued strength for the remainder of 2024 support our guidance rates. Over a 10-year period, we have increased the dividend on average 14% compared to the REIT average of 5.5%. Our balance sheet is in great shape with an average term to maturity of nine years. 18% of our debt is fully amortizing and not subject to refinance risk, while our debt maturity schedule through 2026 shows only 11% of our debt coming due compared to the REIT average of 29%. We have spent the last 30 years building a portfolio focused on high-quality coastal and Sunbelt retirement and vacation destinations. We are in locations where active adults want to be. Our customer base is seeking a place to escape from the cold winter and lead an active lifestyle in locations such as Florida, Arizona, and California. We are in states with outsized growth in seniors, and we appeal to the right demographic. The population of people aged 55 and older in the US is expected to grow 15% from now until 2039, with 10,000 baby boomers turning 65 each day for the near future. Our MH portfolio comprises approximately 60% of our total revenue and our properties are 95% occupied. The MH business is unique as once an elevated level of occupancy is achieved at a property, the occupancy becomes sustainable for a long time. For ELS, the key to that stickiness is an elevated level of homeowners in the portfolio, which is currently 96% occupied by homeowners. This composition of our resident base is important to protect an uninterrupted cash flow stream as we welcome new residents to our communities. Our residents enjoy the community found in our properties and focus on building new relationships with their fellow residents. We continue to engage our existing customers and attract new prospects through media outreach, social media campaigns, and targeted digital advertising. Our public relations strategy helps build awareness and credibility through coverage of the lifestyle offered at our properties and interesting stories about our customers who make a difference in the communities in which we operate. Our social media strategy aims to engage both customers and prospects across a wide variety of platforms to reach people where they spend their time. We have almost two million fans and followers across social media networks, having grown our social media presence by an average of 19% annually over the past 10 years. Our property teams in the North are gearing up to open the summer season. This year Thousand Trails will celebrate its 55th anniversary. Thousand Trails is one of America's most well-known camping brands, and we have earned strong customer loyalty with hundreds of thousands of our members making memories with their families and friends throughout the company's long history. We have closed another successful quarter, and our teams will now begin to focus on welcoming our residents to our northern locations as we kick off the summer season. I would like to thank all of our team members for their hard work in making this winter season so successful. I will now turn it over to Patrick, to provide an operational overview.

Thank you, Marguerite. As we wind down the 2023-2024 Sunbelt season and look forward to the 2024 summer season, I will provide color on the Sunbelt season results and a view into the summer season, including drivers of demand. Overall, we continue to see consistent demand across each of our lifestyle property types, reflecting the high quality of our property locations. I will start by highlighting our MH business. Over my 30 years in the industry, my responsibilities have ranged from acquisitions to asset management to operations. Regardless of my area of focus, the consistency of our high-quality MH portfolio has been a constant. MH properties operate year-round, and seasonality is not a consideration. Our MH portfolio maintains high occupancy, with an annual turnover of approximately 10% of our resumes. This turnover results in an uninterrupted revenue stream for ELS, as current homeowners sell their homes to incoming buyers, who pay market rent. Year-to-date, we have seen an average rent increase of 5.6% for renewing residents. Our resident base generally consists of retired individuals who are cash buyers. Due to the high homeowner base in our portfolio, occupancy remains resilient, with a very low delinquency rate reflected in bad debt that typically ranges from 40 to 45 basis points of revenue. This low level of delinquency has been consistent over the last 30 years across all economic cycles. Moving to the RV portfolio, the Sunbelt season runs from December to April, peaking in February. Demand largely comprises snowbirds from the Northern U.S. and Canada seeking the temporary climate of Florida, California, Arizona, and Texas. In Q1, annuals delivered steady occupancy and strong rate growth. Combined seasonal and transient revenue increased in line with expectations, supported by consistent rate growth. It's worth noting that nearly 50% of our seasonal revenue for the full year comes in Q1 during the Sunbelt season, while Q1 transient revenue represents less than 20% of the full-year transient revenue. Looking toward the summer season, which encompasses the 100 days of camping from Memorial Day to Labor Day and spans 14 weeks, this is when our annual customers at 125 summer resorts and campgrounds visit their getaways on weekends, holidays, and summer vacations. Summer season annuals generally have a vacation or lake house, essentially a resort cottage or park model, located on one of our properties. The resorts are now active with customers focused on spring cleaning and preparing their homes for summer activities. In contrast to the seasonal revenue in the Sunbelt season, around two-thirds of our transient revenue for the full year is earned in the second and third quarters. Our reservation pace is similar to last year, with holiday weekends in demand. While booking windows remain similar to last year, they have been short, and therefore we have limited visibility. More than 50% of transient reservations are booked within 10 days of arrival, making them susceptible to short-term disruptions like weather. Finally, I would like to focus on our home sales efforts. Over the last five years, we have sold 4,500 new homes. Investing in these new homes represents an upgrade for the community. The quality of new home construction meets stick-built standards, featuring primary bedrooms with walk-in closets, open floor kitchens with high-end, energy-efficient appliances, and exterior finishes like gable roofs and architectural shingles, while remaining affordable compared to other housing options. We've been able to sell our homes for an average price of about $100,000 with limited concessions. Demand for these homes in our locations is evident from new leads and referrals from current residents, supporting an 8.5% increase in Q1 new home sales year-over-year and more than a 100% increase from pre-COVID timeframes in Q1 2019. The aging trends of 70 million baby boomers currently moving through their retirement years, combined with almost 140 million Gen Xs and Millennials who will follow the boomers into their own retirement years, all support continued generational demand for MH and all of our property offerings for decades to come. I'll now turn it over to Paul.

Thanks, Patrick, and good morning, everyone. I will review our first quarter 2024 results and provide an overview of our second quarter and full year 2024 guidance. First quarter normalized FFO was $0.78 per share, in line with our guidance. Strong core portfolio performance generated 7.1% growth in the quarter, also in line with our expectations. FFO was $0.86 per share and includes $14.8 million of insurance recovery revenue that has been deducted from normalized FFO. Core community-based rental income increased 6.4% for the quarter compared to 2023, primarily due to increases noticed for renewing residents and market rent paid by new residents after resident turnover. We increased homeowners by 123 sites in the quarter, with rental homes currently representing 3.1% of our MH occupancy. First quarter core resort and marina-based rental income increased 5.8% compared to 2023. Rent growth from annuals in the first quarter was 8%. As a reminder, 2024 is a leap year, resulting in an additional day of revenue allocated to the first quarter, yielding higher rate growth than we expect in subsequent quarters of 2024. Our first quarter rent from core RV seasonal and transient generally performed in line with expectations, with seasonal rent increasing 2.4% and transient rent increasing 1.4% compared to first quarter 2023. For the first quarter, the net contribution from our membership business, which consists of annual subscription and upgrade sales revenues offset by sales and marketing expenses, was $14.9 million, an increase of 3% compared to the prior year. The net deferral impact for the quarter was $3.2 million. Subscription revenues increased 2.7% due to rate increases effective for 2024. During the quarter, we sold just over 800 upgrades. Our average upgrade sale price increased 4%, with the percentage of sales attributed to our adventure upgrade product representing 28% of our first quarter 2024 sales. Core utility and other income increased 5.6%, which includes pass-through recovery of real estate tax increases from 2023. Our utility income recovery percentage was 46.5%, about 70 basis points higher than the first quarter of 2023. First quarter core operating expenses increased 3.9% compared to the same period in 2023. Growth in real estate taxes and insurance reflects the run rate impact of increases that took effect after the first quarter of 2023. Repairs and maintenance decreased compared to 2023 when we incurred expenses to recover from several winter storms. Utility expenses reflect moderating rate growth along with reduced gas consumption, particularly in California. We renewed our property and casualty insurance programs on April 1, with the premium increase of approximately 9%. We are pleased with the result, which reflects no change in our program deductibles and expansion of coverage limits for named windstorm damage. Core property operating revenues increased 5.8%, while core property operating expenses increased 3.9%, 50 basis points lower than the midpoint of our guidance. This resulted in a growth in core NOI before property management of 7.1%, 10 basis points higher than the midpoint of our guidance. Our non-core properties contributed $5.3 million in the quarter, in line with our expectations. The press release and supplemental package provide an overview of our 2024 second quarter and full year earnings guidance. The following remarks 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. Our guidance for 2024 full-year normalized FFO is $2.89 per share at the midpoint of our guidance range of $2.84 to $2.94, an increase of $0.01 per share compared to prior guidance. We project full-year core property operating income growth of 5.8% at the midpoint of our range of 5.3% to 6.3%. Full-year guidance assumes core base rent growth in the ranges of 5.6% to 6.6% for MH and 4.5% to 5.5% for RV and Marina. We assume occupancy in our stabilized MH portfolio will remain flat compared to the first quarter. Core property operating expenses are projected to increase 4.2% to 5.2%. Our full-year expense growth assumption includes the benefit of first-quarter savings in repairs and maintenance and payroll expenses, along with the impact of our April insurance renewal for the remainder of 2024. Our guidance model includes the impact of the fixed-rate swaps we disclosed in our earnings release and supplemental package. The full-year guidance model makes no assumptions regarding other capital events or the use of free cash flow we expect to generate in 2024. Our second quarter guidance assumes normalized FFO per share in the range of $0.61 to $0.67. Core property operating income growth is projected to be 4.6% at the midpoint of our guidance range for the second quarter, representing approximately 23% of our expected full-year core NOI. In our core portfolio, property operating revenues are projected to increase 5.1%, with expenses projected to rise by 5.6%, both at the midpoint of the guidance range. Now, I would like to provide some comments on our balance sheet and the financing market. As noted in the earnings release and supplemental package, we executed fixed rate swaps on our $300 million unsecured term loan maturing in 2026. The swaps fixed the all-in borrowing cost at 6.05% through maturity. We are pleased with this execution as it eliminates floating rate exposure, except for balances outstanding from time to time on our line of credit. Current secured debt terms vary depending on several factors, including lender, borrower sponsor, and asset type and quality. Current 10-year loans are quoted between 6% and 6.75%, at 60% to 75% loan-to-value, and 1.4 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 the best financing terms. Regarding our liquidity position, we have approximately $470 million available on our line of credit, and our ATM program has $500 million of capacity. Our weighted average secured debt maturity is almost 10 years. Our debt to adjusted EBITDA is 5.1 times, and interest coverage is 5.2 times. We continue to place high importance on balance sheet flexibility, believing we have multiple sources of capital available to us. Now we would like to open it up for questions.

Yes, guys. Thanks for the time. I just wanted to dig into the guidance update a little bit. It looks like you lowered your RV and Marina revenue range midpoint by 40 basis points. I'm assuming there's a corresponding drop in expenses. Is that all transient-related, or is it somewhat Marina? I guess how do you think about the mix here?

Yes. I think Josh, maybe it'll help if I walk through the process. When we think about our budget and reforecast process for seasonal and transient rent overall, I'll start by framing the timing and composition of those revenue streams. During the first quarter, we earned approximately 50% of our anticipated full-year seasonal rent and almost 20% of our full-year transient rent. By the end of the second quarter, we've earned almost two-thirds of our anticipated full-year seasonal rent and close to 45% of our full-year transient. In the third quarter, we earned almost 40% of our transient rent. We've talked often about the impact of weather on those variable rental income streams, particularly concerning the short booking window for transient customers. I mentioned in January that when we prepared our 2024 budget, we focused on reservation pacing at that time for rent we anticipated earning in the first quarter. We had expectations for modest rates of growth in subsequent quarters. We're pleased with our first quarter results for both seasonal and transient, especially seasonal, which represents half of the seasonal ramp we expect this year. Our guidance update for the second quarter and full year employs the same methodology we use for budgeting. We focused on reservation pacing for rent we anticipate earning this quarter and did not assume any change to our original budget assumptions for the third and fourth quarters. Our current view on second-quarter reservation pacing reflects some softness, mainly as a result of weather in April. I think Patrick can provide a little more color on that.

Yes. During the first half of April, precipitation was significantly above average in California, the Midwest, and the Northeast, particularly in California where the RV portfolio experienced precipitation around 300% of average. California has had more precipitation in the first half of April than in the entirety of April last year. This has been a headwind for the business. Some markets in the Midwest and the Northeast have also experienced above-average rainfall by about 200%. The relatively cool and wet Sunbelt season in Florida and the mild winter in the Northern U.S. resulted in a difficult year-over-year comparison regarding seasonal guests, extending from Q1 into Q2. This has resulted in seasonal guests declining for the winter season.

Okay. I appreciate that color. And then maybe just on the Thousand Trails membership. It looks like it dipped in the quarter. I'm just curious what's driving that? Is this just normal seasonality, or any color would be helpful?

Sure, Josh. There is certainly some seasonality to that. At the end of the quarter, we had around 119,000 members. Those members consist of both dues-paying members and free trial members. The drivers of the decrease include a reduction in free trials and a reduction in sales activity. Typically at the property level, we see most of that happening in the first quarter of other years. I think there's a few things to focus on regarding the membership line. If you go back to the beginning when we started operating the Thousand Trails properties, which was in 2008, you'll see some years with a drop in member count. Even with that decrease in those various times, we've managed to grow the dues revenue base significantly through rate increases and additional product offerings. So, I think you'll continue to see us do that.

Thanks for the color.

Great. Thanks. And good morning.

Good morning, Jamie.

Hi. To start, I want to follow up on the 9% insurance renewal. Can you discuss the assumptions that were initially included in your guidance? Additionally, how much did the overall reduction in property expense growth, specifically operating expenses, come from the lower-than-expected insurance premium? Are there other areas in your expenses where you are experiencing more savings than you initially anticipated?

Yes. Generally, Jamie, we're pleased with the 9% premium increase on renewal. In terms of other line items, we observed a reduction in our repairs and maintenance expenses that were savings on R&M. Some of that was timing-related, and we've included that in the reforecast moving forward, but there was meaningful savings compared to our budget that we consider permanent in repairs and maintenance.

Okay. And then on the insurance side, how did the 9% compare to your initial guidance?

It was favorable.

Yes, as we all know that. I mean can you ballpark it? A lot of people were thinking like 20% to 30%. Were you that high or maybe not?

We didn't have an assumption as high as 30% in our budget, no.

Okay. All right. And then I guess second question is just I know you have said in the past not a lot happening on the distressed acquisition front. But maybe provide an update as we are further into the cycle and the banks seem to be working through more loans. Is anything starting to look more promising or interesting that we might be able to get your hands on?

Sure. We continue to have discussions with owners, but the overall market has been slow, as you point out. There is very little distress in the market regarding owners of our assets. The owners have generally been conservative over the years with their balance sheets and have the luxury of taking the time to transact. I think it's a good idea, Jamie, to consider a longer-term perspective on how we've grown as a company from 41 properties 30 years ago to 450 properties today. The acquisition environment has been episodic. There have been a few times in our history where we've had a very low level of acquisition volume followed by a year of outsized growth. We work on planting the seeds for that growth over the years and are ready to act when it makes sense for us.

Okay. Are you foreshadowing that it could get better soon, or just flagging that you keep working on it?

Yes, I think we continue to be in conversations with owners. To the extent we have closings, we'll let everyone know as soon as we have information to share.

Do you think there are opportunities to get involved in the capital stack like debt investments? Or do you think anything you do would be straight equity?

No, we have looked at it in the past, certainly a debt structure where we have the ability to own the asset at some point. We have also looked at management along those same lines. We continue to explore unique structures that could make sense for us.

Okay. All right. Thank you.

Thank you, Jamie.

If I look at your other income and ancillary services, it's about 9% of your revenues. I know a lot is just utility income, but I was curious whether you're implementing any new initiatives to grow the other piece of it. I would assume that the RV members and MH tenants might want bundled Internet or smart home equipment, but I'm curious if there's an opportunity to grow that part of the business more quickly?

Before that, Eric, we talk about some new initiatives, which I would characterize as modest in terms of generating incremental revenue. I would point to a couple of things. First, utility income, as you mentioned, we've continued to segregate utility charges from rents and build customers for those. We also had the impact of real estate tax pass-throughs driving some growth in 2024 compared to 2023. Additionally, we do have business interruption insurance proceeds impacting that line item year-over-year.

Got it. Yes. I guess it takes discussion on some departments and call it adding like 50 basis points revenue per year. But it doesn't sound like there's probably something that's going to be there. So, my second question is whether you mentioned the collection of property taxes. I'd just like to know how that's going so far and if you could share what you sort of baked into your forecast this year for that specifically.

In terms of the recovery, we have notified those customers for the amounts they have been paying. No issues with that. It represented about 95% of the increase we realized in the MH portfolio, the amount that we built back to the customers.

Got it. Is there a way for us to think about the aggregate amount that could be considered other income? I don't know if there's a deal like a $1 million number that's embedded in there.

It's a little tricky when you think about it quarter to quarter, but for the full year, because of the timing of the leases and when those pass-throughs might start, it's a couple of million dollars in recovery.

Thank you, Eric.

Good morning. Thanks for taking my questions.

Good morning, Michael.

Can you hear me?

We can hear you. Good morning.

Good morning, guys. In the prepared remarks, you talked a little bit about the reservation piece being similar to last year. Is that less encouraging than you're expecting at this point in the year? Or was the base case kind of in line with last year?

I think it's in line. When we consider the reservation pacing that we used for seasonal and transient, the seasonal is tracking in line for almost 80% of that second-quarter rent, which is consistent. We often discuss the variability in transient but the current pacing is in line with our expectations, with no surprises.

Got it. My second question relates to how demand for transients has been choppy over the last couple of years, but a pleasant surprise has been the ability to match expenses with that demand. As you think about the outlook for this year, what have been the learnings from managing payroll to transient demand? Are there preparations in place to flex up or flex down payroll depending on how transient reservations play out through the peak transient period?

There is a considerable focus on matching the resources we have on site, particularly with transient customer flow. As an example, we use seasonal employees to provide services and activities for those transient customers. This morning, I spoke with one of my SVPs about our plans for ramping up for the summer season in the upcoming weekends.

Yes. Thanks for the time, guys. Just first, your non-core portfolio outlook was increased. I'm curious what's driving that?

The non-core primarily reflects a mix of performance. It's a bit tricky given the business interruption proceeds and the restoration of properties impacted by the hurricane, leading to an uptick as we return to normalized business operations.

Got it. Bigger picture, looking at your rental loan portfolio, there is a notable decline on a year-over-year basis and a drop of over 100 units sequentially. I'm curious what's driving this and how should we think about this relative to the mix of home sales versus the potential for you to add homes that you don't sell to your rental portfolio this year?

Certainly, what's driving activity is people buying homes. They may be renting the home and want to buy it, or someone within the community is interested in purchasing that home. Over the past few years, we've seen a significant conversion of rental homes to owned ones, successfully reducing our rental program from a high of about 9% down to around 3%. This is a function of demand for our properties and people wanting to enjoy that lifestyle.

Hi. Good morning, everyone. Hey, Marguerite, can you expand on the property and casualty insurance renewals? I know it was up 9%, and to a previous question, it is less than what you had initially baked in. Can you walk us through the process and conversations you had to achieve a lower premium increase, as it is surprising based on what peers have been reporting?

Of course. We provide quite a detailed disclosure in our filings concerning our insurance program. It can be challenging to compare with other REITs or companies because specifics aren't always available. However, we believe we have done a thorough analysis of where we ended up. The process involved considerable time and effort to ensure carriers appreciated our properties and understood our offerings. Additionally, our claims experience has been good, which helped in discussions as we headed over to London for negotiations.

Okay. Got it. My second question is around the transient business. Paul or Patrick, what are you expecting for transient to be down this year? I know the combined number of seasonal and transient might suggest a flat to down outlook, but can you provide expectations for seasonal and transient?

As we consider those revenue streams and volatility, we've adopted a practice over the last couple of years of combining those for guidance. We believe this helps reduce some volatility seen quarter-to-quarter, so we don't have a transient number independent of seasonal.

Good morning.

Good morning.

Just one question on expansion sites. I know historically, you aim to deliver about 1,000 per year. Last year, it was a bit lower than that. Can you talk about the constraints to doing more in terms of delivering expansion sites?

Certainly. As you mentioned, we were just shy of 1,000 last year, which has been our goal. For the current year, we foresee delivering around 700 to 800 sites. One of the variables putting pressure on the timeline is the process of getting plans through the approval stages, which can frequently include multiple steps. You submit development plans and need to pull permits. If there are comments, you have to resubmit. This process is often lengthy, especially in higher-activity markets. For example, Florida is experiencing pressure due to continued recovery efforts from Hurricane Ian and high construction activity levels.

Do you think that's a structural headwind? Is it likely that you will consistently deliver in the 700 to 800 range going forward, or is it just timing this year?

I would mainly attribute it to timing. We'll manage through those headwinds. I expect that they will subside over time. For perspective, we currently have over 1,100 sites under construction, so the timing of completion and getting shovels in the ground on the pipeline will play out. I anticipate we will be back to the neighborhood of 1,000 sites on a run-rate basis, although there may be occasional headwinds.

Hey, guys. Good morning. What drove the decline in seasonal sites? It looked like there was a change from 12,500 to 11,800. Do you think it will remain at this level?

The seasonal site count adjustment reflects a change in occupancy across the seasonal footprint, primarily driven by locations in California and the South, associated with transient workers. We have traveling nurses and construction workers who stay on our properties for longer and qualify as seasonal. That is the driver.

Okay. Are you seeing any pushback on the price increases for your various Thousand Trails upgrade options? Are you noticing more members moving up the tiers or more moving down?

Regarding membership upgrades, we haven't seen any issues with the pricing. Members are excited to upgrade and receive additional benefits. However, during COVID, we had a higher number of upgrades than expected, and we're now seeing that trend return to pre-COVID levels.

Hey, guys. Thanks for taking my question. I know it might be too early to tell, but have you seen any benefits from the recent changes to increase the loan limits of Title I manufactured housing?

A couple of things on that. A, it is early to tell, Anthony. B, the vast majority—over 95% of our customers pay cash for homes in our communities, so there isn't much reliance on financing in our portfolio.

That would likely help you sell those homes, right? Some of those loans go up to $195,000?

Right. Customers come and purchase homes in our communities for over $100,000, often paying cash.

This aligns with our long history of customers paying cash, adding to ownership feelings at the property level.

Got you. Do you expect the membership to start growing again since RV shipments are up 15% this year?

Certainly, increasing RV shipments is a positive overall for our business, including the membership side.

Thanks for the time. Paul, are the revenue declines for the seasonal and transient businesses over the balance of the year that's implied in your guidance solely driven by the rainy April and tough seasonal RV comp in Q2? Or are there signs of price sensitivity from customers?

The adjustment is mainly for Q2, driven by the April activity that Patrick discussed.

I would love to hear your insights on shifts in the transaction market. I know the volumes are quiet right now, but we are observing deeply negative leverage given the secured financing costs you mentioned. Assuming interest rates remain stable, where would you expect MH cap rates to settle with ELS quality product in the coming quarters when more transaction volume comes in?

It is challenging to predict where cap rates will trend based on the current environment. Over the past 18 to 24 months, there have been few deals. Pinpointing cap rates requires more robust markets with numerous data points. However, demand for our asset class remains very high; people are interested in owning these properties. Most owners are hesitant to sell, and we see strong demand from new entrants.

Thank you for the time.

Thank you for joining us today. We look forward to updating you on the second-quarter call. Take care.

This concludes today's conference call. Thank you for participating. You may now disconnect.