What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-04-27 compared with 2021-10-26 · 164 added, 341 removed, 326 unchanged (61% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”), as well as information in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”), as well as information in Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K.

Overview and Outlook

We are a self-administered and self-managed real estate investment trust (“REIT”) with headquarters in Chicago, Illinois.

We are a fully integrated owner of lifestyle-oriented properties (“Properties”) consisting of property operations and home sales and rental operations primarily within manufactured home (“MH”) and recreational vehicle (“RV”) communities.

As of September 30, 2021, we owned or had an ownership interest in a portfolio of 436 Properties located throughout the United States and Canada containing 167,123 individual developed areas (“Sites”).

As of March 31, 2022, we owned or had an ownership interest in a portfolio of 446 Properties located throughout the United States and Canada containing 169,984 individual developed areas (“Sites”).

These Properties are located in 35 states and British Columbia, with more than 110 Properties with lake, river or ocean frontage and more than 120 Properties within 10 miles of the coastal United States.

We invest in properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on delivering value to our residents and guests as well as stockholders.

We invest in properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on delivering an exceptional experience to our residents and guests that results in delivery of value to stockholders.

Our business model is intended to provide an opportunity for increased cash flows and appreciation in value.

4 unchanged sentences

It is estimated that approximately 10,000 baby boomers are turning 65 daily through 2030.

In addition, the population aged 55 and older is expected to grow 17% from 2021 to 2036.

In addition, the population age 55 and older is expected to grow 17% within the next 15 years.

These individuals, seeking an active lifestyle, will continue to drive the market for second-home sales as vacation properties, investment opportunities or retirement retreats.

We expect it is likely that over the next decade, we will continue to see high levels of second-home sales and that manufactured homes and cottages in our Properties will continue to provide a viable second-home alternative to site-built homes.

We also believe the Millennial and Generation X demographics will contribute to our future long-term customer pipeline.

RV Industry Association (“RVIA”) tracking of the RV industry as of 2021 showed that those under 45 years of age is the fastest growing segment of RV owners and has been for the past few years.

The RVIA also completed a survey showing that RV purchase intent is strongest among Millennials, followed closely by Generation X.

Millennials and Generation X combined represent over half of RV buyers.

RVIA statistics as of 2021 show that over 11 million U.S.

households own an RV, an increase of 62% over the past 20 years.

The increase is driven by strong interest from younger individuals and families who live an active, outdoor lifestyle and baby boomers who are entering retirement.

These groups exhibit interest in adopting a minimalist lifestyle due to its affordability, preference over home quality relative to its size and the overall unique experience that our communities can provide.

We also believe the Millennial and Generation Z demographic will contribute to our future long-term customer pipeline.

After conducting a comprehensive study of RV ownership, according to the Recreational Vehicle Industry Association (“RVIA”), data suggested that RV sales are expected to benefit from an increase in demand from those born in the United States from 1980 to 2003, or Millennials and Generation Z, over the coming years.

We believe the demand from baby boomers and these younger generations will continue to outpace supply for MH and RV communities.

3 unchanged sentences

MH Sites are generally leased on an annual basis to residents who own or lease factory-built homes, including manufactured homes.

RV and marina Sites are leased to those who generally have an RV, factory-built cottage, boat or other unit placed on the site, including those customers renting marina dry storage slips.

Annual Sites are leased on an annual basis, including those Northern Properties that are open for the summer season.

Seasonal Sites are leased to customers generally for one to six months.

Transient Sites are leased to customers on a short-term basis.

Annual RV and marina Sites are leased on an annual basis to customers who generally have an RV, factory-built cottage, boat or other unit placed on the site, including those Northern properties that are open for the summer season.

Seasonal RV and marina Sites are leased to customers generally for one to six months.

Transient RV and marina Sites are leased to customers on a short-term basis.

The revenue from seasonal and transient Sites is generally higher during the first and third quarters.

We consider the transient revenue stream to be our most volatile as it is subject to weather conditions and other factors affecting the marginal RV customer’s vacation and travel preferences.

We also generate revenue from customers renting our marina dry storage.

Additionally, we have interests in joint venture Properties for which revenue is classified as Equity in income from unconsolidated joint ventures on the Consolidated Statements of Income and Comprehensive Income.

1 unchanged sentence

The following table shows the breakdown of our Sites by type (amounts are approximate):

Total Sites as of September 30, 2021

Total Sites as of March 31, 2022

MH Sites 73,400

Annual 34,000

Seasonal 12,700

Transient 14,700

2 unchanged sentences

Joint Ventures (2)

Total 170,000

_________________________

(1) Includes sites reserved but not used by seasonal customers due to travel restrictions.

(1) Primarily utilized to service the approximately 128,100 members.

Includes approximately 6,200 Sites rented on an annual basis.

(3) Includes approximately 2,900 annual Sites, 200 seasonal Sites and 500 transient Sites and includes sites at Voyager RV Resort.

(4) Total does not foot due to rounding.

(2) Includes approximately 1,800 annual Sites and 1,000 transient Sites.

In our Home Sales and Rentals Operations business, our revenue streams include home sales, home rentals and brokerage services and ancillary activities.

3 unchanged sentences

Additionally, home sale brokerage services are offered to our residents who may choose to sell their homes rather than relocate them when moving from a Property.

At certain Properties, we operate ancillary facilities, such as golf courses, retail operations and restaurants.

At certain Properties, we operate ancillary facilities, such as golf courses, pro shops, stores and restaurants.

In the manufactured housing industry, options for home financing, also known as chattel financing, are limited.

Chattel financing options available today include community owner-funded programs or third-party lender programs that provide subsidized financing to customers and often require the community owner to guarantee customer defaults.

Third-party lender programs have stringent underwriting criteria, sizable down payment requirements, short loan amortization and relatively high interest rates.

Third-party lender programs have stringent underwriting criteria, sizable down payment requirements, short term loan amortization and high interest rates.

We have a limited program under which we purchase loans made by an unaffiliated lender to homebuyers at our Properties.

7 unchanged sentences

We have implemented and may continue to implement Centers for Disease Control and Prevention (“CDC”) and local public health department guidelines and protocols for social distancing and enhanced community and office cleaning procedures.

All properties continue to be open subject to seasons of operation and state and local guidelines.

Our Properties continue to be open subject to seasons of operations and state and local guidelines.

Our property offices are open to residents and customers and we are complying with CDC recommended protocols.

We continue to see strong demand in our RV business as our customers seek safe vacation and leisure activities and value the opportunity to spend time outdoors.

During the third quarter of 2021, Core Transient RV rental income increased $5.4 million, or 21.1% compared to the third quarter of 2020.

Core Annual RV rental income increased $3.8 million, or 7.8% compared to the third quarter of 2020.

Core Seasonal RV rental income increased $1.9 million, or 37.5% compared to the third quarter of 2020.

RV and marina rental income in our Core Portfolio for the nine months ended September 30, 2021 was 11.9% higher than the nine months ended September 30, 2020.

Compared to the same period in 2020, annual and transient rental income for the nine months ended September 30, 2021 increased 6.5% and 47.4%, respectively, while seasonal rental income decreased 12.4%.

The decrease in seasonal rental income was primarily due to lower seasonal RV rental income in the South and West regions during the first quarter of 2021, as seasonal customers, in particular Canadian customers, were impacted by travel restrictions resulting from COVID-19.

Management's Discussion and Analysis (continued)

We attribute the solid performance of our business, as shown by increases in home sales and occupancy, and growth in RV rental income, to the fundamentals of our business model.

Our customers have made an investment in a housing unit that is placed on land leased from us.

In addition, there is continued demand for our Properties.

We attribute the solid performance of our business to the fundamentals of our business model.

The property locations and the lifestyle we offer have broad appeal to customers interested in enjoying an outdoor experience.

1 unchanged sentence

We intend to continue to monitor the evolving situation and we may take further actions that alter our business operations as may be required and that are in the best interests of our employees, residents, customers and shareholders.

The extent of the impact that COVID-19 will have on our business going forward, including our financial condition, results of operations and cash flows, is dependent on multiple factors, many of which are unknown.

Management's Discussion and Analysis (continued)

Results Overview

For the quarter ended September 30, 2021, net income available for Common Stockholders increased $20.0 million, or $0.10 per fully diluted Common Share, to $70.6 million, or $0.38 per fully diluted Common Share, compared to $50.6 million, or $0.28 per fully diluted Common Share, for the same period in 2020.

For the nine months ended September 30, 2021, net income available for Common Stockholders increased $33.3 million, or $0.18 per fully diluted Common Share, to $196.9 million, or $1.08 per fully diluted Common Share, compared to $163.6 million, or $0.90 per fully diluted Common Share, for the same period in 2020.

For the quarter ended September 30, 2021, FFO available for Common Stock and Operating Partnership unit (“OP Unit”) holders increased $28.7 million, or $0.15 per fully diluted Common Share, to $124.5 million, or $0.65 per fully diluted Common Share, compared to $95.8 million, or $0.50 per fully diluted Common Share, for the same period in 2020.

For the nine months ended September 30, 2021, FFO available for Common Stock and OP Unit holders increased $65.0 million, or $0.33 per fully diluted Common Share, to $362.6 million, or $1.88 per fully diluted Common Share, compared to $297.6 million, or $1.55 per fully diluted Common Share, for the same period in 2020.

For the quarter ended September 30, 2021, Normalized FFO available for Common Stock and OP Unit holders increased $19.0 million, or $0.10 per fully diluted Common Share, to $124.5 million, or $0.65 per fully diluted Common Share, compared to $105.5 million, or $0.55 per fully diluted Common Share, for the same period in 2020.

For the nine months ended September 30, 2021, Normalized FFO available for Common Stock and OP Unit holders increased $55.6 million, or $0.29 per fully diluted Common Share, to $365.4 million, or $1.90 per fully diluted Common Share, compared to $309.8 million, or $1.61 per fully diluted Common Share, for the same period in 2020.

For the quarter ended September 30, 2021, our Core Portfolio property operating revenues, excluding deferrals, increased 8.5% and property operating expenses, excluding deferrals and property management, increased 5.7%, from the same period in 2020, resulting in an increase in income from property operations, excluding deferrals and property management, of 10.7% compared to the same period in 2020.

For the nine months ended September 30, 2021, our Core Portfolio property operating revenues, excluding deferrals, increased 8.5% and property operating expenses, excluding deferrals and property management, increased 7.8%, from the same period in 2020, resulting in an increase in income from property operations, excluding deferrals and property management, of 9.0% compared to the same period in 2020.

For the quarter ended March 31, 2022, net income available for Common Stockholders increased $17.7 million, or $0.09 per fully diluted Common Share, to $82.9 million, or $0.45 per fully diluted Common Share, compared to $65.2 million, or $0.36 per fully diluted Common Share, for the same period in 2021.

For the quarter ended March 31, 2022, FFO available for Common Stock and Operating Partnership unit (“OP Unit”) holders increased $20.3 million, or $0.09 per fully diluted Common Share, to $140.9 million, or $0.72 per fully diluted Common Share, compared to $120.6 million, or $0.63 per fully diluted Common Share, for the same period in 2021.

For the quarter ended March 31, 2022, Normalized FFO available for Common Stock and OP Unit holders increased $18.8 million, or $0.08 per fully diluted Common Share, to $141.4 million, or $0.72 per fully diluted Common Share, compared to $122.6 million, or $0.64 per fully diluted Common Share, for the same period in 2021.

For the quarter ended March 31, 2022, our Core Portfolio property operating revenues, excluding deferrals, increased 9.5% and property operating expenses, excluding deferrals and property management, increased 10.3%, from the same period in 2021, resulting in an increase in income from property operations, excluding deferrals and property management, of 9.0%, compared to the same period in 2021.

We continue to focus on the quality of occupancy growth by increasing the number of manufactured homeowners in our Core Portfolio.

Our Core Portfolio average occupancy includes both homeowners and renters in our MH communities and was 95.1% for each of the quarters ended March 31, 2022 and December 31, 2021.

Our Core Portfolio average occupancy was 95.2% for the quarter ended March 31, 2021.

The decrease in average occupancy from the prior year was due to expansion sites completed and added to our Core Portfolio during the quarter but not yet occupied as of March 31, 2022.

For the quarter ended March 31, 2022, our Core Portfolio occupancy increased by 38 sites with an increase in homeowner occupancy of 191 sites, compared to occupancy as of December 31, 2021.

By comparison, for the quarter ended March 31, 2021, our Core Portfolio occupancy increased 92 sites with an increase in homeowner occupancy of 109 sites.

While we continue to focus on increasing the number of manufactured homeowners in our Core Portfolio, we also believe renting our vacant homes represents an attractive source of occupancy and an opportunity to potentially convert the renter to a new homebuyer in the future.

We continue to expect there to be fluctuations in the sources of occupancy gains depending on local market conditions, availability of vacant sites and success with converting renters to homeowners.

Our Core Portfolio average occupancy, including both homeowners and renters, in our MH communities was 95.1% for the quarter ended September 30, 2021, compared to 95.2% for the quarter ended June 30, 2021 and 95.3% for the same period in 2020.

The decrease in average occupancy from the prior quarter is due to expansion sites completed and added to our Core Portfolio during the quarter but not yet occupied as of September 30, 2021.

For the quarter ended September 30, 2021, our Core Portfolio occupancy increased by 60 sites with an increase in homeowner occupancy of 268 sites, compared to occupancy as of June 30, 2021.

By comparison, for the quarter ended September 30, 2020, our Core Portfolio occupancy increased 93 sites with an increase in homeowner occupancy of 114 sites.

In addition to higher occupancy, we have increased rental rates during the quarter and nine months ended September 30, 2021, contributing to a growth of 4.2% for each respective period in MH rental income, compared to the same period in 2020.

RV and marina rental income in our Core Portfolio for the quarter ended September 30, 2021 was 14.1% higher than the same period in 2020.

Annual, seasonal and transient rental income for the quarter ended September 30, 2021 increased 7.8%, 37.5% and 21.1%, respectively.

The increase in Annual RV and marina base rental income was attributable to both rate and occupancy, driven by occupancy gains in the North and Northeast regions.

Seasonal and transient rental income increased across all regions as we have continued to see positive demand as our customers seek safe vacation and leisure activities and value the opportunity to spend time outdoors.

RV and marina rental income in our Core Portfolio for the nine months ended September 30, 2021 was 11.9% higher than the same period in 2020.

Annual and transient rental income for the nine months

Management's Discussion and Analysis (continued)

ended September 30, 2021 increased 6.5% and 47.4%, respectively, while seasonal rental income decreased 12.4%.

We continue to experience strong performance in our membership base within our Thousand Trails portfolio.

For the quarter ended September 30, 2021, annual membership subscriptions revenue increased 12.5% over the same period in 2020.

We sold approximately 6,700 TTC memberships during the quarter ended September 30, 2021, compared to 7,400 in the same period in 2020.

For the nine months ended September 30, 2021, we sold approximately 20,200 TTC memberships compared to 16,400 in the same period in 2020.

We also activated approximately 6,800 TTC memberships through our RV dealer program for the quarter ended September 30, 2021.

Membership upgrade sales, gross increased $3.5 million for the quarter ended September 30, 2021 compared to the same period in 2020, driven by approximately 1,400 membership upgrade sales during the quarter.

We also experienced a 14% increase in the average sales price per upgrade sold during the quarter ended September 30, 2021 compared to the same period ended September 30, 2020.

The increase in upgrade sales and average sales price was driven by an increase in customer demand, including a new upgrade product, Adventure, introduced in the first quarter of 2021.

Adventure was introduced in response to demand we were seeing from our current customers who were looking for longer stays and advanced booking windows.

We periodically introduce new upgrade products.

Based on our historical experience, during the first 60 to 90 days following a new product launch, we experience an increase in upgrade sales and thereafter the upgrade sales fall back in line with historical run rate performance.

For the nine months ended September 30, 2021, we sold approximately 4,000 membership upgrades and upgrade revenues increased 77.6% over the same period in 2020.

As of March 31, 2022, we had 3,310 occupied rental homes in our Core MH communities, including 210 homes rented through our ECHO JV.

RV and marina rental income in our Core Portfolio for the quarter ended March 31, 2022 was 21.4% higher than the same period in 2021 driven by the rebound of seasonal demand in the South and West as we welcomed back our Canadian guests and our domestic customers were able to travel without restrictions.

Annual, seasonal and transient rental income for the quarter ended March 31, 2022 increased 8.6%, 64.8% and 21.2%, respectively.

Annual membership subscription revenue in our Core Portfolio increased $1.5 million, or 11%, from 2021, reflecting a 5.3% increase in the number of Thousand Trails Camping members and a rate increase of 5.7%.

The increase in annual membership subscription revenue compared to 2021 was offset by a Membership upgrade sales current period, gross decrease of $2.9 million, or 28.9%, from 2021, as a result of the decrease in the number of upgrades sold primarily due to the introduction of the Adventure product during the first quarter of 2021.

Demand for our homes and communities remains strong as evidenced by factors including our high occupancy levels.

We closed 338 new home sales during the quarter ended September 30, 2021, compared to 183 new home sales during the quarter ended September 30, 2020.

We closed 825 new home sales during the nine months ended September 30, 2021, compared to 471 new home sales during the nine months ended September 30, 2020.

We closed 261 new home sales during the quarter ended March 31, 2022, compared to 192 new home sales during the quarter ended March 31, 2021, an increase of 35.9%.

The increase in new home sales was primarily due to favorable housing trends in the broader real estate market.

As of September 30, 2021, we had 3,586 occupied rental homes in our Core MH communities, including 253 homes rented through our ECHO JV.

Our Core Portfolio income from rental operations, net of depreciation, was $7.8 million and $7.6 million for the quarters ended September 30, 2021 and 2020, respectively.

Approximately $7.8 million and $7.9 million of rental operations revenue related to Site rental was included in MH base rental income in our Core Portfolio for the quarters ended September 30, 2021 and 2020, respectively.

Our Core Portfolio income from rental operations, net of depreciation, was $24.7 million and $23.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Approximately $24.0 million and $23.5 million of rental operations revenue related to Site rental was included in MH base rental income in our Core Portfolio for the nine months ended September 30, 2021 and 2020, respectively.

Our gross investment in real estate increased $634.4 million to $6,794.8 million as of September 30, 2021 from $6,160.4 million as of December 31, 2020, primarily due to acquisitions and capital improvements during the nine months ended September 30, 2021.

Our gross investment in real estate increased $82.8 million to $7,071.9 million as of March 31, 2022 from $6,989.1 million as of December 31, 2021, primarily due to acquisitions and capital improvements during the quarter ended March 31, 2022.

Management's Discussion and Analysis (continued)

The following chart lists the Properties acquired or sold from January 1, 2020 through September 30, 2021 and Sites added through expansion opportunities at our existing Properties:

The following chart lists the Properties acquired or sold from January 1, 2021 through March 31, 2022 and Sites added through expansion opportunities at our existing Properties:

Location Type of Property Transaction Date Sites

1 unchanged sentence

Acquisition Properties:

Marina Dunes RV Park Marina, California RV October 15, 2020 96

Acorn Campground Green Creek, New Jersey RV October 16, 2020 323

Dolce Vita at Superstition Mountain Apache Junction, Arizona MH December 8, 2020 484

Leisure World RV Resort Weslaco, Texas RV December 9, 2020 333

Trails End RV Resort Weslaco, Texas RV December 9, 2020 362

Meridian RV Resort Apache Junction, Arizona RV December 14, 2020 264

Harbor Point RV Community Sneads Ferry, North Carolina RV December 16, 2020 203

Topsail Sound RV Park Holly Ridge, North Carolina RV December 17, 2020 230

Marker 1 Marina Dunedin, Florida Marina December 30, 2020 477

Okeechobee KOA Resort Okeechobee, Florida RV January 21, 2021 740

Marina Portfolio (11 Properties) Multiple Marina February 5, 2021 4,167

Cortez Village Marina Cortez, Florida Marina February 5, 2021 353

Fish Tale Marina Fort Myers Beach, Florida Marina February 5, 2021 296

Hi-Lift Marina Adventure, Florida Marina February 5, 2021 211

Hidden Harbour Marina Pompano Beach, Florida Marina February 5, 2021 357

Inlet Harbor Marina Ponce Inlet, Florida Marina February 5, 2021 295

Palm Harbour Marina Cape Haze, Florida Marina February 5, 2021 260

Riverwatch Marina Stuart, Florida Marina February 5, 2021 306

Boathouse Marina Beaufort, North Carolina Marina February 5, 2021 547

Dale Hollow State Park Marina Burkesville, Kentucky Marina February 5, 2021 198

Bay Point Marina Marblehead, Ohio Marina February 5, 2021 841

Rivers Edge Marina North Charleston, South Carolina Marina February 5, 2021 503

Pine Haven Cape May, New Jersey RV June 3, 2021 629

Pirateland Myrtle Beach, South Carolina RV August 26, 2021 813

Myrtle Beach Property (2)

Myrtle Beach, South Carolina RV August 26, 2021 813

Voyager RV Resort (3)

Tucson, Arizona RV October 14, 2021 —

RVC Portfolio Multiple JV November 1, 2021 988

Hope Valley Turner, Oregon RV November 18, 2021 164

Lake Conroe Montgomery, Texas RV December 15, 2021 261

Blue Mesa Recreational Ranch Gunnison, Colorado Membership February 18, 2022 385

Pilot Knob RV Resort Winterhaven, California RV February 18, 2022 247

Expansion Site Development:

1 unchanged sentence

Sites added (reconfigured) in 2022 56

Total Sites as of September 30, 2021 (1)

Total Sites as of March 31, 2022 (1)

______________________

1 unchanged sentence

Total does not foot due to rounding.

(2) RV community operated by a tenant pursuant to an existing ground lease.

(3) On October 14, 2021, we completed the acquisition of the remaining interest in the Voyager RV Resort joint venture.

The Voyager RV Resort joint venture sites are included in the Total Sites as of January 1, 2021.

Non-GAAP Financial Measures

6 unchanged sentences

Income from property operations represents rental income, membership subscriptions and upgrade sales, utility and other income less property and rental home operating and maintenance expenses, real estate taxes, sales and marketing expenses and property management expenses.

Income from property operations, excluding deferrals and property management, represents income from property operations excluding property management expenses and the impact of the GAAP deferrals of membership upgrade sales upfront payments and membership sales commissions, net.

Income from property operations,

Management's Discussion and Analysis (continued)

excluding deferrals and property management, represents income from property operations excluding property management expenses and the impact of the GAAP deferrals of membership upgrade sales upfront payments and membership sales commissions, net.

We present bad debt expense within Property operating, maintenance and real estate taxes in the current and prior periods.

2 unchanged sentences

Our Non-Core Portfolio includes all Properties that were not owned and operated during all of 2021 and 2022.

This includes, but is not

Management's Discussion and Analysis (continued)

limited to, one MH community, seven RV communities and one marina acquired during 2020 and three RV communities and eleven marinas acquired during 2021.

This includes, but is not limited to, six RV communities and eleven marinas acquired during 2021, one membership RV community and one RV community acquired during 2022 and our Westwinds MH community and Nicholson Plaza.

Funds from Operations ( “ FFO”) and Normalized Funds from Operations ( “ Normalized FFO”)

19 unchanged sentences

Management's Discussion and Analysis (continued)

The following table reconciles net income available for Common Stockholders to income from property operations for the quarters and nine months ended September 30, 2021 and 2020:

Quarters Ended September 30, Nine Months Ended September 30,

The following table reconciles net income available for Common Stockholders to income from property operations for the quarters ended March 31, 2022 and 2021:

Quarters Ended March 31,

(amounts in thousands)

2021 2020 2021 2020

Computation of Income from Property Operations:

Net income available for Common Stockholders $ 82,906 $ 65,240

Redeemable preferred stock dividends — — 8 8

Income allocated to non-controlling interests – Common OP Units 4,144 3,747

3 unchanged sentences

Total other expenses, net 86,831 82,209

(Gain)/Loss from home sales operations and other (3,182) (611) (6,919) 1,906

Gain from home sales operations and other (2,530) (1,383)

Income from property operations $ 171,180 $ 149,004

The following table presents a calculation of FFO available for Common Stock and OP Unitholders and Normalized FFO available for Common Stock and OP Unitholders for the quarters and nine months ended September 30, 2021 and 2020:

Quarters Ended September 30, Nine Months Ended September 30,

Quarters Ended March 31,

(amounts in thousands)

2021 2020 2021 2020

Computation of FFO and Normalized FFO:

8 unchanged sentences

Early debt retirement 516 2,029

COVID-19 expenses — — — 1,446

Normalized FFO available for Common Stock and OP Unit holders $ 141,402 $ 122,584

2 unchanged sentences

Results of Operations

This section discusses the comparison of our results of operations for the quarters and nine months ended September 30, 2021 and September 30, 2020 and our operating activities, investing activities and financing activities for the nine months ended September 30, 2021 and September 30, 2020.

For the comparison of our results of operations for the quarters and nine months ended September 30, 2020 and September 30, 2019 and discussion of our operating activities, investing activities and financing activities for the nine months ended September 30, 2020 and September 30, 2019, refer to Part I, Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2020, filed with the SEC on October 27, 2020.

Comparison of the quarter ended September 30, 2021 to the quarter ended September 30, 2020

This section discusses the comparison of our results of operations for the quarters ended March 31, 2022 and March 31, 2021 and our operating activities, investing activities and financing activities for the quarters ended March 31, 2022 and March 31, 2021.

For the comparison of our results of operations for the quarters ended March 31, 2021 and March 31, 2020 and discussion of our operating activities, investing activities and financing activities for the quarters ended March 31, 2021 and March 31, 2020, refer to Part I, Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021, filed with the SEC on April 27, 2021.

Comparison of the quarter ended March 31, 2022 to the quarter ended March 31, 2021

Income from Property Operations

The following table summarizes certain financial and statistical data for our Core Portfolio and total portfolio for the quarters ended September 30, 2021 and September 30, 2020:

The following table summarizes certain financial and statistical data for our Core Portfolio and total portfolio for the quarters ended March 31, 2022 and March 31, 2021:

Core Portfolio Total Portfolio

Quarters Ended September 30, Quarters Ended September 30,

Quarters Ended March 31, Quarters Ended March 31,

(amounts in thousands) 2022 2021 Variance %

26 unchanged sentences

_____________________

(1) Rental income consists of the following total portfolio income items:

(1) Rental income consists of the following total portfolio income items in this table:

1) MH base rental income, 2) Rental home income, 3) RV and marina base rental income and 4) Utility income, which is calculated by subtracting Other income on the Consolidated Statements of Income and Comprehensive Income from Utility and other income in this table.

2 unchanged sentences

(3) See Non-GAAP Financial Measures section of the Management Discussion and Analysis for definitions and reconciliations of these Non-GAAP measures to Net Income available for Common Shareholders.

Total portfolio income from property operations for 2021 increased $17.4 million, or 13.2%, from 2020, driven by an an increase of $11.4 million, or 8.6%, from our Core Portfolio and an increase of $6.0 million from our Non-Core Portfolio.

The increase in income from property operations from our Core Portfolio was primarily due to higher property operating revenues, excluding deferrals primarily from increased RV and marina base rental income and MH base rental income, partially offset by an increase in property operating expenses, excluding deferrals and property management.

The increase in income from property operations from our Non-Core Portfolio was attributed to income from properties acquired in the fourth quarter of 2020 and the first three quarters of 2021.

Total portfolio income from property operations for the quarter ended March 31, 2022, increased $22.2 million, or 14.9%, from the quarter ended March 31, 2021, driven by an increase of $14.9 million, or 10.2%, from our Core Portfolio and an increase of $7.3 million from our Non-Core Portfolio.

The increase in income from property operations from our Core Portfolio was primarily due to higher property operating revenues, excluding deferrals, primarily in RV and marina base rental income and MH base rental income, partially offset by an increase in property operating expenses, excluding deferrals and property management.

The increase in income from property operations from our Non-Core Portfolio was primarily attributed to income from properties acquired in 2021 and the first quarter of 2022.

Management's Discussion and Analysis (continued)

Property Operating Revenues

MH base rental income in our Core Portfolio for 2021 increased $6.7 million, or 4.7%, from 2020, which reflects 4.2% growth from rate increases and 0.5% growth from occupancy gains.

The average monthly base rental income per Site in our Core Portfolio increased to approximately $725 in 2021 from approximately $696 in 2020.

The average occupancy for our Core Portfolio was 95.1% and 95.3% for the quarters ended September 30, 2021 and September 30, 2020 respectively.

The average occupancy rate decreased slightly due to expansion sites added.

MH base rental income in our Core Portfolio for the quarter ended March 31, 2022 increased $8.2 million, or 5.6%, from the quarter ended March 31, 2021, which reflects 5.1% growth from rate increases and 0.5% growth from occupancy gains.

The average monthly base rental income per Site in our Core Portfolio increased to approximately $747 for the quarter ended March 31, 2022 from approximately $711 for the quarter ended March 31, 2021.

The average occupancy for our Core Portfolio was 95.1% and 95.2% for the quarters ended March 31, 2022 and March 31, 2021, respectively.

The average occupancy rate decreased slightly due to the addition of expansion sites.

RV and marina base rental income is comprised of the following:

Core Portfolio Total Portfolio

Quarters Ended September 30, Quarters Ended September 30,

Quarters Ended March 31, Quarters Ended March 31,

(amounts in thousands) 2022 2021 Variance %

4 unchanged sentences

RV and marina base rental income $ 96,402 $ 79,405 $ 16,997 21.4 % $ 108,764 $ 83,588 $ 25,176 30.1 %

RV and marina base rental income in our Core Portfolio for 2021 increased $11.1 million, or 14.1%, from 2020.

We experienced strong revenue growth across annual, seasonal and transient customers, which reflects the demand for our properties and the outdoor recreation opportunities they provide.

The increase in annual RV and marina base rental income was attributable to both rate and occupancy, driven by occupancy gains in the North and Northeast regions.

Membership upgrade sales, gross for 2021 increased $3.5 million, or 52.6%, from 2020.

The increase in membership upgrade sales was due to approximately 1,400 upgrade sales in 2021, compared to 1,000 in 2020, an increase of 34%.

We also experienced a 14% increase in the average sales price per upgrade sold during the third quarter of 2021, compared to the third quarter of 2020.

The increase in upgrade sales and average sales price was driven by an increase in customer demand, including a new upgrade product, Adventure, introduced during the first quarter of 2021.

Utility and other income in our Core Portfolio for 2021 increased $0.1 million, or 0.4%, from 2020.

The increase was due to higher utility income of $1.4 million and pass-through income of $0.5 million, partially offset by lower other property income of $1.8 million.

The increase in utility income was seen across all categories with electricity being the largest contributor.

The decrease in other property income was driven by insurance proceeds related to Hurricanes Hanna and Isaias received in the third quarter of 2020.

RV and marina base rental income in our Core Portfolio for the quarter ended March 31, 2022 increased $17.0 million, or 21.4%, from the quarter ended March 31, 2021, driven by an increase in Seasonal and Annual RV and marina base rental income.

The increase in Seasonal RV and marina base rental income of 64.8% was driven by increases in all regions, due to the rebound of seasonal demand in the South and West as we welcomed back our Canadian guests and our domestic customers were able to travel without restrictions.

The increase in Annual RV and marina base rental income was 8.6%, with 5.5% growth from rate increases and 3.1% from occupancy gains.

Annual membership subscription revenue in our Core Portfolio for the quarter ended March 31, 2022 increased $1.5 million, or 11%, from the quarter ended March 31, 2021, reflecting a 5.3% increase in the number of Thousand Trails Camping members.

Utility and other income in our Core Portfolio for the quarter ended March 31, 2022 increased $2.9 million, or 12.2%, from the quarter ended March 31, 2021.

The increase was due to higher utility income of $2.0 million, pass-through income of $0.5 million, and other property income of $0.4 million.

The increase in utility income was primarily due to an increase in electric income across the West, South, and Northeast.

The utility recovery rate (utility income divided by utility expenses) for both the quarters ended March 31, 2022 and 2021 was approximately 46%.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for 2021 increased $6.9 million, or 5.7%, from 2020, driven by increases in property operating and maintenance expenses of $4.3 million, gross sales and marketing expenses of $1.5 million and real estate taxes of $1.3 million.

Core property operating and maintenance expenses were higher in 2021 primarily due to increases in utility expenses of $2.5 million and property payroll of $1.3 million.

The increase in gross sales and marketing expense is primarily due to an increase in membership upgrade sales during the third quarter of 2021 compared to the third quarter of 2020.

The increase in real estate taxes was due to higher assessments, primarily in Florida.

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended March 31, 2022 increased $11.3 million, or 10.3%, from the quarter ended March 31, 2021, driven by increases in property operating and maintenance expenses of $11.4 million and real estate taxes of $1.0 million, partially offset by a decrease in gross sales and marketing expenses of $1.3 million.

Core property operating and maintenance expenses were higher in 2022 primarily due to increases in utility expenses of $4.6 million, repair and maintenance of $2.9 million, property payroll of $1.7 million and administrative expenses of $1.6 million.

Management's Discussion and Analysis (continued)

2 unchanged sentences

The following table summarizes certain financial and statistical data for our Home Sales and Other Operations:

Quarters Ended September 30,

Quarters Ended March 31,

(amounts in thousands, except home sales volumes) 2022 2021 Variance %

7 unchanged sentences

Loss from used home sales (412) (271) (141) (52.0) %

Brokered resale and ancillary services revenues, net 2,956 1,648 1,308 79.4 %

Home selling expenses 1,203 1,241 (38) (3.1) %

Gross revenue from brokered resales and ancillary services 13,167 9,940 3,227 32.5 %

Cost of brokered resales and ancillary services 5,948 3,968 1,980 49.9 %

Gross profit from brokered resales and ancillary services 7,219 5,972 1,247 20.9 %

Home selling and ancillary operating expenses 6,481 4,941 1,540 31.2 %

Income from home sales and other $ 2,530 $ 1,383 $ 1,147 82.9 %

8 unchanged sentences

(2) Total new home sales volume includes home sales from our ECHO JV.

The income from home sales and other operations was $3.2 million for the third quarter of 2021, compared to income of $0.6 million in the third quarter of 2020.

The increase in income from home sales and other operations was due to an increase in gross profit from new home sales resulting from an increase of 155 new homes sales during the third quarter of 2021 compared to the third quarter of 2020 primarily driven by favorable housing trends in the broader real estate market.

Additionally, there was an increase in ancillary services revenues, net, due to increased revenue from restaurants, stores and activities across the portfolio that were closed last year as a result of COVID-19 and an increase in non-core marina ancillary revenues, net.

Income from home sales and other operations was $2.5 million for the first quarter of 2022, an increase of $1.1 million, compared to $1.4 million in the first quarter of 2021.

The increase in income from home sales and other operations was primarily due to an increase in gross profit from new home sales resulting from an increase of 69 new home sales during the first quarter of 2022 compared to the first quarter of 2021, primarily driven by favorable housing trends in the broader real estate market.

Management's Discussion and Analysis (continued)

1 unchanged sentence

The following table summarizes certain financial and statistical data for our MH Rental Operations:

Quarters Ended September 30,

Quarters Ended March 31,

(amounts in thousands, except rental unit volumes)

17 unchanged sentences

(1) Consists of Site rental income and home rental income.

Approximately $7.8 million and $7.9 million for the quarters ended September 30, 2021 and September 30, 2020, respectively, of Site rental income is included in MH base rental income in the Core Portfolio Income from Property Operations table.

Approximately $7.4 million and $8.1 million for the quarters ended March 31, 2022 and March 31, 2021, respectively, of Site rental income is included in MH base rental income in the Core Portfolio Income from Property Operations table.

The remainder of home rental income is included in rental home income in our Core Portfolio Income from Property Operations table.

1 unchanged sentence

(3) New home cost basis does not include the costs associated with our ECHO JV.

Our investment in the ECHO JV was $17.8 million and $17.2 million as of September 30, 2021 and September 30, 2020, respectively.

(4) Includes 253 and 286 homes rented through our ECHO JV as of September 30, 2021 and 2020, respectively.

Other Income and Expenses

The following table summarizes other income and expenses, net:

Quarters Ended September 30,

(amounts in thousands, expenses shown as negative)

2021 2020 Variance %

Depreciation and amortization $ (44,414) $ (38,581) $ (5,833) (15.1) %

Interest income 1,805 1,801 4 0.2 %

Income from other investments, net 1,238 1,428 (190) (13.3) %

General and administrative (10,401) (9,692) (709) (7.3) %

Other expenses (797) (658) (139) (21.1) %

Early debt retirement — (9,732) 9,732 100.0 %

Interest and related amortization (27,361) (25,218) (2,143) (8.5) %

Total other income and expenses, net $ (79,930) $ (80,652) $ 722 0.9 %

Total other income and expenses, net decreased $0.7 million in 2021 compared to 2020, primarily due to early debt retirement costs incurred during the third quarter of 2020, partially offset by higher depreciation and amortization and higher interest and related amortization.

The increase in depreciation and amortization is due to depreciation on Non-core properties acquired in the fourth quarter of 2020 and the first three quarters of 2021.

The increase in interest and related amortization is due to higher debt levels than the same period in 2020.

Management's Discussion and Analysis (continued)

Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

Income from Property Operations

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the nine months ended September 30, 2021 and 2020.

Core Portfolio Total Portfolio

Nine Months Ended September 30, Nine Months Ended September 30,

(amounts in thousands) 2021 2020 Variance %

Change 2021 2020 Variance %

MH base rental income (1)

$ 447,461 $ 427,407 $ 20,054 4.7 % $ 450,261 $ 427,490 $ 22,771 5.3 %

Rental home income (1)

12,685 12,213 472 3.9 % 12,713 12,218 495 4.1 %

RV and marina base rental income (1)

246,396 220,146 26,250 11.9 % 273,185 220,146 53,039 24.1 %

Annual membership subscriptions 43,041 39,476 3,565 9.0 % 43,048 39,476 3,572 9.0 %

Membership upgrade sales current period, gross 29,343 16,522 12,821 77.6 % 29,343 16,522 12,821 77.6 %

Utility and other income (1)

77,720 73,692 4,028 5.5 % 80,539 73,692 6,847 9.3 %

Property operating revenues, excluding deferrals 856,646 789,456 67,190 8.5 % 889,089 789,544 99,545 12.6 %

Property operating and maintenance (1)(2)

287,194 268,217 18,977 7.1 % 302,253 268,520 33,733 12.6 %

Real estate taxes 51,258 49,382 1,876 3.8 % 54,154 49,490 4,664 9.4 %

Rental home operating and maintenance 4,036 4,297 (261) (6.1) % 4,093 4,306 (213) (4.9) %

Sales and marketing, gross 18,983 13,309 5,674 42.6 % 18,987 13,308 5,679 42.7 %

Property operating expenses, excluding deferrals and property management 361,471 335,205 26,266 7.8 % 379,487 335,624 43,863 13.1 %

Income from property operations, excluding deferrals and property management (3)

495,175 454,251 40,924 9.0 % 509,602 453,920 55,682 12.3 %

Property management 48,945 44,344 4,601 10.4 % 48,955 44,344 4,611 10.4 %

Income from property operations, excluding deferrals (3)

446,230 409,907 36,323 8.9 % 460,647 409,576 51,071 12.5 %

Membership upgrade sales upfront payments and membership sales commission, deferred, net 16,729 8,052 8,677 107.8 % 16,729 8,052 8,677 107.8 %

Income from property operations (3)

$ 429,501 $ 401,855 $ 27,646 6.9 % $ 443,918 $ 401,524 $ 42,394 10.6 %

__________________________

(1) Rental income consists of the following total portfolio income items:

The difference between the sum of the total portfolio income items and Rental income on the Consolidated Statements of Income and Comprehensive Income is bad debt expense, which is presented in Property operating maintenance expense in this table.

(2) Includes bad debt expense for all periods presented.

(3) See Non-GAAP Financial Measures section of the Management Discussion and Analysis for definitions and reconciliation of these Non-GAAP measures to Net Income available for Common Shareholders.

Total Portfolio income from property operations for 2021 increased $42.4 million, or 10.6%, from 2020, driven by an increase of $27.6 million, or 6.9%, from our Core Portfolio and by an increase of $14.8 million from our Non-Core Portfolio.

The increase in income from property operations from our Core Portfolio was primarily due to increases in RV and marina base rental income, MH base rental income and Membership upgrade sales, gross.

The increase in income from property operations from our Non-Core Portfolio was attributed to income from properties acquired in the fourth quarter of 2020 and during the nine months ended September 30, 2021.

Property Operating Revenues

MH base rental income in our Core Portfolio for 2021 increased $20.1 million, or 4.7%, from 2020, which reflects 4.2% growth from rate increases and 0.5% growth from occupancy gains.

The average monthly base rental income per Site increased to approximately $721 in 2021 from approximately $692 in 2020.

The average occupancy for the Core Portfolio was 95.2% for both the nine months ended September 30, 2021 and 2020.

Management's Discussion and Analysis (continued)

RV and marina base rental income is comprised of the following:

Core Portfolio Total Portfolio

Nine Months Ended September 30, Nine Months Ended September 30,

(amounts in thousands)

2021 2020 Variance %

Change 2021 2020 Variance %

Annual $ 151,860 $ 142,641 $ 9,219 6.5 % $ 173,702 $ 142,641 $ 31,061 21.8 %

Seasonal 28,861 32,946 (4,085) (12.4) % 30,145 32,946 (2,801) (8.5) %

Transient 65,675 44,559 21,116 47.4 % 69,338 44,559 24,779 55.6 %

RV and marina base rental income $ 246,396 $ 220,146 $ 26,250 11.9 % $ 273,185 $ 220,146 $ 53,039 24.1 %

RV and marina base rental income in our Core Portfolio for 2021 increased $26.3 million, or 11.9%, from 2020 primarily due to increases in Transient RV and marina base rental income of $21.1 million, or 47.4% and Annual RV and marina base rental income of $9.2 million, or 6.5%, partially offset by a decrease in Seasonal RV and marina base rental income of $4.1 million, or 12.4%.

Transient RV and marina base rental income increased across all regions, primarily due to cancellations in RV reservations and site closures during the nine months ended September 30, 2020 as a result of COVID-19.

We continue to see positive Transient demand as our customers seek safe vacation and leisure activities and value the opportunity to spend time outdoors.

The increase in Annual RV and marina base rental income was primarily due to growth from rate increases.

The decrease in Seasonal RV and marina base rental income was primarily due to a decrease in seasonal RV rental income in the South and West regions during the first quarter of 2021, as seasonal customers, in particular Canadian customers, were impacted by travel restrictions resulting from COVID-19.

Membership upgrade sales, gross for 2021 increased $12.8 million, or 77.6%, from 2020.

The increase in membership upgrade sales was due to approximately 4,000 upgrade sales during the nine months ended September 30, 2021, compared to 2,600 during the nine months ended September 30, 2020, an increase of 54%.

We also experienced a 15% increase in the average sales price per upgrade sold during the nine months ended September 30, 2021, compared to the same period ended September 30, 2020.

The increase in upgrade sales and average sales price was driven by an increase in customer demand, including a new upgrade product, Adventure, introduced during the first quarter of 2021.

Utility and other income in our Core Portfolio for 2021 increased $4.0 million, or 5.5%, from 2020.

The increase was primarily due to an increase in utility income of $2.3 million and other property income of $1.0 million.

The increase in other property income is due to increased late fees due to the suspension of late fees in 2020 as a result of COVID-19.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for 2021 increased $26.3 million, or 7.8%, from 2020, driven by increases in property operating and maintenance expenses of $19.0 million and gross sales and marketing expenses of $5.7 million.

Core property operating and maintenance expenses were higher during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to increases in utility expenses of $7.6 million, property payroll expenses of $3.9 million, insurance expense of $2.9 million and repairs and maintenance expenses of $1.5 million.

The increase in gross sales and marketing expenses was primarily due to an increase in membership upgrade sales.

Management's Discussion and Analysis (continued)

Home Sales and Rental Operations

Home Sales and Other

The following table summarizes certain financial and statistical data for Home Sales and Other Operations:

Nine Months Ended September 30,

(amounts in thousands, except home sales volumes)

2021 2020 Variance %

Gross revenues from new home sales (1)

$ 64,071 $ 28,863 $ 35,208 122.0 %

Cost of new home sales (1)

60,477 28,067 32,410 115.5 %

Gross profit from new home sales 3,594 796 2,798 351.5 %

Gross revenues from used home sales 2,852 4,382 (1,530) (34.9) %

Cost of used home sales 4,094 5,560 (1,466) (26.4) %

Loss from used home sales (1,242) (1,178) (64) (5.4) %

Brokered resale and ancillary services revenues, net 8,422 2,011 6,411 318.8 %

Home selling expenses 3,855 3,535 320 9.1 %

Income (loss) from home sales and other $ 6,919 $ (1,906) $ 8,825 463.0 %

Home sales volumes

Total new home sales (2)

825 471 354 75.2 %

New Home Sales Volume - ECHO JV 56 38 18 47.4 %

Used home sales 314 450 (136) (30.2) %

Brokered home resales 543 454 89 19.6 %

_________________________

(1) New home sales gross revenues and costs of new home sales do not include the revenues and costs associated with our ECHO JV.

(2) Total new home sales volume includes home sales from our ECHO JV.

The income from home sales and other was $6.9 million for the nine months ended September 30, 2021 compared to a loss of $1.9 million for the nine months ended September 30, 2020.

The increase in income from home sales and other was due to an increase in ancillary services revenues, net, driven by increased revenue from restaurants, stores and activities across the portfolio primarily as a result of closures in 2020 as a result of COVID-19, an increase in non-core marina ancillary revenues, net and an increase in gross profit from new home sales as a result of an increase in the number of new homes sold.

Management's Discussion and Analysis (continued)

Rental Operations

The following table summarizes certain financial and statistical data for MH Rental Operations.

Nine Months Ended September 30,

(amounts in thousands, except rental unit volumes)

2021 2020 Variance %

Rental operations revenue (1)

$ 36,683 $ 35,679 $ 1,004 2.8 %

Rental home operating and maintenance expenses 4,036 4,297 (261) (6.1) %

Income from rental operations 32,647 31,382 1,265 4.0 %

Depreciation on rental homes (2)

7,958 8,228 (270) (3.3) %

Income from rental operations, net of depreciation $ 24,689 $ 23,154 $ 1,535 6.6 %

Gross investment in new manufactured home rental units (3)

$ 232,094 $ 232,765 $ (671) (0.3) %

Gross investment in used manufactured home rental units $ 16,645 $ 16,445 $ 200 1.2 %

Net investment in new manufactured home rental units $ 190,143 $ 199,257 $ (9,114) (4.6) %

Net investment in used manufactured home rental units $ 8,724 $ 9,557 $ (833) (8.7) %

Number of occupied rentals – new, end of period (4)

3,130 3,314 (184) (5.6) %

Number of occupied rentals – used, end of period 456 588 (132) (22.4) %

______________________

(1) Rental operations revenue consists of Site rental income and home rental income in our Core Portfolio.

Approximately $24.0 million and $23.5 million of Site rental income for the nine months ended September 30, 2021 and 2020, respectively, are included in community base rental income within the Core Portfolio Income from Property Operations table.

The remainder of home rental income is included in rental home income within the Core Portfolio Income from Property Operations table.

(2) Presented in Depreciation and amortization in the Consolidated Statements of Income and Comprehensive Income.

(3) Includes both occupied and unoccupied rental homes in our Core Portfolio.

New home cost basis does not include the costs associated with our ECHO JV.

Our investment in the ECHO JV was $17.8 million and $17.2 million as of September 30, 2021 and 2020, respectively.

(4) Occupied rentals as of the end of the period in our Core Portfolio and includes 253 and 286 homes rented through our ECHO JV as of September 30, 2021 and 2020, respectively.

Income from rental operations, net of depreciation, was $1.5 million higher during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to an increase in rental rates.

Our investment in the ECHO JV was $18.3 million and $17.5 million as of March 31, 2022 and March 31, 2021, respectively.

(4) Includes 210 and 295 homes rented through our ECHO JV as of March 31, 2022 and 2021, respectively.

Income from rental operations, net of depreciation, decreased $1.1 million during the first quarter of 2022, compared to the first quarter of 2021 primarily due to a decrease in rental operations revenues as a result of a decrease in the number of new occupied rentals.

Other Income and Expenses

The following table summarizes other income and expenses, net:

Nine Months Ended September 30,

Quarters Ended March 31,

(amounts in thousands, expenses shown as negative)

8 unchanged sentences

Total other income and expenses, net $ (86,831) $ (82,209) $ (4,622) (5.6) %

Total other income and expenses, net increased $17.6 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to higher depreciation and amortization and interest and related amortization expense, partially early offset by early debt retirement costs.

The increase in depreciation and amortization was due to depreciation on Non-Core properties acquired in the fourth quarter of 2020 and the nine months ended September 30, 2021.

The increase in interest and related amortization is due to higher debt levels in 2021 compared to 2020.

The decrease in early debt retirement costs was due to lower debt repayment costs in 2021 compared to 2020.

Equity in income of unconsolidated joint ventures

Equity in income of unconsolidated joint ventures increased $0.5 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to an increase in distributions received in 2021 compared to 2020.

Total other income and expenses, net increased $4.6 million for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, primarily due to higher depreciation and amortization and an increase in general and administrative costs, partially offset by a decrease in early debt retirement costs.

The increase in depreciation and amortization is due to depreciation on Non-core properties acquired in 2021 and the first quarter of 2022.

The decrease in early debt retirement costs was due to lower debt repayment costs for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021.

Management's Discussion and Analysis (continued)

9 unchanged sentences

Accessing long-term low-cost secured debt continues to be our focus.

Our at-the-market (“ATM”) equity offering program allows us, from time-to-time, to sell shares of our common stock, par value $0.01 per share, having an aggregate offering price up to $200.0 million.

As of September 30, 2021, the full capacity remained available for issuance.

As of September 30, 2021, we had available liquidity in the form of approximately 416.2 million shares of authorized and unissued common stock, par value $0.01 per share, and 10.0 million shares of authorized and unissued preferred stock registered for sale under the Securities Act of 1933, as amended.

During the nine months ended September 30, 2021, we closed on an amended revolving line of credit with borrowing capacity of $500.0 million and a $300.0 million term loan (“Term Loan”).

The variable interest rate on the Term Loan is LIBOR plus 1.40%.

Pursuant to the Swap (as defined below), we have fixed the interest rate at 1.8% per annum.

On February 24, 2022, we entered into our current at-the-market (“ATM”) equity offering program with certain sales agents, pursuant to which we may sell, from time-to-time, shares of our common stock, par value $0.01 per share, having an aggregate offering price of up to $500.0 million.

Prior to the new program, the aggregate offering price was up to $200.0 million.

As of March 31, 2022, the full capacity of our current ATM equity offering program remained available for issuance.

During the quarter ended March 31, 2022, we sold 328,123 shares of our common stock under our prior ATM equity program for gross cash proceeds of approximately $28.0 million at a weighted average share price of $86.46.

As of March 31, 2022, we had available liquidity in the form of approximately 414.0 million shares of authorized and unissued common stock, par value $0.01 per share, and 10.0 million shares of authorized and unissued preferred stock registered for sale under the Securities Act of 1933, as amended.

During the quarter ended March 31, 2022, we closed on a $200.0 million senior unsecured term loan.

The maturity date is January 21, 2027.

The term loan bears interest at a rate of Secured Overnight Financing Rate (“SOFR”), plus approximately 1.30% to 1.80%, depending on leverage levels.

Financial Statements—Note 8.

3 unchanged sentences

The changes in the fair value of the designated derivative are recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets and subsequently reclassified into earnings on the Consolidated Statements of Income and Comprehensive Income in the period that the hedged forecasted transaction affects earnings.

During the nine months ended September 30, 2021, we entered into a three-year LIBOR Swap Agreement (“the Swap”) allowing us to trade the variable interest rate associated with our variable rate debt for a fixed interest rate.

The Swap has a notional amount of $300.0 million of outstanding principal and fixes the underlying LIBOR rate at 0.39% per annum and matures on March 25, 2024.

For additional information regarding our interest rate swap, see Item 1.

Financial Statements—Note 9.

Derivative Instruments and Hedging Activities.

Derivative Instruments and Hedging .

We expect to meet our short-term liquidity requirements, including principal payments, capital improvements and dividend distributions for the next twelve months, generally through available cash, net cash provided by operating activities and our LOC.

As of September 30, 2021, our LOC had a borrowing capacity of $280.0 million.

As of September 30, 2021, the LOC bears interest at a rate of LIBOR plus 1.25% to 1.65%, carries an annual facility fee of 0.20% to 0.35% and matures on April 18, 2025.

We expect to meet certain long-term liquidity requirements, such as scheduled debt maturities, property acquisitions and capital improvements, using long-term collateralized and uncollateralized borrowings including the existing LOC and the issuance of debt securities or the issuance of equity including under our ATM equity offering program.

On October 14, 2021, we acquired our joint venture partner’s 50% interest in Voyager RV Resort.

The purchase price to acquire our partner’s interest consisted of debt assumption of $20.1 million and a $35.2 million payment primarily comprised of 427,723 Operating Partnership units issued with the remainder in cash.

As of March 31, 2022, our LOC had a borrowing capacity of $431.0 million.

As of March 31, 2022, the LOC bears interest at a rate of LIBOR plus 1.25% to 1.65%, carries an annual facility fee of 0.20% to 0.35% and matures on April 18, 2025.

On April 18, 2022, we closed on a secured refinancing transaction generating gross proceeds of $200.0 million.

The loan is secured by one MH community, has a fixed interest rate of 3.36% per annum and has a maturity date of May 1, 2034.

The net proceeds from the transaction were used to repay all debt scheduled to mature in 2022 and to repay amounts outstanding on the LOC.

Financial Statements—Note 13.

Subsequent events.

Management's Discussion and Analysis (continued)

Subsequent Events for further details.

We continue to monitor the development and adoption of an alternative index to LIBOR to manage the transition.

Given the majority of our current debt is secured and not subject to LIBOR, we do not believe the discontinuation of LIBOR will have a significant impact on our consolidated financial statements.

Management's Discussion and Analysis (continued)

The impact the COVID-19 pandemic will continue to have on our financial condition and cashflows is uncertain and is dependent upon various factors including the manner in which operations will continue at our Properties, customer payment patterns and operational decisions we have made and may make in the future in response to guidance from public authorities and/or for the health and safety of our employees, residents and guests.

The following table summarizes our cash flows activity:

For the nine months ended September 30,

For the quarters ended March 31,

(amounts in thousands) 2022 2021

1 unchanged sentence

Net cash used in investing activities (105,182) (351,653)

Net cash provided by (used in) financing activities 240,559 (113,981)

Net increase in cash and restricted cash $ 16,212 $ 85,358

Net cash (used in) provided by financing activities (157,427) 245,790

Net (decrease) increase in cash and restricted cash $ (85,278) $ 67,468

Operating Activities

Net cash provided by operating activities increased $92.7 million to $453.6 million for the nine months ended September 30, 2021 from $360.9 million for the nine months ended September 30, 2020.

The increase in net cash provided by operating activities was primarily due to higher income from property operations of $42.4 million, an increase in other assets, net and accounts payable and other liabilities of $28.4 million, higher deferred membership revenue of $12.8 million, and an increase in rents and other customer payments received in advance and security deposits of $7.6 million.

Net cash provided by operating activities increased $4.0 million to $177.3 million for the quarter ended March 31, 2022 from $173.3 million for the quarter ended March 31, 2021.

The increase in net cash provided by operating activities was primarily due to higher income from property operations of $22.2 million, partially offset by long term incentive compensation of approximately $4.4 million paid during the first quarter of 2022 and a decrease in deferred membership revenue of $4.2 million.

Investing Activities

Net cash used in investing activities increased $516.4 million to $678.0 million for the nine months ended September 30, 2021 from $161.5 million for the nine months ended September 30, 2020.

The increase was due to increased spending on acquisitions of $468.9 million along with an increase in capital improvement spending of $49.0 million.

Net cash used in investing activities decreased $246.5 million to $105.2 million for the quarter ended March 31, 2022 from $351.7 million for the quarter ended March 31, 2021.

The decrease was due to a decrease in spending on acquisitions of $280.2 million, partially offset by an increase in capital improvement spending of $26.9 million.

Capital Improvements

The following table summarizes capital improvements:

For the nine months ended September 30,

For the quarters ended March 31,

(amounts in thousands) 2022 2021

Recurring capital expenditures (1)

Asset preservation (1)

$ 9,906 $ 7,644

Improvements and renovations (2)

Property upgrades and development 30,302 23,566

5 unchanged sentences

______________________

(1) Primarily comprised of common area, utility infrastructure and mechanical improvements.

(1) Includes upkeep of property infrastructure including utilities and streets and replacement of community equipment and vehicles.

(2) Includes enhancements to amenities such as buildings, common areas, swimming pools and replacement of furniture and site amenities.

(3) Excludes new home investments associated with our ECHO JV.

(3) Net proceeds from home sale activities are reflected within Operating Activities.

(4) Net proceeds from new and used home sale activities are reflected within Operating Activities.

Financing Activities

Net cash provided by financing activities was $240.6 million for the nine months ended September 30, 2021.

Net cash used in financing activities was $114.0 million for the nine months ended September 30, 2020.

The increase in net cash provided by financing activities was primarily due to an increase in net term loan proceeds of $300.0 million and an increase in net borrowings on the LOC of $108.0 million, partially offset by an increase in net mortgage debt repayments of $46.0 million.

Net cash used in financing activities was $157.4 million for the quarter ended March 31, 2022.

Net cash provided by financing activities was $245.8 million for the quarter ended March 31, 2021.

The decrease in net cash provided by financing activities was primarily due to a decrease in net debt proceeds of approximately $425.0 million, partially offset by proceeds from the sale of common stock under our ATM program of approximately $28.0 million.

Contractual Obligations

Significant ongoing contractual obligations consist primarily of long-term borrowings, interest expense, operating leases, LOC maintenance fees and ground leases.

For a summary and complete presentation and description of our ongoing

For a summary and complete presentation and description of our ongoing commitments and contractual obligations, see Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations in our 2021 Form 10-K.

Management's Discussion and Analysis (continued)

commitments and contractual obligations, see the Contractual Obligations section of the “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K.

The Operating Partnership operates and manages Westwinds, a 720 site mobilehome community, and Nicholson Plaza, an adjacent shopping center, both located in San Jose, California pursuant to ground leases that expire on August 31, 2022 and do not contain extension options.

6 unchanged sentences

In 1997, the Operating Partnership acquired the leasehold interest in the ground leases.

In addition to rent based on the operations of Westwinds, the Nicholsons receive a percentage of gross revenues from the sale of new or used mobilehomes in Westwinds.

In addition to rent based on the operations of Westwinds, the Nicholsons receive a percentage of gross revenues from the sale of new or used mobile homes in Westwinds.

The Operating Partnership has entered into subtenancy agreements with the mobilehome residents of Westwinds.

2 unchanged sentences

Notwithstanding this, the Nicholsons have made what we believe to be an unlawful demand that the Operating Partnership deliver the property free and clear of any subtenancies upon the expiration of the ground leases by August 31, 2022.

We believe the Nicholsons’ demand (i) violates California state and San Jose municipal law because the Nicholsons are demanding that the Operating Partnership remove all residents without just cause and (ii) conflicts with the terms and conditions of the ground leases, which contain no express or implied requirement that the Operating Partnership deliver the property free and clear of all subtenancies at the mobilehome park and require, instead, that the Operating Partnership continuously operate the mobilehome park during the lease term.

We believe the Nicholsons’ demand (i) violates California state and San Jose municipal law because the Nicholsons are demanding that the Operating Partnership remove all residents without just cause and (ii) conflicts with the terms and conditions of the ground leases, which contain no express or implied requirement that the Operating Partnership deliver the property free and clear of all subtenancies at the mobile home park and require, instead, that the Operating Partnership continuously operate the mobilehome park during the lease term.

On December 30, 2019, the Operating Partnership, together with certain interested parties, filed a complaint in California Superior Court for Santa Clara County, seeking declaratory relief pursuant to which it requested that the Court determine, among other things, that the Operating Partnership has no obligation to deliver the property free and clear of the mobilehome residents upon the expiration of the ground leases.

3 unchanged sentences

On July 29, 2020, the Superior Court issued a final order denying the Nicholsons' motion to compel arbitration.

The Nicholsons filed a notice of appeal on August 7, 2020.

The Nicholsons filed a notice of appeal on August 7, 2020, which appeal was heard on February 1, 2022.

On February 4, 2022, the California Court of Appeal affirmed the Superior Court’s order denying the Nicholsons' motion to compel arbitration.

On February 22, 2022, the Nicholsons filed a petition for rehearing, which the Court of Appeal denied on March 2, 2022.

On March 16, 2022, the Nicholsons filed a petition for review with the California Supreme Court.

The arbitration is stayed pursuant to an agreement between MHC and the Nicholsons.

1 unchanged sentence

The Nicholsons expressed opposition to this change in designation.

However, on March 10, 2020, following significant pressure from residents and advocacy groups, the City Council approved this new designation for all 58 mobilehome communities in with City of San Jose, including Westwinds.

In addition to requirements imposed by California state and San Jose municipal law, the change in designation requires, among other things, a further amendment to the general plan to a different land use designation by the City Council prior to any change in use.

1 unchanged sentence

Off-Balance Sheet Arrangements

As of September 30, 2021, we have no off-balance sheet arrangements.

As of March 31, 2022, we have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K for a discussion of our critical accounting policies.

There have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2021.

Refer to Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K for a discussion of our critical accounting policies.

There have been no significant changes to our critical accounting policies and estimates during the quarter ended March 31, 2022.

Forward-Looking Statements

8 unchanged sentences

• our ability to renew our insurance policies at existing rates and on consistent terms;

• in the age-qualified Properties, home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility;

• results from home sales and occupancy will continue to be impacted by local economic conditions, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing;

• home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility;

• results from home sales and occupancy will continue to be impacted by local economic conditions, including an adequate supply of homes at reasonable costs, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing;

• impact of government intervention to stabilize site-built single-family housing and not manufactured housing;

3 unchanged sentences

• our ability to obtain financing or refinance existing debt on favorable terms or at all;

• the effect of interest rates;

• the effect of inflation and interest rates;

• the effect from any breach of our, or any of our vendors’, data management systems;

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis