What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-10-25 compared with 2023-08-03 · 127 added, 126 removed, 471 unchanged (35% 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 June 30, 2023, we owned or had an ownership interest in a portfolio of 450 Properties located throughout the United States and Canada containing 171,706 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.

As of September 30, 2023, we owned or had an ownership interest in a portfolio of 450 Properties located throughout the United States and Canada containing 171,707 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 ten 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 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 June 30, 2023

Total Sites as of September 30, 2023

MH Sites 72,700

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Results Overview

For the quarter ended June 30, 2023, net income available for Common Stockholders increased $1.4 million to $62.9 million, or $0.34 per fully diluted Common Share, compared to $61.5 million, or $0.33 per fully diluted Common Share, for the same period in 2022.

For the six months ended June 30, 2023, net income available for Common Stockholders increased $0.9 million, to $145.3 million, or $0.78, per fully diluted Common Share, compared to $144.4 million, or $0.78 per fully diluted Common Share, for the same period in 2022.

Net income available for Common Stockholders for the six months ended June 30, 2023 includes accelerated vesting of stock-based compensation expense of $6.3 million recognized during the quarter ended June 30, 2023 and an impairment charge of approximately $2.6 million recognized during the quarter ended March 31, 2023 related to flooding events at certain Properties in California.

For the quarter ended June 30, 2023, FFO available for Common Stock and Operating Partnership unit (“OP Unit”) holders increased $1.8 million, or $0.01 per fully diluted Common Share, to $123.4 million, or $0.63 per fully diluted Common Share, compared to $121.6 million, or $0.62 per fully diluted Common Share, for the same period in 2022.

For the six months ended June 30, 2023, FFO available for Common Stock and OP Unit holders increased $5.0 million, or $0.03 per fully diluted Common Share, to $267.5 million, or $1.37 per fully diluted Common Share, compared to $262.5 million, or $1.34 per fully diluted Common Share for the same period in 2022.

For the quarter ended June 30, 2023, Normalized FFO available for Common Stock and OP Unit holders increased $4.4 million, or $0.02 per fully diluted Common Share, to $129.7 million, or $0.66 per fully diluted Common Share, compared to

For the quarter ended September 30, 2023, net income available for Common Stockholders increased $9.8 million to $77.0 million, or $0.41 per fully diluted Common Share, compared to $67.2 million, or $0.36 per fully diluted Common Share, for the same period in 2022.

For the nine months ended September 30, 2023, net income available for Common Stockholders increased $10.7 million, to $222.3 million, or $1.19, per fully diluted Common Share, compared to $211.6 million, or $1.14 per fully diluted Common Share, for the same period in 2022.

Net income available for Common Stockholders for the nine months ended September 30, 2023 includes accelerated vesting of stock-based compensation expense of $6.3 million recognized during the quarter ended June 30, 2023 and an impairment charge of approximately $3.6 million recognized during the nine months ended September 30, 2023 primarily related to flooding events at certain Properties in California.

For the quarter ended September 30, 2023, FFO available for Common Stock and Operating Partnership unit (“OP Unit”) holders increased $5.3 million, or $0.02 per fully diluted Common Share, to $139.7 million, or $0.71 per fully diluted Common Share, compared to $134.4 million, or $0.69 per fully diluted Common Share, for the same period in 2022.

For the nine months ended September 30, 2023, FFO available for Common Stock and OP Unit holders increased $10.2 million, or $0.05 per fully diluted Common Share, to $407.1 million, or $2.08 per fully diluted Common Share, compared to $396.9 million, or $2.03 per fully diluted Common Share for the same period in 2022.

Management's Discussion and Analysis (continued)

$125.3 million, or $0.64 per fully diluted Common Share, for the same period in 2022.

For the six months ended June 30, 2023, Normalized FFO available for Common Stock and OP Unit holders increased $7.3 million, or $0.03 per fully diluted Common Share, to $274.0 million, or $1.40 per fully diluted Common Share, compared to $266.7 million, or $1.37 per fully diluted Common Share, for the same period in 2022.

For the quarter ended June 30, 2023, our Core Portfolio property operating revenues, excluding deferrals, increased 5.0% and property operating expenses, excluding deferrals and property management, increased 7.0%, from the same period in 2022, resulting in an increase in income from property operations, excluding deferrals and property management, of 3.5%, compared to the same period in 2022.

For the six months ended June 30, 2023, our Core Portfolio property operating revenues, excluding deferrals, increased 5.7% and property operating expenses, excluding deferrals and property management, increased 7.2% from the same period in 2022, resulting in an increase in income from property operations, excluding deferrals and property management, of 4.6% compared to the same period in 2022.

For the quarter ended September 30, 2023, Normalized FFO available for Common Stock and OP Unit holders increased $2.9 million, or $0.01 per fully diluted Common Share, to $139.7 million, or $0.71 per fully diluted Common Share, compared to $136.8 million, or $0.70 per fully diluted Common Share, for the same period in 2022.

For the nine months ended September 30, 2023, Normalized FFO available for Common Stock and OP Unit holders increased $10.2 million, or $0.05 per fully diluted Common Share, to $413.7 million, or $2.12 per fully diluted Common Share, compared to $403.5 million, or $2.07 per fully diluted Common Share, for the same period in 2022.

For the quarter ended September 30, 2023, our Core Portfolio property operating revenues, excluding deferrals, increased 4.7% and property operating expenses, excluding deferrals and property management, increased 5.1%, from the same period in 2022, resulting in an increase in income from property operations, excluding deferrals and property management, of 4.4%, compared to the same period in 2022.

For the nine months ended September 30, 2023, our Core Portfolio property operating revenues, excluding deferrals, increased 5.4% and property operating expenses, excluding deferrals and property management, increased 6.5% from the same period in 2022, resulting in an increase in income from property operations, excluding deferrals and property management, of 4.5% compared to the same period in 2022.

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 94.8%, 95.1% and 95.1% for the quarters ended June 30, 2023, December 31, 2022 and June 30, 2022, respectively.

For the quarter ended June 30, 2023, our Core Portfolio occupancy decreased by 23 sites, which included an increase in homeowner occupancy of 151 sites and a decrease in rental occupancy of 174 compared to March 31, 2023.

Our Core Portfolio average occupancy includes both homeowners and renters in our MH communities and was 94.9%, 95.1% and 95.2% for the quarters ended September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

For the quarter ended September 30, 2023, our Core Portfolio occupancy increased by 42 sites, which included an increase in homeowner occupancy of 225 sites and a decrease in rental occupancy of 183 compared to June 30, 2023.

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 June 30, 2023, we had 2,528 occupied rental homes in our Core MH communities.

RV and marina base rental income in our Core Portfolio increased 2.3% for the quarter ended June 30, 2023, compared to the same period in 2022 driven by an increase in Annual and Seasonal RV rental income, partially offset by a decline in Transient RV rental income.

Core RV and marina base rental income from annuals represents more than 71.6% of total Core RV and marina base rental income and increased 7.8% for the quarter ended June 30, 2023, compared to the same period in 2022 due to a 7.3% increase in rate and 0.5% increase in occupancy.

Core seasonal RV and marina base rental income increased 1.6% for the quarter ended June 30, 2023, compared to the same period in 2022.

Core transient RV and marina base rental income decreased by $2.9 million, or 13.9% for the quarter ended June 30, 2023, compared to the same period in 2022.

Since June 30, 2022, we have increased our Core RV and marina annual site count by approximately 240 resulting in a reduction in the number of transient sites available for use.

We also experienced significant weather events during the quarter ended June 30, 2023 in California, the Pacific Northwest, and the East Coast, which impacted our transient RV and marina base rental income.

As of September 30, 2023, we had 2,345 occupied rental homes in our Core MH communities.

RV and marina base rental income in our Core Portfolio increased 2.0% for the quarter ended September 30, 2023, compared to the same period in 2022 driven by an increase in Annual RV rental income, partially offset by a decline in Seasonal and Transient RV rental income.

Core RV and marina base rental income from annuals represents 66.1% of total Core RV and marina base rental income and increased 8.0% for the quarter ended September 30, 2023, compared to the same period in 2022 due to a 7.8% increase in rate and 0.2% increase in occupancy.

Core seasonal RV and marina base rental income decreased 8.5% for the quarter ended September 30, 2023, compared to the same period in 2022.

Core transient RV and marina base rental income decreased by $2.3 million, or 7.6% for the quarter ended September 30, 2023, compared to the same period in 2022.

Since September 30, 2022, we have increased our Core RV and marina annual site count by approximately 40% resulting in a reduction in the number of transient sites available for use.

We also experienced local storm events across the portfolio during the quarter ended September 30, 2023, particularly in the North, Northeast and California, which impacted our transient RV and marina base rental income.

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

We closed 226 new home sales during the quarter ended June 30, 2023, compared to 365 new home sales during the quarter ended June 30, 2022, a decrease of 38.1%.

The decrease in new home sales during the quarter ended June 30, 2023 were primarily in the Florida and Arizona market.

Our gross investment in real estate increased $179.8 million to $7,549.3 million as of June 30, 2023 from $7,369.6 million as of December 31, 2022, primarily due to capital improvements and an acquisition during the six months ended June 30, 2023.

We closed 285 new home sales during the quarter ended September 30, 2023, compared to 331 new home sales during the quarter ended September 30, 2022, a decrease of 13.9%.

The decrease in new home sales during the quarter ended September 30, 2023 were primarily in the Florida and Arizona markets.

Our gross investment in real estate increased $255.9 million to $7,625.5 million as of September 30, 2023 from $7,369.6 million as of December 31, 2022, primarily due to capital improvements and an acquisition during the nine months ended September 30, 2023.

Management's Discussion and Analysis (continued)

The following chart lists the Properties acquired or sold from January 1, 2022 through June 30, 2023 and Sites added through expansion opportunities at our existing Properties:

The following chart lists the Properties acquired or sold from January 1, 2022 through September 30, 2023 and Sites added through expansion opportunities at our existing Properties:

Location Type of Property Transaction Date Sites

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

Total Sites as of June 30, 2023 (1)

Total Sites as of September 30, 2023 (1)

______________________

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We believe that this Non-GAAP financial measure is helpful to investors and analysts as a measure of the operating results of our properties.

Management's Discussion and Analysis (continued)

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, four RV communities and one membership RV community acquired during 2022 and one RV community acquired

Management's Discussion and Analysis (continued)

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

During the quarter ended June 30, 2023, we designated Rancho Oso and Turtle Beach as Non-Core properties as operations at these properties have been suspended due to storms and flooding events in California.

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, Ramblers Rest, Rancho Oso and Turtle Beach.

FFO and Normalized FFO

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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 six months ended June 30, 2023 and 2022:

Quarters Ended June 30, Six Months Ended June 30,

The following table reconciles net income available for Common Stockholders to income from property operations for the quarters and nine months ended September 30, 2023 and 2022:

Quarters Ended September 30, Nine Months Ended September 30,

(amounts in thousands)

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Loss on sale of real estate and impairment, net (1)

949 3,747 3,581 3,747

Total other expenses, net 91,094 90,755 280,976 268,617

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_____________________

(1) During the six months ended June 30, 2023, we recorded an impairment charge of approximately $2.6 million related to flooding events at certain Properties in California.

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 six months ended June 30, 2023 and 2022:

Quarters Ended June 30, Six Months Ended June 30,

(1) During the nine months ended September 30, 2023, we recorded impairment charges of approximately $3.6 million primarily related to flooding events at certain Properties in California.

Quarters Ended September 30, Nine Months Ended September 30,

(amounts in thousands)

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Accelerated vesting of stock-based compensation (2)

6,320 — 6,320 —

Lease termination expenses (3)

— 2,073 90 2,073

Normalized FFO available for Common Stock and OP Unit holders $ 139,733 $ 136,784 $ 413,742 $ 403,531

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

(2) Represents accelerated vesting of stock-based compensation expense of $6.3 million recognized during the quarter ended June 30, 2023 as

a result of the passing of a member of our Board of Directors.

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

administrative expense in the Consolidated Statements of Income and Comprehensive Income.

(2) Represents accelerated vesting of stock-based compensation expense of $6.3 million recognized during the quarter ended June 30, 2023 as a result of the passing of a member of our Board of Directors.

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

Management's Discussion and Analysis (continued)

Results of Operations

This section discusses the comparison of our results of operations for the quarters and six months ended June 30, 2023 and June 30, 2022 and our operating activities, investing activities and financing activities for the six months ended June 30, 2023 and June 30, 2022.

For the comparison of our results of operations for the quarters and six months ended June 30, 2022 and June 30, 2021 and discussion of our operating activities, investing activities and financing activities for the six months ended June 30, 2022 and June 30, 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 June 30, 2022, filed with the SEC on July 26, 2022.

Comparison of the Quarter Ended June 30, 2023 to the Quarter Ended June 30, 2022

This section discusses the comparison of our results of operations for the quarters and nine months ended September 30, 2023 and September 30, 2022 and our operating activities, investing activities and financing activities for the nine months ended September 30, 2023 and September 30, 2022.

For the comparison of our results of operations for the quarters and nine months ended September 30, 2022 and September 30, 2021 and discussion of our operating activities, investing activities and financing activities for the nine months ended September 30, 2022 and September 30, 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 September 30, 2022, filed with the SEC on October 21, 2022.

Comparison of the Quarter Ended September 30, 2023 to the Quarter Ended September 30, 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 June 30, 2023 and June 30, 2022:

The following table summarizes certain financial and statistical data for our Core Portfolio and total portfolio for the quarters ended September 30, 2023 and September 30, 2022:

Core Portfolio Total Portfolio

Quarters Ended June 30, Quarters Ended June 30,

Quarters Ended September 30, Quarters Ended September 30,

(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 June 30, 2023, increased $10.2 million, or 6.8%, from the quarter ended June 30, 2022, driven by an increase of $6.2 million, or 4.3%, from our Core Portfolio, and an increase of $4.0 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 in MH base rental income, Utility and other income and RV and marina base rental income, partially offset by an increase in property operating and maintenance expenses.

The increase in income from property operations from our Non-Core Portfolio was primarily due to business interruption income related to Hurricane Ian recognized during the quarter ended June 30, 2023 and higher RV and marina base rental income, partially offset by MH base rental income.

Total portfolio income from property operations for the quarter ended September 30, 2023, increased $9.7 million, or 6.1%, from the quarter ended September 30, 2022, driven by an increase of $7.6 million, or 5.0%, from our Core Portfolio, and an increase of $2.0 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 in MH base rental income, RV and marina base rental income and Utility and other income, partially offset by an increase in property operating and maintenance expenses and real estate taxes.

Management's Discussion and Analysis (continued)

Property Operating Revenues

MH base rental income in our Core Portfolio for the quarter ended June 30, 2023 increased $10.5 million, or 6.7%, from the quarter ended June 30, 2022, which reflects 7.0% growth from rate increases and a decline of 0.3% in occupancy.

The average monthly base rental income per Site in our Core Portfolio increased to approximately $806 for the quarter ended June 30, 2023 from approximately $753 for the quarter ended June 30, 2022.

The average occupancy for our Core Portfolio was 94.8% for the quarter ended June 30, 2023 and 95.1% for the quarter ended June 30, 2022.

MH base rental income in our Core Portfolio for the quarter ended September 30, 2023 increased $10.7 million, or 6.8%, from the quarter ended September 30, 2022, which reflects 7.1% growth from rate increases and a decline of 0.3% in occupancy.

The average monthly base rental income per Site in our Core Portfolio increased to approximately $813 for the quarter ended September 30, 2023 from approximately $759 for the quarter ended September 30, 2022.

The average occupancy for our Core Portfolio was 94.9% for the quarter ended September 30, 2023 and 95.2% for the quarter ended September 30, 2022.

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

Core Portfolio Total Portfolio

Quarters Ended June 30, Quarters Ended June 30,

Quarters Ended September 30, Quarters Ended September 30,

(amounts in thousands) 2023 2022 Variance %

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RV and marina base rental income $ 106,426 $ 104,297 $ 2,129 2.0 % $ 112,819 $ 109,882 $ 2,937 2.7 %

RV and marina base rental income in our Core Portfolio for the quarter ended June 30, 2023 increased $2.2 million, or 2.3%, from the quarter ended June 30, 2022, driven by an increase in Annual and Seasonal RV and marina base rental income, partially offset by a decrease in Transient rental income.

RV and marina base rental income in our Core Portfolio for the quarter ended September 30, 2023 increased $2.1 million, or 2.0%, from the quarter ended September 30, 2022, driven by an increase in Annual RV and marina base rental income, partially offset by a decrease in Transient and Seasonal RV and marina base rental income.

The increase in Annual RV and marina base rental income of 8.0% was driven by an increase in rate of 7.8%.

The decrease in Transient RV and marina base rental income of 13.9% 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 June 30, 2023 increased $2.3 million, or 8.6%, from the quarter ended June 30, 2022.

The decrease in Transient RV and marina base rental income of 7.6% was primarily due to a decrease in Transient RV revenue as a result of a reduction in the number of Transient sites available and local storm events across the portfolio, particularly in the North, Northeast and California during the quarter ended September 30, 2023.

Utility and other income in our Core Portfolio for the quarter ended September 30, 2023 increased $1.8 million, or 6.0%, from the quarter ended September 30, 2022.

The increase was primarily due to a $1.3 million and $1.0 million increase in utility income and other property income, respectively.

The increase in utility income was primarily due to an increase in trash income in all regions, sewer income in the South and West and gas income in California and the West.

The increase in utility income was primarily due to an increase in trash and electric income in all regions except California and sewer income in all regions except the Northeast.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended June 30, 2023 increased $9.5 million, or 7.0%, from the quarter ended June 30, 2022, driven by increases in property operating and maintenance expenses of $8.9 million.

Core property operating and maintenance expenses were higher in 2023 primarily due to increases in insurance of $3.3 million, repair and maintenance of $2.1 million and utility expenses of $2.1 million.

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended September 30, 2023 increased $7.2 million, or 5.1%, from the quarter ended September 30, 2022, driven by increases in property operating and maintenance expenses of $4.8 million.

Core property operating and maintenance expenses were higher in 2023 primarily due to increases in insurance of $2.0 million, repair and maintenance expenses of $1.8 million and utility expenses of $1.4 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 June 30,

Quarters Ended September 30,

(amounts in thousands, except home sales volumes) 2023 2022 Variance %

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Home sales volumes

Total new home sales (1)

New home sales (1)

285 331 (46) (13.9) %

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_________________________

(1) Total new home sales volume for the quarter ended June 30, 2022 includes 29 home sales from our ECHO JV.

Gross revenues from new home sales decreased $10.8 million and Cost of new home sales decreased $9.2 million during the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022, primarily due to a decrease in new home sales.

Management's Discussion and Analysis (continued)

(1) Total new home sales volume for the quarter ended September 30, 2022 includes 21 home sales from our ECHO JV.

Gross revenues from new home sales decreased $5.2 million and Cost of new home sales decreased $5.3 million during the quarter ended September 30, 2023, compared to the quarter ended September 30, 2022, primarily due to a decrease in new home sales.

Rental Operations

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

Quarters Ended June 30,

Quarters Ended September 30,

(amounts in thousands, except rental unit volumes)

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Net investment in new manufactured home rental units (3)

$ 207,303 $ 180,299 $ 27,004 15.0 %

Net investment in used manufactured home rental units $ 7,481 $ 8,657 $ (1,176) (13.6) %

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

Approximately $6.1 million and $7.1 million for the quarters ended June 30, 2023 and June 30, 2022, respectively, of Site rental income is included in MH base rental income in the Core Portfolio Income from Property Operations table.

Approximately $5.9 million and $6.7 million for the quarters ended September 30, 2023 and September 30, 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.

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

Our investment in the ECHO JV as of June 30, 2022 was $18.7 million.

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

(4) Occupied rentals as of the end of the period in our Core Portfolio.

Included in occupied rentals as of June 30, 2022 were 185 homes rented through our ECHO JV.

Rental operations revenues were $1.0 million or 9.6% lower during the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022, primarily due to a decrease in the number of occupied rentals.

Included in occupied rentals as of September 30, 2022 were 165 homes rented through our ECHO JV.

Management's Discussion and Analysis (continued)

Rental operations revenues were $1.0 million or 9.7% lower during the quarter ended September 30, 2023, compared to the quarter ended September 30, 2022, 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 June 30,

Quarters Ended September 30,

(amounts in thousands, expenses shown as negative)

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Total other income and expenses, net $ (91,094) $ (90,755) $ (339) (0.4) %

Total other income and expenses, net increased $6.8 million for the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022, primarily due to higher interest and related amortization expense as a result of an increase in interest rates and general and administrative expense as a result of accelerated vesting of stock-based compensation expense.

Total other income and expenses, net increased $0.3 million for the quarter ended September 30, 2023, compared to the quarter ended September 30, 2022, primarily due to higher interest and related amortization expense as a result of an increase in interest rates, partially offset by decreases in depreciation and amortization and general and administrative expenses.

Casualty-related charges/(recoveries), net

During the quarter ended June 30, 2023, we recorded $1.8 million of expenses for debris removal and cleanup costs and an offsetting insurance recovery revenue of $1.8 million related to Hurricane Ian.

During the quarter ended September 30, 2023, we recorded $1.8 million of expenses for debris removal and cleanup costs and an offsetting insurance recovery revenue of $1.8 million related to Hurricane Ian.

Management's Discussion and Analysis (continued)

Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

Income from Property Operations

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the six months ended June 30, 2023 and 2022:

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the nine months ended September 30, 2023 and 2022:

Core Portfolio Total Portfolio

Six Months Ended June 30, Six Months Ended June 30,

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

(amounts in thousands) 2023 2022 Variance %

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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 six months ended June 30, 2023 increased $17.6 million, or 5.5%, from the same period in 2022, driven by an increase of $14.9 million, or 4.8%, from our Core Portfolio and an increase of $2.7 million from our Non-Core Portfolio.

Total Portfolio income from property operations for the nine months ended September 30, 2023 increased $27.2 million, or 5.7%, from the same period in 2022, driven by an increase of $22.5 million, or 4.9%, from our Core Portfolio and an increase of $4.7 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, RV and marina base rental income and Utility and other income, partially offset by an increase in property operating and maintenance expenses.

Property Operating Revenues

MH base rental income in our Core Portfolio for the six months ended June 30, 2023 increased $20.5 million, or 6.6%, from the same period in 2022, which reflects 6.8% growth from rate increases and 0.2% decline in occupancy.

The average monthly base rental income per Site increased to approximately $801 for the six months ended June 30, 2023 from approximately $750, for the six months ended June 30, 2022.

The average occupancy for the Core Portfolio was 94.9% for the six months ended June 30, 2023 compared to 95.1% for the six months ended June 30, 2022.

MH base rental income in our Core Portfolio for the nine months ended September 30, 2023 increased $31.2 million, or 6.7%, from the same period in 2022, which reflects 6.9% growth from rate increases and 0.2% decline in occupancy.

The average monthly base rental income per Site increased to approximately $805 for the nine months ended September 30, 2023 from approximately $753 for the nine months ended September 30, 2022.

The average occupancy for the Core Portfolio was 94.9% for the nine months ended September 30, 2023 compared to 95.1% for the nine months ended September 30, 2022.

Management's Discussion and Analysis (continued)

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Core Portfolio Total Portfolio

Six Months Ended June 30, Six Months Ended June 30,

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

(amounts in thousands)

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RV and marina base rental income $ 311,228 $ 301,112 $ 10,116 3.4 % $ 326,280 $ 316,984 $ 9,296 2.9 %

RV and marina base rental income in our Core Portfolio for the six months ended June 30, 2023 increased $8.0 million, or 4.1%, from the same period in 2022 primarily due to increases in Annual and Seasonal RV and marina base rental income, partially offset by a decrease in Transient RV base rental income.

The increase in Annual RV and marina base rental income of $10.2 million, or 8.1% was seen across all regions, primarily in the South, West and Northeast.

RV and marina base rental income in our Core Portfolio for the nine months ended September 30, 2023 increased $10.1 million, or 3.4%, from the same period in 2022 primarily due to increases in Annual and Seasonal RV and marina base rental income, partially offset by a decrease in Transient RV base rental income.

The increase in Annual RV and marina base rental income of $15.4 million, or 8.1% was primarily due to the South, Northeast and West regions.

The increase in Seasonal RV and marina base rental income of $2.3 million, or 5.5% was driven by increases in the South and West regions during the first quarter where we had 15.0% and 9.1% increases, respectively.

Since June 30, 2022, we have increased our Core RV and marina annual site count by approximately 240 sites resulting in a reduction in number of transient sites available for use.

We also experienced significant weather events during the six months ended June 30, 2023 in California, the Pacific Northwest, and the East Coast, which impacted our transient RV and marina base rental income.

Utility and other income in our Core Portfolio for the six months ended June 30, 2023 increased $4.8 million, or 9.0%, from the same period in 2022.

The increase was primarily due to an increase in utility income of $3.4 million.

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

Since September 30, 2022, we have increased our Core RV and marina annual site count by approximately 40% resulting in a reduction in the number of transient sites available for use.

We also experienced significant weather events during the nine months ended September 30, 2023 in California, the Pacific Northwest, and the East Coast, which impacted our Transient RV and marina base rental income.

Utility and other income in our Core Portfolio for the nine months ended September 30, 2023 increased $6.6 million, or 7.9%, from the same period in 2022.

The increase was primarily due to an increase in utility income and other property income of $4.7 million and $2.1 million, respectively.

The increase in utility income was primarily due to increases in trash, sewer and electric income.

The utility recovery rate (utility income divided by utility expenses) for 2023 and 2022 was approximately 45% and 44%, respectively.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the six months ended June 30, 2023 increased $18.8 million, or 7.2%, from the same period in 2022, driven by increases in property operating and maintenance expenses of $18.3 million.

Core property operating and maintenance expenses were higher during the six months ended June 30, 2023, compared to the same period in 2022 due to increases in utility expenses of $6.2 million, repair and maintenance expenses of $4.7 million, insurance of $3.9 million, and property payroll expenses of $3.4 million.

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the nine months ended September 30, 2023 increased $26.0 million, or 6.5%, from the same period in 2022, driven by increases in property operating and maintenance expenses of $23.1 million.

Core property operating and maintenance expenses were higher during the nine months ended September 30, 2023, compared to the same period in 2022 due to increases in utility expenses of $7.6 million, repair and maintenance expenses of $6.5 million, insurance of $5.9 million, and property payroll expenses of $2.9 million.

Management's Discussion and Analysis (continued)

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

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands, except home sales volumes)

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Home sales volumes

Total new home sales (1)

New home sales (1)

687 957 (270) (28.2) %

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_________________________

(1) Total new home sales volume for the six months ended June 30, 2022 includes 51 home sales from our ECHO JV.

Gross revenues from new home sales decreased $18.0 million and Cost of new home sales decreased $15.9 million during the six months ended June 30, 2023, compared to the six months ended June 30, 2022, primarily due to a decrease in new home sales.

(1) Total new home sales volume for the nine months ended September 30, 2022 includes 72 home sales from our ECHO JV.

Gross revenues from new home sales decreased $23.2 million and Cost of new home sales decreased $21.2 million during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily due to a decrease in new home sales.

Rental Operations

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

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands, except rental unit volumes)

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

Approximately $12.5 million and $14.5 million of Site rental income for the six months ended June 30, 2023 and 2022, respectively, are included in community base rental income within the Core Portfolio Income from Property Operations table.

Approximately $18.4 million and $21.1 million of Site rental income for the nine months ended September 30, 2023 and 2022, respectively, are included in MH 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.

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

Our investment in the ECHO JV as of June 30, 2022 was $18.7 million.

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

(4) Occupied rentals as of the end of the period in our Core Portfolio.

Included in occupied rentals as of June 30, 2022 were 185 homes rented through our ECHO JV.

Rental operations revenues were $2.1 million or 9.6% lower during the six months ended June 30, 2023, compared to the six months ended June 30, 2022, primarily due to a decrease in the number of occupied rentals.

Included in occupied rentals as of September 30, 2022 were 165 homes rented through our ECHO JV.

Management's Discussion and Analysis (continued)

Rental operations revenues were $3.1 million or 9.6% lower during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily due to a decrease in the number of occupied rentals.

Other Income and Expenses

The following table summarizes other income and expenses, net:

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands, expenses shown as negative)

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Total other income and expenses, net $ (280,976) $ (268,617) $ (12,359) (4.6) %

Total other income and expenses, net increased $12.0 million during the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to higher interest and related amortization expense as a result of an increase in interest rates and general and administrative expense as a result of accelerated vesting of stock-based compensation expense.

Total other income and expenses, net increased $12.4 million during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily due to higher interest and related amortization expense as a result of an increase in interest rates and higher general and administrative expense primarily as a result of accelerated vesting of stock-based compensation expense.

Casualty-related charges/(recoveries), net

During the six months ended June 30, 2023, we recorded $10.3 million of expenses for debris removal and cleanup costs and an offsetting insurance recovery revenue of $10.3 million related to Hurricane Ian.

During the nine months ended September 30, 2023, we recorded $12.1 million of expenses for debris removal and cleanup costs and an offsetting insurance recovery revenue of $12.1 million related to Hurricane Ian.

Loss on sale of real estate and impairment, net

During the six months ended June 30, 2023, we recorded an impairment charge of approximately $2.6 million related to flooding events at certain California properties.

During the nine months ended September 30, 2023, we recorded an impairment charge of approximately $3.6 million primarily related to flooding events at certain California properties.

Liquidity and Capital Resources

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

As of June 30, 2023, we had available liquidity in the form of approximately 413.7 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.

As of September 30, 2023, we had available liquidity in the form of approximately 413.6 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.

Management's Discussion and Analysis (continued)

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 .

Management's Discussion and Analysis (continued)

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”).

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Borrowing Arrangements for further details.

As of June 30, 2023, the Company has no remaining LIBOR based borrowings.

In May 2023, we locked rate on a $375.0 million secured financing at a weighted average interest rate of 5.05% with a weighted average term to maturity of 7.5 years.

We expect to close in the third quarter of 2023.

As of September 30, 2023, the Company has no remaining LIBOR based borrowings.

In June 2023, we closed on a secured financing transaction generating gross proceeds of $89.0 million (the “June 2023 financing”).

The loan represents an incremental borrowing from an existing secured facility, has a fixed interest rate of 5.04% per annum and matures in 10 years.

In July 2023, we repaid all debt scheduled to mature in 2023 and 2024 with proceeds from the June 2023 financing and our unsecured line of credit.

In July 2023, we also closed on an $80.0 million tranche of the $375.0 million secured financing, and we expect to close on the remaining $295.0 million in the third quarter of 2023.

The loan represents an incremental borrowing from an existing secured facility, has a fixed interest rate of 5.04% per annum and matures in ten years.

In July and August 2023, we closed on three secured financing transactions generating gross proceeds of $375.0 million.

The loans are secured by 20 MH and RV properties, have a weighted average fixed interest rate of 5.05% per annum and a weighted average maturity of approximately eight years.

During the quarter ended September 30, 2023, proceeds from the four secured financing transactions were used to repay $100.4 million of principal on three mortgage loans that were due to mature in 2023 and 2024 and the remaining outstanding balance on the LOC.

The repaid mortgage loans had a weighted average fixed interest rate of 4.94% per annum and were secured by 14 MH and RV properties.

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 six months ended June 30, 2023, in connection with the amendment to the Credit Agreement, we replaced the LIBOR benchmarked swap with a SOFR benchmarked swap.

During the nine months ended September 30, 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.

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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 June 30, 2023, our LOC had a borrowing capacity of $295.0 million.

As of September 30, 2023, our LOC had a borrowing capacity of $500.0 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.

The following table summarizes our cash flows activity:

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands) 2023 2022

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(1) See Part I.

Note 2 – Significant Accounting Policies (e) Prior Period Correction for additional information.

Financial Statements – Note 2.

Summary of Significant Accounting Policies:

(e) Prior Period Correction for additional information.

Operating Activities

Net cash provided by operating activities decreased $36.9 million to $266.8 million for the six months ended June 30, 2023 from $303.8 million for the six months ended June 30, 2022.

The decrease in net cash provided by operating activities was primarily due to a net increase in manufactured homes and the net change in other assets, net and accounts payable and other liabilities.

Net cash provided by operating activities increased $13.5 million to $418.7 million for the nine months ended September 30, 2023 from $405.1 million for the nine months ended September 30, 2022.

The increase in net cash provided by operating activities was primarily due to a net increase in proceeds from insurance claims and higher income from property operations, partially offset by an increase in Manufactured homes, net.

Management's Discussion and Analysis (continued)

The following table summarizes our purchase and sale activity of manufactured homes:

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands)

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Sale of manufactured homes 58,497 75,726

Net increase in manufactured homes $ 30,402 $ 2,136

Management's Discussion and Analysis (continued)

Manufactured homes, net $ (31,980) $ (6,972)

Investing Activities

Net cash used in investing activities decreased $97.7 million to $153.6 million for the six months ended June 30, 2023 from $251.4 million for the six months ended June 30, 2022.

Net cash used in investing activities decreased $78.7 million to $237.5 million for the nine months ended September 30, 2023 from $316.2 million for the nine months ended September 30, 2022.

The decrease was due to a decrease in spending on acquisitions of $109.9 million and a decrease in investments in unconsolidated joint ventures of $10.0 million, partially offset by an increase in capital improvement spending of $45.3 million.

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The following table summarizes capital improvements:

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands) 2023 2022

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Property upgrades and development (3)

132,310 97,800

Site development (4)

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

(3) Includes $28.3 million of restoration and improvement capital expenditures related to Hurricane Ian for the nine months ended September 30, 2023.

(4) Includes capital expenditures to improve the infrastructure required to set manufactured homes.

Financing Activities

Net cash used in financing activities decreased $25.9 million to $107.5 million for the six months ended June 30, 2023 from $133.4 million for the six months ended June 30, 2022.

Net cash used in financing activities decreased $38.0 million to $143.8 million for the nine months ended September 30, 2023 from $181.8 million for the nine months ended September 30, 2022.

The decrease was primarily due to a decrease in net debt repayments of approximately $90.6 million compared to the same period in the prior year, partially offset by a decrease in proceeds from the sale of common stock under our prior at-the-market equity offering program of approximately $28.4 million.

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Off-Balance Sheet Arrangements

As of June 30, 2023, we have no off-balance sheet arrangements.

As of September 30, 2023, we have no off-balance sheet arrangements.

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 June 30, 2023.

There have been no significant changes to our critical accounting policies and estimates during the quarter ended September 30, 2023.

Management's Discussion and Analysis (continued)

Forward-Looking Statements

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• our ability to control costs and real estate market conditions, our ability to retain customers, the actual use of Sites by customers and our success in acquiring new customers at our Properties (including those that we may acquire);

Management's Discussion and Analysis (continued)

• our ability to maintain historical or increase future rental rates and occupancy with respect to properties currently owned or that we may acquire;

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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