Operator: And our next question comes from the line of Samir Khanal from Evercore ISI.
Samir Khanal : I guess, Paul, you talked about seasonal business. But looking at — is there a way to sort of break that down in the transient business here? On the RV side? And how should we think about that over the course of the year? I guess, what are you assuming for transient? I mean you were down about 11%, I think, in ’23. So is this a business that sort of turns positive at this point in ’24? Help us think through this process?
Paul Seavey: Well, I guess, generally speaking, given the building blocks for Q1. So you can see what the combined seasonal and transient is. And then as we — and again, the first quarter is the largest quarter in terms of that seasonal business. So it’s far more modest in the remainder of the year. The transient and seasonal combined, as I said earlier, we essentially have a close to flat assumption for quarters 2, 3 and 4.
Samir Khanal : Right. But it’s sort of — you’re saying seasonal/transient. I was trying to dig more into the transient business, right? It’s because going to get to — go ahead.
Paul Seavey: Yes. Sorry. Sorry, Samir. I guess in our view, given the volatility that we’ve seen, there’s been consistency in how we’ve talked about seasonal and transient together. And so that’s how we presented the information.
Samir Khanal : Okay. And then I guess my second question is on – I don’t think we’ve touched on this, but insurance renewals. I know it’s an April 1 sort of date that you have, but maybe talk around sort of conversations you’ve had with providers and what’s sort of embedded in the guidance?
A –Marguerite Nader: Sure. So you’re right that our property level insurance policies renew on April 1 of this year. Our claims experience has been good so far this policy year, which is a positive. We have built in an assumption into our guidance but continue to work with our carriers on the renewal. And at this point, we’re not disclosing within guidance as we’re still negotiating that. We have no indications that coverage will be an issue, and we’ll continue with our past practice of updating on the – on our next call.
Operator: And our next question comes from the line of [Robin Lou] from Green Street.
Unidentified Analyst: Just on property taxes. I think you mentioned earlier that some of the Florida counties saw higher values from trades in the last few years, which is obviously a trend that you probably saw in other markets. Can you probably sort of give us an update on whether there are other markets where you are concerned about the tax headwind as well?
Paul Seavey: Well, I mentioned the counties — 2 of the counties. We also had some impact in Sarasota County. So Charlotte, Lee and Sarasota counties were 3 counties in Florida that were significant. In terms of other areas of the country, if that’s the direction of your question, we’ve seen less exposure or less activity in the way of increased assessed values in other parts of the country. It’s primarily Florida, that’s driving the change that we see.
Unidentified Analyst: And then on the transaction market, can you provide an update on what you’re seeing now in terms of cap rates across the 3 segments?
Marguerite Nader: Sure. Sure, Robin. So in 2023, there were really very few deals on the market. As I think you saw, we only closed on 1 transaction. We’re active in the market talking to owners, and we have not seen a lot of stress in the market. Sellers generally have very conservative balance sheets and they have their ability to take time on a transaction. I’d say, if you kind of broaden the time period out to the last 18 to 24 months, the cap rates ranging from 4% to 6% based on the quality of the property, with very high quality, age qualified MH trading much more aggressively. So not a lot of data points out there, but I anticipate that, that may change in 2024.
Unidentified Analyst: I know that this sizable MH portfolio traded at the end of last year. Did you by any chance participate in that?
Marguerite Nader: Well, we — it’s a very small industry. So we are knowledgeable about all the transactions and our look at all the deals that come that come — are in and around the industry. But when we close on something, we announced the closing and don’t really talk about what we’re looking at as we roll through the process.
Operator: And our next question comes from the line of John Kim from BMO Capital Markets.
John Kim : I wanted to ask about transient revenue. I know you’re saying it’s flat. There’s maybe some lower visibility. The number of transient sites went up sequentially by about 5% and year-over-year about 2%. I know that number could jump around quite a bit. But is this — is there a reason why the transient revenue shouldn’t grow by this amount, just given the number of sites available or have increased?
Paul Seavey: So part of the transient site change is from an expansion that we have in Florida. So that — and it’s at a newer property that we acquired. So that’s flowing through the noncore rather than the core. That’s I think roughly half of the transient site increase that we saw. And then the other component of the transient site increase is shifting of sites that had been occupied as annuals in the quarter and we anticipate that those annuals will renew as we head back into the spring season. So they’re not expected to remain transient sights for a long period of time. It’s typical for us at the end of the year to have a decline in transient sites and then refill those sites in the — these are northern properties that I’m referring to, refill those sites next year as the spring season starts.
John Kim : Okay. That makes sense. I just had a second question on your FAD adjustments. The first part of that was non-revenue-enhancing CapEx? I think Paul, you mentioned $85 million of recurring CapEx, what you expect this year? Is that the same number on an apples-to-apples basis versus the $99.8 million that adjustment? And the second part is the announcement you made last week on the change in membership upgrade sales from a cash basis that you had previously on non-GAAP measures. Is this something that we should be contemplating, adding back to AFFO? And is that something that should be added back to your FAD and if not, why not?
