EQUITY LIFESTYLE PROPERTIES INC 10-Q/A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q/A and in our Annual Report on Form 10-K for the year ended December 31, 2022, as amended on January 22, 2024 (“2022 Form 10-K/A”), as well as information in Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K/A. Certain items within this Management’s discussion and analysis have been updated as a result of the amendment, as described in further detail in the “Explanatory Note”. Overview and Outlook We are a self-administered and self-managed real estate investment trust (“REIT”) with headquarters in Chicago, Illinois. We are a fully integrated owner of lifestyle-oriented properties (“Properties”) consisting of property operations and home sales and rental operations primarily within manufactured home (“MH”) and recreational vehicle (“RV”) communities and marinas. 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. Our business model is intended to provide an opportunity for increased cash flows and appreciation in value. We seek growth in earnings, Funds from Operations (“FFO”), Normalized Funds from Operations (“Normalized FFO”) and cash flows by enhancing the profitability and operation of our Properties and investments. We accomplish this by attracting and retaining high quality customers to our Properties, who take pride in our Properties and in their homes and efficiently managing our Properties by increasing occupancy, maintaining competitive market rents and controlling expenses. We also actively pursue opportunities that fit our acquisition criteria and are currently engaged in various stages of negotiations relating to the possible acquisition of additional properties. We believe the demand from baby boomers for MH and RV communities will continue to be strong over the long term. It is estimated that approximately 10,000 baby boomers are turning 65 daily through 2030. In addition, the population age 55 and older is expected to grow 17% within the next 15 years. These individuals, seeking an active lifestyle, will continue to drive the market for second-home sales as vacation properties, investment opportunities or retirement retreats. We expect it is likely that over the next decade, we will continue to see high levels of second-home sales and that manufactured homes and cottages in our Properties will continue to provide a viable second-home alternative to site-built homes. We also believe the Millennial and Generation Z demographic will contribute to our future long-term customer pipeline. After conducting a comprehensive study of RV ownership, according to the Recreational Vehicle Industry Association (“RVIA”), data suggested that RV sales are expected to benefit from an increase in demand from those born in the United States from 1980 to 2003, or Millennials and Generation Z, over the coming years. We believe the demand from baby boomers and these younger generations will continue to outpace supply for MH and RV communities. The entitlement process to develop new MH and RV communities is extremely restrictive. As a result, there have been limited new communities developed in our target geographic markets. We generate the majority of our revenues from customers renting our Sites or entering into right-to-use contracts, also known as membership subscriptions, which provide them access to specific Properties for limited stays. MH Sites are generally leased on an annual basis to residents who own or lease factory-built homes, including manufactured homes. Annual RV and marina Sites are leased on an annual basis to customers who generally have an RV, factory-built cottage, boat or other unit placed on the site, including those Northern properties that are open for the summer season. Seasonal RV and marina Sites are leased to customers generally for one to six months. Transient RV and marina Sites are leased to customers on a short-term basis. The revenue from seasonal and transient Sites is generally higher during the first and third quarters. We consider the transient revenue stream to be our most volatile as it is subject to weather conditions and other factors affecting the marginal RV customer’s vacation and travel preferences. We also generate revenue from customers renting our marina dry storage. Additionally, we have interests in joint venture Properties for which revenue is classified as Equity in income from unconsolidated joint ventures on the Consolidated Statements of Income and Comprehensive Income. 21 Management's Discussion and Analysis (continued) The following table shows the breakdown of our Sites by type (amounts are approximate): Total Sites as of September 30, 2023 MH Sites 72,700 RV Sites: Annual 35,300 Seasonal 12,500 Transient 14,900 Marina Slips 6,900 Membership (1) 25,800 Joint Ventures (2) 3,600 Total 171,700 _________________________ (1) Primarily utilized to service approximately 125,300 members. Includes approximately 6,200 Sites rented on an annual basis. (2) Includes approximately 2,000 annual Sites and 1,600 transient Sites. In our Home Sales and Rentals Operations business, our revenue streams include home sales, home rentals and brokerage services and ancillary activities. We generate revenue through home sales and rental operations by selling or leasing manufactured homes and cottages that are located in Properties owned and managed by us. 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. Additionally, home sale brokerage services are offered to our residents who may choose to sell their homes rather than relocate them when moving from a Property. At certain Properties, we operate ancillary facilities, such as golf courses, pro shops, stores and restaurants. In the manufactured housing industry, options for home financing, also known as chattel financing, are limited. Chattel financing options available today include community owner-funded programs or third-party lender programs that provide subsidized financing to customers and often require the community owner to guarantee customer defaults. Third-party lender programs have stringent underwriting criteria, sizable down payment requirements, short term loan amortization and high interest rates. We have a limited program under which we purchase loans made by an unaffiliated lender to homebuyers at our Properties. In addition to net income computed in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we assess and measure our overall financial and operating performance using certain Non-GAAP supplemental measures, which include: (i) FFO, (ii) Normalized FFO, (iii) Income from property operations, (iv) Income from property operations, excluding property management, and (v) Core Portfolio income from property operations, excluding property management (operating results for Properties owned and operated in both periods under comparison). We use these measures internally to evaluate the operating performance of our portfolio and provide a basis for comparison with other real estate companies. Definitions and reconciliations of these measures to the most comparable GAAP measures are included below in this discussion. Results Overview 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 $6.0 million, or $0.03 per fully diluted Common Share, to $133.8 million, or $0.68 per fully diluted Common Share, compared to $127.8 million, or $0.65 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. 22 Management's Discussion and Analysis (continued) For the quarter ended September 30, 2023, Normalized FFO available for Common Stock and OP Unit holders increased $3.7 million, or $0.01 per fully diluted Common Share, to $133.9 million, or $0.68 per fully diluted Common Share, compared to $130.2 million, or $0.67 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 increased 5.0% and property operating expenses, excluding property management, increased 5.1%, from the same period in 2022, resulting in an increase in income from property operations, property management, of 5.0%, compared to the same period in 2022. For the nine months ended September 30, 2023, our Core Portfolio property operating revenues, increased 5.6% and property operating expenses, excluding property management, increased 6.5% from the same period in 2022, resulting in an increase in income from property operations, excluding property management, of 4.9% 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 94.9%, 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 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 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. 23 Management's Discussion and Analysis (continued) 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 Total Sites as of January 1, 2022 (1) 169,300 Acquisition Properties: Blue Mesa Recreational Ranch Gunnison, Colorado Membership February 18, 2022 385 Pilot Knob RV Resort Winterhaven, California RV February 18, 2022 247 Holiday Trav-L-Park Resort Emerald Isle, North Carolina RV June 15, 2022 299 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: Sites added (reconfigured) in 2022 1,034 Sites added (reconfigured) in 2023 236 Ground Lease Termination: Westwinds San Jose, California MH August 31, 2022 (723) Total Sites as of September 30, 2023 (1) 171,700 ______________________ (1) Sites are approximate. 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 and Normalized FFO. We believe investors should review Income from property operations and Core Portfolio, FFO and Normalized FFO, 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 and Normalized FFO, and a reconciliation to net income, are included below. Income from Property Operations and Core Portfolio We use income from property operations, income from property operations, excluding property management, and Core Portfolio income from property operations, excluding property management, as alternative measures to evaluate the operating results of our Properties. Income from property operations represents rental income, membership subscriptions and upgrade sales, utility and other income less property and rental home operating and maintenance expenses, real estate taxes, membership sales and marketing expenses and property management expenses. Income from property operations, excluding property management, represents income from property operations excluding property management expenses. Property management represents the expenses associated with indirect costs such as off-site payroll and certain administrative and professional expenses. We believe exclusion of property management expenses is helpful to investors and analysts as a measure of the operating results of our properties, excluding items that are not directly related to the operation of the properties. For comparative purposes, we present bad debt expense within Property operating and maintenance in the current and prior periods. We believe that this Non-GAAP financial measure is helpful to investors and analysts as a measure of the operating results of our properties. 24 Management's Discussion and Analysis (continued) Our Core Portfolio consists of our Properties owned and operated during all of 2022 and 2023. Core Portfolio income from property operations, excluding property management, is useful to investors for annual comparison as it removes the fluctuations associated with acquisitions, dispositions and significant transactions or unique situations. 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 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 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. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with our interpretation of standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. We believe FFO, as defined by the Board of Governors of NAREIT, is generally a measure of performance for an equity REIT. While FFO is a relevant and widely used measure of operating performance for equity REITs, it does not represent cash flow from operations or net income as defined by GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance. We define Normalized FFO as FFO excluding non-operating income and expense items, such as gains and losses from early debt extinguishment, including prepayment penalties, defeasance costs, transaction/pursuit costs, and other miscellaneous non-comparable items. Normalized FFO presented herein is not necessarily comparable to Normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same methodology for computing this amount. We believe that FFO and Normalized FFO are helpful to investors as supplemental measures of the performance of an equity REIT. We believe that by excluding the effect of gains or losses from sales of properties, depreciation and amortization related to real estate and impairment charges, which are based on historical costs and may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. We further believe that Normalized FFO provides useful information to investors, analysts and our management because it allows them to compare our operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences not related to our normal operations. For example, we believe that excluding the early extinguishment of debt and other miscellaneous non-comparable items from FFO allows investors, analysts and our management to assess the sustainability of operating performance in future periods because these costs do not affect the future operations of the properties. 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. 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. 25 Management's Discussion and Analysis (continued) The following table reconciles net income available for Common Stockholders to income from property operations for the quarters and nine months ended September 30, 2023 and 2022: Quarters Ended September 30, Nine Months Ended September 30, (amounts in thousands) 2023 2022 2023 2022 Computation of Income from Property Operations: Net income available for Common Stockholders $ 76,969 $ 67,163 $ 222,260 $ 211,578 Redeemable preferred stock dividends — — 8 8 Income allocated to non-controlling interests – Common OP Units 3,772 3,346 10,981 10,563 Equity in income of unconsolidated joint ventures (661) (1,465) (2,158) (2,889) Income before equity in income of unconsolidated joint ventures 80,080 69,044 231,091 219,260 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 Gain from home sales operations and other (4,160) (5,243) (8,703) (11,897) Income from property operations $ 167,963 $ 158,303 $ 506,945 $ 479,727 _____________________ (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. 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, 2023 and 2022: Quarters Ended September 30, Nine Months Ended September 30, (amounts in thousands) 2023 2022 2023 2022 Computation of FFO and Normalized FFO: Net income available for Common Stockholders $ 76,969 $ 67,163 $ 222,260 $ 211,578 Income allocated to non-controlling interests – Common OP Units 3,772 3,346 10,981 10,563 Depreciation and amortization 50,968 52,547 152,934 152,737 Depreciation on unconsolidated joint ventures 1,141 1,035 3,357 2,811 Gain on unconsolidated joint ventures — — (416) — Loss on sale of real estate and impairment, net 949 3,747 3,581 3,747 FFO available for Common Stock and OP Unit holders 133,799 127,838 392,697 381,436 Early debt retirement 68 — 68 1,156 Transaction/pursuit costs (1) — 302 117 3,384 Accelerated vesting of stock-based compensation (2) — — 6,320 — Lease termination expenses (3) — 2,073 90 2,073 Normalized FFO available for Common Stock and OP Unit holders $ 133,867 $ 130,213 $ 399,292 $ 388,049 Weighted average Common Shares outstanding – Fully Diluted 195,440 195,269 195,414 195,248 _____________________ (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. 26 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, 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. 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, 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 September 30, 2023 and September 30, 2022: Core Portfolio Total Portfolio Quarters Ended September 30, Quarters Ended September 30, (amounts in thousands) 2023 2022 Variance % Change 2023 2022 Variance % Change MH base rental income (1) $ 167,780 $ 157,037 $ 10,743 6.8 % $ 167,937 $ 159,045 $ 8,892 5.6 % Rental home income (1) 3,542 3,729 (187) (5.0) % 3,553 3,744 (191) (5.1) % RV and marina base rental income (1) 106,426 104,297 2,129 2.0 % 112,819 109,882 2,937 2.7 % Annual membership subscriptions 16,242 15,833 409 2.6 % 16,673 16,254 419 2.6 % Membership upgrades sales (2) 3,331 2,427 904 37.2 % 3,744 3,308 436 13.2 % Utility and other income (1) 31,350 29,582 1,768 6.0 % 35,840 32,746 3,094 9.4 % Property operating revenues 328,671 312,905 15,766 5.0 % 340,566 324,979 15,587 4.8 % Property operating and maintenance (1)(3) 122,469 117,640 4,829 4.1 % 126,238 122,513 3,725 3.0 % Real estate taxes 18,529 16,577 1,952 11.8 % 19,017 17,734 1,283 7.2 % Rental home operating and maintenance 1,762 1,483 279 18.8 % 1,765 1,489 276 18.5 % Membership sales and marketing (4) 5,595 5,413 182 3.4 % 5,696 5,937 (241) (4.1) % Property operating expenses, excluding property management 148,355 141,113 7,242 5.1 % 152,716 147,673 5,043 3.4 % Income from property operations, excluding property management (5) 180,316 171,792 8,524 5.0 % 187,850 177,306 10,544 5.9 % Property management 19,887 19,003 884 4.7 % 19,887 19,003 884 4.7 % Income from property operations (5) $ 160,429 $ 152,789 $ 7,640 5.0 % $ 167,963 $ 158,303 $ 9,660 6.1 % _____________________ (1) Rental income consists of the following total portfolio income items in this table: 1) MH base rental income, 2) Rental home income, 3) RV and marina base rental income and 4) Utility income, which is calculated by subtracting Other income on the Consolidated Statements of Income and Comprehensive Income from Utility and other income in this table. 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 and maintenance expense in this table. (2) Membership upgrade sales revenue is net of deferrals of $7.0 million and $7.8 million for the quarters ended September 30, 2023 and September 30, 2022, respectively. (3) Includes bad debt expense for all periods presented. (4) Membership sales and marketing expense is net of sales commission deferrals of $1.2 million for both quarters ended September 30, 2023 and September 30, 2022. (5) See Part I. Item 2. 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, 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 $2.1 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, 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. 27 Management's Discussion and Analysis (continued) Property Operating Revenues 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 September 30, Quarters Ended September 30, (amounts in thousands) 2023 2022 Variance % Change 2023 2022 Variance % Change Annual $ 70,374 $ 65,181 $ 5,193 8.0 % $ 74,125 $ 68,008 $ 6,117 9.0 % Seasonal 8,035 8,779 (744) (8.5) % 8,462 9,478 (1,016) (10.7) % Transient 28,017 30,337 (2,320) (7.6) % 30,232 32,396 (2,164) (6.7) % 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 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 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 and electric income in all regions except California and sewer income in all regions except the Northeast. Property Operating Expenses Property operating expenses, excluding 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. 28 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 our Home Sales and Other Operations: Quarters Ended September 30, (amounts in thousands, except home sales volumes) 2023 2022 Variance % Change Gross revenues from new home sales $ 27,684 $ 32,850 $ (5,166) (15.7) % Cost of new home sales 24,068 29,380 (5,312) (18.1) % Gross revenues from used home sales 1,020 972 48 4.9 % Cost of used home sales 932 747 185 24.8 % Gross revenue from brokered resales and ancillary services 16,091 18,725 (2,634) (14.1) % Cost of brokered resales and ancillary services 8,471 10,097 (1,626) (16.1) % Home selling and ancillary operating expenses 7,164 7,080 84 1.2 % Home sales volumes New home sales (1) 285 331 (46) (13.9) % Used home sales 84 81 3 3.7 % Brokered home resales 160 223 (63) (28.3) % _________________________ (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 September 30, (amounts in thousands, except rental unit volumes) 2023 2022 Variance % Change Rental operations revenue (1) $ 9,406 $ 10,420 $ (1,014) (9.7) % Rental home operating and maintenance expenses 1,762 1,483 279 18.8 % Depreciation on rental homes (2) 2,726 2,521 205 8.1 % Gross investment in new manufactured home rental units (3) $ 249,568 $ 221,840 $ 27,728 12.5 % Gross investment in used manufactured home rental units $ 12,606 $ 15,226 $ (2,620) (17.2) % 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) % Number of occupied rentals – new, end of period (4) 2,086 2,594 (508) (19.6) % Number of occupied rentals – used, end of period 259 355 (96) (27.0) % ______________________ (1) Consists of Site rental income and home rental income. 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. (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 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 September 30, 2022 were 165 homes rented through our ECHO JV. 29 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 September 30, (amounts in thousands, expenses shown as negative) 2023 2022 Variance % Change Depreciation and amortization $ (50,968) $ (52,547) $ 1,579 3.0 % Interest income 2,276 1,865 411 22.0 % Income from other investments, net 2,333 2,399 (66) (2.8) % General and administrative (9,895) (11,086) 1,191 10.7 % Other expenses (1,338) (1,627) 289 17.8 % Early debt retirement (68) — (68) — % Interest and related amortization (33,434) (29,759) (3,675) (12.3) % Total other income and expenses, net $ (91,094) $ (90,755) $ (339) (0.4) % 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 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. 30 Management's Discussion and Analysis (continued) 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 nine months ended September 30, 2023 and 2022: Core Portfolio Total Portfolio Nine Months Ended September 30, Nine Months Ended September 30, (amounts in thousands) 2023 2022 Variance % Change 2023 2022 Variance % Change MH base rental income (1) $ 498,442 $ 467,233 $ 31,209 6.7 % $ 498,906 $ 475,070 $ 23,836 5.0 % Rental home income (1) 11,096 11,487 (391) (3.4) % 11,130 11,519 (389) (3.4) % RV and marina base rental income (1) 311,228 301,112 10,116 3.4 % 326,280 316,984 9,296 2.9 % Annual membership subscriptions 47,738 45,885 1,853 4.0 % 48,832 47,003 1,829 3.9 % Membership upgrade sales (2) 10,127 8,217 1,910 23.2 % 10,863 9,543 1,320 13.8 % Utility and other income (1) 90,062 83,457 6,605 7.9 % 107,029 92,612 14,417 15.6 % Property operating revenues 968,693 917,391 51,302 5.6 % 1,003,040 952,731 50,309 5.3 % Property operating and maintenance (1)(3) 351,319 328,194 23,125 7.0 % 361,282 340,821 20,461 6.0 % Real estate taxes 54,403 52,025 2,378 4.6 % 56,165 56,373 (208) (0.4) % Rental home operating and maintenance 3,879 4,094 (215) (5.3) % 3,883 4,117 (234) (5.7) % Membership sales and marketing (4) 15,821 15,060 761 5.1 % 16,055 15,720 335 2.1 % Property operating expenses, excluding property management 425,422 399,373 26,049 6.5 % 437,385 417,031 20,354 4.9 % Income from property operations, excluding property management (5) 543,271 518,018 25,253 4.9 % 565,655 535,700 29,955 5.6 % Property management 58,710 55,972 2,738 4.9 % 58,710 55,973 2,737 4.9 % Income from property operations (5) $ 484,561 $ 462,046 $ 22,515 4.9 % $ 506,945 $ 479,727 $ 27,218 5.7 % __________________________ (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) Membership upgrade sales revenue is net of deferrals of $17.2 million and $18.2 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. (3) Includes bad debt expense for all periods presented. (4) Membership sales and marketing expense is net of sales commission deferrals of $2.8 million and $2.7 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. (5) See Part I. Item 2. 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, 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, 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 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. 31 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) 2023 2022 Variance % Change 2023 2022 Variance % Change Annual $ 206,440 $ 191,018 $ 15,422 8.1 % $ 216,163 $ 198,994 $ 17,169 8.6 % Seasonal 44,518 42,186 2,332 5.5 % 45,908 45,576 332 0.7 % Transient 60,270 67,908 (7,638) (11.2) % 64,209 72,414 (8,205) (11.3) % 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 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 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 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. 32 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) 2023 2022 Variance % Change Gross revenues from new home sales $ 69,036 $ 92,228 $ (23,192) (25.1) % Cost of new home sales 61,542 82,726 (21,184) (25.6) % Gross revenues from used home sales 3,229 3,337 (108) (3.2) % Cost of used home sales 2,987 3,594 (607) (16.9) % Gross revenue from brokered resales and ancillary services 43,576 49,372 (5,796) (11.7) % Cost of brokered resales and ancillary services 21,351 25,574 (4,223) (16.5) % Home selling and ancillary operating expenses 21,258 21,146 112 0.5 % Home sales volumes New home sales (1) 687 957 (270) (28.2) % Used home sales 252 250 2 0.8 % Brokered home resales 495 674 (179) (26.6) % _________________________ (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: Nine Months Ended September 30, (amounts in thousands, except rental unit volumes) 2023 2022 Variance % Change Rental operations revenue (1) $ 29,491 $ 32,635 $ (3,144) (9.6) % Rental home operating and maintenance expenses 3,879 4,094 (215) (5.3) % Depreciation on rental homes (2) 8,275 7,538 737 9.8 % Gross investment in new manufactured home rental units (3) $ 249,568 $ 221,840 $ 27,728 12.5 % Gross investment in used manufactured home rental units $ 12,606 $ 15,226 $ (2,620) (17.2) % Net investment in new manufactured home rental units $ 207,303 $ 180,299 $ 27,004 15.0 % Net investment in used manufactured home rental units $ 7,481 $ 8,657 $ (1,176) (13.6) % Number of occupied rentals – new, end of period (4) 2,086 2,594 (508) (19.6) % Number of occupied rentals – used, end of period 259 355 (96) (27.0) % ______________________ (1) Rental operations revenue consists of Site rental income and home rental income in our Core Portfolio. 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. (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 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 September 30, 2022 were 165 homes rented through our ECHO JV. 33 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: Nine Months Ended September 30, (amounts in thousands, expenses shown as negative) 2023 2022 Variance % Change Depreciation and amortization $ (152,934) $ (152,737) $ (197) (0.1) % Interest income 6,623 5,346 1,277 23.9 % Income from other investments, net 6,897 6,920 (23) (0.3) % General and administrative (38,163) (34,834) (3,329) (9.6) % Other expenses (4,187) (6,880) 2,693 39.1 % Early debt retirement (68) (1,156) 1,088 94.1 % Interest and related amortization (99,144) (85,276) (13,868) (16.3) % Total other income and expenses, net $ (280,976) $ (268,617) $ (12,359) (4.6) % 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 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 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 Liquidity Our primary demands for liquidity include payment of operating expenses, dividend distributions, debt service, including principal and interest, capital improvements on Properties, home purchases and property acquisitions. 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 line of credit (the “LOC”) and proceeds from issuance of equity and debt securities. One of our stated objectives is to maintain financial flexibility. Achieving this objective allows us to take advantage of strategic opportunities that may arise. When investing capital, we consider all potential uses, including returning capital to our stockholders or the conditions under which we may repurchase our stock. These conditions include, but are not limited to, market price, balance sheet flexibility, alternative opportunistic capital uses and capital requirements. We believe effective management of our balance sheet, including maintaining various access points to raise capital, managing future debt maturities and borrowing at competitive rates, enables us to meet this objective. Accessing long-term low-cost secured debt continues to be our focus. 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. We also utilize interest rate swaps to add stability to our interest expense and to manage our exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The changes in the fair value of the designated derivative are recorded in accumulated other comprehensive income (loss) on 34 Management's Discussion and Analysis (continued) the Consolidated Balance Sheets and subsequently reclassified into earnings on the Consolidated Statements of Income and Comprehensive Income in the period that the hedged forecasted transaction affects earnings. For additional information regarding our interest rate swap, see Part I. Item 1. Financial Statements—Note 9. 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. See Part I. Item 1. Financial Statements—Note 8. Borrowing Arrangements for further details. 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 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 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. See Part I. Item 1. 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. See Part I. Item 1. 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, 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: Nine Months Ended September 30, (amounts in thousands) 2023 2022 Net cash provided by operating activities (1) $ 418,658 $ 405,123 Net cash used in investing activities (1) (237,519) (316,186) Net cash used in financing activities (143,806) (181,825) Net increase (decrease) in cash and restricted cash $ 37,333 $ (92,888) ______________________ (1) Amounts are restated. See Part I. Item 1. Financial Statements – Note 2. Summary of Significant Accounting Policies: (e) Prior Period Correction for more information. Operating Activities 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. The following table summarizes our purchase and sale activity of manufactured homes: 35 Management's Discussion and Analysis (continued) Nine Months Ended September 30, (amounts in thousands) 2023 2022 Purchase of manufactured homes $ (90,477) $ (82,698) Sale of manufactured homes 58,497 75,726 Manufactured homes, net $ (31,980) $ (6,972) Investing Activities 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. Capital Improvements The following table summarizes capital improvements: Nine Months Ended September 30, (amounts in thousands) 2023 2022 Asset preservation (1) $ 41,246 $ 32,302 Improvements and renovations (2) 29,505 26,950 Property upgrades and development (3) 132,310 97,800 Site development (4) 22,596 16,683 Total property improvements 225,657 173,735 Corporate 5,515 12,181 Total capital improvements $ 231,172 $ 185,916 ______________________ (1) Includes upkeep of property infrastructure including utilities and streets and replacement of community equipment and vehicles. (2) Includes enhancements to amenities such as buildings, common areas, swimming pools and replacement of furniture and site amenities. (3) 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 $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. Contractual Obligations Significant ongoing contractual obligations consist primarily of long-term borrowings, interest expense, operating leases, LOC maintenance fees and ground leases. For a summary and complete presentation and description of our ongoing commitments and contractual obligations, see Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations in our 2022 Form 10-K/A. Off-Balance Sheet Arrangements As of September 30, 2023, we have no off-balance sheet arrangements. Critical Accounting Policies and Estimates Refer to Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K/A 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, 2023. 36 Management's Discussion and Analysis (continued) Forward-Looking Statements This Quarterly Report on Form 10-Q/A includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as “anticipate,” “expect,” “believe,” “project,” “intend,” “may be” and “will be” and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements and may include without limitation, information regarding our expectations, goals or intentions regarding the future, and the expected effect of our acquisitions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to: • 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); • our ability to maintain historical or increase future rental rates and occupancy with respect to properties currently owned or that we may acquire; • our ability to attract and retain customers entering, renewing and upgrading membership subscriptions; • our assumptions about rental and home sales markets; • our ability to manage counterparty risk; • our ability to renew our insurance policies at existing rates and on consistent terms; • home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility; • results from home sales and occupancy will continue to be impacted by local economic conditions, including an adequate supply of homes at reasonable costs, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing; • impact of government intervention to stabilize site-built single-family housing and not manufactured housing; • 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; • the completion of future transactions in their entirety, if any, and timing and effective integration with respect thereto; • unanticipated costs or unforeseen liabilities associated with recent acquisitions; • the effect of Hurricane Ian on our business including, but not limited to the following: (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; • the effect of inflation and interest rates; • the effect from any breach of our, or any of our vendors’, data management systems; • the dilutive effects of issuing additional securities; • the potential impact of, and our ability to remediate, material weaknesses in our internal control over financial reporting; • the outcome of pending or future lawsuits or actions brought by or against us, including those disclosed in our filings with the Securities and Exchange Commission; and • other risks indicated from time to time in our filings with the Securities and Exchange Commission. These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise. 37 Item 3. Quantitative and Qualitative Disclosures About Market Risk We disclosed a quantitative and qualitative analysis regarding market risk in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2022 Form 10-K/A. There have been no material changes in the assumptions used or results obtained regarding market risk since December 31, 2022.