Oct 17, 2017
Operator
Good day, everyone, and thank you all for joining us today to discuss Equity LifeStyle Properties' Third Quarter 2017 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 meaning of the Federal Securities Laws.
Our forward-looking statements are subject to certain economic risk 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. Reconciliation 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.
Marguerite Nader
Good morning and thank you for joining us today. Today, we'll be focused on a detailed review of the third quarter, our initial 2018 guidance and our rationale for the recommended 2018 dividend increase.
The results from the quarter reflect the continued strong demand for our products and properties. For as long as I've been at the ELS, we've been looking forward to the baby boomer generation coming-of-age.
That time is now as 10,000 people per day are turning 65 and entering our target demographic. This trend will continue each day for the next 13 years.
Our customers appreciate our lifestyle offerings and the social aspects of community living. We continue to build on our successful multi-channel marketing campaigns, incorporating social media and advanced marketing analytics.
As we approach this time of year when the seasons change and it begins to get cold in the North, our customers are making their plans to escape to the South. The demand for our product offering is high as seen by web traffic, call center traffic, reservations and sales.
About half of our revenues booked through our call center and digital channel. Both channels have a significant increase in revenue booked versus last year.
In the third quarter, we continue the positive trend in occupancy gains, and we are currently 94% occupied at our MH properties. The occupancy growth in the quarter was 95 sites.
In the quarter, we sold 173 new homes. Our average new home sales price for the quarter was $58,000 and 50% of our new home sales were in Florida and Colorado.
This quarter, we had our strongest quarter for rental conversions with the conversion rate of 23%. Our sales platform incorporates the use of open houses, referral programs and targeted Internet marketing.
We have now completed our summer marketing campaign. As we did last year, we focused on 100 days of camping between Memorial Day and Labor Day and ran a social media promotion, which had a social media reach of 5.1 million as we encouraged consumers to post pictures of themselves enjoying our properties.
The summer social media campaign increased year-over-year reach by over 35%. This campaign leveraged our over 400,000 fans and followers across multiple social media platforms.
Turning to 2018, each year, we finish our budget process in October and provide detailed projections for the following year. We have issued guidance of $3.84 for next year, which is a 7% growth in FFO per share.
Certain line items like seasonal and transient activity require more visibility to be able to forecast with more accuracy. As is our practice, we will update guidance at each quarter as we have more knowledge about reservations at the property level.
We anticipate that we will continue to see the same positive trends from 2017 coming into 2018, including strength in our RV footprint and increased MH ownership transaction. I would like to update you on our proposed 2018 dividend policy.
The ultimate decision for the dividend is a board-level decision that is typically done during our fourth quarter Board of Directors' meeting. We feel it's helpful to highlight management's recommendations and rationale with respect to the dividend.
Each year, to arrive at a recommendation, we review our projected growth in FFO and our outstanding obligation with the goal of ensuring our underlying financial flexibility. In addition, we stress test our future obligations, including factoring in an increased interest rate environment to ensure that we can continue to meet our obligations.
The stress test reveals the strength of our balance sheet that has been fortified over the years with longer term maturities. Our current average term to maturity is 13 years, more than double the REIT sector average, and has an average coupon of 4.5%.
This compares favorably to five years ago when our average term to maturity was five years with an average coupon of 5.1%. The stability and growth of our cash flow, our solid balance sheet and the strong underlying trends in our business had led our management team to recommend a $0.25 increase in our dividend to $2.20 for 2018.
Over the past five years, we have increased our dividend 122%. Going back in history even further shows that this is our 14th consecutive year of dividend growth.
Please note while this is management's recommendation, the Board has not yet met to discuss this. Now I would like to comment on the recent hurricane that impacted the entire state of Florida.
Our first concern was for our residents, guests and employees, and we are pleased that we did not suffer any fatalities or injuries as a result of the storm. The storm's trajectory caused it to impact almost every ELS property to varying degrees.
As with prior storm events, we prepared in advance and were able to begin the cleanup process shortly after the storm passed. The ELS team was focused and driven towards the goal of resuming operations as soon as possible.
Our response time in the field to the storm was impressive. Our two RV properties in the Keys sustained damage to the utility systems and we're currently working on repairing the systems.
We intend to open on a limited basis as soon as the beginning of November with the remaining sites coming online thereafter. I would like to express my gratitude to the teams who have worked tirelessly to ready the properties for our residents and guests.
Each of our employees was dealing with their own personal circumstances in addition to going above and beyond to fulfill their ELS duties. Their energy and enthusiasm for the tasks was impressive.
The coordination effort from cleanup to restoration to communication was well-orchestrated and well-executed. The relatively limited damage caused by the storm to the homes in our communities is a testament to the stability and durability of the homes.
Since 1992, there have been improved building standards for manufacturers homes which significantly mitigated the damages at our communities. We are looking forward to finishing this year strong and executing on our 2018 plan.
I will now turn it over to Paul to walk through the numbers in detail.
Paul Seavey
Thanks, Marguerite, and good morning, everyone. I will review our third quarter results, walk through our detailed guidance assumptions for the remainder of 2017 and discuss our preliminary guidance for 2018.
We reported $0.91 normalized FFO per share for the third quarter, $0.02 ahead of our guidance. Core property operations generated higher-than-expected revenues, mainly resulting from insurance proceeds related to prior periods storm events as well as our recognition of income to offset expense related to Hurricane Irma, which I'll discuss in detail in a moment.
Other income and expenses were higher than guidance as a result of the contribution from our ancillary property operations, interest income and some nonrecurring corporate income. Before I discuss third quarter results in detail, I'll walk through the impact of hurricane Irma on our results for the quarter.
In the weeks since the storm passed through Florida, we've assessed the impact on our properties, made initial estimates of costs related to identify damage, and made good progress on our efforts to clean up and restore normal operations. As we completed this work, we looked for indications that our post-Irma experience might differ significantly from our past storm events in terms of the type of impact on our properties, time and effort required to resume operations, access to resources to provide cost estimates and perform work as well as other factors.
While the storm impacted a larger number of properties than we had experienced in the past, aside from the time to restore operations at our two properties in the Keys, there aren't meaningful differences between Irma and our prior storm experience. Our process to review cost estimates and improve restoration work for the Mainland Florida properties that have been open for the past month as well as the two Keys properties that are not yet reopened, is thorough, and we expect it to take time before it's complete.
Based on our assessment and available information at the end of the third quarter, we recognized expense of $3.7 million related to property damage and restoration work that has been approved and/or completed to date at our properties. Based on our evaluation of these costs and our review of the potential insurance claim and our estimate of the related deductible, we recorded a revenue accrual of $3.5 million during the quarter.
It is important to keep in mind that the storm occurred just 20 days before the end of the reporting period. We plan to provide an update on our next quarterly conference call.
Core based rental income was up 5% compared to last year, slightly higher than forecast, with 4% coming from rate and 1% coming from occupancy. Our year-to-date occupancy gain of 350 sites is the result of increasing our homeowner count by 599 and reducing rental occupancy by 249.
Year-to-date, we have sold 430 new homes, including 126 through our ECHO joint venture. Our Core RV revenues were lower than guidance in the quarter.
Annual and seasonal revenues showed strong growth of 6% and almost 19%, respectively. Growth in annuals was primarily the result of rate increases across our on-Core and Thousand Trails portfolios.
Seasonal revenue outperformance was driven by our West region resorts. Transient revenues in our northern resorts, mainly in Wisconsin and New York, were not as strong as expected during the quarter.
Membership dues revenue was higher than guidance in the quarter. During the quarter, we sold 4,400 Thousand Trails camping pass memberships.
Year-to-date, we have sold approximately 11,700 camping passes. Upgrade sales volume in the quarter was 757 units at an average price of approximately $5,600.
The net contribution for membership sales and expenses was higher than guidance as a result of sales of our higher cost to upgrade product. Utility and other income is higher than guidance, mainly from the Hurricane Irma revenue accrual I previously mentioned.
In addition, during the quarter, we received insurance proceeds from prior storm events. In the quarter, Core property operating expenses were higher than forecast, mainly from Hurricane Irma expenses.
The remainder of the variance is primarily the result of increased utility expenses. Water and sewer expenses were higher than projected in the West and North regions.
Overall, Core NOI before property management grew 7.1% in the quarter. Year-to-date, Core NOI increased 5.2%.
Core revenues were up 5.6% and Core expenses have increased 6.2%. NOI from acquisition properties was $1.5 million in the quarter.
Year-to-date, the acquisition properties have performed as expected and have contributed $6.7 million of NOI. Property management and corporate G&A expenses of $20.7 million were slightly higher than guidance because of increased spend on technology initiatives during the quarter.
Other income and expenses were higher than guidance as a result of ancillary activity, interest income and a nonrecurring corporate income item. Financing cost of $27.3 million were in line with guidance.
Year-to-date normalized FFO is $2.72 per share, a growth rate of 8.7% over 2016. The press release and supplemental package provides fourth quarter and full year 2017 guidance in detail as well as preliminary 2018 guidance.
As I discuss guidance, keep in mind my remarks are intended to provide our current estimate of future results. All growth rates and revenue and expense projections represent midpoints in our guidance range.
Our fourth quarter normalized FFO guidance is approximately $81.6 million or $0.87 per share at the midpoint of our guidance range. We expect core NOI growth of 4.4% in the fourth quarter to contribute to 4.9% core NOI growth for the full year.
We assume no floor MH occupancy gain during the quarter. Looking ahead to the fourth quarter in our RV business, our current annual, seasonal and transient reservation pace is in line with our expectation.
Our fourth quarter Core property operating revenue and expense growth assumptions don't include assumptions related to any additional impact as we continue our assessment of damage caused by storm events, including Hurricane Irma. For the full year, we expect Core revenue growth of 5.1% and Core NOI growth of 4.9%.
Guidance for financing cost and other in the fourth quarter includes the impact of the capital events I'll discuss later when I talk about our balance sheet. Normalized FFO at the midpoint of our guidance range is about $335 million or $3.59 a share, a growth rate of 8.4%.
The midpoint of our preliminary guidance range for full year 2018 normalized FFO is approximately $361.3 million or $3.84 per share, this represents a 7% increase over 2017 normalized FFO per share. Growth in Core NOI before property management is expected to be approximately 4.4%.
Our projections of Core NOI and normalized FFO growth for 2018 assume fourth quarter 2017 results will be consistent with our stated guidance. Consistent with our past practice, we plan to update guidance on our January call, and we may adjust growth rates on certain line items after we finalize results for 2017.
We assume no growth from incremental occupancy we may gain in our Core MH properties during 2018. Base rent is expected to grow 4% with 3.7% coming from rate and 30 basis points from occupancy as a result of sites we filled in 2017.
In our Core RV resort business, we expect 4.9% growth in 2018. Our annual revenues are expected to represent more than 60% of our total RV revenues, and we expect 5.3% growth, mainly as a result of increases in rate across our portfolio.
We project 3% growth in seasonal revenues and 4.9% transient revenue growth. During the first quarter we expect to generate more than 50% of our seasonal revenue for the year and just over 20% of our transient revenue.
Though the winter season is still weeks away, we considered our seasonal and transient reservation pace for the first quarter 2018 when developing our guidance assumptions. In total, our right to use annual payment revenue, right to use contract sales and sales and marketing expenses are expected to contribute approximately $48.6 million in 2018 compared to $47.8 million in 2017.
We assume sales and activations of 32,800 Thousand Trails camping passes next year. In 2018, we expect to sell approximately 14,700 camping passes, and we expect the RV dealer program to generate 18,100 additional memberships.
Core property operating maintenance and real estate tax expenses are assumed to increase 1.3% in 2018. As we built our budget for repairs and maintenance expenses, we assumed normal run rate operations.
Historically, we have not assumed expenses related to property damage or other one-time items in our guidance. Adjusted for the impact of Hurricane Irma in 2017 as well as storm events earlier this year, the 2018 Core property maintenance and real estate tax expense growth rate would be approximately 2.7%.
Our guidance for acquisition properties includes the expected contribution from the property we acquired during the second quarter of 2017. The expected contributions from the joint venture investments we've made this year are included in other income and expenses and will appear in our equity and income of unconsolidated joint ventures when we report their results.
We assume no other acquisition activity in our 2018 guidance model. Our guidance for financing cost and other includes the impact of capital events I'll discuss now as I provide some comments on our balance sheet.
During the third quarter, we repaid debt maturity at $6.9 million secured loan bearing interest of 6.47%. We also redeemed our $136.1 million 6.75% Series C preferred stock.
The main source of proceeds was $146 million 20-year 4.07% fixed-rate loan we closed with Freddie Mac. We closed yesterday on a $204 million 20- year secured facility loan with Fannie Mae, bearing a 3.97% fixed rate of interest.
Proceeds were used to repay our 2018 maturities. We incurred approximately $2.7 million in prepayment penalties associated with the debt repayment and have included this amount in our fourth quarter guidance.
We have obtained commitments from our bank group for our $600 million unsecured credit facility and expect to close before the end of the month. The recast of our current facility has a $400 million line of credit component and a $200 million term loan component.
The line of credit matures in four years and at current leverage metrics, our all-in interest rate floats at LIBOR plus 125 basis points. The term loan matures in 5.5 years and at current leverage metrics, our interest rate is LIBOR plus 125 basis points.
Finally we have increased our potential capacity by expanding the accordion feature from $100 million to $200 million. Current secured debt terms are 10 years at coupons in the 3.75% to 4.25% range, 60% to 75% loan-to-value and 1.35 to 1.5 times debt service coverage.
The GSEs and life companies continue to quote MH RV deals at rates loan inside CMBS. We continue to see interest in long-term financing options from life insurance companies although we note they have limited capacity until their allocations reset at the beginning of 2018.
High-quality age-qualified MH assets continue to command best financing terms. We continue to place high importance on balance sheet flexibility.
Our interest coverage is 4.4 times and our line of credit has $400 million of availability. Now we'd like to open it up for questions.
Operator
[Operator Instructions] Our first question comes from Drew Babin with Robert W. Baird.
Drew Babin
Hi good morning.
Marguerite Nader
Good morning Drew.
Drew Babin
Quick question on the Marina deal. I was hoping you could talk about the yield economics on that and a little more about how those leases are set up.
Marguerite Nader
Sure, as far as the economics it operates very similar to our other JVs where we're getting our pro rata share of the FFO. And the cap rate on that deal is kind of between a six and a seven cap.
With respect to the leases, really, it's very similar to the RV business where you have annual, seasonal and transient kind of revenue. So that's based on – the length of stay determines the lease.
Drew Babin
Okay, and just one quick question on the balance sheet. It looks like the guidance for the fourth quarter, there's a decent uptick in shares.
And so I was just wondering if you could recap any quarter-to-date ATM activity that may have transpired, or anything that you may expect to transpire behind the share count guidance?
Paul Seavey
As we noted in the press release, we raised $41.5 million in third quarter. There was some incremental ATM activity that carried over into October, but it wasn't a significant amount.
So most of it is representative of what was raised in the third quarter.
Drew Babin
Okay, that is all from me. Thank you.
Marguerite Nader
Thanks Drew.
Paul Seavey
Thanks Drew.
Operator
Our next question comes from Joshua Dennerlein with Bank of America.
Joshua Dennerlein
Hey guys just wanted to kind of stick with the Marina. Can you maybe discuss how the JV acquisition came about, and then maybe what your future plans are for Marina industry?
Marguerite Nader
Sure, sure, so we’ve been talking with the operator, Suntex, who's a well-known operator, seasoned operator who operates 44 marinas across the country. And we really – we see the Marina businesses having a similar characteristics, cash flow characteristics as the RV business.
I talked earlier with Drew just about the seasonal annual transient nature of it. But it also has kind of the high barriers to entry, fragmented market, stable cash flow and the primary revenue coming from the lease payments and then a significant focus on lifestyle activities.
And we actually already own approximately 12 marinas. They're located in and around our RV parks or MH properties.
And so from an acquisition standpoint, we've been looking at these types of assets for a number of years, and we thought it was a good entry point with an experienced operator. So that's kind of the rationale behind it.
Joshua Dennerlein
Just one follow-up. Do you think maybe you could eventually buy out the JV partner for the other half?
Marguerite Nader
So we're currently JV partners with Suntex in the Loggerhead portfolio, which is the portfolio we addressed, I think, in our last presentation, which had 11 locations in Florida. And then with respect to the greater Suntex portfolio which is that – the 44 marinas, ELS has rights to convert into the parent and increase its invest across a wider marina footprint based on certain criteria.
It's a little too early to tell terms of when that would happen.
Joshua Dennerlein
Okay, great. I yield the floor.
Paul Seavey
Thanks Joshua.
Operator
Our next question comes from Gwen Clark with Evercore ISI.
Gwen Clark
Hi, good morning.
Marguerite Nader
Good morning, Gwen.
Gwen Clark
Can you talk us through the process you went through to get to the 3.7 and what takes of cost you might be able to expect in upcoming quarters?
Paul Seavey
Sure. I mean, over all, I'd say that as we work on the restoration efforts at the Mainland Florida resort that have been opened for the past months as well as those in the Keys that aren't yet reopened, the team's working with internal and external resources to execute on the recovery efforts.
As I mentioned, we didn't see meaningful differences between the impact of Irma and past storm events, but we do think that process is going to take time. It's not uncommon for our efforts to be slow because of difficulty finding third-party contractors to quote on and performance necessary repairs.
And we're also working with the carriers and their adjuster to get the feedback about the expected recovery from the carriers. So all of that kind of rolled together prevents us at this point for being able to estimate the total cost relating to the storm.
And so that what we had available to us at the end of the quarter is what we used to book our revenue and expense amounts. And again, as I mentioned in my remarks, we're talking about a 20-day period from the time of the storm to the end of the quarter.
Gwen Clark
Okay.
Marguerite Nader
And I think, Gwen, what you're going to see is in terms of the majority of the costs are going to be coming out of those – the Keys properties, the two RV properties.
Gwen Clark
Okay. So for the projects that you were able to evaluate so far well in 3Q, does that mean that your out-of-pocket was only $200,000 ultimately?
Paul Seavey
Well, I mean, we have a whole timing issue there. In terms of the out-of-pocket spend, it was a nominal amount in the quarter.
Yes, just because, again, the timing of the storm and then the timing at the end of the quarter.
Gwen Clark
Okay. And then one last one, did you capitalize any cost related to these projects that you were able to evaluate?
Paul Seavey
We had a nominal amount that was capitalized in the quarter. It was nothing significant.
Again, it speaks to the timing of the event and the cutoff for the quarter.
Gwen Clark
Okay. Thank you very much.
Paul Seavey
Thanks.
Marguerite Nader
Thanks, Gwen.
Operator
Our next question comes from Nick Joseph with Citigroup.
John Ellwanger
Great, thanks. This is actually John here with Nick.
In Florida and Texas, do you guys expect to see an increase in acquisition opportunities following the hurricanes?
Marguerite Nader
No, we obviously have experience with hurricane events in specifically 2004, 2005. We did see some acquisition opportunities where sellers were just – they were kind of on defense on whether or not they wanted to sell and this is something that pushed them over.
It's something that takes place within weeks or a month after the storm. It takes a little bit of time, so I think there may be some opportunities there.
John Ellwanger
Okay. And then how about hurricanes impact occupancy if at all?
How are you guys thinking about that?
Marguerite Nader
Well, we are actually – as we look to the MH side of our business, which is where the primary occupancy driver is in terms of our overall occupancy rate, for October, as we look at who has kind of paid us through October and we look like – we look very good from an occupancy perspective relative to the hurricane, there really weren't a lot of homes that we saw that were damaged that caused people to not pay rent for October.
John Ellwanger
Okay, thank you.
Paul Seavey
Thanks.
Operator
Our next question comes from John Kim with BMO Capital Markets.
John Kim
Thanks, good morning. You talked about the increase in occupancy and the high rental conversion rate you had on the MH side.
But I'm just wondering if there was any ability to increase expansion sites as a result of this?
Marguerite Nader
I'm sorry, you broke up at the end, or to expand?
John Kim
Expansion sites, any abilities to increase that activity?
Marguerite Nader
Sure. So we anticipate that in the year, we would build out about 600 to 700 sites this year, and the same next year is where we are at.
And certainly, the driver of that and the determination of kind of where we go next is the demand that we see. We see a lot of demand in Florida and Arizona for being able to build-out sites.
The process does take some time from a standpoint of starting it, getting the permits and construction engineering. So a lot of it, even if there were to start something today, we wouldn't kind of have it off the ground until sometime in the next year.
So those numbers that I've given you are probably – are good numbers for the next couple of years, or through 2018, anyway.
John Kim
And your 5,300 acres of development land, can you just update us on how much of that land is entitled?
Marguerite Nader
Roughly, the majority of it is entitled relative to whatever the use is adjacent to it. So if it's an RV Park, it's entitled to be able to build RVs.
And MH, it would be entitled to build MH.
John Kim
Okay. You discussed in length about the impact of Hurricane Irma to expenses, but I'm wondering if there was any impact on the – or if it added any uncertainty to rate increases for 2018?
Marguerite Nader
I mean, what we saw that kind of the week leading up to the storm in Florida and the week after it was kind of difficult to focus on anything but the storm. But the storm passed, and really, the phones started ringing and the reservation pace resumes, so that's on the RV side.
On the MH side, we had already – really, we were in the process of about to send out our rent increase letters. We sent them out in the middle of September.
And we continued that process and we're able to send out notices as planned. So we really didn't see any big – any impact at all.
John Kim
So based on your history with hurricanes, do you think there's going to be any additional pushback or any wider range of outcomes on your rates requests?
Marguerite Nader
No. I think what we see is just a high demand overall, and that's really what generates the ability to push the rates.
I think we said in the past and Patrick has mentioned in the past that our resident base – we meet with our resident base and our homeowners associations on a regular basis and they may have some desire for some capital needs or they may decide that they would like an addition to the clubhouse or something like that, some additional amenity and that may be something that we may be discussing. But I don't think that the rate is an issue.
John Kim
Okay. And then just a follow-up on the Marina.
So on your total sites listed in your supplemental on Page 12, do all of your marina flips fall into the joint venture category, or are they elsewhere as well?
Marguerite Nader
They fall into the joint venture category.
John Kim
Okay. So how big can this be, the 5,900 marina flips that relative to RVs?
How big do you think that business could be for your company?
Paul Seavey
Well, 5,900 represents the sites that we have at JV properties and includes the Marina flips, which we previously disclosed were around 2,300, just to clarify.
John Kim
Okay. And so how big can this be relative to RVs over time?
Marguerite Nader
So if you think about just the marina industry at large, there are 4,500 marinas in the United States, 500 of which are considered kind of institutional quality. And less than 5% of – I think there's four or five owners that make up probably less than 5% or 10% of the total market share, so there's a lot of – highly fragmented, so there's a lot of opportunities for acquisitions.
John Kim
And you described this as a high barrier to entry market. Can you just elaborate on why that's the case?
Marguerite Nader
Sure. In areas where we would want to be located like the Loggerhead portfolio, for instance, it's difficult to build new marinas to get the entitlement to be able to build them.
That might not be the case in any kind of a more Midwestern lake-type of thing, but in the areas where we've made the investment, it's difficult.
John Kim
Okay. Thank you.
Marguerite Nader
Thank you.
Operator
Our next question comes from Todd Stender with Wells Fargo.
Todd Stender
Thanks. Just to stay on that theme of the marinas, what was your going-in cap rate, I guess, for your pace of the investment?
Marguerite Nader
So the going-in is between the six and seven cap.
Todd Stender
Okay. And you funded it all with equity.
Do you plan on netting debt over time? How can you maybe get a little higher return on that?
Paul Seavey
I think one thing that we see in the marina space similar to what we saw in the RV space when we entered it back in 2004 and 2005 was an ability to kind of institutionalize, so to speak, the asset class. Right now, I think that the financing market for marina tends to be similar to project financing in terms of bank balance sheet financing.
And as our experience with Suntex grows, our expectation is that we would introduce lending relationships that would be interested in longer-term kind of conventional 10-year real estate financing on the Marina space. So that's part of the overall plan, but we're not there yet.
Todd Stender
So secured financing, certainly not subject or available for Fannie and Freddie, but some type of 10-year paper?
Paul Seavey
Correct. Correct.
Todd Stender
Okay, thanks. And then just go back on your rate growth continues to be impressive.
Can you point to specific markets you did really well and maybe some of the growth rates that got you that 4% plus growth rate in the quarter?
Patrick Waite
Sure. And you're looking at the MH side of the business?
Todd Stender
Exactly.
Patrick Waite
Florida has been strong for us, particularly the coastal markets. That's also reflected in our occupancy, if you look at the coastal markets in Florida where basically 96%, 97% occupied.
The balance of Florida is more in the mid-90% range. The Western United States is similar for us.
We have a relatively small portfolio in the Pacific Northwest where we've seen consistent high occupancy and strong rate growth there. California has done well for us, particularly where we have the opportunity to mark-to-market on turn over.
In Arizona, which is highly concentrated in the Phoenix, a little over 97% occupancy, and our rate growth there has been consistently strong.
Todd Stender
I know historically we never see new supply in the MH space, but are you guys seeing anything? Does the 96%, 97% occupancy in certain markets suggest that we could see new supply?
Marguerite Nader
I think that the – there's certainly some one-off developments across the country, but nothing of any – nothing that's going to change the lexicon of limited to no new supply in the MH business and the RV business. But I think that what you'll see is an opportunity where we have land adjacent to, that fully entitled ability for us to kind of pick up that activity.
I just don't see a lot of greenfield development to the extent that it impacts the overall pieces of no new supply.
Todd Stender
Sure. Thanks, Marguerite.
And then back to you, Paul. If you don't mind one last question on the balance sheet.
Did I hear that right, did you pay off your 2018 debt maturities already?
Paul Seavey
Yes. So we closed the loan yesterday with Fannie Mae, $204 million at 3.97%.
We used the proceeds to repay the 2018 maturities, and we've dialed in to our guidance for the fourth quarter, the early debt retirement cost associated with that activity.
Todd Stender
Okay. What was that cost?
Paul Seavey
$2.7 million.
Todd Stender
Okay. Thank you.
Paul Seavey
Thanks Todd.
Marguerite Nader
Thanks Todd.
Operator
[Operator Instructions] Our next question comes from Ryan Burke with Green Street Advisors.
Ryan Burke
Thank you. Just wanted to continue, first of all, with the balance sheet.
Paul, you continue to utilize pretty low cost secured debt and term loans. How do you weigh that out?
At what point it makes sense for ELS to become a true long-term unsecured borrower?
Paul Seavey
We've looked at that quite a bit, Ryan over the last few years as we've pursued the strategy of the long term secured debt. I think that the challenge for us is the uncertainty with respect to the treatment that we get from rating agencies.
We've had conversations with them about ELS, about our cash flow. And I think that subjecting our business model and our balance sheet to review by a third party that doesn't necessarily have the resources to fully understand our niche asset class, that's a risk that we've not been able to get ourselves comfortable with.
Ryan Burke
Okay.
Paul Seavey
I'd say the other element of it is just the level of activity that you have to have to be an efficient borrower in the unsecured market is beyond kind of our historical typical annual maturities challenging to kind of hit that $250 million, $300 million plus level in our business with our balance sheet.
Ryan Burke
Okay, makes sense. Switching back over to insurance, I guess particularly in terms of hurricanes given the recent events.
Insurance for the homeowners themselves on their own homes, do you have a feel for what percentage of your residents have insurance in what the typical plan covers?
Paul Seavey
We don't track the insurance that our customers carry. We don't require them to have insurance.
And it's one of those kind of personal decisions that our customers make that when we attempt to inquire of them, we don't necessarily get any answers as to whether or not they have it. So I'd say that generally, there are policies available to them, but whether they choose to purchase them, we don't have that information.
Ryan Burke
Do you know if there's penalties in place in the event that they walk away from the home if it's destroyed by weather?
Paul Seavey
If there are penalties…
Marguerite Nader
The majority of these homes are owned outright all cash, so they would be walking away from their own asset.
Ryan Burke
Yes. Okay.
And then on property level insurance, you do have business interruption insurance. Can you just explain what that covers and for how long?
Paul Seavey
Sure. So the business interruption coverage, it provides coverage for essentially what you would expect, which is the loss of income as a property.
The period of time that it covers, there's a restoration period. So the period from the time of the event until the property is restored to its condition, equivalent condition prior to the event, plus there's a 12-month period beyond that.
Ryan Burke
Okay. Okay.
Interesting. And then last question is just on new home sales, which were down during the quarter year-over-year.
Do you have an estimate of what that trend might have been had the hurricanes not happen? Or are there any broader trends that you're seeing from a new home demand front?
Patrick Waite
Yes, it's Patrick. Let me just talk about the trend for the quarter first, and then I'll address overall trends.
We did see a temporary slowdown in Florida as a result of the hurricane, but we also found it to be somewhat encouraging because the week following the storm, we were going through some new news home closings. So we saw demand that was a little bit of the disruption to the trend.
We were off roughly 13 or 14 home sales in Florida year-over-year. Mostly, we would attribute that to the impact of the storm.
With respect to the broader market, Colorado, particularly the Denver market, has done very well for us over the last three or four years. We're achieving high occupancy rates there.
So the marginal increase in occupancy is a little bit more difficult to come by in that submarket and that probably contributed a bit to the slowdown as well for the quarter. But overall, we see solid demand.
Our needs on the space were up 20% year-over-year. So we're encouraged with respect to the trend in upcoming quarters.
Ryan Burke
Any notable increase in demand for other states? It feels like Colorado's been strong for some time.
But any positive trends otherwise?
Patrick Waite
In particular, Florida. And then California and Colorado and Arizona are all highly occupied, so very, very consist demand.
And the pockets of strength in both the Midwest and Northeast and a few of our larger properties.
Marguerite Nader
And I think in Arizona, we saw an increased demand come in the form of rental conversions. So where people were previously renting from us, and now they're buying the home that they're in.
So that's where we can get additional sales out of basically 100% occupied property.
Ryan Burke
Great, appreciate the color. Thank you.
Marguerite Nader
Thanks, Ryan.
Paul Seavey
Thanks.
Operator
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 her closing comments.
Marguerite Nader
Okay. Thank you all very much for joining us today.
We are around for any questions, any follow-up questions.
Operator
Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day.