What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-04-25 compared with 2022-10-21 · 111 added, 388 removed, 319 unchanged (61% of the section changed)

5 unchanged sentences

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 and marinas.

As of September 30, 2022, we owned or had an ownership interest in a portfolio of 445 Properties located throughout the United States and Canada containing 170,245 individual developed areas (“Sites”).

As of March 31, 2023, we owned or had an ownership interest in a portfolio of 450 Properties located throughout the United States and Canada containing 171,477 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.

See discussion of Hurricane Ian, including the impact to our Florida Properties in Part I.

Management's Discussion and Analysis — Results Overview on page 23 .

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.

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

Total Sites as of September 30, 2022

Total Sites as of March 31, 2023

MH Sites 72,700

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We believe renting our vacant homes represents an attractive source of occupancy and an opportunity to convert the renter to a homebuyer in the future.

We also sell and rent homes through our joint venture, ECHO Financing, LLC (the “ECHO JV”).

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.

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Definitions and reconciliations of these measures to the most comparable GAAP measures are included below in this discussion.

COVID-19 Pandemic Update

Since the COVID-19 pandemic began, we have taken actions to prioritize the safety and security of our employees, residents and customers, while maintaining our high-quality standards in service to our residents and customers.

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.

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 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.

We believe this is particularly relevant in a COVID-19 impacted environment.

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, 2022, net income available for Common Stockholders decreased $3.4 million to $67.2 million, or $0.36 per fully diluted Common Share, compared to $70.6 million, or $0.38 per fully diluted Common Share, for the same period in 2021.

For the nine months ended September 30, 2022, net income available for Common Stockholders increased $14.7 million, or $0.06 per fully diluted Common Share, to $211.6 million, or $1.14 per fully diluted Common Share, compared to $196.9 million, or $1.08 per fully diluted Common Share, for the same period in 2021.

For the quarter ended September 30, 2022, FFO available for Common Stock and Operating Partnership unit (“OP Unit”) holders increased $9.9 million, or $0.04 per fully diluted Common Share, to $134.4 million, or $0.69 per fully diluted Common Share, compared to $124.5 million, or $0.65 per fully diluted Common Share, for the same period in 2021.

For the nine months ended September 30, 2022, FFO available for Common Stock and OP Unit holders increased $34.3 million, or $0.15 per fully diluted Common Share, to $396.9 million, or $2.03 per fully diluted Common Share, compared to $362.6 million, or $1.88 per fully diluted Common Share, for the same period in 2021.

For the quarter ended September 30, 2022, Normalized FFO available for Common Stock and OP Unit holders increased $12.3 million, or $0.05 per fully diluted Common Share, to $136.8 million, or $0.70 per fully diluted Common Share, compared to $124.5 million, or $0.65 per fully diluted Common Share, for the same period in 2021.

For the nine months ended September 30, 2022, Normalized FFO available for Common Stock and OP Unit holders increased $38.1 million, or $0.17 per fully diluted Common Share, to $403.5 million, or $2.07 per fully diluted Common Share, compared to $365.4 million, or $1.90 per fully diluted Common Share, for the same period 2021.

For the quarter ended September 30, 2022, our Core Portfolio property operating revenues, excluding deferrals, increased 5.3% and property operating expenses, excluding deferrals and property management, increased 7.8%, from the same period in 2021, resulting in an increase in income from property operations, excluding deferrals and property management, of 3.5%, compared to the same period in 2021.

For the nine months ended September 30, 2022, our Core Portfolio property operating revenues, excluding deferrals, increased 6.5% and property operating expenses, excluding deferrals and property management, increased 8.3%, from the same period in 2021, resulting in an increase in income from property operations, excluding deferrals and property management, of 5.3%, compared to the same period in 2021.

Hurricane Ian made landfall on the west coast of Florida on September 28, 2022.

Approximately 60% of our Florida portfolio was in the path of the storm as it moved across the state.

During the storm, we prioritized the safety of our residents, guests and employees.

For the majority of our properties the impact was limited to flooding, wind, wind-blown debris and falling trees and branches.

These properties have resumed operations.

The most significant damage to our properties occurred in or near the Fort Myers area.

Six of our Properties in or near this market continue to experience utility disruptions and are temporarily closed.

The properties include four RV parks and two marinas with a total of 2,100 sites/slips.

During the storm, the four RV properties experienced strong winds as well as significant flooding, including from unprecedented storm surges that resulted in damage to certain common area buildings, utility infrastructure and residents’ homes.

The two marinas suffered wind related building damage and the process of restoring the buildings has begun.

We currently expect these properties will resume operations during the fourth quarter, although certain locations may operate at a limited capacity.

Since the storm passed, we have worked towards quickly returning our properties to full operating condition with efforts focused on debris cleanup and removal and initiating the process to restore impacted buildings and infrastructure.

Based on our prior experience with recovery following major storms, developing restoration plans and estimating costs to execute on those plans takes time, often several weeks.

We did not accrue any repair and maintenance expenses related to cleanup or restoration efforts during the third quarter of 2022 given the short period of time between the storm’s passage and the end of the reporting period.

However, as part of our review and based on information currently available, we have determined that storm-related damage to certain assets supported a $3.7 million reduction to the carrying value of those assets, which is included in Loss on sale of real estate and impairment, net in the Consolidated Statements of Income.

We believe the costs to restore these damaged assets will be included in our insurance claim.

We believe we have adequate insurance coverage, subject to deductibles, including business interruption though we are unable to predict the timing or amount of insurance recovery.

For the quarter ended March 31, 2023, net income available for Common Stockholders decreased $0.5 million to $82.4 million, or $0.44 per fully diluted Common Share, compared to $82.9 million, or $0.45 per fully diluted Common Share, for the same period in 2022.

Net income available for Common Stockholders for the quarter ended March 31, 2023 includes an impairment charge of approximately $2.6 million related to flooding events at certain Properties in California.

For the quarter ended March 31, 2023, FFO available for Common Stock and Operating Partnership unit (“OP Unit”) holders increased $3.2 million, or $0.02 per fully diluted Common Share, to $144.1 million, or $0.74 per fully diluted Common Share, compared to $140.9 million, or $0.72 per fully diluted Common Share, for the same period in 2022.

For the quarter ended March 31, 2023, Normalized FFO available for Common Stock and OP Unit holders increased $2.9 million, or $0.02 per fully diluted Common Share, to $144.3 million, or $0.74 per fully diluted Common Share, compared to $141.4 million, or $0.72 per fully diluted Common Share, for the same period in 2022.

For the quarter ended March 31, 2023, our Core Portfolio property operating revenues, excluding deferrals, increased 6.4% and property operating expenses, excluding deferrals and property management, increased 7.4%, from the same period in 2022, resulting in an increase in income from property operations, excluding deferrals and property management, of 5.7%, compared to the same period in 2022.

Management's Discussion and Analysis (continued)

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 95.2%, 95.1% and 95.0% for the quarters ended September 30, 2022, December 31, 2021 and September 30, 2021, respectively.

For the quarter ended September 30, 2022, our Core Portfolio occupancy increased by 22 sites with an increase in homeowner occupancy of 190 sites, compared to occupancy as of June 30, 2022.

By comparison, for the quarter ended September 30, 2021, our Core Portfolio occupancy increased 67 sites with an increase in homeowner occupancy of 275 sites.

Our Core Portfolio average occupancy includes both homeowners and renters in our MH communities and was 94.9%, 95.1% and 95.0% for the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

For the quarter ended March 31, 2023, our Core Portfolio occupancy decreased by 79 sites, which included an increase in homeowner occupancy of 30 sites and a decrease in rental occupancy of 109 compared to December 31, 2022.

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.

As of September 30, 2022, we had 2,949 occupied rental homes in our Core MH communities, including 165 homes rented through our ECHO JV.

RV and marina base rental income in our Core Portfolio increased 4.1% and 10.3% for the quarter ended September 30, 2022 and nine months ended September 30, 2022, respectively, compared to the same periods in 2021 driven by annual and seasonal rental income.

Core RV and marina base rental income from annuals represents more than 60% of total Core RV and marina base rental income and increased 8.6% and 8.8% for the quarter ended September 30, 2022 and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

Core seasonal RV and marina base rental income increased 21.2% and 46.0% for the quarter ended September 30, 2022 and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

Core transient RV and marina base rental income decreased by $2.3 million, or 7.2% for the quarter ended September 30, 2022, compared to the same period in 2021 and decreased $1.0 million, or 1.4% for the nine months ended September 30, 2022, compared to the same period in 2021.

Annual membership subscription revenue increased $1.1 million, or 7.5% for the quarter ended September 30, 2022 and $4.0 million, or 9.2% for the nine months ended September 30, 2022, compared to the same periods in 2021.

The increase in annual membership subscription revenue for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily offset by a decrease in Membership upgrade sales current period, gross of $1.6 million, or 5.4%, for the nine months ended September 30, 2022 compared to the same period in 2021.

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

As of March 31, 2023, we had 2,702 occupied rental homes in our Core MH communities.

RV and marina base rental income in our Core Portfolio increased 5.5% for the quarter ended March 31, 2023, compared to the same period in 2022 driven by annual and seasonal rental income.

Core RV and marina base rental income from annuals represents more than 60% of total Core RV and marina base rental income and increased 8.4% for the quarter ended March 31, 2023, compared to the same period in 2022 due to an 8.0% increase in rate and 0.4% increase in occupancy.

Core seasonal RV and marina base rental income increased 11.9% for the quarter ended March 31, 2023, compared to the same period in 2022.

Core transient RV and marina base rental income decreased by $2.4 million, or 14.9% for the quarter ended March 31, 2023, compared to the same period in 2022.

Across the portfolio we have fewer sites available for transient stays and we experienced operating disruptions in California as a result of flooding events during the quarter ended March 31, 2023.

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

We closed 331 new home sales during the quarter ended September 30, 2022, compared to 338 new home sales during the quarter ended September 30, 2021, a decrease of 2.1%.

We closed 957 new home sales during the nine months ended September 30, 2022, compared to 825 new home sales during the nine months ended September 30, 2021, an increase of 16.0%.

The increase in new home sales was primarily in the Florida and Arizona markets due to favorable housing trends.

Our gross investment in real estate increased $279.1 million to $7,268.2 million as of September 30, 2022 from $6,989.1 million as of December 31, 2021, primarily due to acquisitions and capital improvements during the nine months ended September 30, 2022.

Management's Discussion and Analysis (continued)

The following chart lists the Properties acquired or sold from January 1, 2021 through September 30, 2022 and Sites added through expansion opportunities at our existing Properties:

We closed 176 new home sales during the quarter ended March 31, 2023, compared to 261 new home sales during the quarter ended March 31, 2022, a decrease of 32.6%.

The new home sales during the quarter ended March 31, 2023 were primarily in the Florida market.

Our gross investment in real estate increased $84.7 million to $7,454.3 million as of March 31, 2023 from $7,369.6 million as of December 31, 2022, primarily due to capital improvements and an acquisition during the quarter ended March 31, 2023.

The following chart lists the Properties acquired or sold from January 1, 2022 through March 31, 2023 and Sites added through expansion opportunities at our existing Properties:

Location Type of Property Transaction Date Sites

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Acquisition Properties:

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

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

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 Unconsolidated 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

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Oceanside RV Resort Oceanside, California RV June 16, 2022 139

Hiawasee KOA JV Hiawassee, Georgia Unconsolidated JV November 10, 2022 283

Whippoorwill Campground Marmora, New Jersey RV December 20, 2022 288

Red Oak Shores Campground

Ocean View, New Jersey RV March 28, 2023 223

Expansion Site Development:

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Ground Lease Termination:

Westwinds (4)

San Jose, California MH August 31, 2022 (723)

Total Sites as of September 30, 2022 (1) (5)

Westwinds San Jose, California MH August 31, 2022 (723)

Total Sites as of March 31, 2023 (1)

______________________

(1) Sites are approximate.

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.

(4) MH communities operated and managed by the Operating Partnership pursuant to ground leases that expired on August 31, 2022.

For additional information see Part I.

Financial Statements — Note 11.

Commitments and Contingencies.

(5) See discussion of Hurricane Ian, including the impact to our Florida Properties in Part I.

Management's Discussion and Analysis—Results Overview on page 23.

Non-GAAP Financial Measures

Management’s discussion and analysis of financial condition and results of operations include certain Non-GAAP financial measures that in management’s view of the business are meaningful as they allow investors the ability to understand key operating details of our business both with and without regard to certain accounting conventions or items that may not always be indicative of recurring annual cash flows of the portfolio.

These Non-GAAP financial measures as determined and presented by us may not be comparable to similarly titled measures reported by other companies, and include income from property operations and Core Portfolio, FFO, Normalized FFO and income from rental operations, net of depreciation.

These Non-GAAP financial measures as determined and

Management's Discussion and Analysis (continued)

presented by us may not be comparable to similarly titled measures reported by other companies, and include income from property operations and Core Portfolio, FFO, Normalized FFO and income from rental operations, net of depreciation.

We believe investors should review Income from property operations and Core Portfolio, FFO, Normalized FFO and Income from rental operations, net of depreciation, along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT’s operating performance.

A discussion of Income from property operations and Core Portfolio, FFO, Normalized FFO and Income from rental operations, net of depreciation, and a reconciliation to net income, are included below.

Management's Discussion and Analysis (continued)

Income from Property Operations and Core Portfolio

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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.

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

For comparative purposes, we present bad debt expense within Property operating and maintenance in the current and prior periods.

Our Core Portfolio consists of our Properties owned and operated during all of 2022 and 2023.

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Our Non-Core Portfolio includes all Properties that were not owned and operated during all of 2022 and 2023.

This includes, but is not limited to, six RV communities and eleven marinas acquired during 2021, one membership RV community and three RV communities acquired during 2022 and our Westwinds MH community and an adjacent shopping center.

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

This includes, but is not limited to, four RV communities and one membership RV community acquired during 2022 and one RV community acquired during 2023.

The Non-Core Properties also include Fish Tale Marina, Fort Myers Beach, Gulf Air, Palm Harbour Marina, Pine Island and Ramblers Rest.

FFO and Normalized FFO

We define FFO as net income, computed in accordance with GAAP, excluding gains or losses from sales of properties, depreciation and amortization related to real estate, impairment charges and adjustments to reflect our share of FFO of unconsolidated joint ventures.

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In some cases, we provide information about identified non-cash components of FFO and Normalized FFO because it allows investors, analysts and our management to assess the impact of those items.

Management's Discussion and Analysis (continued)

Income from Rental Operations, Net of Depreciation

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We believe this measure is meaningful for investors as it provides a complete picture of the home rental program operating results including the impact of depreciation which affects our home rental program investment decisions.

Management's Discussion and Analysis (continued)

Our definitions and calculations of these Non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable.

These Non-GAAP financial and operating measures do not represent cash generated from operating activities in accordance with GAAP, nor do they represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash flows from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

The following table reconciles net income available for Common Stockholders to income from property operations for the quarters and nine months ended September 30, 2022 and 2021:

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, 2023 and 2022:

Quarters Ended March 31,

(amounts in thousands)

2022 2021 2022 2021

Computation of Income from Property Operations:

Net income available for Common Stockholders $ 82,371 $ 82,906

Redeemable preferred stock dividends — — 8 8

Income allocated to non-controlling interests – Common OP Units 4,088 4,144

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Income from property operations $ 178,539 $ 171,180

_____________________

(1) During the quarter ended March 31, 2023, we recorded an impairment charge of approximately $2.6 million related to flooding events at certain Properties in California.

Management's Discussion and Analysis (continued)

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, 2022 and 2021:

Quarters Ended September 30, Nine Months Ended September 30,

Quarters Ended March 31,

(amounts in thousands)

2022 2021 2022 2021

Computation of FFO and Normalized FFO:

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Depreciation on unconsolidated joint ventures 1,135 941

Gain on unconsolidated joint ventures (416) —

Loss on sale of real estate and impairment, net 2,632 —

3,747 — 3,747 59

FFO available for Common Stock and OP Unit holders 144,103 140,886

1 unchanged sentence

Transaction/pursuit costs (1)

302 — 3,384 —

Lease termination expenses (2)

2,073 — 2,073 —

Normalized FFO available for Common Stock and OP Unit holders $ 144,309 $ 141,402

1 unchanged sentence

_____________________

(1) Reflects a $3.7 million reduction to the carrying value of certain assets, including home inventory as a result of Hurricane Ian for the quarter and nine months ended September 30, 2022.

(1) Represents transaction/pursuit costs related to unconsummated acquisitions included in Other expenses in the Consolidated Statements of Income.

(3) Represents non-operating expenses associated with the Westwinds ground leases that terminated on August 31, 2022 and is included in General and Administrative expenses in the Consolidated Statement of Income.

(2) Represents non-operating expenses associated with the Westwinds ground leases that terminated on August 31, 2022 and is included in General and

Administrative expenses in the Consolidated Statement of Income.

Management's Discussion and Analysis (continued)

Results of Operations

This section discusses the comparison of our results of operations for the quarters and nine months ended September 30, 2022 and September 30, 2021 and our operating activities, investing activities and financing activities for the nine months ended September 30, 2022 and September 30, 2021.

For the comparison of our results of operations for the quarters and nine months ended September 30, 2021 and September 30, 2020 and discussion of our operating activities, investing activities and financing activities for the nine months ended September 30, 2021 and September 30, 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 September 30, 2021, filed with the SEC on October 26, 2021.

Comparison of the quarter ended September 30, 2022 to the quarter ended September 30, 2021

This section discusses the comparison of our results of operations for the quarters ended March 31, 2023 and March 31, 2022 and our operating activities, investing activities and financing activities for the quarters ended March 31, 2023 and March 31, 2022.

For the comparison of our results of operations for the quarters ended March 31, 2022 and March 31, 2021 and discussion of our operating activities, investing activities and financing activities for the quarters ended March 31, 2022 and March 31, 2021, refer to Part I.

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, 2022, filed with the SEC on April 27, 2022.

Comparison of the quarter ended March 31, 2023 to the quarter ended March 31, 2022

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, 2022 and September 30, 2021:

The following table summarizes certain financial and statistical data for our Core Portfolio and total portfolio for the quarters ended March 31, 2023 and March 31, 2022:

Core Portfolio Total Portfolio

Quarters Ended September 30, Quarters Ended September 30,

Quarters Ended March 31, Quarters Ended March 31,

(amounts in thousands) 2023 2022 Variance %

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Management's Discussion and Analysis—Non-GAAP Financial Measures for definitions and reconciliations of these Non-GAAP measures to Net Income available for Common Shareholders.

Total portfolio income from property operations for the quarter ended September 30, 2022, increased $8.3 million, or 5.5%, from the quarter ended September 30, 2021, driven by an increase of $3.0 million, or 2.1%, from our Core Portfolio and an increase of $5.3 million from our Non-Core Portfolio.

Total portfolio income from property operations for the quarter ended March 31, 2023, increased $7.4 million, or 4.3%, from the quarter ended March 31, 2022, driven by an increase of $8.6 million, or 5.3%, from our Core Portfolio, partially offset by a decrease of $1.3 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 MH base rental income and RV and marina 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 three quarters of 2022.

The decrease in income from property operations from our Non-Core Portfolio was primarily due to lower MH base rental income and RV and marina base rental income, partially offset by business interruption income related to Hurricane Ian of $3.6 million recognized during the quarter ended March 31, 2023.

Management's Discussion and Analysis (continued)

Property Operating Revenues

MH base rental income in our Core Portfolio for the quarter ended September 30, 2022 increased $8.7 million, or 5.9%, from the quarter ended September 30, 2021, which reflects 5.5% growth from rate increases and 0.4% growth from occupancy gains.

The average monthly base rental income per Site in our Core Portfolio increased to approximately $759 for the quarter ended September 30, 2022 from approximately $720 for the quarter ended September 30, 2021.

The average occupancy for our Core Portfolio was 95.2% for the quarter ended September 30, 2022 and 95.0% for the quarter ended September 30, 2021.

MH base rental income in our Core Portfolio for the quarter ended March 31, 2023 increased $10.0 million, or 6.5%, from the quarter ended March 31, 2022, which reflects 6.6% growth from rate increases and a decline of 0.1% in occupancy.

The average monthly base rental income per Site in our Core Portfolio increased to approximately $797 for the quarter ended March 31, 2023 from approximately $747 for the quarter ended March 31, 2022.

The average occupancy for our Core Portfolio was 94.9% for the quarter ended March 31, 2023 and 95.0% for the quarter ended March 31, 2022.

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) 2023 2022 Variance %

4 unchanged sentences

RV and marina base rental income $ 108,403 $ 102,737 $ 5,666 5.5 % $ 111,592 $ 108,764 $ 2,828 2.6 %

RV and marina base rental income in our Core Portfolio for the quarter ended September 30, 2022 increased $3.8 million, or 4.1%, from the quarter ended September 30, 2021, driven by an increase in Annual and Seasonal RV and marina base rental income that was partially offset by a decrease in Transient rental income.

The increase in Annual RV and marina base rental income of 8.6% was driven by a net increase in Annual RV sites.

The increase in Seasonal RV and marina base rental income of 21.2% was driven by increases in all regions except the Northeast, with the South as the largest contributor.

The decrease in Transient RV and marina base rental income of 7.2% was primarily due to a decrease in transient RV revenue as a result of a reduction in the number of Transient sites available.

Annual membership subscription revenue in our Core Portfolio for the quarter ended September 30, 2022 increased $0.9 million, or 6.1%, from the quarter ended September 30, 2021.

During the quarter ended September 30, 2022 we sold approximately 7,200 Thousand Trails Camping Pass memberships, an increase of 7.5% from the quarter ended September 30, 2021.

Utility and other income in our Core Portfolio for the quarter ended September 30, 2022 increased $2.5 million, or 9.9%, from the quarter ended September 30, 2021.

The increase was primarily due to a $1.5 million increase in utility income, which was primarily due to an increase in electric income in the South and West, sewer income in all regions and trash income in the South.

The utility recovery rate (utility income divided by utility expenses) for the quarters ended September 30, 2022 and 2021 was approximately 42% and 43%, respectively.

RV and marina base rental income in our Core Portfolio for the quarter ended March 31, 2023 increased $5.7 million, or 5.5%, from the quarter ended March 31, 2022, driven by an increase in Annual and Seasonal RV and marina base rental income, partially offset by a decrease in Transient rental income.

The increase in Annual RV and marina base rental income of 8.4% was driven by an increase in rate.

The increase in Seasonal RV and marina base rental income of 11.9% was driven by an increase in the South and West regions.

The decrease in Transient RV and marina base rental income of 14.9% was primarily due to a decrease in transient RV revenue as a result of a reduction in the number of Transient sites available and flooding events at certain Properties in California during the quarter.

Utility and other income in our Core Portfolio for the quarter ended March 31, 2023 increased $2.5 million, or 9.4%, from the quarter ended March 31, 2022.

The increase was primarily due to a $1.9 million increase in utility income, which was primarily due to an increase in electric income in all regions except the Northeast, gas income in the South and trash income in all regions and an increase of $0.4 million in other property income primarily due to business interruption income related to Hurricane Ian recognized during the quarter ended March 31, 2023.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended September 30, 2022 increased $10.0 million, or 7.8%, from the quarter ended September 30, 2021, driven by increases in property operating and maintenance expenses of $9.4 million and real estate taxes of $0.5 million.

Core property operating and maintenance expenses were higher in 2022 primarily due to increases in utility expenses of $4.2 million, property payroll of $2.8 million, administrative expenses of $1.3 million, and repair and maintenance of $1.2 million.

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended March 31, 2023 increased $9.2 million, or 7.4%, from the quarter ended March 31, 2022, driven by increases in property operating and maintenance expenses of $9.3 million.

Core property operating and maintenance expenses were higher in 2023 primarily due to increases in utility expenses of $4.1 million, repair and maintenance of $2.5 million and property payroll of $2.4 million.

Management's Discussion and Analysis (continued)

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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) 2023 2022 Variance %

Gross revenues from new home sales $ 18,314 $ 25,530 $ (7,216) (28.3) %

$ 32,850 $ 26,413 $ 6,437 24.4 %

Cost of new home sales 16,662 23,326 (6,664) (28.6) %

29,380 24,519 4,861 19.8 %

Gross profit from new home sales 1,652 2,204 (552) (25.0) %

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Cost of used home sales 945 1,410 (465) (33.0) %

Profit (Loss) from used home sales 225 (465) 690 148.4 %

Gross profit/(loss) from used home sales 230 (412) 642 155.8 %

Gross revenue from brokered resales and ancillary services 12,644 13,167 (523) (4.0) %

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176 261 (85) (32.6) %

New Home Sales Volume - ECHO JV 21 32 (11) (34.4) %

Used home sales 102 72 30 41.7 %

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_________________________

(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.

Income from home sales and other operations was $5.2 million for the quarter ended September 30, 2022, an increase of $2.1 million, compared to $3.2 million in the quarter ended September 30, 2021.

The increase in income from home sales and other operations was primarily due to an increase in gross profit from new home sales during the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, primarily driven by favorable housing trends in the broader real estate market.

(1) Total new home sales volume for the quarter ended March 31, 2022 includes 22 home sales from our ECHO JV.

Income from home sales and other operations was $2.1 million for the quarter ended March 31, 2023, a decrease of $0.5 million, compared to $2.5 million for the quarter ended March 31, 2022.

The decrease in income from home sales and other operations was primarily due to a decrease in gross profit from new home sales and higher home selling and ancillary operating expenses, partially offset by an increase in gross profit from used home sales during the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022.

Management's Discussion and Analysis (continued)

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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)

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Gross investment in new manufactured home rental units $ 252,204 $ 226,890 $ 25,314 11.2 %

$ 221,840 $ 231,705 $ (9,865) (4.3) %

Gross investment in used manufactured home rental units $ 14,056 $ 15,004 $ (948) (6.3) %

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Number of occupied rentals – new, end of period 2,389 2,908 (519) (17.8) %

2,594 3,132 (538) (17.2) %

Number of occupied rentals – used, end of period 313 402 (89) (22.1) %

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

Approximately $6.7 million and $7.8 million for the quarters ended September 30, 2022 and September 30, 2021, respectively, of Site rental income is included in MH base rental income in the Core Portfolio Income from Property Operations table.

Approximately $6.4 million and $7.4 million for the quarters ended March 31, 2023 and March 31, 2022, 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.

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

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

Our investment in the ECHO JV was $19.0 million and $17.8 million as of September 30, 2022 and September 30, 2021, respectively.

(4) Includes 165 and 253 homes rented through our ECHO JV as of September 30, 2022 and 2021, respectively.

Income from rental operations, net of depreciation, decreased $1.4 million during the quarter ended September 30, 2022, compared to the quarter ended September 30, 2021, primarily due to a decrease in the number of occupied rentals.

Other Income and Expenses

The following table summarizes other income and expenses, net:

Quarters Ended September 30,

(amounts in thousands, expenses shown as negative)

2022 2021 Variance %

Depreciation and amortization $ (52,547) $ (44,414) $ (8,133) (18.3) %

Interest income 1,865 1,805 60 3.3 %

Income from other investments, net 2,399 1,238 1,161 93.8 %

General and administrative (11,086) (10,401) (685) (6.6) %

Other expenses (1,627) (797) (830) (104.1) %

Interest and related amortization (29,759) (27,361) (2,398) (8.8) %

Total other income and expenses, net $ (90,755) $ (79,930) $ (10,825) (13.5) %

Total other income and expenses, net increased $10.8 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, primarily due to 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 2021 and the nine months ended September 30, 2022.

Loss on sale of real estate and impairment, net

During the quarter ended September 30, 2022, we wrote down the carrying value of certain assets at six properties by approximately $3.7 million as a result of property damage caused by Hurricane Ian.

For additional information see Part I.

Management's Discussion and Analysis — Results Overview.

Management's Discussion and Analysis (continued)

Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

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, 2022 and 2021.

Core Portfolio Total Portfolio

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

(amounts in thousands) 2022 2021 Variance %

Change 2022 2021 Variance %

MH base rental income (1)

$ 467,236 $ 441,893 $ 25,343 5.7 % $ 475,070 $ 450,261 $ 24,809 5.5 %

Rental home income (1)

11,487 12,695 (1,208) (9.5) % 11,519 12,713 (1,194) (9.4) %

RV and marina base rental income (1)

280,514 254,239 26,275 10.3 % 316,984 273,185 43,799 16.0 %

Annual membership subscriptions 46,552 43,044 3,508 8.1 % 47,003 43,048 3,955 9.2 %

Membership upgrade sales current period, gross 26,770 29,343 (2,573) (8.8) % 27,771 29,343 (1,572) (5.4) %

Utility and other income (1)

80,675 76,005 4,670 6.1 % 92,612 80,539 12,073 15.0 %

Property operating revenues, excluding deferrals 913,234 857,219 56,015 6.5 % 970,959 889,089 81,870 9.2 %

Property operating and maintenance (1)(2)

318,772 289,857 28,915 10.0 % 340,821 302,253 38,568 12.8 %

Real estate taxes 50,762 48,703 2,059 4.2 % 56,373 54,154 2,219 4.1 %

Rental home operating and maintenance 4,091 4,043 48 1.2 % 4,117 4,093 24 0.6 %

Sales and marketing, gross 17,868 18,983 (1,115) (5.9) % 18,466 18,987 (521) (2.7) %

Property operating expenses, excluding deferrals and property management 391,493 361,586 29,907 8.3 % 419,777 379,487 40,290 10.6 %

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

521,741 495,633 26,108 5.3 % 551,182 509,602 41,580 8.2 %

Property management 55,973 48,956 7,017 14.3 % 55,973 48,955 7,018 14.3 %

Income from property operations, excluding deferrals (3)

465,768 446,677 19,091 4.3 % 495,209 460,647 34,562 7.5 %

Membership upgrade sales upfront payments and membership sales commission, deferred, net 15,482 16,729 (1,247) (7.5) % 15,482 16,729 (1,247) (7.5) %

Income from property operations (3)

$ 450,286 $ 429,948 $ 20,338 4.7 % $ 479,727 $ 443,918 $ 35,809 8.1 %

__________________________

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

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.

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 Part I.

Management's Discussion and Analysis—Non-GAAP Financial Measures for definitions and reconciliation of these Non-GAAP measures to Net Income available for Common Shareholders.

Total Portfolio income from property operations for the nine months ended September 30, 2022 increased $35.8 million, or 8.1%, from the same period in 2021, driven by an increase of $20.3 million, or 4.7%, from our Core Portfolio and by an increase of $15.5 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 attributed to income from properties acquired in 2021 and the first three quarters of 2022.

Property Operating Revenues

MH base rental income in our Core Portfolio for the nine months ended September 30, 2022 increased $25.3 million, or 5.7%, from the same period in 2021, which reflects 5.3% growth from rate increases and 0.4% growth from occupancy gains.

The average monthly base rental income per Site increased to approximately $753 in 2022 from approximately $715 in 2021.

The average occupancy for the Core Portfolio was 95.1% for both the nine months ended September 30, 2022 and 2021.

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)

2022 2021 Variance %

Change 2022 2021 Variance %

Annual $ 171,295 $ 157,497 $ 13,798 8.8 % $ 198,994 $ 173,702 $ 25,292 14.6 %

Seasonal 42,684 29,235 13,449 46.0 % 45,576 30,145 15,431 51.2 %

Transient 66,535 67,507 (972) (1.4) % 72,414 69,338 3,076 4.4 %

RV and marina base rental income $ 280,514 $ 254,239 $ 26,275 10.3 % $ 316,984 $ 273,185 $ 43,799 16.0 %

RV and marina base rental income in our Core Portfolio for the nine months ended September 30, 2022 increased $26.3 million, or 10.3%, from the same period in 2021 primarily due to increases in Annual and Seasonal RV and marina base rental income.

The increase in Annual RV and marina base rental income of $13.8 million, or 8.8% was seen across all regions, primarily in the South, West and Northeast.

The increase in Seasonal RV and marina base rental income of $13.4 million, or 46.0% was 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.

Annual membership subscription revenue in our Core Portfolio for the nine months ended September 30, 2022 increased $3.5 million, or 8.1%, from the same period in 2021, reflecting a 5.7% increase in the number of Thousand Trails Camping members.

The increase in annual membership subscription revenue of $3.5 million, or 8.1%, from 2021 was offset by a Membership upgrade sales current period, gross decrease of $2.6 million, or 8.8%, 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 quarter ended March 31, 2021.

Utility and other income in our Core Portfolio for the nine months ended September 30, 2022 increased $4.7 million, or 6.1%, from the same period in 2021.

The increase was primarily due to an increase in utility income of $4.8 million and pass-through income of $1.2 million, partially offset by a decrease in insurance proceeds of $1.8 million.

The increase in utility income was primarily due to an increase in electric income.

The utility recovery rate (utility income divided by utility expenses) for both 2022 and 2021 was approximately 44%.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the nine months ended September 30, 2022 increased $29.9 million, or 8.3%, from the same period in 2021, driven by increases in property operating and maintenance expenses of $28.9 million.

Core property operating and maintenance expenses were higher during the nine months ended September 30, 2022, compared to the same period in 2021 due to increases in utility expenses of $11.6 million, repairs and maintenance expenses of $6.7 million, and property payroll expenses of $6.2 million.

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)

2022 2021 Variance %

Gross revenues from new home sales (1)

$ 92,228 $ 64,071 $ 28,157 43.9 %

Cost of new home sales (1)

82,726 60,477 22,249 36.8 %

Gross profit from new home sales 9,502 3,594 5,908 164.4 %

Gross revenues from used home sales 3,337 2,852 485 17.0 %

Cost of used home sales 3,594 4,094 (500) (12.2) %

Loss from used home sales (257) (1,242) 985 79.3 %

Gross revenue from brokered resales and ancillary services 49,372 43,125 6,247 14.5 %

Cost of brokered resales and ancillary services 25,574 20,970 4,604 22.0 %

Gross profit from brokered resales and ancillary services 23,798 22,155 1,643 7.4 %

Home selling and ancillary operating expenses 21,146 17,588 3,558 20.2 %

Income from home sales and other $ 11,897 $ 6,919 $ 4,978 71.9 %

Home sales volumes

Total new home sales (2)

957 825 132 16.0 %

New Home Sales Volume - ECHO JV 72 56 16 28.6 %

Used home sales 250 314 (64) (20.4) %

Brokered home resales 674 543 131 24.1 %

_________________________

(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 $11.9 million for the nine months ended September 30, 2022, an increase of $5.0 million, compared to $6.9 million for the nine months ended September 30, 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 132 new home sales during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by favorable housing trends in the broader real estate market.

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)

2022 2021 Variance %

Rental operations revenue (1)

$ 32,635 $ 36,714 $ (4,079) (11.1) %

Rental home operating and maintenance expenses 4,091 4,043 48 1.2 %

Income from rental operations 28,544 32,671 (4,127) (12.6) %

Depreciation on rental homes (2)

7,537 7,959 (422) (5.3) %

Income from rental operations, net of depreciation $ 21,007 $ 24,712 $ (3,705) (15.0) %

Gross investment in new manufactured home rental units (3)

$ 221,840 $ 231,705 $ (9,865) (4.3) %

Gross investment in used manufactured home rental units $ 15,226 $ 16,667 $ (1,441) (8.6) %

Net investment in new manufactured home rental units $ 179,565 $ 198,200 $ (18,635) (9.4) %

Net investment in used manufactured home rental units $ 6,491 $ 10,878 $ (4,387) (40.3) %

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

2,594 3,132 (538) (17.2) %

Number of occupied rentals – used, end of period 355 456 (101) (22.1) %

______________________

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

Approximately $21.1 million and $24.0 million of Site rental income for the nine months ended September 30, 2022 and 2021, 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 $19.0 million and $17.8 million as of September 30, 2022 and 2021, respectively.

(4) Occupied rentals as of the end of the period in our Core Portfolio and includes 165 and 253 homes rented through our ECHO JV as of September 30, 2022 and 2021, respectively.

Income from rental operations, net of depreciation, was $3.7 million lower during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to a decrease in rental operations revenues as a result of a decrease in the number of new occupied rentals.

Income from rental operations, net of depreciation, decreased $0.9 million during the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, primarily due to 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)

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Total other income and expenses, net $ (92,040) $ (86,831) $ (5,209) (6.0) %

Total other income and expenses, net increased $22.2 million during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to higher depreciation and amortization, interest and related amortization and other expenses.

The increase in depreciation and amortization was due to depreciation on Non-Core properties acquired in 2021 and the nine months ended September 30, 2022.

The increase in Interest and related amortization was due to higher interest rates.

The increase in Other expenses was primarily due to transaction/pursuit costs of $3.4 million related to unconsummated acquisitions.

Management's Discussion and Analysis (continued)

Total other income and expenses, net increased $5.2 million for the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022, primarily due to higher interest and related amortization expense as a result of an increase in interest rates and depreciation and amortization expense.

Casualty related charges/(recoveries), net

During the quarter ended March 31, 2023, we recorded $8.5 million of expenses for debris removal and cleanup costs and an offsetting insurance recovery revenue of $8.5 million related to Hurricane Ian.

Loss on sale of real estate and impairment, net

During the nine months ended September 30, 2022, we wrote down the carrying value of certain assets at six properties by approximately $3.7 million as a result of property damage caused by Hurricane Ian.

For additional information see Part 1.

Management's Discussion and Analysis - Results Overview.

During the quarter ended March 31, 2023, we recorded an impairment charge of approximately $2.6 million related to flooding events at certain California properties.

Management's Discussion and Analysis (continued)

Liquidity and Capital Resources

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We expect similar demand for liquidity will continue for the short-term and long-term.

Our primary sources of cash include operating cash flows, proceeds from financings, borrowings under our unsecured LOC and proceeds from issuance of equity and debt securities.

Our primary sources of cash include operating cash flows, proceeds from financings, borrowings under our unsecured line of credit (the “LOC”) and proceeds from issuance of equity and debt securities.

One of our stated objectives is to maintain financial flexibility.

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

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.

During the nine months ended September 30, 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 September 30, 2022, the full capacity of our current ATM equity offering program remained available for issuance.

As of September 30, 2022, we had available liquidity in the form of approximately 413.9 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, 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.

We also 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 refinancing transaction were used to repay all debt scheduled to mature in 2022 and to repay amounts outstanding on the LOC.

Financial Statements—Note 8.

Borrowing Arrangements for further details.

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 $500.0 million.

As of March 31, 2023, the full capacity of our ATM equity offering program remained available for issuance.

As of March 31, 2023, we had available liquidity in the form of approximately 413.8 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.

We also utilize interest rate swaps to add stability to our interest expense and to manage our exposure to interest rate movements.

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Derivative Instruments and Hedging .

We previously entered into a Third Amended and Restated Credit Agreement (“Credit Agreement”), pursuant to which we have access to a $500.0 million unsecured LOC and a $300.0 million senior unsecured term loan (the “$300 million Term Loan”).

On March 1, 2023, we amended the Credit Agreement to transition the LIBOR rate borrowings to Secured Overnight Financing Rate (“SOFR”) borrowings.

Financial Statements—Note 8.

Borrowing Arrangements for further details.

As of March, 31, 2023, the Company has no remaining LIBOR based borrowings.

In connection with our $300 million Term Loan, we entered into a Swap Agreement (the “2021 Swap”) allowing us to trade the variable interest rate for a fixed interest rate.

During the quarter ended March 31, 2023, in connection with the amendment to the Credit Agreement, we replaced the LIBOR benchmarked swap with a SOFR benchmarked swap.

Financial Statements—Note 9.

Derivative Instruments and Hedging for further details.

We previously entered into a $200.0 million senior unsecured term loan agreement.

In connection with our $200 million Term Loan, in April 2023, we entered into a Swap Agreement (the “2023 Swap”) allowing us to trade the variable interest rate for a fixed interest rate.

Financial Statements—Note 9.

Derivative Instruments and Hedging for further details.

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, 2022, our LOC had a borrowing capacity of $405.0 million.

As of September 30, 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.

As of March 31, 2023, our LOC had a borrowing capacity of $288.0 million.

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.

Management's Discussion and Analysis (continued)

issuance of debt securities or the issuance of equity including under our ATM equity offering program.

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.

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:

Nine Months ended September 30,

For the quarters ended March 31,

(amounts in thousands) 2023 2022

1 unchanged sentence

Net cash used in investing activities (101,928) (105,182)

Net cash (used in) provided by financing activities (181,825) 240,559

Net (decrease) increase in cash and restricted cash $ (92,888) $ 16,212

Net cash used in financing activities (84,219) (157,427)

Net increase (decrease) in cash and restricted cash $ 8,314 $ (85,278)

Operating Activities

Net cash provided by operating activities increased $34.2 million to $487.8 million for the nine months ended September 30, 2022 from $453.6 million for the nine months ended September 30, 2021.

The increase in net cash provided by operating activities was primarily due to higher income from property operations of $35.8 million.

Net cash provided by operating activities increased $17.1 million to $194.5 million for the quarter ended March 31, 2023 from $177.3 million for the quarter ended March 31, 2022.

The increase in net cash provided by operating activities was primarily due to higher income from property operations of $7.4 million and the net change in other assets, net and accounts payable and other liabilities.

Investing Activities

Net cash used in investing activities decreased $279.1 million to $398.9 million for the nine months ended September 30, 2022 from $678.0 million for the nine months ended September 30, 2021.

The decrease was due to a decrease in spending on acquisitions of $358.5 million, partially offset by an increase in capital improvement spending of $64.6 million and an increase in investments in unconsolidated joint ventures of $15.5 million.

Net cash used in investing activities decreased $3.3 million to $101.9 million for the quarter ended March 31, 2023 from $105.2 million for the quarter ended March 31, 2022.

The decrease was due to a decrease in spending on acquisitions of $6.6 million, a decrease in investments in unconsolidated joint ventures of $6.2 million and an increase in insurance proceeds of $2.7 million, partially offset by an increase in capital improvement spending of $12.8 million.

Capital Improvements

The following table summarizes capital improvements:

Nine Months ended September 30,

For the quarters ended March 31,

(amounts in thousands) 2023 2022

2 unchanged sentences

Improvements and renovations (2)

26,950 19,401

Property upgrades and development 33,204 30,302

1 unchanged sentence

45,043 28,657

Used home investments (3)

Total property improvements 96,359 75,296

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(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 new and used home sale activities are reflected within Operating Activities.

Financing Activities

Net cash used in financing activities was $181.8 million for the nine months ended September 30, 2022.

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

The decrease in net cash provided by financing activities was primarily due to a decrease in net debt proceeds of approximately $432.7 million, partially offset by proceeds from the sale of common stock under our ATM program of approximately $28.4 million.

Management's Discussion and Analysis (continued)

Net cash used in financing activities decreased $73.2 million to $84.2 million for the quarter ended March 31, 2023 from $157.4 million for the quarter ended March 31, 2022.

The decrease was primarily due to a decrease in net debt repayments of approximately $107.1 million during the quarter ended March 31, 2023, compared to the same period in the prior year and proceeds from the sale of common stock under our prior ATM program of approximately $28.4 million recognized during the quarter ended March 31, 2022.

Contractual Obligations

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Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations in our 2022 Form 10-K.

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

Westwinds provides affordable, rent-controlled homes to numerous residents, including families with children and residents over 65 years of age.

For the year ended December 31, 2021, Westwinds and Nicholson Plaza generated approximately $6.0 million of net operating income.

The master lessor of these ground leases, The Nicholson Family Partnership (together with its predecessor in interest, the “Nicholsons”), has expressed a desire to redevelop Westwinds, and in a written communication, they claimed that we were obligated to deliver the property free and clear of any and all subtenancies upon the expiration of the ground leases on August 31, 2022.

In connection with any redevelopment, the City of San Jose’s conversion ordinance requires, among other things, that the landowner provide relocation, rental and purchase assistance to the impacted residents.

We believe the Nicholsons are unlawfully attempting to impose those obligations upon the Operating Partnership.

Westwinds opened in the 1970s and was developed by the original ground lessee with assistance from the Nicholsons.

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 received a percentage of gross revenues from the sale of new or used mobile homes in Westwinds.

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

Because the ground leases with the Nicholsons had an expiration date of August 31, 2022, and no further right of extension, the Operating Partnership did not enter into any subtenancy agreements that extended beyond August 31, 2022.

However, the mobilehome residents’ occupancy rights continued by operation of California state and San Jose municipal law beyond the expiration date of the ground leases.

Notwithstanding this, the Nicholsons 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) violated California state and San Jose municipal law because the Nicholsons had demanded that the Operating Partnership remove all residents without just cause and (ii) conflicted 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 had no obligation to deliver the property free and clear of the mobilehome residents upon the expiration of the ground leases.

The Operating Partnership and the interested parties filed an amended complaint on January 29, 2020.

Following the filing of our lawsuit, the City of San Jose took steps to accelerate the passage of a general plan amendment previously under review by the City to change the designation for Westwinds from its current general plan designation of Urban Residential (which would allow for higher density redevelopment), to a newly created designation of Mobile Home Park.

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 the 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.

The Nicholsons filed a demand for arbitration on January 28, 2020, which they subsequently amended, seeking (i) a declaration that the Operating Partnership, as the “owner and manager” of Westwinds, is “required by the Ground Leases, and State and local law to deliver the Property free of any encumbrances or third-party claims at the expiration of the lease terms,” (ii) that the Operating Partnership anticipatorily breached the ground leases by publicly repudiating any such obligation and (iii) that the Operating Partnership is required to indemnify the Nicholsons with respect to the claims brought by the interested parties in the Superior Court proceeding.

Management's Discussion and Analysis (continued)

On February 3, 2020, the Nicholsons filed a motion in California Superior Court to compel arbitration and to stay the Superior Court litigation, which motion was heard on June 25, 2020.

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, 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, which the California Supreme Court denied on April 20, 2022.

On May 18, 2022, the Nicholsons filed a cross complaint alleging that the Operating Partnership is obligated to deliver Westwinds free and clear of encumbrances and in good condition and repair.

The cross complaint asserts that it is no longer feasible for the Operating Partnership to cure its alleged breaches given that the ground leases terminate on August 31, 2022.

The Nicholsons filed a demurrer to our complaint which was denied by the Superior Court.

On July 19, 2022, the Nicholsons sent two notices of default to the Operating Partnership, one related to Westwinds and the other related to Nicholson Plaza, the adjacent shopping center.

The notices generally assert that the Operating Partnership failed to maintain or repair certain infrastructure and improvements at Westwinds and Nicholson Plaza.

The Operating Partnership disputes the contention that it did not maintain Westwinds and Nicholson Plaza in compliance with the terms of the applicable ground leases.

The arbitration that was previously stayed pursuant to an agreement between the Operating Partnership and the Nicholsons was set for a hearing on October 31, 2022 with respect to the Nicholsons’ claim that the Operating Partnership is required to indemnify the Nicholsons with respect to the claims brought by the interested parties in the Superior Court proceeding and a claim by the Operating Partnership for recovery of fees incurred in connection with the Nicholsons’ failed motion to compel arbitration.

On October 6, 2022, the parties to the Superior Court proceeding as well as the arbitration entered into a binding agreement pursuant to which, among other things, the parties agreed to dismiss with prejudice all claims pending in the Superior Court and in the arbitration;

however, the Nicholsons reserved their rights to pursue their claim that the Operating Partnership failed to maintain or repair certain infrastructure and improvements at Westwinds and Nicholson Plaza.

To the extent the Nicholsons pursue such claim, we intend to vigorously defend our interests.

The parties are in the process of further documenting and implementing the settlement agreement.

Off-Balance Sheet Arrangements

As of September 30, 2022, we have no off-balance sheet arrangements.

As of March 31, 2023, we have no off-balance sheet arrangements.

Management's Discussion and Analysis (continued)

Critical Accounting Policies and Estimates

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Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 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 September 30, 2022.

There have been no significant changes to our critical accounting policies and estimates during the quarter ended March 31, 2023.

Forward-Looking Statements

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• 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;

Management's Discussion and Analysis (continued)

• 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;

• impact of the COVID-19 pandemic or other highly infectious or contagious diseases on our business operations, our residents, our customers, our employees and the economy generally;

• effective integration of recent acquisitions and our estimates regarding the future performance of recent acquisitions;

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• the effect of Hurricane Ian on our business including, but not limited to the following:

(i) the timing and cost of recovery, (ii) the impact of the condition of properties and homes on occupancy demand and related rent revenue and (iii) the timing and amount of insurance proceeds;

(i) the timing and cost of recovery, (ii) the condition of properties and the impact on occupancy demand and related rent revenue and (iii) the timing and amount of insurance proceeds;

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

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• other risks indicated from time to time in our filings with the Securities and Exchange Commission.

In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration of the pandemic, the extent of the adverse health impact on the general population and on our residents, customers, and employees in particular, its impact on the employment rate and the economy, the extent and impact of governmental responses, and the impact of operational changes we have implemented and may implement in response to the pandemic.

These forward-looking statements are based on management’s present expectations and beliefs about future events.

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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