EQUITY LIFESTYLE PROPERTIES INC - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________

FORM 10-Q

_________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-11718

_________________________________________________________

EQUITY LIFESTYLE PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

_________________________________________________________

Maryland

36-3857664

(State or other jurisdiction of incorporation)

(IRS Employer Identification Number)

Two North Riverside Plaza, Suite 800

Chicago,

Illinois

60606

(Address of Principal Executive Offices)

(Zip Code)

(312) 279-1400

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 Par Value

ELS

New York Stock Exchange

_________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 182,224,703 shares of Common Stock as of October 22, 2020.

Equity LifeStyle Properties, Inc.

Table of Contents

Page

Part I - Financial Information

Item 1.

Financial Statements (unaudited)

Index To Financial Statements

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

Consolidated Statements of Income and Comprehensive Income for the quarters and nine months ended September 30, 2020 and 2019

Consolidated Statements of Changes in Equity for the quarters and nine months ended September 30, 2020 and 2019

Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

Notes to Consolidated Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II - Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Part I – Financial Information

Item 1. Financial Statements

Equity LifeStyle Properties, Inc.

Consolidated Balance Sheets

(amounts in thousands, except share and per share data)


	As of		As of
	September 30, 2020		December 31, 2019
	(unaudited)
Assets
Investment in real estate:
Land	$	1,531,313	$	1,525,407
Land improvements	3,434,393		3,336,070
Buildings and other depreciable property	905,679		881,572
	5,871,385		5,743,049
Accumulated depreciation	(1,886,768)		(1,776,224)
Net investment in real estate	3,984,617		3,966,825
Cash and restricted cash	114,218		28,860
Notes receivable, net	36,230		37,558
Investment in unconsolidated joint ventures	19,933		20,074
Deferred commission expense	42,220		41,149
Other assets, net	63,195		56,809
Total Assets	$	4,260,413	$	4,151,275

Liabilities and Equity
Liabilities:
Mortgage notes payable, net	$	2,450,783	$	2,049,509
Term loan, net	—		198,949
Unsecured line of credit	50,000		160,000
Accounts payable and other liabilities	148,034		124,665
Deferred revenue – upfront payments from membership upgrade sales	136,194		126,814
Deferred revenue – annual membership subscriptions	12,035		10,599
Accrued interest payable	8,055		8,639
Rents and other customer payments received in advance and security deposits	90,219		91,234
Distributions payable	66,001		58,978
Total Liabilities	2,961,321		2,829,387
Equity:
Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of September 30, 2020 and December 31, 2019; none issued and outstanding.	—		—
Common stock, $0.01 par value, 600,000,000 and 400,000,000 shares authorized as of September 30, 2020 and December 31, 2019, respectively; 182,222,007 and 182,089,595 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively.	1,812		1,812
Paid-in capital	1,408,253		1,402,696
Distributions in excess of accumulated earnings	(181,754)		(154,318)
Accumulated other comprehensive income (loss)	—		(380)
Total Stockholders’ Equity	1,228,311		1,249,810
Non-controlling interests – Common OP Units	70,781		72,078
Total Equity	1,299,092		1,321,888
Total Liabilities and Equity	$	4,260,413	$	4,151,275

The accompanying notes are an integral part of the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Income and Comprehensive Income

(amounts in thousands, except per share data)

(unaudited)


	Quarters Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues:
Rental income	$	238,869	$	225,116	$	696,178	$	660,689
Annual membership subscriptions	13,442		13,150		39,476		38,052
Membership upgrade sales current period, gross	6,631		5,730		16,522		14,609
Membership upgrade sales upfront payments, deferred, net	(4,171)		(3,530)		(9,379)		(8,213)
Other income	12,268		11,263		33,007		31,898
Gross revenues from home sales	13,070		8,438		33,245		22,738
Brokered resale and ancillary services revenues, net	1,648		2,133		2,011		4,564
Interest income	1,801		1,831		5,399		5,385
Income from other investments, net	1,428		7,029		3,093		8,894
Total revenues	284,986		271,160		819,552		778,616
Expenses:
Property operating and maintenance	99,566		90,765		268,465		253,581
Real estate taxes	15,981		15,166		49,490		45,596
Sales and marketing, gross	5,054		4,063		13,308		11,686
Membership sales commissions, deferred, net	(630)		(313)		(1,327)		(893)
Property management	14,527		14,605		44,344		42,675
Depreciation and amortization	38,581		37,032		115,937		112,785
Cost of home sales	12,866		8,434		33,627		23,230
Home selling expenses	1,241		1,033		3,535		3,218
General and administrative	9,692		8,710		31,156		27,844
Other expenses	658		1,460		1,885		2,427
Early debt retirement	9,732		—		10,786		1,491
Interest and related amortization	25,218		25,547		77,540		77,964
Total expenses	232,486		206,502		648,746		601,604
Gain on sale of real estate, net	—		—		—		52,507
Income before equity in income of unconsolidated joint ventures	52,500		64,658		170,806		229,519
Equity in income of unconsolidated joint ventures	968		3,518		2,239		8,277
Consolidated net income	53,468		68,176		173,045		237,796

Income allocated to non-controlling interests – Common OP Units	(2,908)		(3,715)		(9,415)		(13,617)
Redeemable perpetual preferred stock dividends	—		—		(8)		(8)
Net income available for Common Stockholders	$	50,560	$	64,461	$	163,622	$	224,171

Consolidated net income	$	53,468	$	68,176	$	173,045	$	237,796
Other comprehensive income (loss):
Adjustment for fair market value of swap	1,161		(257)		380		(2,798)
Consolidated comprehensive income	54,629		67,919		173,425		234,998
Comprehensive income allocated to non-controlling interests – Common OP Units	(2,971)		(3,701)		(9,436)		(13,460)
Redeemable perpetual preferred stock dividends	—		—		(8)		(8)
Comprehensive income attributable to Common Stockholders	$	51,658	$	64,218	$	163,981	$	221,530

Earnings per Common Share – Basic	$	0.28	$	0.35	$	0.90	$	1.24

Earnings per Common Share – Fully Diluted	$	0.28	$	0.35	$	0.90	$	1.24

Weighted average Common Shares outstanding – Basic	181,869		181,649		181,811		180,515
Weighted average Common Shares outstanding – Fully Diluted	192,537		192,400		192,548		191,840

The accompanying notes are an integral part of the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes in Equity

(amounts in thousands; adjusted for stock split)

(unaudited)


	Common Stock		Paid-in Capital		Redeemable Perpetual Preferred Stock		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interests – Common OP Units		Total Equity
Balance as of December 31, 2019	$	1,812	$	1,402,696	$	—	$	(154,318)	$	(380)	$	72,078	$	1,321,888
Cumulative effect of change in accounting principle (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326))	—		—		—		(3,875)		—		—		(3,875)
Balance as of January 1, 2020	1,812		1,402,696		—		(158,193)		(380)		72,078		1,318,013
Exchange of Common OP Units for Common Stock	—		63		—		—		—		(63)		—

Issuance of Common Stock through employee stock purchase plan	—		619		—		—		—		—		619

Compensation expenses related to restricted stock and stock options	—		2,964		—		—		—		—		2,964
Repurchase of Common Stock or Common OP Units	—		(3,962)		—		—		—		—		(3,962)
Adjustment for Common OP Unitholders in the Operating Partnership	—		277		—		—		—		(277)		—
Adjustment for fair market value of swap	—		—		—		—		(1,333)		—		(1,333)
Consolidated net income	—		—		—		66,875		—		3,849		70,724
Distributions	—		—		—		(62,385)		—		(3,590)		(65,975)
Other	—		(143)		—		—		—		—		(143)
Balance as of March 31, 2020	1,812		1,402,514		—		(153,703)		(1,713)		71,997		1,320,907


Issuance of Common Stock through employee stock purchase plan	—		531		—		—		—		—		531

Compensation expenses related to restricted stock and stock options	—		2,669		—		—		—		—		2,669

Adjustment for Common OP Unitholders in the Operating Partnership	—		193		—		—		—		(193)		—
Adjustment for fair market value of swap	—		—		—		—		552		—		552
Consolidated net income	—		—		8		46,187		—		2,658		48,853
Distributions	—		—		(8)		(62,387)		—		(3,591)		(65,986)
Other	—		(143)		—		—		—		—		(143)
Balance as of June 30, 2020	1,812		1,405,764		—		(169,903)		(1,161)		70,871		1,307,383


Issuance of Common Stock through employee stock purchase plan	—		528		—		—		—		—		528

Compensation expenses related to restricted stock and stock options	—		2,878		—		—		—		—		2,878

Adjustment for Common OP Unitholders in the Operating Partnership	—		(592)		—		—		—		592		—
Adjustment for fair market value of swap	—		—		—		—		1,161		—		1,161
Consolidated net income	—		—		—		50,560		—		2,908		53,468
Distributions	—		—		—		(62,411)		—		(3,590)		(66,001)
Other	—		(325)		—		—		—		—		(325)
Balance as of September 30, 2020	$	1,812	$	1,408,253	$	—	$	(181,754)	$	—	$	70,781	$	1,299,092

The accompanying notes are an integral part of the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes in Equity

(amounts in thousands; adjusted for stock split)

(unaudited)


	Common Stock		Paid-in Capital		Redeemable Perpetual Preferred Stock		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling interests – Common OP Units		Total Equity
Balance as of January 1, 2019	$	1,792	$	1,328,495	$	—	$	(211,034)	$	2,299	$	71,792	$	1,193,344
Exchange of Common OP Units for Common Stock	—		66		—		—		—		(66)		—
Issuance of Common Stock through exercise of options	—		53		—		—		—		—		53
Issuance of Common Stock through employee stock purchase plan	—		652		—		—		—		—		652
Compensation expenses related to restricted stock and stock options	—		2,420		—		—		—		—		2,420
Repurchase of Common Stock or Common OP Units	—		(53)		—		—		—		—		(53)
Adjustment for Common OP Unitholders in the Operating Partnership	—		(56)		—		—		—		56		—
Adjustment for fair market value of swap	—		—		—		—		(931)		—		(931)
Consolidated net income	—		—		—		113,309		—		7,226		120,535
Distributions	—		—		—		(55,123)		—		(3,516)		(58,639)
Other	—		(63)		—		—		—		—		(63)
Balance as of March 31, 2019	1,792		1,331,514		—		(152,848)		1,368		75,492		1,257,318
Exchange of Common OP Units for Common Stock	10		6,425		—		—		—		(6,435)		—
Issuance of Common Stock through employee stock purchase plan	—		587		—		—		—		—		587
Issuance of Common Stock through our ATM equity offering program	10		59,309		—		—		—		—		59,319
Compensation expenses related to restricted stock and stock options	—		2,625		—		—		—		—		2,625
Adjustment for Common OP Unitholders in the Operating Partnership	—		(2,883)		—		—		—		2,883		—
Adjustment for fair market value of swap	—		—		—		—		(1,610)		—		(1,610)
Consolidated net income	—		—		8		46,401		—		2,676		49,085
Distributions	—		—		(8)		(55,757)		—		(3,215)		(58,980)
Other	—		(870)		—		—		—		—		(870)
Balance as of June 30, 2019	1,812		1,396,707		—		(162,204)		(242)		71,401		1,307,474
Exchange of Common OP Units for Common Stock	—		33		—		—		—		(33)		—
Issuance of Common Stock through employee stock purchase plan	—		698		—		—		—		—		698
Compensation expenses related to restricted stock and stock options	—		2,734		—		—		—		—		2,734
Adjustment for Common OP Unitholders in the Operating Partnership	—		(165)		—		—		—		165		—
Adjustment for fair market value of swap	—		—		—		—		(257)		—		(257)
Consolidated net income	—		—		—		64,461		—		3,715		68,176
Distributions	—		—		—		(55,762)		—		(3,214)		(58,976)
Other	—		(56)		—		—		—		—		(56)
Balance as of September 30, 2019	$	1,812	$	1,399,951	$	—	$	(153,505)	$	(499)	$	72,034	$	1,319,793

The accompanying notes are an integral part of the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash Flows From Operating Activities:
Consolidated net income	$	173,045	$	237,796
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Gain on sale of real estate, net	—		(52,507)
Early debt retirement	10,786		1,491
Depreciation and amortization	117,870		114,160
Amortization of loan costs	2,636		2,623
Debt premium amortization	(304)		(359)
Equity in income of unconsolidated joint ventures	(2,239)		(8,277)
Distributions of income from unconsolidated joint ventures	84		5,010
Proceeds from insurance claims, net	(1,453)		(1,742)
Compensation expense related to restricted stock and stock options	8,511		7,779
Revenue recognized from membership upgrade sales upfront payments	(7,143)		(6,394)
Commission expense recognized related to membership sales	2,774		2,773
Long-term incentive plan compensation	1,148		(3,226)
Changes in assets and liabilities:
Notes receivable, net	(1,460)		(2,441)
Deferred commission expense	(3,844)		(3,418)
Other assets, net	21,663		1,070
Accounts payable and other liabilities	22,029		35,771
Deferred revenue – upfront payments from membership upgrade sales	16,522		14,609
Deferred revenue – annual membership subscriptions	1,436		1,340
Rents and other customer payments received in advance and security deposits	(1,193)		3,290
Net cash provided by operating activities	360,868		349,348
Cash Flows From Investing Activities:
Real estate acquisitions, net	(8,871)		(176,296)
Proceeds from disposition of properties, net	—		77,746
Investment in unconsolidated joint ventures	—		(983)
Distributions of capital from unconsolidated joint ventures	2,294		5,734
Proceeds from insurance claims	109		6,689


Capital improvements	(155,061)		(189,788)
Net cash used in investing activities	(161,529)		(276,898)

The accompanying notes are an integral part of the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows (continued)

(amounts in thousands)

(unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan	1,678		1,934
Gross proceeds from the issuance of common stock	—		59,319
Distributions:
Common Stockholders	(180,537)		(160,336)
Common OP Unitholders	(10,393)		(9,891)
Preferred Stockholders	(8)		(8)

Share based award tax withholding payments	(3,962)		—
Principal payments and mortgage debt repayment	(455,252)		(107,367)
Mortgage notes payable financing proceeds	662,255		—
Line of Credit repayment	(367,500)		(120,000)
Line of Credit proceeds	257,500		240,000
Debt issuance and defeasance costs	(17,150)		(1,700)
Other	(612)		(989)
Net cash used in financing activities	(113,981)		(99,038)
Net increase (decrease) in cash and restricted cash	85,358		(26,588)
Cash and restricted cash, beginning of period	28,860		68,974
Cash and restricted cash, end of period	$	114,218	$	42,386


	Nine Months Ended September 30,
	2020		2019
Supplemental Information:
Cash paid for interest	$	76,551	$	76,508
Net investment in real estate – reclassification of rental homes	$	28,774	$	19,241
Other assets, net – reclassification of rental homes	$	(28,774)	$	(19,241)

Real estate acquisitions:
Investment in real estate	$	(9,050)	$	(240,324)
Investment in unconsolidated joint ventures	—		35,789
Other assets, net	—		(1,415)
Debt assumed	—		19,212

Other liabilities	179		10,442
Real estate acquisitions, net	$	(8,871)	$	(176,296)

Real estate dispositions:
Investment in real estate	$	—	$	35,572
Notes receivable, net	—		295
Other assets, net	—		97
Mortgage notes payable, net	—		(11,175)
Other liabilities	—		450
Gain on sale of real estate, net	—		52,507
Real estate dispositions, net	$	—	$	77,746

The accompanying notes are an integral part of the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 1 – Organization and Basis of Presentation

Equity LifeStyle Properties, Inc. ("ELS"), a Maryland corporation, together with MHC Operating Limited Partnership (the "Operating Partnership") and its other consolidated subsidiaries (the "Subsidiaries"), are referred to herein as "we," "us," and "our." We are a fully integrated owner and operator of lifestyle-oriented properties ("Properties") consisting primarily of manufactured home ("MH") and recreational vehicle ("RV") communities. We provide our customers the opportunity to place manufactured homes, cottages or RVs on our Properties either on a long-term or short-term basis. Our customers may lease individual developed areas ("Sites") or enter into right-to-use contracts, also known as membership subscriptions, which provide them access to specific Properties for limited stays.

Our Properties are owned primarily by the Operating Partnership and managed internally by affiliates of the Operating Partnership. ELS is the sole general partner of the Operating Partnership, has exclusive responsibility and discretion in management and control of the Operating Partnership and held a 94.6% interest as of September 30, 2020. As the general partner with control, ELS is the primary beneficiary of, and therefore consolidates, the Operating Partnership.

Equity method of accounting is applied to entities in which ELS does not have a controlling interest or for variable interest entities in which ELS is not considered the primary beneficiary, but with respect to which it can exercise significant influence over operations and major decisions. Our exposure to losses associated with unconsolidated joint ventures is primarily limited to the carrying value of these investments. Accordingly, distributions from a joint venture in excess of our carrying value are recognized in earnings.

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Securities and Exchange Commission (“SEC”) rules and regulations for Quarterly Reports on Form 10-Q. Accordingly, they do not include all of the information and note disclosures required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Intercompany balances and transactions have been eliminated. All adjustments to the interim consolidated financial statements are of a normal, recurring nature and, in the opinion of management, are necessary for a fair presentation of results for these interim periods. Revenues and expenses are subject to seasonal fluctuations and accordingly, quarterly interim results may not be indicative of full year results.

On October 15, 2019, we effected a two-for-one stock split of our common stock. Pursuant to the anti-dilution provision in the Operating Partnership's Agreement of Limited Partnership, the stock split also effected a two-for-one split of the outstanding Operating Partnership units ("OP units"). All shares of common stock and OP units and per share data in the consolidated financial statements and accompanying notes, for all periods presented, have been adjusted to reflect the stock split.

Note 2 – Summary of Significant Accounting Policies

(a) Recently Adopted Accounting Pronouncements

On January 1, 2020, we prospectively adopted FASB ("ASU 2018-15") Intangibles - Goodwill and Other - Internal-Use Software (ASC 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 provides guidance on accounting for fees paid when the arrangement includes a software license and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs to develop or obtain internal-use software. The adoption of this guidance did not have a material impact on our consolidated financial statements.

On January 1, 2020, we adopted FASB (“ASU 2016-13”) Financial Instruments - Credit Losses (Topic 326) using the modified retrospective approach. ASU 2016-13 requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities should use forward-looking information to better form their credit loss estimates.

We are exposed to credit losses primarily through sales of annual membership subscriptions and membership upgrades and home sales. We have developed an allowance for credit losses, which represents an estimate of expected losses over the remaining contractual life of our receivables. The estimate is a result of our ongoing assessments and evaluations of

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (continued)

collectability including historical loss experience, current market conditions and future expectations in forecasting credit losses in each of our receivable portfolios. We recognized a cumulative-effect adjustment of $3.9 million, which decreased opening retained earnings as of January 1, 2020.

The cumulative-effect adjustment resulting from the adoption of ASU 2016-13 as of January 1, 2020 was as follows:


Balance net of allowance	Balance Sheet Location	Balance at December 31, 2019		Adjustment due to ASU 2016-13 Adoption		Balance at January 1, 2020		Balance at September 30, 2020
(amounts in thousands)
Annual membership subscriptions	Other assets, net	$	2,394	$	(1,361)	$	1,033	$	1,649
Membership upgrades	Notes receivable, net	$	25,236	$	(2,514)	$	22,722	$	25,123

(b) Revenue Recognition

Rental income is accounted for in accordance with the ASC 842, Leases, and is recognized over the term of the respective lease or the length of a customer's stay. Utility recoveries are presented within Rental income on the Consolidated Statements of Income and Comprehensive Income. The allowance for credit losses related to the collectability of lease receivables is presented as a reduction to Rental Income. Lease receivables are presented within Other assets, net on the Consolidated Balance Sheets and are net of an allowance for credit losses. The estimate for credit losses is a result of our ongoing assessments and evaluations of collectibility including historical loss experience, current market conditions and future expectations in forecasting credit losses. See Note 3. Leases for additional information.

Annual membership subscriptions and membership upgrade sales are accounted for in accordance with ASC 606, Revenue from Contracts with Customers. Membership subscriptions provide our customers access to specific Properties for limited stays at a specified group of Properties. Payments are deferred and recognized on a straight-line basis over the one-year period during which access to Sites at certain Properties is provided. Membership subscription receivables are presented within Other assets, net on the Consolidated Balance Sheets and are net of an allowance for credit losses. Membership upgrades grant certain additional access rights to the customer and require non-refundable upfront payments. The non-refundable upfront payments are recognized on a straight-line basis over 20 years. Financed upgrade sales (also known as contract receivables) are presented within Notes receivable, net on the Consolidated Balance Sheets and are net of an allowance for credit losses.

Income from home sales is recognized when the earnings process is complete. The earnings process is complete when the home has been delivered, the purchaser has accepted the home and title has transferred. We have a limited program under which we purchase loans made by an unaffiliated lender to homebuyers at our Properties. Financed home sales (also known as chattel loans) are presented within Notes receivable, net on the Consolidated Balance Sheets and are net of an allowance for credit losses.

As of September 30, 2020 and December 31, 2019, restricted cash consists of $25.9 million and $25.1 million, respectively, primarily related to cash reserved for customer deposits and escrows for insurance and real estate taxes.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 3 – Leases

Lessor

Rental income derived from customers renting our Sites is accounted for in accordance with ASC 842, Leases, and is recognized over the term of the respective operating lease or the length of a customer's stay. 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. In addition, customers may lease homes that are located in our communities.

The leases entered into between the customer and us for a rental of a Site are renewable upon the consent of both parties or, in some instances, as provided by statute. Long-term leases that are non-cancelable by the tenants are in effect at certain Properties. Rental rate increases at these Properties are primarily a function of increases in the Consumer Price Index, taking into consideration certain conditions. Additionally, periodic market rate adjustments are made as deemed appropriate. In addition, certain state statutes allow entry into long-term agreements that effectively modify lease terms related to rent amounts and increases over the term of the agreements. The following table presents future minimum rents expected to be received under long-term non-cancelable tenant leases, as well as those leases that are subject to long-term agreements governing rent payments and increases:


(amounts in thousands)	As of September 30, 2020
2020	$	22,649
2021	91,467
2022	57,035
2023	34,989
2024	35,598
Thereafter	71,532
Total	$	313,270

Lessee

We lease land under non-cancelable operating leases at 13 Properties expiring at various dates through 2054. The majority of the leases have terms requiring fixed payments plus additional rents based on a percentage of gross revenues at those Properties. We also have other operating leases, primarily office space, expiring at various dates through 2030. For the quarters ended September 30, 2020 and 2019, total operating lease payments were $2.5 million and $2.3 million, respectively. For the nine months ended September 30, 2020 and 2019, total operating lease payments were $7.3 million and $6.9 million, respectively.

The following table summarizes our minimum future rental payments, excluding variable costs, which are discounted by our incremental borrowing rate to calculate the lease liability for our operating leases as of September 30, 2020:


	As of September 30, 2020
(amounts in thousands)	Ground Leases		Office and Other Leases		Total
2020	$	487	$	1,015	$	1,502
2021	1,949		3,074		5,023
2022	1,479		1,399		2,878
2023	534		1,182		1,716
2024	534		911		1,445
Thereafter	4,984		2,899		7,883
Total undiscounted rental payments	9,967		10,480		20,447
Less imputed interest	(2,116)		(998)		(3,114)
Total lease liabilities	$	7,851	$	9,482	$	17,333

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 3 – Leases (continued)

Right-of-use ("ROU") assets and lease liabilities from our operating leases, included within Other assets, net and Accounts payable and other liabilities on the Consolidated Balance Sheets, were $16.6 million and $17.3 million, respectively, as of September 30, 2020. The weighted average remaining lease term for our operating leases was eight years and the weighted average incremental borrowing rate was 4.0% at September 30, 2020.

ROU assets and lease liabilities from our operating leases, included within Other assets, net and Accounts payable and other liabilities on the Consolidated Balance Sheets, were $15.1 million and $16.2 million, respectively, as of December 31, 2019. The weighted average remaining lease term for our operating leases was seven years and the weighted average incremental borrowing rate was 4.4% at December 31, 2019.

Note 4 – Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per share of common stock for the quarters and nine months ended September 30, 2020 and 2019:


	Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands, except per share data)	2020		2019		2020		2019
Numerators:
Net income available for Common Stockholders – Basic	$	50,560	$	64,461	$	163,622	$	224,171
Amounts allocated to dilutive securities	2,908		3,715		9,415		13,617
Net income available for Common Stockholders – Fully Diluted	$	53,468	$	68,176	$	173,037	$	237,788
Denominators:
Weighted average Common Shares outstanding – Basic	181,869		181,649		181,811		180,515
Effect of dilutive securities:
Exchange of Common OP Units for Common Shares	10,482		10,496		10,485		11,084
Stock options and restricted stock	186		255		252		241
Weighted average Common Shares outstanding – Fully Diluted	192,537		192,400		192,548		191,840

Earnings per Common Share – Basic	$	0.28	$	0.35	$	0.90	$	1.24

Earnings per Common Share – Fully Diluted	$	0.28	$	0.35	$	0.90	$	1.24

Note 5 – Common Stock and Other Equity Related Transactions

Two-for-One Common Stock and OP Units Split

On October 15, 2019, a two-for-one stock split of our common stock, effected by and in the form of a stock dividend, was paid to stockholders of record as of October 1, 2019. In connection with our stock split, the OP Units of our Operating Partnership also split on a two-for-one basis.

Increase in Authorized Shares

On April 28, 2020, our stockholders approved an amendment to our charter that increased the number of shares of common stock that we are authorized to issue from 400,000,000 to 600,000,000 shares.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 5 – Common Stock and Other Equity Related Transactions (continued)

Common Stockholder Distribution Activity

The following quarterly distributions, as adjusted for the stock split, have been declared and paid to Common Stockholders and the OP Unit holders since January 1, 2019.

Distribution Amount Per Share

For the Quarter Ended

Stockholder Record Date

Payment Date

$0.3063

March 31, 2019

March 29, 2019

April 12, 2019

$0.3063

June 30, 2019

June 28, 2019

July 12, 2019

$0.3063

September 30, 2019

September 27, 2019

October 11, 2019

$0.3063

December 31, 2019

December 27, 2019

January 10, 2020

$0.3425

March 31, 2020

March 27, 2020

April 10, 2020

$0.3425

June 30, 2020

June 26, 2020

July 10, 2020

$0.3425

September 30, 2020

September 25, 2020

October 9, 2020

Equity Offering Program

On July 30, 2020, we entered into our current at-the-market (“ATM”) equity offering program with certain sales agents, pursuant to which we may sell, from time-to-time, shares of our common stock, par value $0.01 per share, having an aggregate offering price of up to $200.0 million. As of September 30, 2020, the full capacity remained available for issuance.

There was no ATM equity activity during the nine months ended September 30, 2020. The following table presents the shares that were issued under the previous ATM equity offering program during the nine months ended September 30, 2019.


	Nine Months Ended September 30,
(amounts in thousands, except share data)	2019
Shares of Common Stock sold	1,010,472
Weighted average price	$	58.71
Total gross proceeds	$	59,319
Commissions paid to sales agents	$	771

Exchanges

Subject to certain limitations, OP Unit holders can request an exchange of any or all of their OP Units for shares of Common Stock at any time. Upon receipt of such a request, we may, in lieu of issuing shares of Common Stock, cause the Operating Partnership to pay cash. During the nine months ended September 30, 2020 and 2019, 9,228 and 995,550 OP Units, respectively, were exchanged for an equal number of shares of Common Stock.

Note 6 – Investment in Real Estate

Acquisitions

On July 31, 2020, we completed the acquisition of an 11-acre development parcel that contained an additional 56 sites in Stella, North Carolina. On August 27, 2020, we completed the acquisition of a 51-acre vacant land parcel, also in Stella, North Carolina, for additional expansion. Both parcels are adjacent to our RV community, White Oak Shores. The total aggregate purchase price was $4.8 million, which was funded with available cash.

On April 21, 2020, we completed the acquisition of a 4.6-acre vacant land parcel in North Ellenton, Florida, adjacent to our MH community, Colony Cove, for additional expansion. The purchase price was $2.2 million, which was funded with available cash.

On September 10, 2019, we completed the acquisition of the remaining interest in the Loggerhead joint venture that owned 11 marinas for a purchase price of approximately $49.0 million. As part of the acquisition, we also funded the joint

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 6 – Investments in Real Estate (continued)

venture's repayment of its non-transferable debt of approximately $72.0 million. The transaction was funded with proceeds from our unsecured line of credit. Following the consummation of the transaction, we own 100% of the marinas.

On May 29, 2019, we completed the acquisition of White Oak Shores Camping and RV Resort, a 455-site RV community located in Stella, North Carolina, for a purchase price of $20.5 million. The acquisition was funded with available cash.

On April 10, 2019, we completed the acquisition of Round Top RV Campground, a 391-site RV community located in Gettysburg, Pennsylvania, for a purchase price of $12.4 million. This acquisition was funded with available cash and a loan assumption of approximately $7.8 million, excluding mortgage premium of $0.2 million.

On March 25, 2019, we completed the acquisitions of Drummer Boy Camping Resort, a 465-site RV community located in Gettysburg, Pennsylvania, and Lake of the Woods Campground, a 303-site RV community located in Wautoma, Wisconsin, for a total purchase price of $25.4 million. These acquisitions were funded with available cash and a loan assumption of approximately $10.8 million, excluding mortgage premium of $0.4 million.

Dispositions

On January 23, 2019, we closed on the sale of five all-age MH communities located in Indiana and Michigan, collectively containing 1,463 sites, for $89.7 million and recognized a gain of $52.5 million, net of transaction costs, during the first quarter of 2019.

Note 7 – Investment in Unconsolidated Joint Ventures

The following table summarizes our investment in unconsolidated joint ventures (investment amounts in thousands with the number of Properties shown parenthetically as of September 30, 2020 and December 31, 2019, respectively):


						Investment as of						Income/(Loss) for Nine Months Ended
Investment	Location	Number of Sites	Economic Interest ^(a)			September 30, 2020		December 31, 2019		September 30, 2020		September 30, 2019
Meadows	Various (2,2)	1,077	50	%		$	—	$	146	$	1,404	$	1,200
Lakeshore	Florida (3,3)	721	(b)			2,328		2,467		313		183
Voyager	Arizona (1,1)	1,801	50	%	^(c)	373		599		153		2,938
Loggerhead	Florida	2,343	—	%	^(d)	—		—		—		3,501
ECHO JV	Various	—	50	%		17,232		16,862		369		455
		5,942				$	19,933	$	20,074	$	2,239	$	8,277

_____________________

(a)The percentages shown approximate our economic interest as of September 30, 2020. Our legal ownership interest may differ.

(b)Includes two joint ventures in which we own a 65% interest and the Crosswinds joint venture in which we own a 49% interest.

(c)Primarily consists of a 50% interest in Voyager RV Resort and a 33% interest in the utility plant servicing this Property.

(d)On September 10, 2019, we completed the acquisition of the remaining interest in the Loggerhead joint venture. Loggerhead sites represent marina slip count.

We received approximately $2.4 million and $10.7 million in distributions from our unconsolidated joint ventures for the nine months ended September 30, 2020 and 2019, respectively. Approximately $1.8 million and $3.2 million of the distributions made to us exceeded our basis in our unconsolidated joint ventures for the nine months ended September 30, 2020 and 2019, respectively, and as such, were recorded as income from unconsolidated joint ventures.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 8 – Borrowing Arrangements

Mortgage Notes Payable

Our mortgage notes payable is classified as Level 2 in the fair value hierarchy. The following table presents the fair value of our mortgage notes payable:


	As of September 30, 2020						As of December 31, 2019
(amounts in thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgage notes payable, excluding deferred financing costs	$	2,681,820	$	2,479,066	$	2,227,185	$	2,072,416

The weighted average interest rate on our outstanding mortgage indebtedness, including the impact of premium/discount amortization and loan cost amortization on mortgage indebtedness, as of September 30, 2020, was approximately 4.2% per annum. The debt bears interest at stated rates ranging from 2.5% to 8.9% per annum and matures on various dates ranging from 2022 to 2041. The debt encumbered a total of 114 and 116 of our Properties as of September 30, 2020 and December 31, 2019, respectively, and the gross carrying value of such Properties was approximately $2,551.9 million and $2,524.7 million, as of September 30, 2020 and December 31, 2019, respectively.

2020 Activity

During the quarter ended March 31, 2020, we entered into a $275.4 million secured credit facility with Fannie Mae, maturing in 10 years and bearing a 2.7% interest rate. The facility is secured by eight MH and four RV communities. We also repaid $48.1 million of principal on three mortgage loans that were due to mature in 2020, incurring $1.0 million of prepayment penalties. These mortgage loans had a weighted average interest rate of 5.2% per annum and were secured by three MH communities.

During the quarter ended September 30, 2020, we entered into a Secured Credit Facility with Fannie Mae for $386.9 million. The loan consists of two tranches with a weighted average interest rate of 2.55% per annum and a weighted average maturity of 13.4 years. The first tranche generated proceeds of $202.0 million with an interest rate of 2.47% per annum and a maturity of 12 years. The second tranche generated proceeds of $184.9 million with an interest rate of 2.64% per annum and a maturity of 15 years. The loan is secured by ten MH communities. The net proceeds from the transaction were primarily used to repay our $200.0 million unsecured term loan scheduled to mature in 2023 and $166.8 million of secured loans scheduled to mature in 2021. The unsecured term loan had an interest rate of LIBOR plus 1.20% to 1.90% per annum and, subject to certain conditions, could be prepaid at any time without premium or penalty. In connection with the term loan, we entered into a LIBOR swap agreement allowing us to trade the variable rate of LIBOR on the term loan for a fixed interest rate of 1.85%. Our spread over LIBOR was 1.20% resulting in an all-in interest rate of 3.05% per annum. In connection with the repayment of the unsecured term loan, we terminated the associated swap agreement as disclosed in Note 9. Derivative Instruments and Hedging Activities. The secured loans had a weighted average interest rate of approximately 5.0% per annum. As part of the repayment of the loans, we incurred early debt retirement costs of $8.8 million.

2019 Activity

During the quarter ended March 31, 2019, we defeased mortgage debt of $11.2 million in conjunction with the disposition of five all-age MH communities as disclosed in Note 6. Investment in Real Estate. These loans had a weighted average interest rate of 5.0% per annum. We also assumed mortgage debt of $10.8 million, excluding mortgage note premium of $0.4 million, as a result of the acquisitions that were closed during the quarter. This loan carries an interest rate of 5.5% per annum and matures in 2024.

During the quarter ended June 30, 2019, we repaid $66.8 million of principal on four mortgage loans that were due to mature in 2020, incurring $1.4 million of prepayment penalties. These loans had a weighted average interest rate of 6.9% per annum and were secured by three MH communities and one RV community. We also assumed mortgage debt of $7.8 million, excluding mortgage note premium of $0.2 million, as a result of the acquisitions that were closed during the quarter as disclosed in Note 6. Investment in Real Estate. This loan carries an interest rate of 5.3% per annum and matures in 2022.

Unsecured Line of Credit

During the nine months ended September 30, 2020, we borrowed and paid off amounts on our unsecured Line of Credit ("LOC"), leaving a balance of $50.0 million outstanding as of September 30, 2020. As of September 30, 2020, our LOC has a

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 8 – Borrowing Arrangements (continued)

remaining borrowing capacity of $350.0 million with the option to increase the borrowing capacity by $200.0 million, subject to certain conditions. The LOC had $160.0 million outstanding at December 31, 2019.

As of September 30, 2020, we were in compliance in all material respects with the covenants in all our borrowing arrangements.

Note 9 – Derivative Instruments and Hedging

Cash Flow Hedges of Interest Rate Risk

We record all derivatives at fair value. Our objective in utilizing interest rate derivatives is to add stability to our interest expense and to manage our exposure to interest rate movements. We do not enter into derivatives for speculative purposes. During the quarter ended September 30, 2020, in connection with the repayment of our $200.0 million unsecured term loan (See Note 8. Borrowing Arrangements for additional information), we terminated the interest rate swap that was scheduled to mature on November 1, 2020. As a result of the interest rate swap termination, we incurred an early termination fee of $0.9 million, which was recognized in the Consolidated Statements of Income and Comprehensive Income.

Our derivative financial instrument was classified as Level 2 in the fair value hierarchy. The following table presents the fair value of our derivative financial instrument:


		As of September 30,		As of December 31,
(amounts in thousands)	Balance Sheet Location	2020		2019
Interest Rate Swap	Accounts payable and other liabilities	$	—	$	380

The following table presents the effect of our derivative financial instrument on the Consolidated Statements of Income and Comprehensive Income:


Derivatives in Cash Flow Hedging Relationship	Amount of (gain)/loss recognized in OCI on derivative for the nine months ended September, 30					Location of (gain)/ loss reclassified from accumulated OCI into income		Amount of (gain)/loss reclassified from accumulated OCI into income for the nine months ended September 30,
(amounts in thousands)	2020		2019		(amounts in thousands)	2020		2019
Interest Rate Swap	$	1,561	$	1,957	Interest Expense	$	1,941	$	(841)

Note 10 – Equity Incentive Awards

Our 2014 Equity Incentive Plan (the “2014 Plan”) was adopted by the Board of Directors on March 11, 2014 and approved by our stockholders on May 13, 2014. During the quarter ended March 31, 2020, 90,933 shares of restricted stock were awarded to certain members of our management team. Of these shares, 50% are time-based awards, vesting in equal installments over a three-year period on January 29, 2021, January 31, 2022, and January 27, 2023, respectively, and have a grant date fair value of $3.3 million. The remaining 50% are performance-based awards vesting in equal installments on January 29, 2021, January 31, 2022, and January 27, 2023, respectively, upon meeting performance conditions as established by the Compensation Committee in the year of the vesting period. They are valued using the closing price at the grant date when all the key terms and conditions are known to all parties. The 15,154 shares of restricted stock subject to 2020 performance goals have a grant date fair value of $1.1 million.

During the quarter ended September 30, 2020, we awarded to certain members of our Board of Directors 60,171 shares of restricted stock at a fair value of approximately $4.0 million and options to purchase 16,090 shares of common stock with an exercise price of $66.81. These are time-based awards subject to various vesting dates between January 28, 2021 and July 28, 2023.

Stock based compensation expense, reported in General and administrative expense on the Consolidated Statements of Income and Comprehensive Income, for the quarters ended September 30, 2020 and 2019, was $2.9 million and $2.7 million, respectively, and for the nine months ended September 30, 2020 and 2019, was $8.5 million and $7.8 million, respectively.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 11 – Commitments and Contingencies

We are involved in various legal and regulatory proceedings ("Proceedings") arising in the ordinary course of business. The Proceedings include, but are not limited to, legal claims made by employees, vendors and customers, and notices, consent decrees, information requests, additional permit requirements and other similar enforcement actions by governmental agencies relating to our utility infrastructure, including water and wastewater treatment plants and other waste treatment facilities and electrical systems. Additionally, in the ordinary course of business, our operations are subject to audit by various taxing authorities. Management believes these Proceedings taken together do not represent a material liability. In addition, to the extent any such Proceedings or audits relate to newly acquired Properties, we consider any potential indemnification obligations of sellers in our favor.

The Operating Partnership operates and manages Westwinds, a 720 site mobilehome community, and Nicholson Plaza, an adjacent shopping center, both located in San Jose, California pursuant to ground leases that expire on August 31, 2022 and do not contain extension options. The master lessor of these ground leases, The Nicholson Family Partnership (the “Nicholsons”), has expressed a desire to redevelop Westwinds, and in a written communication, they claimed that we were obligated to deliver the property free and clear of any and all subtenancies upon the expiration of the ground leases on August 31, 2022. In connection with any redevelopment, the City of San Jose’s conversion ordinance requires, among other things, that the landowner provide relocation, rental and purchase assistance to the impacted residents.

We believe the Nicholsons’ demand is unlawful, and on December 30, 2019, the Operating Partnership, together with certain interested parties, filed a complaint in California Superior Court for Santa Clara County, seeking declaratory relief pursuant to which it requested that the Court determine, among other things, that the Operating Partnership has no obligation to deliver the property free and clear of the mobilehome residents upon the expiration of the ground leases. The Operating Partnership and the interested parties filed an amended complaint on January 29, 2020. The Nicholsons filed a demand for arbitration on January 28, 2020, which they subsequently amended, pursuant to which they request (i) a declaration that the Operating Partnership, as the “owner and manager” of Westwinds, is “required by the Ground Leases, and State and local law to deliver the Property free of any encumbrances or third-party claims at the expiration of the lease terms,” (ii) that the Operating Partnership anticipatorily breached the ground leases by publicly repudiating any such obligation and (iii) that the Operating Partnership is required to indemnify the Nicholsons with respect to the claims brought by the interested parties in the Superior Court proceeding.

On February 3, 2020, the Nicholsons filed a motion in California Superior Court to compel arbitration and to stay the Superior Court litigation, which motion was heard on June 25, 2020. On July 29, 2020, the Superior Court issued a final order denying the Nicholson’s motion to compel arbitration. The Nicholsons filed a notice of appeal on August 7, 2020. The Nicholson’s claim that the Operating Partnership is required to indemnify the Nicholsons for legal fees with respect to the claims brought by the third parties in the Superior Court litigation is proceeding in the arbitration.

We intend to continue to vigorously defend our interests in this matter. As of September 30, 2020 we have not made an accrual, as we are unable to predict the outcome of this matter or reasonably estimate any possible loss.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 12 – Reportable Segments

We have identified two reportable segments: (i) Property Operations and (ii) Home Sales and Rentals Operations. The Property Operations segment owns and operates land lease Properties and the Home Sales and Rentals Operations segment purchases, sells and leases homes at the Properties. The distribution of the Properties throughout the United States reflects our belief that geographic diversification helps insulate the portfolio from regional economic influences.

All revenues were from external customers and there is no customer who contributed 10% or more of our total revenues during the quarters and nine months ended September 30, 2020 or 2019.

The following tables summarize our segment financial information for the quarters and nine months ended September 30, 2020 and 2019:

Quarter Ended September 30, 2020


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	264,284	$	17,473	$	281,757
Operations expenses	(132,780)		(15,825)		(148,605)
Income from segment operations	131,504		1,648		133,152
Interest income	1,104		694		1,798
Depreciation and amortization	(35,878)		(2,703)		(38,581)

Income (loss) from operations	$	96,730	$	(361)	$	96,369
Reconciliation to consolidated net income:
Corporate interest income					3
Income from other investments, net					1,428
General and administrative					(9,692)
Other expenses					(658)
Interest and related amortization					(25,218)
Equity in income of unconsolidated joint ventures					968
Early debt retirement					(9,732)
Consolidated net income					$	53,468

Total assets	$	3,997,064	$	263,349	$	4,260,413
Capital improvements	$	40,387	$	11,527	$	51,914

Quarter Ended September 30, 2019


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	249,632	$	12,668	$	262,300
Operations expenses	(122,683)		(11,070)		(133,753)
Income from segment operations	126,949		1,598		128,547
Interest income	985		840		1,825
Depreciation and amortization	(34,273)		(2,759)		(37,032)

Income (loss) from operations	$	93,661	$	(321)	$	93,340
Reconciliation to consolidated net income:
Corporate interest income					6
Income from other investments, net					7,029
General and administrative					(8,710)
Other expenses					(1,460)
Interest and related amortization					(25,547)
Equity in income of unconsolidated joint ventures					3,518
Early debt retirement					—
Consolidated net income					$	68,176

Total assets	$	3,871,379	$	266,092	$	4,137,471
Capital improvements	$	26,000	$	42,344	$	68,344

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

Nine Months Ended September 30, 2020


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	764,913	$	46,147	$	811,060
Operations expenses	(369,974)		(41,468)		(411,442)
Income from segment operations	394,939		4,679		399,618
Interest income	3,240		2,148		5,388
Depreciation and amortization	(107,709)		(8,228)		(115,937)

Income (loss) from operations	$	290,470	$	(1,401)	$	289,069
Reconciliation to consolidated net income:
Corporate interest income					11
Income from other investments, net					3,093
General and administrative					(31,156)
Other expenses					(1,885)
Interest and related amortization					(77,540)
Equity in income of unconsolidated joint ventures					2,239
Early debt retirement					(10,786)
Consolidated net income					$	173,045

Total assets	$	3,997,064	$	263,349	$	4,260,413
Capital improvements	$	110,544	$	44,517	$	155,061

Nine Months Ended September 30, 2019


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	729,496	$	34,841	$	764,337
Operations expenses	(348,546)		(30,547)		(379,093)
Income from segment operations	380,950		4,294		385,244
Interest income	2,829		2,535		5,364
Depreciation and amortization	(105,013)		(7,772)		(112,785)
Gain on sale of real estate, net	52,507		—		52,507
Income (loss) from operations	$	331,273	$	(943)	$	330,330
Reconciliation to consolidated net income:
Corporate interest income					21
Income from other investments, net					8,894
General and administrative					(27,844)
Other expenses					(2,427)
Interest and related amortization					(77,964)
Equity in income of unconsolidated joint venture					8,277
Early debt retirement					(1,491)
Consolidated net income					$	237,796

Total assets	$	3,871,379	$	266,092	$	4,137,471
Capital Improvements	$	78,907	$	110,881	$	189,788

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

The following table summarizes our financial information for the Property Operations segment for the quarters and nine months ended September 30, 2020 and 2019:


	Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2020		2019		2020		2019
Revenues:
Rental income	$	234,711	$	221,306	$	683,960	$	649,663
Annual membership subscriptions	13,442		13,150		39,476		38,052
Membership upgrade sales current period, gross	6,631		5,730		16,522		14,609
Membership upgrade sales upfront payments, deferred, net	(4,171)		(3,530)		(9,379)		(8,213)
Other income	12,268		11,263		33,007		31,898
Ancillary services revenues, net	1,403		1,713		1,327		3,487
Total property operations revenues	264,284		249,632		764,913		729,496
Expenses:
Property operating and maintenance	97,848		89,162		264,159		249,482
Real estate taxes	15,981		15,166		49,490		45,596
Sales and marketing, gross	5,054		4,063		13,308		11,686
Membership sales commissions, deferred, net	(630)		(313)		(1,327)		(893)
Property management	14,527		14,605		44,344		42,675
Total property operations expenses	132,780		122,683		369,974		348,546
Income from property operations segment	$	131,504	$	126,949	$	394,939	$	380,950

The following table summarizes our financial information for the Home Sales and Rentals Operations segment for the quarters and nine months ended September 30, 2020 and 2019:


	Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2020		2019		2020		2019
Revenues:
Rental income ^(a)	$	4,158	$	3,810	$	12,218	$	11,026
Gross revenue from home sales	13,070		8,438		33,245		22,738
Brokered resale revenues, net	245		420		684		1,077
Ancillary services revenues, net	—		—		—		—
Total revenues	17,473		12,668		46,147		34,841
Expenses:
Rental home operating and maintenance	1,718		1,603		4,306		4,099
Cost of home sales	12,866		8,434		33,627		23,230
Home selling expenses	1,241		1,033		3,535		3,218
Total expenses	15,825		11,070		41,468		30,547
Income from home sales and rentals operations segment	$	1,648	$	1,598	$	4,679	$	4,294

______________________

(a)Rental income within Home Sales and Rentals Operations does not include base rent related to the rental home Sites. Base rent is included within property operations.

Note 13 – Subsequent Events

In October 2020, we completed the acquisition of:

•Marina Dunes RV Park, an 89-site RV community located in Marina, California, and Acorn Campground, a 323-site RV community in Green Creek, New Jersey. The total aggregate purchase price for these properties was $36.0 million, which was funded with available cash.

•Two development properties, The Resort at Tranquility Lake, a planned 500-site RV community located in Cape Coral, Florida and Bayport, a planned 900-site RV community located in Jamaica, Virginia, for a total aggregate purchase price of $16.3 million. These acquisitions were funded with available cash.

•Three parcels of land adjacent to our properties for a total aggregate purchase price of $1.6 million, which was funded with available cash.

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 and in our Annual Report on Form 10-K for the year ended December 31, 2019 ("2019 Form 10-K"), as well as information in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Form 10-K. All shares of common stock ("Common Shares") and units of common interests in our Operating Partnership ("OP Units") as well as per share results reflect the two-for-one stock split that was completed on October 15, 2019.

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (COVID-19) a pandemic. See the COVID-19 Pandemic Update ("COVID Update") section below for a discussion of the impact on our business to date, including operational changes we have implemented, performance indicators such as rent collections and factors that we anticipate will inform our future decisions and actions. The current operating environment is changing rapidly. Our future response and the resulting impact on our business is difficult to predict. The extent of the impact that the COVID-19 pandemic will have on our business going forward, including our financial condition, results of operations and cash flows, is dependent on multiple factors, many of which are unknown. For additional details, see Item 1A. Risk Factors.

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 and operator of properties (“Properties”) consisting primarily of manufactured home ("MH") and recreational vehicle ("RV") communities. As of September 30, 2020, we owned or had an ownership interest in a portfolio of 413 Properties located throughout the United States and Canada containing 157,278 individual developed areas ("Sites"). These Properties are located in 33 states and British Columbia, with more than 90 Properties with lake, river or ocean frontage and more than 120 Properties within 10 miles of the coastal United States.

We invest in properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on delivering value to our residents and guests as well as stockholders. 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") 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 18% from 2020 to 2035. These individuals, seeking an active lifestyle, will continue to drive the market for second home sales as vacation properties, investment opportunities or retirement retreats. We expect it is likely that over the next decade, we will continue to see high levels of second-home sales and that manufactured homes and cottages in our Properties will continue to provide a viable second-home alternative to site-built homes. We also believe the Millennial and Generation X demographic will contribute to our future long-term customer pipeline. Millennials and Generation X combined represent over half of RV buyers. There is an increasing trend among these groups to adopt a minimalist lifestyle due to its affordability, preference over home quality relative to its size and the overall unique experience that our communities can provide. We 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.

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, 2020
MH Sites						72,500
RV Sites:
Annual						29,900
Seasonal						10,200
Transient						14,100
Marina Slips						2,300
Membership ⁽¹⁾						24,600
Joint Ventures ⁽²⁾						3,600
Total ⁽³⁾						157,300

_________________________

⁽¹⁾Primarily utilized to service the approximately 117,900 members. Includes approximately 6,000 Sites rented on an annual basis.

⁽²⁾Includes approximately 2,900 annual Sites, 500 seasonal Sites and 200 transient Sites.

⁽³⁾Total does not foot due to rounding.

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. We also sell and rent homes through our joint venture, ECHO Financing, LLC (the "ECHO JV"). Additionally, home sale brokerage services are offered to our residents who may choose to sell their homes rather than relocate them when moving from a Property. At certain Properties, we operate ancillary facilities, such as golf courses, pro shops, stores and restaurants.

In the manufactured housing industry, options for home financing, also known as chattel financing, are limited. Chattel financing options available today include community owner-funded programs or third-party lender programs that provide subsidized financing to customers and often require the community owner to guarantee customer defaults. Third-party lender programs have stringent underwriting criteria, sizable down payment requirements, short loan amortization and 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 Funds from Operations ("Normalized FFO"), (iii) Income from property operations, (iv) Income from property operations, excluding deferrals and property management, (v) Core Portfolio income from property operations, excluding deferrals and property management (operating results for Properties owned and operated in both periods under comparison), and (vi) Income from rental operations, net of depreciation. 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.

COVID-19 Pandemic Update

Since the COVID-19 pandemic began, we have taken actions to prioritize the safety and security of our employees, residents and customers, while maintaining our high-quality standards in service to our residents and customers. We have implemented and may continue to implement Center for Disease Control ("CDC") and local public health department guidelines and protocols for social distancing and enhanced community and office cleaning procedures. Our property offices continue to be open to residents and customers by appointment only. All properties continue to be open subject to state and local guidelines. Some of the amenities at certain properties remain closed due to state and local guidelines. We are closely monitoring these guidelines and may limit future transient reservations as necessary and appropriate.

With consideration for the hardship our residents and customers might have experienced as a result of COVID-19 and in response to certain regulatory guidelines, during the second quarter of 2020, we offered a rent deferral program, waived late fees and RV cancellation fees, and allowed extended stays for Thousand Trails members as a result of shelter-in-place orders and suspended eviction proceedings. These measures were discontinued during the third quarter of 2020 as properties reopened and COVID-19 restrictions were lifted. While we temporarily suspended mailing MH rent increase notices in April and May 2020, we resumed mailing MH rent increase notices in June 2020. By the end of October 2020, we will have sent 2021 rent increase notices to 48% of our MH residents and we will have set RV annual rates for the 2021 season for 90% of our annual sites.

Management's Discussion and Analysis (continued)

In response to COVID-19, we introduced an emergency time-off program for our property employees that provides incremental pay for up to two weeks. In addition, we also provided a one-time property employee appreciation bonus during the quarter ended June 30, 2020. Employees in our corporate and regional offices are both returning to their work locations and working remotely. We are continuing to keep our focus on employee safety and our ability to adapt to changing demands and local, federal and CDC guidelines.

The primary financial statement impact from the COVID-19 pandemic has been a reduction of transient RV rental income. We have seen positive demand since our properties reopened to transient RV reservation at the beginning of June 2020 when shelter-in-place orders were lifted. During the third quarter of 2020, we recognized $24.4 million of transient RV rental income in our Core Portfolio, an increase of $1.7 million, or 7.3%, compared to $22.7 million for the same period in 2019. The increase was evidenced in the North, South and Northeast as overall performance in these regions rebounded late in the third quarter after certain COVID-19 restrictions had been lifted.

Our Thousand Trail Camping ("TTC") membership sales continued to see positive demand as COVID-19 restrictions were lifted, as TTC sales volume increased 24% in the third quarter of 2020 compared to the same period in 2019, and our RV Dealer activations increased 15% compared to the prior year. We also saw an increase in upgrade sales of 20%, with over 1,000 membership upgrades sold during the quarter ended September 30, 2020.

We continue to closely monitor cash collections as a leading indicator of the performance of our business. We have not experienced a significant change in the payment patterns and collection rates from our customers for the third quarter of 2020 as compared to previous quarters.

We attribute the solid performance of our business, as shown by our cash collection activity, increases in home sales and occupancy, and growth in transient RV rental income, to the fundamentals of our business model. Our customers have made an investment in a housing unit that is placed on land leased from us. In addition, there is continued demand for our properties. The property locations and the lifestyle we offer have broad appeal to customers interested in enjoying an outdoor experience. We believe this is particularly relevant in a COVID-19 impacted environment. We intend to continue to monitor the rapidly evolving situation and we may take further actions that alter our business operations as may be required and that are in the best interests of our employees, residents, customers and shareholders.

Results Overview

For the quarter ended September 30, 2020, net income available for Common Stockholders decreased $13.9 million, or $0.07 per fully diluted Common Share, to $50.6 million, or $0.28 per fully diluted Common Share, compared to $64.5 million, or $0.35 per fully diluted Common Share, for the same period in 2019. For the nine months ended September 30, 2020, net income available for Common Stockholders decreased $60.6 million, or $0.34 per fully diluted Common Share, to $163.6 million, or $0.90 per fully diluted Common Share, compared to $224.2 million, or $1.24 per fully diluted Common Share, for the same period in 2019. The financial results for 2019 included a gain of $52.5 million on the sale of five all-age MH communities.

For the quarter ended September 30, 2020, FFO available for Common Stock and OP Unit holders decreased $12.8 million, or $0.06 per fully diluted Common Share, to $95.8 million, or $0.50 per fully diluted Common Share, compared to $108.6 million, or $0.56 per fully diluted Common Share, for the same period in 2019. For the nine months ended September 30, 2020, FFO available for Common Stock and OP Unit holders decreased $8.8 million, or $0.05 per fully diluted Common Share, to $297.6 million, or $1.55 per fully diluted Common Share, compared to $306.4 million, or $1.60 per fully diluted Common Share, for the same period in 2019.

For the quarter ended September 30, 2020, Normalized FFO available for Common Stock and OP Unit holders increased $2.8 million, or $0.02 per fully diluted Common Share, to $105.5 million, or $0.55 per fully diluted Common Share, compared to $102.7 million, or $0.53 per fully diluted Common Share, for the same period in 2019. For the nine months ended September 30, 2020, Normalized FFO available for Common Stock and OP Unit holders increased $7.5 million, or $0.03 per fully diluted Common Share, to $309.8 million, or $1.61 per fully diluted Common Share, compared to $302.3 million, or $1.58 per fully diluted Common Share, for the same period in 2019.

For the quarter ended September 30, 2020, our Core Portfolio property operating revenues, excluding deferrals, increased 4.9% and property operating expenses, excluding deferrals and property management, increased 9.1%, from the same period in 2019, resulting in an increase in income from property operations, excluding deferrals and property management, of 1.8% compared to the same period in 2019. For the nine months ended September 30, 2020, our Core Portfolio property operating revenues, excluding deferrals, increased 3.7% and property operating expenses, excluding deferrals and property management, increased 5.0%, from the same period in 2019, resulting in an increase in income from property operations, excluding deferrals and property management, of 2.7% compared to the same period in 2019.

Management's Discussion and Analysis (continued)

While we continue to focus on increasing the number of manufactured homeowners in our Core Portfolio, we also believe renting our vacant homes represents an attractive source of occupancy and an opportunity to potentially convert the renter to a new homebuyer in the future. We continue to expect there to be fluctuations in the sources of occupancy gains depending on local market conditions, availability of vacant sites and success with converting renters to homeowners. Our Core Portfolio average occupancy, including both homeowners and renters, in our MH communities was 95.3% for the quarter ended September 30, 2020, compared to 95.2% for the quarter ended June 30, 2020 and 95.1% for the same period in 2019. For the quarter ended September 30, 2020, our Core Portfolio occupancy increased by 93 sites with an increase in homeowner occupancy of 114 sites compared to occupancy as of June 30, 2020. By comparison, for the quarter ended September 30, 2019, our Core Portfolio occupancy increased 56 sites with an increase in homeowner occupancy of 82 sites. In addition to higher occupancy, we have increased rental rates during the quarter and nine months ended September 30, 2020, contributing to a growth of 3.8% and 4.1%, respectively, in MH rental income compared to the same periods in 2019.

RV rental income in our Core Portfolio for the quarter ended September 30, 2020 was 5.2% higher than the same period in 2019. Annual and transient rental income for the quarter ended September 30, 2020 increased 5.2% and 7.3%, respectively, while seasonal rental income decreased 4.5%. We have continued to experience positive demand since our properties reopened to transient RV reservations at the beginning of June 2020 as shelter-in-place orders were lifted. RV rental income in our Core Portfolio for the nine months ended September 30, 2020 was 0.9% higher than the same period in 2019. Annual and seasonal rental income for the nine months ended September 30, 2020 increased 5.8% and 2.3%, respectively, while transient rental income decreased 12.2%. The decrease in transient rental income for the nine months ended September 30, 2020 was largely due to cancellations, declines in reservations and temporary site closures during the second quarter of 2020 due to COVID-19.

We continue to experience strong performance in our membership base within our Thousand Trails portfolio. For the quarter ended September 30, 2020, annual membership subscriptions revenue increased 2.2% over the same period in 2019. We sold approximately 7,400 TTC memberships during the quarter ended September 30, 2020, representing a 24% increase in sales volume compared to the same period in 2019. For the quarter ended September 30, 2020, membership upgrade sales increased $0.9 million compared to the same period in 2019, driven by approximately 1,000 membership upgrade sales during the quarter ended September 30, 2020, representing an increase of 20.1% in sales volume. In addition, we activated approximately 7,400 TTC memberships through our RV dealer program for the quarter ended September 30, 2020. For the nine months ended September 30, 2020, we sold approximately 16,400 TTC memberships and approximately 2,600 membership upgrades, an increase in membership subscriptions and upgrade revenues of 3.7% and 13.1%, respectively, over the same period in 2019.

Demand for our homes and communities remains strong as evidenced by factors including our high occupancy levels. We closed 183 new home sales during the quarter ended September 30, 2020 compared to 128 new home sales during the quarter ended September 30, 2019. We closed 471 new home sales during the nine months ended September 30, 2020 compared to 336 new home sales during the nine months ended September 30, 2019. The increases in new home sales was primarily due to favorable housing trends and timing of the availability of home inventory ready for sale.

As of September 30, 2020, we had 3,902 occupied rental homes in our Core MH communities, including 286 homes rented through our ECHO JV. Our Core Portfolio income from rental operations, net of depreciation, was $7.6 million and $7.3 million for the quarters ended September 30, 2020 and 2019, respectively. Approximately $7.8 million and $7.9 million of rental operations revenue related to Site rental was included in MH base rental income in our Core Portfolio for the quarters ended September 30, 2020 and 2019, respectively. Our Core Portfolio income from rental operations, net of depreciation, was $23.2 million and $22.4 million for the nine months ended September 30, 2020 and 2019, respectively. Approximately $23.5 million and $23.4 million of rental operations revenue related to Site rental was included in MH base rental income in our Core Portfolio for the nine months ended September 30, 2020 and 2019, respectively.

Our gross investment in real estate increased $128.4 million to $5,871.4 million as of September 30, 2020 from $5,743.0 million as of December 31, 2019, primarily due to capital improvements during the nine months ended September 30, 2020.

Management's Discussion and Analysis (continued)

The following chart lists the Properties acquired or sold from January 1, 2019 through September 30, 2020 and Sites added through expansion opportunities at our existing Properties:

Location

Type of Property

Transaction Date

Sites

Total Sites as of January 1, 2019 ^{(1) (2)}

155,400

Acquisition Properties:

Drummer Boy Camping Resort

Gettysburg, Pennsylvania

March 25, 2019

465

Lake of the Woods Campground

Wautoma, Wisconsin

March 25, 2019

303

Round Top RV Campground

Gettysburg, Pennsylvania

April 10, 2019

391

White Oak Shores Camping and RV Resort

Stella, North Carolina

May 29, 2019

455

Expansion Site Development:

Sites added (reconfigured) in 2019

891

Sites added (reconfigured) in 2020

773

Dispositions:

Hoosier Estates

Lebanon, Indiana

January 23, 2019

(288)

Lake in the Hills

Auburn Hills, Michigan

January 23, 2019

(238)

North Glen Village

Westfield, Indiana

January 23, 2019

(282)

Oak Tree Village

Portage, Indiana

January 23, 2019

(361)

Swan Creek

Ypsilanti, Michigan

January 23, 2019

(294)

Total Sites as of September 30, 2020⁽²⁾

157,300

______________________

⁽¹⁾Includes the marina slips from the acquisition of the remaining interest in our joint venture investment of 11 marinas in Florida.

⁽²⁾Sites are approximate. Total does not foot due to rounding.

Non-GAAP Financial Measures

Management's discussion and analysis of financial condition and results of operations include certain Non-GAAP financial measures that in management's view of the business are meaningful as they allow investors the ability to understand key operating details of our business both with and without regard to certain accounting conventions or items that may not always be indicative of recurring annual cash flows of the portfolio. These Non-GAAP financial measures as determined and presented by us may not be comparable to similarly titled measures reported by other companies, and include income from property operations and Core Portfolio, FFO, Normalized FFO and income from rental operations, net of depreciation.

We believe investors should review Income from property operations and Core Portfolio, FFO, Normalized FFO and Income from rental operations, net of depreciation, along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT's operating performance. A discussion of Income from property operations and Core Portfolio, FFO, Normalized FFO and Income from rental operations, net of depreciation, and a reconciliation to net income, are included below.

Income from Property Operations and Core Portfolio

We use income from property operations, income from property operations, excluding deferrals and property management, and Core Portfolio income from property operations, excluding deferrals and 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, sales and marketing expenses and property management expenses. Income from property operations, excluding deferrals and property management, represents income from property operations excluding property management expenses and the impact of the GAAP deferrals of membership upgrade sales upfront payments and membership sales commissions, net. For comparative purposes, we present bad debt expense within Property operating, maintenance and real estate taxes in the current and prior periods.

Our Core Portfolio consists of our Properties owned and operated during all of 2019 and 2020. Core Portfolio income from property operations, excluding deferrals and 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 2019 and 2020. This includes, but is not limited to, four properties and the marinas acquired and five properties sold during 2019.

Management's Discussion and Analysis (continued)

Funds from Operations ("FFO") and Normalized Funds from Operations ("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 receive non-refundable upfront payments from membership upgrade contracts. In accordance with GAAP, the non-refundable upfront payments and related commissions are deferred and amortized over the estimated membership upgrade contract term. Although the NAREIT definition of FFO does not address the treatment of non-refundable upfront payments, we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO.

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 and defeasance 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 which 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.

Income from Rental Operations, Net of Depreciation

We use income from rental operations, net of depreciation as an alternative measure to evaluate the operating results of our home rental program. Income from rental operations, net of depreciation represents income from rental operations less depreciation expense on rental homes. We believe this measure is meaningful for investors as it provides a complete picture of the home rental program operating results including the impact of depreciation which affects our home rental program investment decisions.

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.

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, 2020 and 2019:


	Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2020		2019		2020		2019
Computation of Income from Property Operations:
Net income available for Common Stockholders	$	50,560	$	64,461	$	163,622	$	224,171
Redeemable preferred stock dividends	—		—		8		8
Income allocated to non-controlling interests – Common OP Units	2,908		3,715		9,415		13,617
Equity in income of unconsolidated joint ventures	(968)		(3,518)		(2,239)		(8,277)
Income before equity in income of unconsolidated joint ventures	52,500		64,658		170,806		229,519
Gain on sale of real estate, net	—		—		—		(52,507)
Total other expenses, net	80,652		63,889		228,812		208,232
Loss from home sales operations and other	(611)		(1,104)		1,906		(854)
Income from property operations	$	132,541	$	127,443	$	401,524	$	384,390

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, 2020 and 2019:


	Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2020		2019		2020		2019
Computation of FFO and Normalized FFO:
Net income available for Common Stockholders	$	50,560	$	64,461	$	163,622	$	224,171
Income allocated to non-controlling interests – Common OP Units	2,908		3,715		9,415		13,617
Membership upgrade sales upfront payments, deferred, net	4,171		3,530		9,379		8,213
Membership sales commissions, deferred, net	(630)		(313)		(1,327)		(893)
Depreciation and amortization	38,581		37,032		115,937		112,785
Depreciation on unconsolidated joint ventures	183		174		544		1,047
Gain on sale of real estate, net	—		—		—		(52,507)
FFO available for Common Stock and OP Unit holders	95,773		108,599		297,570		306,433
Early debt retirement	9,732		—		10,786		2,085
Insurance proceeds due to catastrophic weather event ⁽¹⁾	—		(5,856)		—		(6,205)
COVID-19 expenses⁽²⁾	—		—		1,446		—
Normalized FFO available for Common Stock and OP Unit holders	$	105,505	$	102,743	$	309,802	$	302,313
Weighted average Common Shares outstanding – Fully Diluted	192,537		192,400		192,548		191,840

______________________

⁽¹⁾Represents insurance recovery revenue from reimbursement for capital expenditures related to Hurricane Irma.

⁽²⁾Includes expenses incurred related to the development and implementation of CDC and public health guidelines for social distancing and enhanced cleaning, property employee appreciation bonuses and emergency time-off pay. These COVID-19 expenses are considered incremental to our normal operations and are nonrecurring. As such, they have been excluded from the calculation of Normalized FFO.

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, 2020 and September 30, 2019 and discussion of our operating activities, investing activities and financing activities for the nine months ended September 30, 2020 and September 30, 2019. For the comparison of our results of operations for the quarters and nine months ended September 30, 2019 and September 30, 2018 and discussion of our operating activities, investing activities and financing activities for the nine months ended September 30, 2019 and September 30, 2018, 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, 2019, filed with the SEC on October 30, 2019.

Comparison of the quarter ended September 30, 2020 to the quarter ended September 30, 2019

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, 2020 and September 30, 2019:


	Core Portfolio														Total Portfolio
	Quarters Ended September 30,														Quarters Ended September 30,
(amounts in thousands)	2020		2019		Variance		% Change		2020		2019		Variance		% Change
MH base rental income ⁽¹⁾	$	143,469	$	137,596	$	5,873	4.3	%	$	143,512	$	137,596	$	5,916	4.3	%
Rental home income ⁽¹⁾	4,153		3,810		343		9.0	%	4,158		3,810		348		9.1	%
RV and marina base rental income ⁽¹⁾⁽²⁾	72,326		68,783		3,543		5.2	%	78,979		71,665		7,314		10.2	%
Annual membership subscriptions	13,413		13,150		263		2.0	%	13,442		13,150		292		2.2	%
Membership upgrades sales current period, gross	6,631		5,730		901		15.7	%	6,631		5,730		901		15.7	%
Utility and other income ⁽¹⁾	25,475		23,931		1,544		6.5	%	26,130		24,252		1,878		7.7	%
Property operating revenues, excluding deferrals	265,467		253,000		12,467		4.9	%	272,852		256,203		16,649		6.5	%

Property operating and maintenance ⁽¹⁾⁽³⁾	96,470		88,419		8,051		9.1	%	99,490		90,106		9,384		10.4	%
Real estate taxes	15,761		14,973		788		5.3	%	15,981		15,166		815		5.4	%
Rental home operating and maintenance	1,711		1,603		108		6.7	%	1,718		1,603		115		7.2	%
Sales and marketing, gross	5,053		4,060		993		24.5	%	5,054		4,063		991		24.4	%
Property operating expenses, excluding deferrals and property management	118,995		109,055		9,940		9.1	%	122,243		110,938		11,305		10.2	%
Income from property operations, excluding deferrals and property management ⁽⁴⁾	146,472		143,945		2,527		1.8	%	150,609		145,265		5,344		3.7	%
Property management	14,527		14,605		(78)		(0.5)	%	14,527		14,605		(78)		(0.5)	%
Income from property operations, excluding deferrals⁽⁴⁾	131,945		129,340		2,605		2.0	%	136,082		130,660		5,422		4.1	%
Membership upgrade sales upfront payments and membership sales commission, deferred, net	3,541		3,217		324		10.1	%	3,541		3,217		324		10.1	%
Income from property operations ⁽⁴⁾	$	128,404	$	126,123	$	2,281	1.8	%	$	132,541	$	127,443	$	5,098	4.0	%

_____________________

⁽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⁾Marina rental income has been included in our Non-Core Portfolio since the acquisition of the remaining interest in a joint venture investment of 11 marinas in Florida occurred on September 10, 2019.

⁽³⁾Includes bad debt expense for all periods presented.

⁽⁴⁾See Non-GAAP Financial Measures section of the Management Discussion and Analysis for definitions and reconciliations of these Non-GAAP measures to Net Income available for Common Shareholders.

Total portfolio income from property operations for 2020 increased $5.1 million, or 4.0%, from 2019, driven by an increase of $2.3 million, or 1.8%, from our Core Portfolio and an increase of $2.8 million from our Non-Core Portfolio. The increase in income from property operations from our Core Portfolio was primarily resulting from higher MH and RV base rental income. The increase in income from property operations from our None-Core Portfolio was attributed to income from properties acquired throughout 2019, most notably the marinas in Florida.

Management's Discussion and Analysis (continued)

Property Operating Revenues

MH base rental income in our Core Portfolio for 2020 increased $5.9 million, or 4.3%, from 2019, which reflects 3.8% growth from rate increases and 0.5% growth from occupancy gains. The average monthly base rental income per Site in our Core Portfolio increased to approximately $696 in 2020 from approximately $671 in 2019. The average occupancy for our Core Portfolio increased to 95.3% in 2020 from 95.1% in 2019.

RV base rental income in our Core Portfolio for 2020 increased $3.5 million, or 5.2%, from 2019. The increase was primarily due to higher annual rental income, driven by growth from rate increases, and higher transient income. Transient income increased 7.3% from 2019, most notably in the North, South and Northeast. We have seen positive demand since our properties reopened to transient RV reservations at the beginning of June 2020 as shelter-in-place orders were lifted. 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)	2020		2019		Variance		% Change		2020		2019		Variance		% Change
Annual	$	42,866	$	40,744	$	2,122	5.2	%	$	48,194	$	42,581	$	5,613	13.2	%
Seasonal	5,093		5,334		(241)		(4.5)	%	5,159		5,424		(265)		(4.9)	%
Transient	24,367		22,705		1,662		7.3	%	25,626		23,660		1,966		8.3	%
RV and marina base rental income ⁽¹⁾	$	72,326	$	68,783	$	3,543	5.2	%	$	78,979	$	71,665	$	7,314	10.2	%

_____________________

⁽¹⁾Marina rental income has been included in our Non-Core Portfolio following the acquisition of the remaining interest in our joint venture investment of 11 marinas in Florida on September 10, 2019.

Utility and other income in our Core Portfolio for 2020 increased $1.5 million, or 6.5%, from 2019. The increase was primarily due to higher insurance recovery revenue of $1.9 million, driven by insurance recovery revenue of $2.3 million for Hurricanes Hanna and Isaias during the third quarter of 2020. Increases in utility income of $0.7 million and pass-through income of $0.5 million were offset by decreases in other property income.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for 2020 increased $9.9 million, or 9.1%, from 2019, driven primarily by increases in property operating and maintenance expenses of $8.1 million and real estate taxes of $0.8 million. Property operating and maintenance expenses were higher in 2020 primarily due to increases in utility expenses, repairs and maintenance expenses, and insurance expense. The increase in utility expenses was primarily due to costs, including labor, associated with distribution system repairs of approximately $2.9 million incurred in 2020. The increase in repairs and maintenance expenses was driven by debris removal and cleanup costs of approximately $2.8 million related to Hurricane Hanna and Hurricane Isaias incurred during the third quarter of 2020. Property taxes in 2020 were higher due to real estate tax increases in Florida.

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)	2020		2019		Variance		% Change
Gross revenues from new home sales ⁽¹⁾	$	11,929	$	6,864	$	5,065	73.8	%
Cost of new home sales ⁽¹⁾	11,398		6,499		4,899		75.4	%
Gross profit from new home sales	531		365		166		45.5	%

Gross revenues from used home sales	1,141		1,574		(433)		(27.5)	%
Cost of used home sales	1,468		1,935		(467)		(24.1)	%
Loss from used home sales	(327)		(361)		34		9.4	%

Brokered resale and ancillary services revenues, net	1,648		2,133		(485)		(22.7)	%
Home selling expenses	1,241		1,033		208		20.1	%

Income (loss) from home sales and other	$	611	$	1,104	$	(493)	(44.7)	%

Home sales volumes
Total new home sales ⁽²⁾	183		128		55		43.0	%
New Home Sales Volume - ECHO JV	15		19		(4)		(21.1)	%
Used home sales	120		198		(78)		(39.4)	%
Brokered home resales	167		270		(103)		(38.1)	%

_________________________

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

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

The income from home sales and other operations was $0.6 million for 2020, compared to $1.1 million for 2019. The decrease in income from home sales and other operations was due to lower brokered resale and ancillary services revenues, net primarily due to reduced capacity at restaurants, stores and activities across the portfolio as a result of COVID-19.

Management's Discussion and Analysis (continued)

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)	2020		2019		Variance		% Change
Rental operations revenue ⁽¹⁾	$	12,032	$	11,670	$	362	3.1	%
Rental home operating and maintenance	1,711		1,603		108		6.7	%
Income from rental operations	10,321		10,067		254		2.5	%
Depreciation on rental homes ⁽²⁾	2,703		2,758		(55)		(2.0)	%
Income from rental operations, net of depreciation	$	7,618	$	7,309	$	309	4.2	%

Gross investment in new manufactured home rental units ⁽³⁾	$	231,192	$	220,669	$	10,523	4.8	%
Gross investment in used manufactured home rental units	$	16,299	$	23,454	$	(7,155)	(30.5)	%

Net investment in new manufactured home rental units	$	192,247	$	195,626	$	(3,379)	(1.7)	%
Net investment in used manufactured home rental units	$	6,798	$	10,418	$	(3,620)	(34.7)	%

Number of occupied rentals – new, end of period ⁽⁴⁾	3,314		3,079		235		7.6	%
Number of occupied rentals – used, end of period	588		914		(326)		(35.7)	%

______________________

⁽¹⁾Consists of Site rental income and home rental income. Approximately $7.8 million and $7.9 million for the quarters ended September 30, 2020 and September 30, 2019, respectively, of Site rental income is included in MH base rental income in the Core Portfolio Income from Property Operations table. The remainder of home rental income is included in rental home income in our Core Portfolio Income from Property Operations table.

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

⁽³⁾New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was $17.2 million and $16.7 million as of September 30, 2020 and September 30, 2019, respectively.

⁽⁴⁾Includes 286 and 294 homes rented through our ECHO JV as of September 30, 2020 and 2019, respectively.

Other Income and Expenses

The following table summarizes other income and expenses, net:


	Quarters Ended September 30,
(amounts in thousands, expenses shown as negative)	2020		2019		Variance		% Change
Depreciation and amortization	$	(38,581)	$	(37,032)	$	(1,549)	(4.2)	%
Interest income	1,801		1,831		(30)		(1.6)	%
Income from other investments, net	1,428		7,029		(5,601)		(79.7)	%
General and administrative	(9,692)		(8,710)		(982)		(11.3)	%
Other expenses	(658)		(1,460)		802		54.9	%
Early debt retirement	(9,732)		—		(9,732)		—	%
Interest and related amortization	(25,218)		(25,547)		329		1.3	%
Total other income and expenses, net	$	(80,652)	$	(63,889)	$	(16,763)	(26.2)	%

Total other income and expenses, net increased $16.8 million in 2020 compared to 2019, primarily due to early debt retirement costs, lower income from other investments, net, and higher depreciation and amortization expenses. The early debt retirement costs was a result of the repayment of our secured term loans that was scheduled to mature in 2021 and the termination of our interest rate swap agreement. The decrease in income from other investments, net was primarily due to reimbursement of capital expenditures related to Hurricane Irma received in 2019.

Equity in income of unconsolidated joint ventures

Equity in income of unconsolidated joint ventures decreased $2.6 million in 2020 compared to 2019, primarily due to a decrease in income recognized from distributions from our unconsolidated joint ventures as we acquired the remaining interest in the Loggerhead joint venture in the third quarter of 2019.

Management's Discussion and Analysis (continued)

Comparison of the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

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, 2020 and 2019.


	Core Portfolio														Total Portfolio
	Nine Months Ended September 30,														Nine Months Ended September 30,
(amounts in thousands)	2020		2019		Variance		% Change		2020		2019		Variance		% Change
MH base rental income ⁽¹⁾	$	427,407	$	408,653	$	18,754	4.6	%	$	427,490	$	409,091	$	18,399	4.5	%
Rental home income ⁽¹⁾	12,213		10,932		1,281		11.7	%	12,218		11,026		1,192		10.8	%
RV and marina base rental income ⁽¹⁾⁽²⁾	202,281		200,532		1,749		0.9	%	220,146		204,830		15,316		7.5	%
Annual membership subscriptions	39,446		38,052		1,394		3.7	%	39,476		38,052		1,424		3.7	%
Membership upgrade sales current period, gross	16,522		14,609		1,913		13.1	%	16,522		14,609		1,913		13.1	%
Utility and other income ⁽¹⁾	72,104		69,778		2,326		3.3	%	73,692		70,253		3,439		4.9	%
Property operating revenues, excluding deferrals	769,973		742,556		27,417		3.7	%	789,544		747,861		41,683		5.6	%

Property operating and maintenance^(1)(3)(4)	260,854		249,390		11,464		4.6	%	268,520		252,095		16,425		6.5	%
Real estate taxes	47,592		45,293		2,299		5.1	%	49,490		45,596		3,894		8.5	%
Rental home operating and maintenance	4,294		4,077		217		5.3	%	4,306		4,099		207		5.1	%
Sales and marketing, gross	13,307		11,683		1,624		13.9	%	13,308		11,686		1,622		13.9	%
Property operating expenses, excluding deferrals and property management	326,047		310,443		15,604		5.0	%	335,624		313,476		22,148		7.1	%
Income from property operations, excluding deferrals and property management ⁽⁴⁾⁽⁵⁾	443,926		432,113		11,813		2.7	%	453,920		434,385		19,535		4.5	%
Property management	44,344		42,675		1,669		3.9	%	44,344		42,675		1,669		3.9	%
Income from property operations, excluding deferrals⁽⁵⁾	399,582		389,438		10,144		2.6	%	409,576		391,710		17,866		4.6	%
Membership upgrade sales upfront payments and membership sales commission, deferred, net	8,052		7,320		732		10.0	%	8,052		7,320		732		10.0	%
Income from property operations ⁽⁵⁾	$	391,530	$	382,118	$	9,412	2.5	%	$	401,524	$	384,390	$	17,134	4.5	%

__________________________

⁽³⁾Includes bad debt expense for all periods presented.

⁽⁴⁾Includes $1.0 million related to expenses incurred related to the development and implementation of CDC and public health guidelines for social distancing and enhanced cleaning, property employee appreciation bonuses and emergency time-off pay for the nine months ended September 30, 2020, respectively. These COVID-19 expenses are considered incremental to our normal operations and are nonrecurring. As such, they were excluded from the calculation of Normalized FFO.

⁽⁵⁾See Non-GAAP Financial Measures section of the Management Discussion and Analysis for definitions and reconciliation of these Non-GAAP measures to Net Income available for Common Shareholders.

Total Portfolio income from property operations for 2020 increased $17.1 million, or 4.5%, from 2019, driven by an increase of $9.4 million, or 2.5%, from our Core Portfolio and an increase of $7.7 million from our Non-Core Portfolio. The increase in income from property operations from our Core Portfolio was primarily due to an increase in MH base rental income, partially offset by an increase in property operating expenses. The increase in income from property operations from our None-Core Portfolio was attributed to income from properties acquired throughout 2019, most notably the marinas in Florida.

Property Operating Revenues

MH base rental income in our Core Portfolio for 2020 increased $18.8 million, or 4.6%, from 2019, which reflects 4.1% growth from rate increases and 0.5% growth from occupancy gains. The average monthly base rental income per Site increased to approximately $692 in 2020 from approximately $665 in 2019. The average occupancy for the Core Portfolio increased to 95.2% in 2020 from 95.1% in 2019.

Management's Discussion and Analysis (continued)

RV base rental income in our Core Portfolio for 2020 increased $1.7 million, or 0.9%, from 2019 due to increased annual and seasonal revenue, mainly driven by higher rental rates. These increases were partially offset by lower transient rental income, primarily resulting from cancellations, declines in reservations and temporary site closures during the second quarter of 2020 as a result of COVID-19. 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)	2020		2019		Variance		% Change		2020		2019		Variance		% Change
Annual	$	126,715	$	119,793	$	6,922	5.8	%	$	142,641	$	122,455	$	20,186	16.5	%
Seasonal	32,827		32,086		741		2.3	%	32,946		32,222		724		2.2	%
Transient	42,739		48,653		(5,914)		(12.2)	%	44,559		50,153		(5,594)		(11.2)	%
RV and marina base rental income⁽¹⁾	$	202,281	$	200,532	$	1,749	0.9	%	$	220,146	$	204,830	$	15,316	7.5	%

_____________________

Utility and other income in our Core Portfolio for 2020 increased $2.3 million, or 3.3%, from 2019. The increase was due to higher pass-through income of $2.3 million and higher utility income of $1.9 million, partially offset by a decrease in other property income of $1.9 million. The increase in pass-through income was primarily driven by increases in real estate taxes in Florida. The increase in utility income was mainly resulting from higher electric and sewer income. The decrease in other property income was primarily due to the suspension of late fees and RV cancellation fees during the second quarter of 2020 as a result of COVID-19, partially offset by an increase in insurance recovery revenue. During the third quarter of 2020, we recognized insurance recovery revenue of $2.3 million related to Hurricanes Hanna and Isaias.

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for 2020 increased $15.6 million, or 5.0%, from 2019, primarily due to an increase in property operating and maintenance expenses of $11.5 million and an increase in real estate taxes of $2.3 million. The increase in property operating and maintenance expenses was primarily due to an increase in utility expenses, including labor costs associated with sewer, water and electric distribution system, of approximately $3.6 million, an increase in insurance expense of $2.5 million and an increase in bad debt expense of $1.8 million, partially offset by a decrease in administrative expense of $1.6 million. Property operating and maintenance expenses in our Core Portfolio for 2020 also includes debris removal and cleanup costs of approximately $2.8 million related to Hurricane Hanna and Hurricane Isaias and $1.0 million in incremental and nonrecurring expenses related to the development of CDC and public health guidelines for social distancing and enhanced cleaning, property employee appreciation bonuses and emergency time-off pay. The increase in real estate taxes was primarily due to real estate tax increases in Florida.

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.


	Nine Months Ended September 30,
(amounts in thousands, except home sales volumes)	2020		2019		Variance		% Change
Gross revenues from new home sales ⁽¹⁾	$	28,863	$	17,492	$	11,371	65.0	%
Cost of new home sales ⁽¹⁾	28,067		16,877		11,190		66.3	%
Gross profit from new home sales	796		615		181		29.4	%

Gross revenues from used home sales	4,382		5,246		(864)		(16.5)	%
Cost of used home sales	5,560		6,353		(793)		(12.5)	%
Loss from used home sales	(1,178)		(1,107)		(71)		(6.4)	%

Brokered resale and ancillary services revenues, net	2,011		4,564		(2,553)		(55.9)	%
Home selling expenses	3,535		3,218		317		9.9	%

Income (loss) from home sales and other	$	(1,906)	$	854	$	(2,760)	(323.2)	%

Home sales volumes
Total new home sales ⁽²⁾	471		336		135		40.2	%
New Home Sales Volume - ECHO JV	38		50		(12)		(24.0)	%
Used home sales	450		627		(177)		(28.2)	%
Brokered home resales	454		675		(221)		(32.7)	%

_________________________

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

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

The loss from home sales and other was $1.9 million for 2020 compared to income of $0.9 million for 2019. The increase in the loss from home sales and other was driven by lower brokered resale and ancillary services revenues, net primarily due to closures or limitations of capacity at restaurants and amenities across the portfolio as a result of COVID-19.

Management's Discussion and Analysis (continued)

Rental Operations

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


	Nine Months Ended September 30,
(amounts in thousands, except rental unit volumes)	2020		2019		Variance		% Change
Manufactured homes:
Rental operations revenue ⁽¹⁾	$	35,679	$	34,312	$	1,367	4.0	%
Rental home operating and maintenance expense	4,294		4,077		217		5.3	%
Income from rental operations	31,385		30,235		1,150		3.8	%
Depreciation on rental homes ⁽²⁾	8,228		7,770		458		5.9	%
Income from rental operations, net of depreciation	$	23,157	$	22,465	$	692	3.1	%

Gross investment in new manufactured home rental units ⁽³⁾	$	231,192	$	220,669	$	10,523	4.8	%
Gross investment in used manufactured home rental units	$	16,299	$	23,454	$	(7,155)	(30.5)	%

Net investment in new manufactured home rental units	$	192,247	$	195,626	$	(3,379)	(1.7)	%
Net investment in used manufactured home rental units	$	6,798	$	10,418	$	(3,620)	(34.7)	%

Number of occupied rentals – new, end of period ⁽⁴⁾	3,314		3,079		235		7.6	%
Number of occupied rentals – used, end of period	588		914		(326)		(35.7)	%

______________________

⁽¹⁾Rental operations revenue consists of Site rental income and home rental income in our Core Portfolio. Approximately $23.5 million and $23.4 million of Site rental income for the nine months ended September 30, 2020 and 2019, respectively, are included in community base rental income within the Core Portfolio Income from Property Operations table. The remainder of home rental income is included in rental home income within the Core Portfolio Income from Property Operations table.

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

⁽³⁾Includes both occupied and unoccupied rental homes in our Core Portfolio. New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was $17.2 million and $16.7 million as of September 30, 2020 and 2019, respectively.

⁽⁴⁾Occupied rentals as of the end of the period in our Core Portfolio and includes 286 and 294 homes rented through our ECHO JV as of September 30, 2020 and 2019, respectively.

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)	2020		2019		Variance		% Change
Depreciation and amortization	$	(115,937)	$	(112,785)	$	(3,152)	(2.8)	%
Interest income	5,399		5,385		14		0.3	%
Income from other investments, net	3,093		8,894		(5,801)		(65.2)	%
General and administrative	(31,156)		(27,844)		(3,312)		(11.9)	%
Other expenses	(1,885)		(2,427)		542		22.3	%
Early debt retirement	(10,786)		(1,491)		(9,295)		(623.4)	%
Interest and related amortization	(77,540)		(77,964)		424		0.5	%
Total other income and expenses, net	$	(228,812)	$	(208,232)	$	(20,580)	(9.9)	%

Total other income and expenses, net increased $20.6 million in 2020 compared to 2019, primarily due to increases in early debt retirement costs, general and administrative expenses and depreciation and amortization, as well as a decrease in income from other investments, net. The higher early debt retirement costs in 2020 was a result of the repayment of our secured term loans that was scheduled to mature in 2021 and the termination of our swap agreement. The increase in general and administrative expenses was primarily due to higher payroll and professional fees. The decrease in income from other investments, net was primarily due to reimbursement of capital expenditures related to Hurricane Irma received in 2019.

Gain on Sale of Real Estate, Net

On January 23, 2019, we closed on the sale of five all-age MH communities located in Indiana and Michigan, collectively containing 1,463 sites, for $89.7 million. We recognized a gain on sale of these Properties of $52.5 million during the first quarter of 2019.

Management's Discussion and Analysis (continued)

Equity in income of unconsolidated joint ventures

Equity in income of unconsolidated joint ventures decreased $6.0 million in 2020 compared to 2019, primarily due to a decrease in income recognized from distributions from our unconsolidated joint ventures as we acquired the remaining interest in the Loggerhead joint venture in the third quarter of 2019 and a distribution received from our Voyager joint venture during the second quarter of 2019 that was in excess of our investment basis.

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 ("LOC") and proceeds from issuance of equity and debt securities.

The impact the COVID-19 pandemic will continue to have on our financial condition and cashflows is uncertain and is dependent upon various factors including the manner in which operations will continue at our Properties, customer payment patterns and operational decisions we have made and may make in the future in response to guidance from public authorities and/or for the health and safety of our employees, residents and guests. We believe, based on information currently available and our cash collection experience, that our current cash reserves provide us sufficient cash to meet our needs for the next twelve months, including our expected dividend payments. Each quarter our Board of Directors considers several factors as it deliberates and decides whether to declare a quarterly dividend. The process includes revisiting our annual budget and considering factors including our planned operating performance and related cash flow, our debt service obligations, capital investments to maintain and expand the business, working capital requirements including home purchases and potential investments to generate external growth.

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.

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

During the quarter ended September 30, 2020, we entered into a Secured Facility with Fannie Mae for $386.9 million. The net proceeds from this transaction were primarily used to repay our $200.0 million unsecured term loan, including termination of the associated interest rate swap, and $166.8 million of secured loans. For information regarding our debt activities and related borrowing arrangements, see Item 1. Financial Statements—Note 8. Borrowing Arrangements. For information regarding our interest rate swap, see Item 1. Financial Statements—Note 9. Derivative Instruments and Hedging.

Total secured debt encumbered a total of 114 and 116 of our Properties as of September 30, 2020 and December 31, 2019, respectively, and the gross carrying value of such Properties was approximately $2,551.9 million and $2,524.7 million, as of September 30, 2020 and December 31, 2019, respectively.

On April 28, 2020, our stockholders approved an amendment to our charter that increased the number of shares of common stock we are authorized to issue from 400,000,000 to 600,000,000 shares. As of September 30, 2020, we have available liquidity in the form of approximately 417.8 million shares of authorized and unissued common stock, par value $0.01 per share, and 10.0 million shares of authorized and unissued preferred stock registered for sale under the Securities Act of 1933, as amended.

On July 30, 2020, we entered into our current at-the-market (“ATM”) equity offering program, which allows us to sell, from time-to-time, shares of our common stock, having an aggregate offering price of up to $200.0 million. As of September 30, 2020, we have $200.0 million of common stock available for issuance under our ATM equity program.

Management's Discussion and Analysis (continued)

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, 2020, our LOC had a borrowing capacity of $350.0 million with the option to increase the borrowing capacity by $200.0 million, subject to certain conditions. The LOC bears interest at a rate of LIBOR plus 1.10% to 1.55%, carries an annual facility fee of 0.15% to 0.35% and matures on October 27, 2021. We also utilize interest rate swaps, as needed, to add stability to our interest expense and to manage our exposure to interest rate movements.

Our LOC arrangement will mature prior to the expected discontinuation of LIBOR subsequent to 2021. We continue to monitor the development and adoption of an alternative index to LIBOR to manage the transition and as it pertains to new arrangements to be entered in the future. Given the majority of our current debt is secured and not subject to LIBOR, we do not believe the discontinuation of LIBOR will have a significant impact on our consolidated financial statements.

The following table summarizes our cash flows activity:


	Nine Months Ended September 30,
(amounts in thousands)	2020		2019
Net cash provided by operating activities	$	360,868	$	349,348
Net cash used in investing activities	(161,529)		(276,898)
Net cash used in financing activities	(113,981)		(99,038)
Net increase (decrease) in cash and restricted cash	$	85,358	$	(26,588)

Operating Activities

Net cash provided by operating activities increased $11.5 million to $360.9 million for the nine months ended September 30, 2020 from $349.3 million for the nine months ended September 30, 2019. The increase in net cash provided by operating activities was primarily due to higher income from property operations of $17.1 million, partially offset by a decrease in rents and other customer payments received in advance and security deposits of $4.5 million.

Investing Activities

Net cash used in investing activities decreased $115.4 million to $161.5 million for the nine months ended September 30, 2020 from $276.9 million for the nine months ended September 30, 2019. The decrease was due to reduced spending on acquisitions of $167.4 million and reduced capital improvement spending of $34.7 million partially offset by proceeds of $77.7 million received in 2019 from the sale of real estate and a decrease in insurance proceeds of $6.6 million in 2020 compared to 2019.

Capital Improvements

The following table summarizes capital improvements:


	Nine Months Ended September 30,
(amounts in thousands)	2020		2019
Recurring capital expenditures ⁽¹⁾	$	42,277	$	37,271
Property upgrades and development ⁽²⁾	64,651		40,429
New home investments^{(3) (4)}	42,934		108,845
Used home investments ⁽⁴⁾	1,583		2,036
Total property improvements	151,445		188,581
Corporate	3,616		1,207
Total capital improvements	$	155,061	$	189,788

______________________

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

⁽²⁾Includes restoration and improvement capital expenditures of $2.5 million related to Hurricane Irma for the nine months ended September 30, 2019.

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

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

Financing Activities

Net cash used in financing activities increased $14.9 million to $114.0 million for the nine months ended September 30, 2020 from $99.0 million for the nine months ended September 30, 2019. The increase in net cash used in financing activities was primarily due to an increase in net repayments on the line of credit of $230.0 million, increased dividend distributions of $20.7 million, increased debt issuance and defeasance costs of $15.5 million and proceeds received in 2019 from the sale of

Management's Discussion and Analysis (continued)

common stock under our ATM equity program of $59.3 million, partially offset by an increase in net financing proceeds of $314.4 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 the Contractual Obligations section of the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Form 10-K.

Westwinds

The master lessor of these ground leases, The Nicholson Family Partnership (together with its predecessor in interest, the “Nicholsons”), has expressed a desire to redevelop Westwinds, and in a written communication, they claimed that we were obligated to deliver the property free and clear of any and all subtenancies upon the expiration of the ground leases on August 31, 2022. In connection with any redevelopment, the City of San Jose’s conversion ordinance requires, among other things, that the landowner provide relocation, rental and purchase assistance to the impacted residents. We believe the Nicholsons are unlawfully attempting to impose those obligations upon the Operating Partnership.

Westwinds opened in the 1970s and was developed by the original ground lessee with assistance from the Nicholsons. In 1997, the Operating Partnership acquired the leasehold interest in the ground leases. In addition to rent based on the operations of Westwinds, the Nicholsons receive a percentage of gross revenues from the sale of new or used mobile homes in Westwinds.

The Operating Partnership has entered into subtenancy agreements with the mobilehome residents of Westwinds. Because the ground leases with the Nicholsons have an expiration date of August 31, 2022, and no further right of extension, the Operating Partnership has not entered into any subtenancy agreements that extend beyond August 31, 2022. However, the mobilehome residents’ occupancy rights continue by operation of California state and San Jose municipal law beyond the expiration date of the ground leases. Notwithstanding this, the Nicholsons’ have made what we believe to be an unlawful demand that the Operating Partnership deliver the property free and clear of any subtenancies upon the expiration of the ground leases by August 31, 2022. We believe the Nicholsons’ demand (i) violates California state and San Jose municipal law because the Nicholsons are demanding that the Operating Partnership remove all residents without just cause and (ii) conflicts with the terms and conditions of the ground leases, which contain no express or implied requirement that the Operating Partnership deliver the property free and clear of all subtenancies at the mobile home park and require, instead, that the Operating Partnership continuously operate the mobilehome park during the lease term.

On December 30, 2019, the Operating Partnership, together with certain interested parties, filed a complaint in California Superior Court for Santa Clara County, seeking declaratory relief pursuant to which it requested that the Court determine, among other things, that the Operating Partnership has no obligation to deliver the property free and clear of the mobilehome residents upon the expiration of the ground leases. The Operating Partnership and the interested parties filed an amended complaint on January 29, 2020.

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

On February 3, 2020, the Nicholsons filed a motion in California Superior Court to compel arbitration and to stay the Superior Court litigation, which motion was heard on June 25, 2020. On July 29, 2020, the Superior Court issued a final order denying the Nicholson’s motion to compel arbitration. The Nicholsons filed a notice of appeal on August 7, 2020. The Nicholson’s claim that the Operating Partnership is required to indemnify the Nicholsons for legal fees with respect to the claims brought by third parties in the Superior Court litigation is proceeding in the arbitration.

Management's Discussion and Analysis (continued)

Following the filing of our lawsuit, the City of San Jose took steps to accelerate the passage of a general plan amendment previously under review by the City to change the designation for Westwinds from its current general plan designation of Urban Residential (which would allow for higher density redevelopment), to a newly created designation of Mobile Home Park. The Nicholsons expressed opposition to this change in designation. However, on March 10, 2020, following significant pressure from residents and advocacy groups, the City Council approved this new designation for all 58 mobilehome communities in with City of San Jose, including Westwinds. In addition to requirements imposed by California state and San Jose municipal law, the change in designation requires, among other things, a further amendment to the general plan to a different land use designation by the City Council prior to any change in use.

Off-Balance Sheet Arrangements

As of September 30, 2020, we have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Refer to the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Form 10-K for a discussion of our critical accounting policies. There have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2020.

Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 counter-party risk;

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

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

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

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

•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;

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

•the effect of interest rates;

•the effect from any breach of our, or any of our vendor's, data management systems;

•the dilutive effects of issuing additional securities;

•the outcome of pending or future lawsuits or actions brought 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.

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

Management's Discussion and Analysis (continued)

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.

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 2019 Form 10-K. There have been no material changes in the assumptions used or results obtained regarding market risk since December 31, 2019.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to us that would potentially be subject to disclosure under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder as of September 30, 2020. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2020, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information

Item 1.Legal Proceedings

See Item 1. Financial Statements—Note 11. Commitments and Contingencies accompanying the Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Item 1A.Risk Factors

A description of the risk factors associated with our business are discussed in “Item 1A. Risk Factors” in our 2019 Form 10-K. In light of the COVID-19 pandemic, the Company has supplemented the risk factors disclosed in "Item 1A. Risk Factors" in our 2019 Form 10-K with the additional risk factor described below.

The current pandemic of the novel coronavirus, or COVID-19, has adversely impacted us, and COVID-19, or the future outbreak of other highly infectious or contagious diseases, could materially and adversely impact or disrupt our business, including our financial condition, results of operations and cash flows.

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. COVID-19 has since spread globally, including throughout the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.

COVID-19 has had, and another pandemic could have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions. The outbreak of COVID-19 in many countries continues to adversely impact regional, national and global economic activity and has contributed to significant volatility and negative pressure in financial markets.

Many U.S. cities and states, including cities and states where our offices and properties are located, have implemented measures to combat COVID-19, including quarantines, “shelter in place” rules, social distancing requirements, and restrictions on travel and the types of business that may continue to operate. We have taken actions in response to or in furtherance of these measures, including, but not limited to, temporarily halting RV reservations by incoming transient customers, delaying opening certain of our northern RV communities, closing all indoor amenity areas, pools and playgrounds, introducing a rent deferral program and waiving certain late fees and cancellation fees, which actions we may continue to implement. See "Management Discussion and Analysis of Financial Condition and Results of Operations-COVID-19 Pandemic Update."

The effects of COVID-19 have had, and could continue to have, or another pandemic, could have an adverse effect on our financial condition, results of operations and cash flows, which impact could be material, due to, among other factors:

•Weaknesses in national, regional or local economies may prevent our residents and customers from paying rent in full or on a timely basis. Federal, state, local, and industry-initiated efforts, including eviction moratoriums, and certain actions we have taken, such as the introduction of a rent deferral program, may affect our ability to collect rent, including on a deferred basis, or enforce remedies for the failure to pay rent, which could lead to an increase in our recognition of credit losses related to our rent receivables. In addition, a reduction in the ability or willingness of prospective customers to visit our properties could impact our ability to lease Sites and sell manufactured homes and may result in lower rental revenue and ancillary operating revenue produced by our Properties.

•The seasonal and transient customers that vacation and camp at our Properties, including our RV communities, may be less likely to visit if they have less disposable income for leisure-time activities or are unable to visit if subject to shelter-in-place or stay-at-home orders, which has caused, and could continue to cause, cancellation of existing reservations and reduced transient RV revenue.

•A general decline in business activity and discretionary spending could result in few customers purchasing membership subscriptions, or existing customers purchasing fewer membership upgrades or failing to pay annual subscription fees or installments on financed upgrade sales.

•A reduction in the demand for our Properties due to a general decline in business activity and discretionary spending could adversely affect the value of our Properties. This could lead to an impairment of our real estate investments. In addition, we may be unable to complete planned development of land for expansion or other capital improvement projects on a timely basis or at all due to government-mandated shutdowns or an inability by our third-party contractors to continue to work on construction projects.

•A general decline in business activity or demand for real estate transactions could adversely affect our ability or desire to acquire additional properties, including through our joint ventures.

•The financial impact of COVID-19 could negatively impact our ability to comply with financial covenants in our credit arrangements and result in a default and potentially an acceleration of indebtedness, which non-compliance could negatively impact our ability to make additional borrowings under our credit facilities.

•A severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our ability to access capital necessary to fund business operations, including the acquisition or expansion of properties, or replace or renew maturing liabilities on a timely basis, on attractive terms, or at all and may adversely affect the valuation of financial assets and liabilities.

•The outbreak of COVID-19 could negatively affect the health, availability and productivity of our current personnel. It could also affect our ability to recruit and attract new employees and retain current employees whose hours have been reduced. An outbreak that directly affects, or threatens to directly affect, any of our properties could also deter or prevent our on-site personnel from reporting to work. In response to shelter-in-place orders, the employees in our corporate and regional offices are currently working remotely. The effects of these shelter-in-place orders, including remote work arrangements for an extended period of time, could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. Further, we have and may continue to implement mitigation and other measures to support and protect our employees, which could result in increased labor costs.

We have also described risks related to changes to federal and state laws and regulations, economic downturn in markets with a large concentration of our properties, and our ability to obtain mortgage financing or refinance maturing mortgages and the effects of these risks on our financial condition, results of operations, cash flows, ability to make distributions, operations and market price of our stock in our 2019 Form 10-K, each of which could be exacerbated by the effects of COVID-19.

The rapid development and fluidity of the circumstances resulting from COVID-19 precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations and cash flows, which could adversely affect our ability to make distributions.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

None.

Item 5.Other Information

None.

Item 6.Exhibits


31.1			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
32.2			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
104			Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


	EQUITY LIFESTYLE PROPERTIES, INC.

Date: October 27, 2020	By:	/s/ Marguerite Nader
		Marguerite Nader
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: October 27, 2020	By:	/s/ Paul Seavey
		Paul Seavey
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: October 27, 2020	By:	/s/ Valerie Henry
		Valerie Henry
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)