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EQUITY LIFESTYLE PROPERTIES INC - Quarter Report: 2022 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, 2022
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)
_________________________________________________________
Maryland36-3857664
(State or other jurisdiction of incorporation)(IRS Employer Identification Number)
Two North Riverside Plaza, Suite 800Chicago,Illinois60606
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueELSNew 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: 186,111,005 shares of Common Stock as of October 18, 2022.




Equity LifeStyle Properties, Inc.
Table of Contents
 
  Page
Item 1.Financial Statements (unaudited)
Index To Financial Statements
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2



Part I – Financial Information

Item 1. Financial Statements

Equity LifeStyle Properties, Inc.
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
September 30, 2022December 31, 2021
(unaudited)
Assets
Investment in real estate:
Land$2,080,234 $2,019,787 
Land improvements4,050,685 3,912,062 
Buildings and other depreciable property1,137,297 1,057,215 
7,268,216 6,989,064 
Accumulated depreciation(2,211,405)(2,103,774)
Net investment in real estate5,056,811 4,885,290 
Cash and restricted cash30,510 123,398 
Notes receivable, net44,653 39,955 
Investment in unconsolidated joint ventures88,352 70,312 
Deferred commission expense50,029 47,349 
Other assets, net135,091 141,567 
Total Assets$5,405,446 $5,307,871 
Liabilities and Equity
Liabilities:
Mortgage notes payable, net$2,708,751 $2,627,783 
Term loan, net496,595 297,436 
Unsecured line of credit94,984 349,000 
Accounts payable and other liabilities184,771 172,285 
Deferred membership revenue195,290 176,439 
Accrued interest payable10,317 9,293 
Rents and other customer payments received in advance and security deposits115,035 118,696 
Distributions payable80,314 70,768 
Total Liabilities3,886,057 3,821,700 
Equity:
Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; none issued and outstanding.
— — 
Common stock, $0.01 par value, 600,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 186,108,851 and 185,640,379 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.
1,916 1,913 
Paid-in capital1,625,751 1,593,362 
Distributions in excess of accumulated earnings(200,969)(183,689)
Accumulated other comprehensive income20,476 3,524 
Total Stockholders’ Equity1,447,174 1,415,110 
Non-controlling interests – Common OP Units72,215 71,061 
Total Equity1,519,389 1,486,171 
Total Liabilities and Equity$5,405,446 $5,307,871 









The accompanying notes are an integral part of the consolidated financial statements.
3


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,
2022202120222021
Revenues:
Rental income$289,016 $269,573 $849,411 $774,293 
Annual membership subscriptions16,254 15,127 47,003 43,048 
Membership upgrade sales current period, gross11,085 10,122 27,771 29,343 
Membership upgrade sales upfront payments, deferred, net(7,777)(7,253)(18,228)(21,134)
Other income15,580 12,053 43,316 36,759 
Gross revenues from home sales, brokered resales and ancillary services52,547 44,570 144,937 110,048 
Interest income1,865 1,805 5,346 5,314 
Income from other investments, net2,399 1,238 6,920 3,396 
Total revenues380,969 347,235 1,106,476 981,067 
Expenses:
Property operating and maintenance123,181 109,164 341,480 300,700 
Real estate taxes17,734 18,408 56,373 54,154 
Sales and marketing, gross7,143 6,513 18,466 18,987 
Membership sales commissions, deferred, net(1,206)(1,468)(2,746)(4,405)
Property management19,003 17,015 55,973 48,955 
Depreciation and amortization52,547 44,414 152,737 138,127 
Cost of home sales, brokered resales and ancillary services40,224 34,830 111,894 85,541 
Home selling expenses and ancillary operating expenses7,080 6,558 21,146 17,588 
General and administrative11,086 10,401 35,078 31,141 
Other expenses1,627 797 6,636 2,295 
Early debt retirement— — 1,156 2,784 
Interest and related amortization29,759 27,361 85,276 80,767 
Total expenses308,178 273,993 883,469 776,634 
Loss on sale of real estate and impairment, net (3,747)— (3,747)(59)
Income before equity in income of unconsolidated joint ventures69,044 73,242 219,260 204,374 
Equity in income of unconsolidated joint ventures1,465 851 2,889 2,786 
Consolidated net income70,509 74,093 222,149 207,160 
Income allocated to non-controlling interests – Common OP Units(3,346)(3,468)(10,563)(10,236)
Redeemable perpetual preferred stock dividends— — (8)(8)
Net income available for Common Stockholders$67,163 $70,625 $211,578 $196,916 
Consolidated net income$70,509 $74,093 $222,149 $207,160 
Other comprehensive income (loss):
Adjustment for fair market value of swap4,235 86 16,952 325 
Consolidated comprehensive income74,744 74,179 239,101 207,485 
Comprehensive income allocated to non-controlling interests – Common OP Units(3,547)(3,472)(11,370)(10,253)
Redeemable perpetual preferred stock dividends— — (8)(8)
Comprehensive income attributable to Common Stockholders$71,197 $70,707 $227,723 $197,224 
Earnings per Common Share – Basic$0.36 $0.38 $1.14 $1.08 
Earnings per Common Share – Fully Diluted$0.36 $0.38 $1.14 $1.08 
Weighted average Common Shares outstanding – Basic185,814 183,469 185,758 182,590 
Weighted average Common Shares outstanding – Fully Diluted195,269 192,736 195,248 192,689 
The accompanying notes are an integral part of the consolidated financial statements.
4


Equity LifeStyle Properties, Inc.
Consolidated Statements of Changes in Equity
(amounts in thousands)
(unaudited)
Common StockPaid-in CapitalRedeemable Perpetual Preferred StockDistributions in Excess of Accumulated EarningsAccumulated Other Comprehensive Income (Loss)Non-controlling Interests – Common OP UnitsTotal Equity
Balance as of December 31, 2021$1,913 $1,593,362 $ $(183,689)$3,524 $71,061 $1,486,171 
Exchange of Common OP Units for Common Stock— 67 — — — (67)— 
Issuance of Common Stock through employee stock purchase plan— 513 — — — — 513 
Issuance of Common Stock28,367 — — — 28,370 
Compensation expenses related to restricted stock and stock options— 2,590 — — — — 2,590 
Repurchase of Common Stock or Common OP Units— (3,449)— — — — (3,449)
Adjustment for Common OP Unitholders in the Operating Partnership— (1,641)— — — 1,641 — 
Adjustment for fair market value of swap— — — — 9,924 — 9,924 
Consolidated net income— — — 82,906 — 4,144 87,050 
Distributions— — — (76,375)— (3,812)(80,187)
Other— (645)— — — — (645)
Balance as of March 31, 20221,916 1,619,164  (177,158)13,448 72,967 1,530,337 
Issuance of Common Stock through employee stock purchase plan— 1,388 — — — — 1,388 
Compensation expenses related to restricted stock and stock options— 2,681 — — — — 2,681 
Adjustment for Common OP Unitholders in the Operating Partnership— (303)— — — 303 — 
Adjustment for fair market value of swap— — — — 2,793 — 2,793 
Consolidated net income— — 61,509 — 3,073 64,590 
Distributions— — (8)(76,179)— (3,812)(79,999)
Other— (54)— — — — (54)
Balance as of June 30, 20221,916 1,622,876  (191,828)16,241 72,531 1,521,736 
Exchange of Common OP Units for Common Stock— 203 — — — (203)— 
Issuance of Common Stock through employee stock purchase plan— 458 — — — — 458 
Compensation expenses related to restricted stock and stock options— 2,654 — — — — 2,654 
Adjustment for Common OP Unitholders in the Operating Partnership— (342)— — — 342 — 
Adjustment for fair market value of swap— — — — 4,235 — 4,235 
Consolidated net income— — — 67,164 — 3,346 70,510 
Distributions— — — (76,305)— (3,801)(80,106)
Other— (98)— — — — (98)
Balance as of September 30, 2022$1,916 $1,625,751 $ $(200,969)$20,476 $72,215 $1,519,389 














5


Equity LifeStyle Properties, Inc.
Consolidated Statements of Changes in Equity
(amounts in thousands)
(unaudited)
Common StockPaid-in CapitalRedeemable Perpetual Preferred StockDistributions in Excess of Accumulated EarningsAccumulated Other Comprehensive Income (Loss)Non-controlling interests – Common OP UnitsTotal Equity
Balance as of December 31, 2020$1,813 $1,411,397 $— $(179,523)$ $71,068 $1,304,755 
Exchange of Common OP Units for Common Stock— 58 — — — (58)— 
Issuance of Common Stock through employee stock purchase plan— 732 — — — — 732 
Compensation expenses related to restricted stock and stock options— 2,556 — — — — 2,556 
Repurchase of Common Stock or Common OP Units— (2,814)— — — — (2,814)
Adjustment for fair market value of swap— — — — 129 — 129 
Consolidated net income— — — 65,240 — 3,747 68,987 
Distributions— — — (66,087)— (3,796)(69,883)
Other— (116)— — — — (116)
Balance as of March 31, 20211,813 1,411,813 — (180,370)129 70,961 1,304,346 
Exchange of Common OP Units for Common Stock14 9,310 — — — (9,324)— 
Issuance of Common Stock through employee stock purchase plan— 605 — — — — 605 
Compensation expenses related to restricted stock and stock options— 2,821 — — — — 2,821 
Adjustment for Common OP Unitholders in the Operating Partnership— (143)— — — 143 — 
Adjustment for fair market value of swap— — — — 110 — 110 
Consolidated net income— — 61,051 — 3,021 64,080 
Distributions— — (8)(66,611)— (3,296)(69,915)
Other— (56)— — — — (56)
Balance as of June 30, 20211,827 1,424,350 — (185,930)239 61,505 1,301,991 
Exchange of Common OP Units for Common Stock438 — — — (439)— 
Issuance of Common Stock through employee stock purchase plan— 379 — — — — 379 
Compensation expenses related to restricted stock and stock options— 2,774 — — — — 2,774 
Adjustment for Common OP Unitholders in the Operating Partnership— (142)— — — 142 — 
Adjustment for fair market value of swap— — — — 86 — 86 
Consolidated net income— — — 70,625 — 3,468 74,093 
Distributions— — — (66,636)— (3,272)(69,908)
Other— (193)— — — — (193)
Balance as of September 30, 2021$1,828 $1,427,606 $ $(181,941)$325 $61,404 $1,309,222 
.










The accompanying notes are an integral part of the consolidated financial statements.
6


Equity LifeStyle Properties, Inc.
Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Cash Flows From Operating Activities:
Consolidated net income$222,149 $207,160 
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Loss on sale of real estate and impairment, net3,747 59 
Early debt retirement1,156 2,784 
Depreciation and amortization156,074 140,336 
Amortization of loan costs3,631 3,505 
Debt premium amortization(145)(243)
Equity in income of unconsolidated joint ventures(2,889)(2,786)
Distributions of income from unconsolidated joint ventures340 52 
Proceeds from insurance claims, net(457)589 
Compensation expense related to incentive plans5,367 9,434 
Revenue recognized from membership upgrade sales upfront payments(9,544)(8,208)
Commission expense recognized related to membership sales3,089 2,843 
Changes in assets and liabilities:
Notes receivable, net(3,954)(4,129)
Deferred commission expense(5,769)(7,119)
Other assets, net75,428 24,616 
Accounts payable and other liabilities15,475 47,520 
Deferred membership revenue28,080 30,738 
Rents and other customer payments received in advance and security deposits(3,957)6,456 
Net cash provided by operating activities487,821 453,607 
Cash Flows From Investing Activities:
Real estate acquisitions, net(119,255)(477,785)
Proceeds from disposition of properties, net— (7)
Investment in unconsolidated joint ventures(16,022)(493)
Distributions of capital from unconsolidated joint ventures3,602 2,320 
Proceeds from insurance claims1,405 2,048 
Capital improvements(268,614)(204,037)
Net cash used in investing activities(398,884)(677,954)
























The accompanying notes are an integral part of the consolidated financial statements.
7



Equity LifeStyle Properties, Inc.
Consolidated Statements of Cash Flows (continued)
(amounts in thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan2,359 1,717 
Gross proceeds from the issuance of common stock28,370 — 
Distributions:
Common Stockholders(219,854)(195,112)
Common OP Unitholders(10,997)(10,681)
Preferred Stockholders(8)(8)
Share based award tax withholding payments(3,449)(2,814)
Principal payments and mortgage debt repayment(119,608)(108,968)
Mortgage notes payable financing proceeds200,000 270,016 
Term loan repayment— (300,000)
Term loan proceeds200,000 600,000 
Line of Credit repayment(495,016)(379,500)
Line of Credit proceeds241,000 377,500 
Debt issuance and defeasance costs(3,826)(11,225)
Other(796)(366)
Net cash (used in) provided by financing activities(181,825)240,559 
Net (decrease) increase in cash and restricted cash(92,888)16,212 
Cash and restricted cash, beginning of year123,398 24,060 
Cash and restricted cash, end of period$30,510 $40,272 

Nine Months Ended September 30,
20222021
Supplemental Information:
Cash paid for interest, net$82,368 $77,377 
Net investment in real estate – reclassification of rental homes$75,726 $55,355 
Other assets, net – reclassification of rental homes$(75,726)$(55,355)
Real estate acquisitions:
Investment in real estate$(119,796)$(494,342)
Notes receivable, net(772)— 
Other assets, net— (2,815)
Deferred revenue - sale of right-to-use contracts315 — 
Accrued expenses and accounts payable— 8,432 
Other liabilities702 — 
Rents and other customer payments received in advance and security deposits296 10,940 
Real estate acquisitions, net$(119,255)$(477,785)
Real estate dispositions:
Investment in real estate$— $52 
Loss on sale of real estate, net— (59)
Real estate dispositions, net$— $(7)












The accompanying notes are an integral part of the consolidated financial statements.
8


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 of lifestyle-oriented properties (“Properties”) consisting of property operations and home sales and rental operations primarily within manufactured home (“MH”) and recreational vehicle (“RV”) communities and marinas. We have a unique business model where we own the land which we lease to customers who own manufactured homes and cottages, RVs and/or boats 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 95.3% interest as of September 30, 2022. 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, 2021.
Intercompany balances and transactions have been eliminated. All adjustments to the unaudited 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. Certain prior period amounts have been reclassified on our unaudited interim consolidated financial statements to conform with current year presentation.

Note 2 – Summary of Significant Accounting Policies
(a)    Revenue Recognition
Our revenue streams are predominantly derived from customers renting our Sites or entering into membership subscriptions. Leases with customers renting our Sites are accounted for as operating leases. The rental income associated with these leases is accounted for in accordance with the Accounting Standards Codification (“ASC”) 842, Leases, and is recognized over the term of the respective 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. RV and marina Sites are leased to those who generally have an RV, factory-built cottage, boat or other unit placed on the site, including those customers renting marina dry storage slips. Annual Sites are leased on an annual basis, including those Northern Properties that are open for the summer season. Seasonal Sites are leased to customers generally for one to six months. Transient Sites are leased to customers on a short-term basis. We do not separate expenses reimbursed by our customers (“utility recoveries”) from the associated rental income as we meet the practical expedient criteria to combine the lease and non-lease components. We assessed the criteria and concluded that the timing and pattern of transfer for rental income and the associated utility recoveries are the same and, as our leases qualify as operating leases, we account for and present rental income and utility recoveries as a single component under Rental income in our Consolidated Statements of Income and Comprehensive Income. In addition, customers may lease homes that are located in our communities. These leases are accounted for as operating leases. Rental income derived from customers leasing homes is also accounted for in accordance with ASC 842, Leases and is recognized over the term of the respective lease. 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 collectability, including historical loss experience, current market conditions and future expectations in forecasting credit losses.
9


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (continued)
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.
(b)    Restricted Cash
As of September 30, 2022 and December 31, 2021, restricted cash consisted of $23.2 million and $29.3 million, respectively, primarily related to cash reserved for customer deposits and escrows for insurance and real estate taxes.

Note 3 – Leases
Lessor
The leases entered into between the customer and us for 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, 2022
2022$42,224 
2023170,732 
2024105,054 
202540,852 
202621,909 
Thereafter67,992 
Total$448,763 

Lessee
We lease land under non-cancelable operating leases at 10 Properties expiring at various dates between 2028 and 2054. The Westwinds ground leases expired August 31, 2022, for additional information see Part I. Item 1. Financial Statements —Note 11. Commitments and Contingencies. 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 2032. For the quarters ended September 30, 2022 and 2021, total operating lease payments were $2.7 million and $2.9 million, respectively. For the nine months ended September 30, 2022 and 2021, total operating lease payments were $8.2 million and $8.0 million, respectively.



10


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 3 – Leases (continued)
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, 2022:
As of September 30, 2022
(amounts in thousands)
Ground LeasesOffice and Other LeasesTotal
2022$145 $1,728 $1,873 
2023626 3,523 4,149 
2024632 3,097 3,729 
2025637 2,763 3,400 
2026615 2,543 3,158 
Thereafter4,325 13,140 17,465 
Total undiscounted rental payments6,980 26,794 33,774 
Less imputed interest(1,705)(4,137)(5,842)
Total lease liabilities$5,275 $22,657 $27,932 

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 $25.9 million and $27.9 million, respectively, as of September 30, 2022. The weighted average remaining lease term for our operating leases was nine years and the weighted average incremental borrowing rate was 3.7% at September 30, 2022.
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 $30.3 million and $30.7 million, respectively, as of December 31, 2021. The weighted average remaining lease term for our operating leases was seven years and the weighted average incremental borrowing rate was 3.8% at December 31, 2021.

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, 2022 and 2021:
Quarters Ended September 30,Nine Months Ended September 30,
(amounts in thousands, except per share data)2022202120222021
Numerators:
Net income available for Common Stockholders – Basic$67,163 $70,625 $211,578 $196,916 
Amounts allocated to non controlling interest (dilutive securities)3,346 3,468 10,563 10,236 
Net income available for Common Stockholders – Fully Diluted$70,509 $74,093 $222,141 $207,152 
Denominators:
Weighted average Common Shares outstanding – Basic185,814 183,469 185,758 182,590 
Effect of dilutive securities:
Exchange of Common OP Units for Common Shares9,288 9,056 9,295 9,888 
Stock options and restricted stock167 211 195 211 
Weighted average Common Shares outstanding – Fully Diluted195,269 192,736 195,248 192,689 
Earnings per Common Share – Basic$0.36 $0.38 $1.14 $1.08 
Earnings per Common Share – Fully Diluted$0.36 $0.38 $1.14 $1.08 
Note 5 – Common Stock and Other Equity Related Transactions
Common Stockholder Distribution Activity
The following quarterly distributions have been declared and paid to Common Stockholders and the Operating Partnership unit (“OP Unit”) holders since January 1, 2021.
11


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 5 – Common Stock and Other Equity Related Transactions (continued)
Distribution Amount Per ShareFor the Quarter EndedStockholder Record DatePayment Date
$0.3625March 31, 2021March 26, 2021April 9, 2021
$0.3625June 30, 2021June 25, 2021July 9, 2021
$0.3625September 30, 2021September 24, 2021October 8, 2021
$0.3625December 31, 2021December 31, 2021January 14, 2022
$0.4100March 31, 2022March 25, 2022April 8, 2022
$0.4100June 30, 2022June 24, 2022July 8, 2022
$0.4100September 30, 2022September 30, 2022October 14, 2022

Equity Offering Program
On February 24, 2022, we entered into our current at-the-market (“ATM”) equity offering program with certain sales agents, pursuant to which we may sell, from time-to-time, shares of our common stock, par value $0.01 per share, having an aggregate offering price of up to $500.0 million. Prior to the new program, the aggregate offering price was up to $200.0 million.
The following table presents the shares that were issued under our prior ATM equity offering program during the quarter ended March 31, 2022.
(amounts in thousands, except share data)
Shares of common stock sold328,123 
Weighted average price$86.46 
Total gross proceeds$28,370 
Commissions paid to sales agents$389 
There has been no ATM activity under the current ATM equity offering program during the nine months ended September 30, 2022 and as of September 30, 2022, the full capacity remained available for issuance. There was no ATM equity activity during the nine months ended September 30, 2021.
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, 2022 and 2021, 34,680 and 1,451,710 OP Units, respectively, were exchanged for an equal number of shares of Common Stock.

Note 6 – Investment in Real Estate
Acquisitions
2022
On February 18, 2022, we completed the acquisition of Blue Mesa Recreational Ranch, a 385-site membership RV community located in Gunnison, Colorado, and Pilot Knob RV Resort a 247-site RV community located in Winterhaven, California for a combined purchase price of $15.9 million. The acquisition was funded with available cash.
On June 1, 2022, we completed the acquisition of a nine acre vacant land parcel in Sarasota, Florida, adjacent to one of our properties, for a purchase price of $2.3 million. The acquisition was funded with available cash.
On June 15, 2022, we completed the acquisition of Holiday Trav-L-Park Resort, a 299-site oceanfront RV community located in Emerald Isle, North Carolina for a purchase price of $50.7 million. The acquisition was funded with available cash and debt financing from the unsecured line of credit.
12


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements
Note 6 – Investment in Real Estate (continued)
On June 16, 2022, we completed the acquisition of Oceanside RV Resort, a 139-site RV community located in Oceanside, California for a total purchase price of $44.4 million. The acquisition was funded with available cash and debt financing from the unsecured line of credit.
On July 21, 2022, we completed the acquisition of an 83-acre vacant land parcel in North Fort Myers, Florida, adjacent to one of our properties, for a purchase price of $6.4 million. The acquisition was funded with available cash.
On August 9, 2022, we completed the acquisition of a 78-acre vacant land parcel in Beecher, Illinois, adjacent to one of our properties, for a purchase price of $0.9 million. The acquisition was funded with available cash.
Impairment
Hurricane Ian made landfall on the west coast of Florida on September 28, 2022. The most significant damage to our properties occurred in or near the Fort Myers area. Six of our Properties in or near this market are temporarily closed. As a result of the storm event and the damage caused, we wrote down the carrying value of certain assets at these properties by approximately $3.7 million during the quarter and nine months ended September 30, 2022, which is included in Loss on sale of real estate and impairment, net in the Consolidated Statements of Income.

Note 7 – Investments 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, 2022 and December 31, 2021, respectively):
    Investment as ofIncome/(Loss) for
the Nine Months Ended
InvestmentLocation Number of Sites
Economic
Interest
(a)
September 30, 2022December 31, 2021September 30, 2022September 30, 2021
MeadowsVarious (2,2)1,077 50 %$150 $— $1,850 $1,350 
LakeshoreFlorida (3,3)721 (b)2,596 2,638 480 417 
VoyagerArizona (1,1)— 33 %
(c)
138 141 39 544 
ECHO JVVarious — 50 %18,979 18,136 843 475 
RVCVarious 1,282 80 %
(d)
57,779 49,397 (323)— 
Mulberry FarmsVarious— 50 %
(e)
8,710 — — — 
3,080 $88,352 $70,312 $2,889 $2,786 
_____________________
(a)The percentages shown approximate our economic interest as of September 30, 2022. Our legal ownership interest may differ.
(b)Includes two joint ventures in which we own a 65% interest in each and the Crosswinds joint venture in which we own a 49% interest.
(c)Consists of a 33% interest in the utility plant servicing Voyager RV Resort. On October 14, 2021, we completed the acquisition of the remaining 50% interest in Voyager RV Resort.
(d)On July 1, 2022, we acquired an 80% interest in an additional joint venture with RVC Outdoor Destinations ("RVC") for a total value of $1.1 million.
(e)On January 18, 2022, we acquired a 50% equity interest in an entity developing an age-restricted community in Prescott Valley, Arizona.
We received approximately $3.9 million and $2.4 million in distributions from our unconsolidated joint ventures for the nine months ended September 30, 2022 and 2021, respectively. Approximately $1.7 million and $2.2 million of the distributions made to us exceeded our basis in our unconsolidated joint ventures for the nine months ended September 30, 2022 and 2021, respectively, and as such, were recorded as income from unconsolidated joint ventures.

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:
13


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 8 - Borrowing Arrangements (continued)
As of September 30, 2022As of December 31, 2021
(amounts in thousands)
Fair ValueCarrying ValueFair ValueCarrying Value
Mortgage notes payable, excluding deferred financing costs$2,027,030 $2,734,310 $2,743,527 $2,654,086 

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, 2022, was approximately 3.7% per annum. The debt bears interest at stated rates ranging from 2.4% to 8.9% per annum and matures on various dates ranging from 2023 to 2041. The debt encumbered a total of 114 and 117 of our Properties as of September 30, 2022 and December 31, 2021, respectively, and the gross carrying value of such Properties was approximately $2,851.5 million and $2,817.5 million, as of September 30, 2022 and December 31, 2021, respectively.
During the nine months ended September 30, 2022, we repaid $14.2 million of principal on two mortgage loans that were due to mature in 2022, incurring $0.5 million of prepayment penalties. These mortgage loans had a weighted average interest rate of 5.25% per annum and were secured by three RV communities.
During the nine months ended September 30, 2022, we entered into a $200.0 million secured refinancing transaction. The loan is secured by one MH community, has a fixed interest rate of 3.36% per annum and has a maturity date of May 1, 2034. The net proceeds from the transaction were used to repay all debt scheduled to mature in 2022 and to repay amounts outstanding on the Line of Credit (“LOC”).
Unsecured Debt
During the nine months ended September 30, 2022, we entered into a $200.0 million senior unsecured term loan agreement. The maturity date is January 21, 2027, with an interest rate of Secured Overnight Financing Rate (“SOFR”) plus approximately 1.30% to 1.80%, depending on leverage levels.
The LOC had a balance of $95.0 million and $349.0 million outstanding as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022, our LOC had a remaining borrowing capacity of $405.0 million.
As of September 30, 2022, 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.
We have a three-year LIBOR Swap Agreement (the “Swap”) allowing us to trade the variable interest rate associated with our variable rate debt for a fixed interest rate. The Swap has a notional amount of $300.0 million of outstanding principal with a fixed interest rate of 0.39% per annum and matures on March 25, 2024. Based on the leverage as of September 30, 2022, our spread over LIBOR was 1.40% resulting in an estimated all-in interest rate of 1.79% per annum.
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 Location20222021
Interest Rate SwapOther assets, net$20,474 $3,524 



14


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 9 – Derivative Instruments and Hedging (continued)
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 RelationshipAmount 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)20222021(amounts in thousands)20222021
Interest Rate Swap$(18,479)$142 Interest Expense$(1,527)$467 

During the next twelve months, we estimate that $11.7 million will be reclassified as a decrease to interest expense. This estimate may be subject to change as the underlying LIBOR changes. We determined that no adjustment was necessary for non-performance risk on our derivative obligation. As of September 30, 2022, we had not posted any collateral related to the Swap.

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, 2022, 79,078 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 27, 2023, January 26, 2024 and January 31, 2025, respectively, and have a grant date fair value of $3.0 million. The remaining 50% are performance-based awards vesting in equal installments on January 27, 2023, January 26, 2024 and January 31, 2025, 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 13,178 shares of restricted stock subject to 2022 performance goals have a grant date fair value of $1.0 million.
During the quarter ended June 30, 2022 we awarded to certain members of our Board of Directors 51,522 shares of restricted stock at a fair value of approximately $4.1 million and options to purchase 7,210 shares of common stock with an exercise price of $79.72. These are time-based awards subject to various vesting dates between October 26, 2022 and April 26, 2025.
Stock based compensation expense, reported in General and administrative expense on the Consolidated Statements of Income and Comprehensive Income, was $2.6 million and $2.8 million for the quarters ended September 30, 2022 and 2021, respectively, and $7.9 million and $8.2 million for the nine months ended September 30, 2022 and 2021, respectively.

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 operated and managed Westwinds, a 720 site mobilehome community, and Nicholson Plaza, an adjacent shopping center, both located in San Jose, California pursuant to ground leases that expired on August 31, 2022 and did not contain extension options. 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.
15


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 11 - Commitments and Contingencies (continued)
We believe the Nicholsons’ demand to be 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 had no obligation to deliver the property free and clear of the mobilehome residents upon the expiration of the ground leases. The Operating Partnership and the interested parties filed an amended complaint on January 29, 2020. The Nicholsons filed a demand for arbitration on January 28, 2020, which they subsequently amended, seeking (i) a declaration that the Operating Partnership, as the “owner and manager” of Westwinds, is “required by the Ground Leases, and State and local law to deliver the Property free of any encumbrances or third-party claims at the expiration of the lease terms,” (ii) that the Operating Partnership anticipatorily breached the ground leases by publicly repudiating any such obligation and (iii) that the Operating Partnership is required to indemnify the Nicholsons with respect to the claims brought by the interested parties in the Superior Court proceeding.
On February 3, 2020, the Nicholsons filed a motion in California Superior Court to compel arbitration and to stay the Superior Court litigation, which motion was heard on June 25, 2020. On July 29, 2020, the Superior Court issued a final order denying the Nicholsons' motion to compel arbitration. The Nicholsons filed a notice of appeal on August 7, 2020, which appeal was heard on February 1, 2022. On February 4, 2022, the California Court of Appeal affirmed the Superior Court’s order denying the Nicholsons' motion to compel arbitration. On February 22, 2022, the Nicholsons filed a petition for rehearing, which the Court of Appeal denied on March 2, 2022. On March 16, 2022, the Nicholsons filed a petition for review with the California Supreme Court, which the California Supreme Court denied on April 20, 2022. On May 18, 2022, the Nicholsons filed a cross complaint alleging that the Operating Partnership is obligated to deliver Westwinds free and clear of encumbrances and in good condition and repair. The cross complaint asserts that it is no longer feasible for the Operating Partnership to cure its alleged breaches given that the ground leases terminate on August 31, 2022. The Nicholsons filed a demurrer to our complaint which was denied by the Superior Court.
On July 19, 2022, the Nicholsons sent two notices of default to the Operating Partnership, one related to Westwinds and the other related to Nicholson Plaza, the adjacent shopping center. The notices generally assert that the Operating Partnership failed to maintain or repair certain infrastructure and improvements at Westwinds and Nicholson Plaza. The Operating Partnership disputes the contention that it did not maintain Westwinds and Nicholson Plaza in compliance with the terms of the applicable ground leases.
The arbitration that was previously stayed pursuant to an agreement between the Operating Partnership and the Nicholsons was set for a hearing on October 31, 2022 with respect to the Nicholsons’ claim that the Operating Partnership is required to indemnify the Nicholsons with respect to the claims brought by the interested parties in the Superior Court proceeding and a claim by the Operating Partnership for recovery of fees incurred in connection with the Nicholsons’ failed motion to compel arbitration.
On October 6, 2022, the parties to the Superior Court proceeding as well as the arbitration entered into a binding agreement pursuant to which, among other things, the parties agreed to dismiss with prejudice all claims pending in the Superior Court and in the arbitration; however, the Nicholsons reserved their rights to pursue their claim that the Operating Partnership failed to maintain or repair certain infrastructure and improvements at Westwinds and Nicholson Plaza. To the extent the Nicholsons pursue such claim, we intend to vigorously defend our interests. The parties are in the process of further documenting and implementing the settlement agreement. We do not expect the settlement agreement to have a material impact to our 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, 2022 or 2021.
16


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

The following tables summarize our segment financial information for the quarters and nine months ended September 30, 2022 and 2021:
Quarter Ended September 30, 2022
(amounts in thousands)Property
Operations
Home Sales
and Rentals
Operations
Consolidated
Operations revenues$338,208 $38,497 $376,705 
Operations expenses(179,775)(33,384)(213,159)
Income from segment operations158,433 5,113 163,546 
Interest income1,441 422 1,863 
Depreciation and amortization(50,026)(2,521)(52,547)
Loss on sale of real estate and impairment, net(2,289)(1,458)(3,747)
Income from operations$107,559 $1,556 $109,115 
Reconciliation to consolidated net income:
Corporate interest income
Income from other investments, net2,399 
General and administrative(11,086)
Other expenses(1,627)
Interest and related amortization(29,759)
Equity in income of unconsolidated joint ventures1,465 
Consolidated net income$70,509 
Total assets$5,160,230 $245,216 $5,405,446 
Capital improvements$49,585 $37,994 $87,579 

Quarter Ended September 30, 2021
(amounts in thousands)Property
Operations
Home Sales
and Rentals
Operations
Consolidated
Operations revenues$312,239 $31,954 $344,193 
Operations expenses(162,234)(28,787)(191,021)
Income from segment operations150,005 3,167 153,172 
Interest income1,320 483 1,803 
Depreciation and amortization(41,761)(2,653)(44,414)
Income (loss) from operations$109,564 $997 $110,561 
Reconciliation to consolidated net income:
Corporate interest income
Income from other investments, net1,238 
General and administrative(10,401)
Other expenses(797)
Interest and related amortization(27,361)
Equity in income of unconsolidated joint ventures851 
Consolidated net income$74,093 
Total assets$4,723,386 $258,474 $4,981,860 
Capital improvements$52,146 $32,169 $84,315 



17


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

Nine Months Ended September 30, 2022
(amounts in thousands)Property
Operations
Home Sales
and Rentals
Operations
Consolidated
Operations revenues$984,535 $109,675 $1,094,210 
Operations expenses(506,739)(95,847)(602,586)
Income from segment operations477,796 13,828 491,624 
Interest income4,198 1,143 5,341 
Depreciation and amortization(145,200)(7,537)(152,737)
Loss on sale of real estate and impairment, net(2,289)(1,458)(3,747)
Income (loss) from operations$334,505 $5,976 $340,481 
Reconciliation to consolidated net income:
Corporate interest income
Income from other investments, net6,920 
General and administrative(35,078)
Other expenses(6,636)
Interest and related amortization(85,276)
Equity in income of unconsolidated joint ventures2,889 
Early debt retirement(1,156)
Consolidated net income$222,149 
Total assets$5,160,230 $245,216 $5,405,446 
Capital improvements$169,265 $99,349 $268,614 














18


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

Nine Months Ended September 30, 2021
(amounts in thousands)Property
Operations
Home Sales
and Rentals
Operations
Consolidated
Operations revenues$891,166 $81,191 $972,357 
Operations expenses(448,432)(73,088)(521,520)
Income from segment operations442,734 8,103 450,837 
Interest income3,720 1,566 5,286 
Depreciation and amortization(130,169)(7,958)(138,127)
Loss on sale of real estate, net(59)— (59)
Income (loss) from operations$316,226 $1,711 $317,937 
Reconciliation to consolidated net income:
Corporate interest income28 
Income from other investments, net3,396 
General and administrative(31,141)
Other expenses(2,295)
Interest and related amortization(80,767)
Equity in income of unconsolidated joint ventures2,786 
Early debt retirement(2,784)
Consolidated net income$207,160 
Total assets$4,723,386 $258,474 $4,981,860 
Capital improvements$129,919 $74,118 $204,037 

The following table summarizes our financial information for the Property Operations segment for the quarters and nine months ended September 30, 2022 and 2021:
 Quarters Ended September 30,Nine Months Ended September 30,
(amounts in thousands)2022202120222021
Revenues:
Rental income$285,272 $265,431 $837,892 $761,580 
Annual membership subscriptions16,254 15,127 47,003 43,048 
Membership upgrade sales current period, gross11,085 10,122 27,771 29,343 
Membership upgrade sales upfront payments, deferred, net(7,777)(7,253)(18,228)(21,134)
Other income15,580 12,053 43,316 36,759 
Gross revenues from ancillary services17,794 16,759 46,781 41,570 
Total property operations revenues338,208 312,239 984,535 891,166 
Expenses:
Property operating and maintenance121,692 107,626 337,363 296,607 
Real estate taxes17,734 18,408 56,373 54,154 
Sales and marketing, gross7,143 6,513 18,466 18,987 
Membership sales commissions, deferred, net(1,206)(1,468)(2,746)(4,405)
Cost of ancillary services9,765 8,785 24,639 20,401 
Ancillary operating expenses5,644 5,355 16,671 13,733 
Property management19,003 17,015 55,973 48,955 
Total property operations expenses179,775 162,234 506,739 448,432 
Income from property operations segment$158,433 $150,005 $477,796 $442,734 







19


Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

The following table summarizes our financial information for the Home Sales and Rentals Operations segment for the quarters and nine months ended September 30, 2022 and 2021:
 Quarters Ended September 30,Nine Months Ended September 30,
(amounts in thousands)2022202120222021
Revenues:
Rental income (a)
$3,744 $4,142 $11,519 $12,713 
Gross revenue from home sales and brokered resales34,753 27,812 98,156 68,478 
Total revenues38,497 31,954 109,675 81,191 
Expenses:
Rental home operating and maintenance1,489 1,538 4,117 4,093 
Cost of home sales and brokered resales30,459 26,046 87,255 65,140 
Home selling expenses1,436 1,203 4,475 3,855 
Total expenses33,384 28,787 95,847 73,088 
Income from home sales and rentals operations segment$5,113 $3,167 $13,828 $8,103 
______________________
(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.
20


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, 2021 (“2021 Form 10-K”), as well as information in Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K.
Overview and Outlook
We are a self-administered and self-managed real estate investment trust (“REIT”) with headquarters in Chicago, Illinois. We are a fully integrated owner of lifestyle-oriented properties (“Properties”) consisting of property operations and home sales and rental operations primarily within manufactured home (“MH”) and recreational vehicle (“RV”) communities and marinas. As of September 30, 2022, we owned or had an ownership interest in a portfolio of 445 Properties located throughout the United States and Canada containing 170,245 individual developed areas (“Sites”). These Properties are located in 35 states and British Columbia, with more than 110 Properties with lake, river or ocean frontage and more than 120 Properties within 10 miles of the coastal United States. See discussion of Hurricane Ian, including the impact to our Florida Properties in Part I. Item 2. Management's Discussion and AnalysisResults Overview on page 23.
We invest in properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on delivering an exceptional experience to our residents and guests that results in delivery of value to stockholders. Our business model is intended to provide an opportunity for increased cash flows and appreciation in value. We seek growth in earnings, Funds from Operations (“FFO”), Normalized Funds from Operations (“Normalized FFO”) and cash flows by enhancing the profitability and operation of our Properties and investments. We accomplish this by attracting and retaining high quality customers to our Properties, who take pride in our Properties and in their homes, and efficiently managing our Properties by increasing occupancy, maintaining competitive market rents and controlling expenses. We also actively pursue opportunities that fit our acquisition criteria and are currently engaged in various stages of negotiations relating to the possible acquisition of additional properties.
We believe the demand from baby boomers for MH and RV communities will continue to be strong over the long term. It is estimated that approximately 10,000 baby boomers are turning 65 daily through 2030. In addition, the population age 55 and older is expected to grow 17% within the next 15 years. These individuals, seeking an active lifestyle, will continue to drive the market for second-home sales as vacation properties, investment opportunities or retirement retreats. We expect it is likely that over the next decade, we will continue to see high levels of second-home sales and that manufactured homes and cottages in our Properties will continue to provide a viable second-home alternative to site-built homes. We also believe the Millennial and Generation Z demographic will contribute to our future long-term customer pipeline. After conducting a comprehensive study of RV ownership, according to the Recreational Vehicle Industry Association (“RVIA”), data suggested that RV sales are expected to benefit from an increase in demand from those born in the United States from 1980 to 2003, or Millennials and Generation Z, over the coming years. We believe the demand from baby boomers and these younger generations will continue to outpace supply for MH and RV communities. The entitlement process to develop new MH and RV communities is extremely restrictive. As a result, there have been limited new communities developed in our target geographic markets.
We generate the majority of our revenues from customers renting our Sites or entering into right-to-use contracts, also known as membership subscriptions, which provide them access to specific Properties for limited stays. MH Sites are generally leased on an annual basis to residents who own or lease factory-built homes, including manufactured homes. Annual RV and marina Sites are leased on an annual basis to customers who generally have an RV, factory-built cottage, boat or other unit placed on the site, including those Northern properties that are open for the summer season. Seasonal RV and marina Sites are leased to customers generally for one to six months. Transient RV and marina Sites are leased to customers on a short-term basis. The revenue from seasonal and transient Sites is generally higher during the first and third quarters. We consider the transient revenue stream to be our most volatile as it is subject to weather conditions and other factors affecting the marginal RV customer’s vacation and travel preferences. We also generate revenue from customers renting our marina dry storage. Additionally, we have interests in joint venture Properties for which revenue is classified as Equity in income from unconsolidated joint ventures on the Consolidated Statements of Income and Comprehensive Income.




21

Management's Discussion and Analysis (continued)


The following table shows the breakdown of our Sites by type (amounts are approximate):
 Total Sites as of September 30, 2022
MH Sites72,700 
RV Sites:
Annual34,400 
Seasonal12,700 
Transient14,600 
Marina Slips6,900 
Membership (1)
25,800 
Joint Ventures (2)
3,100 
Total170,200 
_________________________ 
(1)Primarily utilized to service approximately 132,200 members. Includes approximately 6,400 Sites rented on an annual basis.
(2)Includes approximately 1,800 annual Sites and 1,300 transient Sites.
In our Home Sales and Rentals Operations business, our revenue streams include home sales, home rentals and brokerage services and ancillary activities. We generate revenue through home sales and rental operations by selling or leasing manufactured homes and cottages that are located in Properties owned and managed by us. We believe renting our vacant homes represents an attractive source of occupancy and an opportunity to convert the renter to a homebuyer in the future. 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 term loan amortization and high interest rates. We have a limited program under which we purchase loans made by an unaffiliated lender to homebuyers at our Properties.
In addition to net income computed in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we assess and measure our overall financial and operating performance using certain Non-GAAP supplemental measures, which include: (i) FFO, (ii) Normalized FFO, (iii) Income from property operations, (iv) Income from property operations, excluding 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 Centers for Disease Control and Prevention (“CDC”) and local public health department guidelines and protocols for social distancing and enhanced community and office cleaning procedures. Our Properties continue to be open subject to seasons of operations and state and local guidelines. Our property offices are open to residents and customers and we are complying with CDC recommended protocols.
We attribute the solid performance of our business to the fundamentals of our business model. The property locations and the lifestyle we offer have broad appeal to customers interested in enjoying an outdoor experience. We believe this is particularly relevant in a COVID-19 impacted environment. We intend to continue to monitor the evolving situation and we may take further actions that alter our business operations as may be required and that are in the best interests of our employees, residents, customers and shareholders. The extent of the impact that COVID-19 will have on our business going forward, including our financial condition, results of operations and cash flows, is dependent on multiple factors, many of which are unknown.

22

Management's Discussion and Analysis (continued)


Results Overview
For the quarter ended September 30, 2022, net income available for Common Stockholders decreased $3.4 million to $67.2 million, or $0.36 per fully diluted Common Share, compared to $70.6 million, or $0.38 per fully diluted Common Share, for the same period in 2021. For the nine months ended September 30, 2022, net income available for Common Stockholders increased $14.7 million, or $0.06 per fully diluted Common Share, to $211.6 million, or $1.14 per fully diluted Common Share, compared to $196.9 million, or $1.08 per fully diluted Common Share, for the same period in 2021.
For the quarter ended September 30, 2022, FFO available for Common Stock and Operating Partnership unit (“OP Unit”) holders increased $9.9 million, or $0.04 per fully diluted Common Share, to $134.4 million, or $0.69 per fully diluted Common Share, compared to $124.5 million, or $0.65 per fully diluted Common Share, for the same period in 2021. For the nine months ended September 30, 2022, FFO available for Common Stock and OP Unit holders increased $34.3 million, or $0.15 per fully diluted Common Share, to $396.9 million, or $2.03 per fully diluted Common Share, compared to $362.6 million, or $1.88 per fully diluted Common Share, for the same period in 2021.
For the quarter ended September 30, 2022, Normalized FFO available for Common Stock and OP Unit holders increased $12.3 million, or $0.05 per fully diluted Common Share, to $136.8 million, or $0.70 per fully diluted Common Share, compared to $124.5 million, or $0.65 per fully diluted Common Share, for the same period in 2021. For the nine months ended September 30, 2022, Normalized FFO available for Common Stock and OP Unit holders increased $38.1 million, or $0.17 per fully diluted Common Share, to $403.5 million, or $2.07 per fully diluted Common Share, compared to $365.4 million, or $1.90 per fully diluted Common Share, for the same period 2021.
For the quarter ended September 30, 2022, our Core Portfolio property operating revenues, excluding deferrals, increased 5.3% and property operating expenses, excluding deferrals and property management, increased 7.8%, from the same period in 2021, resulting in an increase in income from property operations, excluding deferrals and property management, of 3.5%, compared to the same period in 2021. For the nine months ended September 30, 2022, our Core Portfolio property operating revenues, excluding deferrals, increased 6.5% and property operating expenses, excluding deferrals and property management, increased 8.3%, from the same period in 2021, resulting in an increase in income from property operations, excluding deferrals and property management, of 5.3%, compared to the same period in 2021.
Hurricane Ian made landfall on the west coast of Florida on September 28, 2022. Approximately 60% of our Florida portfolio was in the path of the storm as it moved across the state. During the storm, we prioritized the safety of our residents, guests and employees. For the majority of our properties the impact was limited to flooding, wind, wind-blown debris and falling trees and branches. These properties have resumed operations.
The most significant damage to our properties occurred in or near the Fort Myers area. Six of our Properties in or near this market continue to experience utility disruptions and are temporarily closed. The properties include four RV parks and two marinas with a total of 2,100 sites/slips. During the storm, the four RV properties experienced strong winds as well as significant flooding, including from unprecedented storm surges that resulted in damage to certain common area buildings, utility infrastructure and residents’ homes. The two marinas suffered wind related building damage and the process of restoring the buildings has begun. We currently expect these properties will resume operations during the fourth quarter, although certain locations may operate at a limited capacity.
Since the storm passed, we have worked towards quickly returning our properties to full operating condition with efforts focused on debris cleanup and removal and initiating the process to restore impacted buildings and infrastructure. Based on our prior experience with recovery following major storms, developing restoration plans and estimating costs to execute on those plans takes time, often several weeks. We did not accrue any repair and maintenance expenses related to cleanup or restoration efforts during the third quarter of 2022 given the short period of time between the storm’s passage and the end of the reporting period. However, as part of our review and based on information currently available, we have determined that storm-related damage to certain assets supported a $3.7 million reduction to the carrying value of those assets, which is included in Loss on sale of real estate and impairment, net in the Consolidated Statements of Income. We believe the costs to restore these damaged assets will be included in our insurance claim. We believe we have adequate insurance coverage, subject to deductibles, including business interruption though we are unable to predict the timing or amount of insurance recovery.




23

Management's Discussion and Analysis (continued)

We continue to focus on the quality of occupancy growth by increasing the number of manufactured homeowners in our Core Portfolio. Our Core Portfolio average occupancy includes both homeowners and renters in our MH communities and was 95.2%, 95.1% and 95.0% for the quarters ended September 30, 2022, December 31, 2021 and September 30, 2021, respectively. For the quarter ended September 30, 2022, our Core Portfolio occupancy increased by 22 sites with an increase in homeowner occupancy of 190 sites, compared to occupancy as of June 30, 2022. By comparison, for the quarter ended September 30, 2021, our Core Portfolio occupancy increased 67 sites with an increase in homeowner occupancy of 275 sites. While we continue to focus on increasing the number of manufactured homeowners in our Core Portfolio, we also believe renting our vacant homes represents an attractive source of occupancy and an opportunity to potentially convert the renter to a new homebuyer in the future. We continue to expect there to be fluctuations in the sources of occupancy gains depending on local market conditions, availability of vacant sites and success with converting renters to homeowners. As of September 30, 2022, we had 2,949 occupied rental homes in our Core MH communities, including 165 homes rented through our ECHO JV.
RV and marina base rental income in our Core Portfolio increased 4.1% and 10.3% for the quarter ended September 30, 2022 and nine months ended September 30, 2022, respectively, compared to the same periods in 2021 driven by annual and seasonal rental income. Core RV and marina base rental income from annuals represents more than 60% of total Core RV and marina base rental income and increased 8.6% and 8.8% for the quarter ended September 30, 2022 and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Core seasonal RV and marina base rental income increased 21.2% and 46.0% for the quarter ended September 30, 2022 and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Core transient RV and marina base rental income decreased by $2.3 million, or 7.2% for the quarter ended September 30, 2022, compared to the same period in 2021 and decreased $1.0 million, or 1.4% for the nine months ended September 30, 2022, compared to the same period in 2021.
Annual membership subscription revenue increased $1.1 million, or 7.5% for the quarter ended September 30, 2022 and $4.0 million, or 9.2% for the nine months ended September 30, 2022, compared to the same periods in 2021. The increase in annual membership subscription revenue for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily offset by a decrease in Membership upgrade sales current period, gross of $1.6 million, or 5.4%, for the nine months ended September 30, 2022 compared to the same period in 2021.
Demand for our homes and communities remains strong as evidenced by factors including our high occupancy levels. We closed 331 new home sales during the quarter ended September 30, 2022, compared to 338 new home sales during the quarter ended September 30, 2021, a decrease of 2.1%. We closed 957 new home sales during the nine months ended September 30, 2022, compared to 825 new home sales during the nine months ended September 30, 2021, an increase of 16.0%. The increase in new home sales was primarily in the Florida and Arizona markets due to favorable housing trends.
Our gross investment in real estate increased $279.1 million to $7,268.2 million as of September 30, 2022 from $6,989.1 million as of December 31, 2021, primarily due to acquisitions and capital improvements during the nine months ended September 30, 2022.












24

Management's Discussion and Analysis (continued)

The following chart lists the Properties acquired or sold from January 1, 2021 through September 30, 2022 and Sites added through expansion opportunities at our existing Properties:
LocationType of PropertyTransaction DateSites
Total Sites as of January 1, 2021 (1)
160,500
Acquisition Properties:
Okeechobee KOA ResortOkeechobee, FloridaRVJanuary 21, 2021740
Cortez Village MarinaCortez, FloridaMarinaFebruary 5, 2021353
Fish Tale MarinaFort Myers Beach, FloridaMarinaFebruary 5, 2021296
Hi-Lift MarinaAdventure, FloridaMarinaFebruary 5, 2021211
Hidden Harbour MarinaPompano Beach, FloridaMarinaFebruary 5, 2021357
Inlet Harbor MarinaPonce Inlet, FloridaMarinaFebruary 5, 2021295
Palm Harbour MarinaCape Haze, FloridaMarinaFebruary 5, 2021260
Riverwatch MarinaStuart, FloridaMarinaFebruary 5, 2021306
Boathouse MarinaBeaufort, North CarolinaMarinaFebruary 5, 2021547
Dale Hollow State Park MarinaBurkesville, KentuckyMarinaFebruary 5, 2021198
Bay Point MarinaMarblehead, OhioMarinaFebruary 5, 2021841
Rivers Edge MarinaNorth Charleston, South CarolinaMarinaFebruary 5, 2021503
Pine HavenCape May, New JerseyRVJune 3, 2021629
Myrtle Beach Property (2)
Myrtle Beach, South CarolinaRVAugust 26, 2021813
Voyager RV Resort (3)
Tucson, ArizonaRVOctober 14, 2021
RVC PortfolioMultipleUnconsolidated JVNovember 1, 2021988
Hope ValleyTurner, OregonRVNovember 18, 2021164
Lake ConroeMontgomery, TexasRVDecember 15, 2021261
Blue Mesa Recreational RanchGunnison, ColoradoMembershipFebruary 18, 2022385
Pilot Knob RV ResortWinterhaven, CaliforniaRVFebruary 18, 2022247
Holiday Trav-L-Park ResortEmerald Isle, North CarolinaRVJune 15, 2022299
Oceanside RV ResortOceanside, CaliforniaRVJune 16, 2022139
Expansion Site Development:
Sites added (reconfigured) in 20211,037
Sites added (reconfigured) in 2022602
Ground Lease Termination:
Westwinds (4)
San Jose, CaliforniaMHAugust 31, 2022(723)
Total Sites as of September 30, 2022 (1) (5)
170,200
______________________
(1)    Sites are approximate. Total does not foot due to rounding.
(2)    RV community operated by a tenant pursuant to an existing ground lease.
(3)    On October 14, 2021, we completed the acquisition of the remaining interest in the Voyager RV Resort joint venture. The Voyager RV Resort joint venture sites are included in the Total Sites as of January 1, 2021.
(4)    MH communities operated and managed by the Operating Partnership pursuant to ground leases that expired on August 31, 2022. For additional information see Part I. Item 1. Financial Statements — Note 11. Commitments and Contingencies.
(5)    See discussion of Hurricane Ian, including the impact to our Florida Properties in Part I. Item 2. Management's Discussion and Analysis—Results Overview on page 23.

Non-GAAP Financial Measures
Management’s discussion and analysis of financial condition and results of operations include certain Non-GAAP financial measures that in management’s view of the business are meaningful as they allow investors the ability to understand key operating details of our business both with and without regard to certain accounting conventions or items that may not always be indicative of recurring annual cash flows of the portfolio. These Non-GAAP financial measures as determined and presented by us may not be comparable to similarly titled measures reported by other companies, and include income from property operations and Core Portfolio, FFO, Normalized FFO and income from rental operations, net of depreciation.
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.
25

Management's Discussion and Analysis (continued)


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. We present bad debt expense within Property operating and maintenance in the current and prior periods.
Our Core Portfolio consists of our Properties owned and operated during all of 2021 and 2022. 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 2021 and 2022. This includes, but is not limited to, six RV communities and eleven marinas acquired during 2021, one membership RV community and three RV communities acquired during 2022 and our Westwinds MH community and an adjacent shopping center.
Funds from Operations (FFO”) and Normalized Funds from Operations (Normalized FFO”)
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, defeasance costs and transaction/pursuit costs, and other miscellaneous non-comparable items. Normalized FFO presented herein is not necessarily comparable to Normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same methodology for computing this amount.
We believe that FFO and Normalized FFO are helpful to investors as supplemental measures of the performance of an equity REIT. We believe that by excluding the effect of gains or losses from sales of properties, depreciation and amortization related to real estate and impairment charges, which are based on historical costs and 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.
26

Management's Discussion and Analysis (continued)

Our definitions and calculations of these Non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These Non-GAAP financial and operating measures do not represent cash generated from operating activities in accordance with GAAP, nor do they represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash flows from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.
The following table reconciles net income available for Common Stockholders to income from property operations for the quarters and nine months ended September 30, 2022 and 2021:
Quarters Ended September 30,Nine Months Ended September 30,
(amounts in thousands)
2022202120222021
Computation of Income from Property Operations:
Net income available for Common Stockholders$67,163 $70,625 $211,578 $196,916 
Redeemable preferred stock dividends— — 
Income allocated to non-controlling interests – Common OP Units3,346 3,468 10,563 10,236 
Equity in income of unconsolidated joint ventures(1,465)(851)(2,889)(2,786)
Income before equity in income of unconsolidated joint ventures69,044 73,242 219,260 204,374 
Loss on sale of real estate and impairment, net3,747 — 3,747 59 
Total other expenses, net90,755 79,930 268,617 246,404 
Gain from home sales operations and other(5,243)(3,182)(11,897)(6,919)
Income from property operations$158,303 $149,990 $479,727 $443,918 
27

Management's Discussion and Analysis (continued)

The following table presents a calculation of FFO available for Common Stock and OP Unitholders and Normalized FFO available for Common Stock and OP Unitholders for the quarters and nine months ended September 30, 2022 and 2021:
 Quarters Ended September 30,Nine Months Ended September 30,
(amounts in thousands)
2022202120222021
Computation of FFO and Normalized FFO:
Net income available for Common Stockholders$67,163 $70,625 $211,578 $196,916 
Income allocated to non-controlling interests – Common OP Units3,346 3,468 10,563 10,236 
Membership upgrade sales upfront payments, deferred, net7,777 7,253 18,228 21,134 
Membership sales commissions, deferred, net(1,206)(1,468)(2,746)(4,405)
Depreciation and amortization52,547 44,414 152,737 138,127 
Depreciation on unconsolidated joint ventures1,035 180 2,811 547 
Loss on sale of real estate and impairment, net (1)
3,747 — 3,747 59 
FFO available for Common Stock and OP Unit holders134,409 124,472 396,918 362,614 
Early debt retirement— — 1,156 2,784 
Transaction/pursuit costs (2)
302 — 3,384 — 
Lease termination expenses (3)
2,073 — 2,073 — 
Normalized FFO available for Common Stock and OP Unit holders$136,784 $124,472 $403,531 $365,398 
Weighted average Common Shares outstanding – Fully Diluted 195,269 192,736 195,248 192,689 









































_____________________
(1)Reflects a $3.7 million reduction to the carrying value of certain assets, including home inventory as a result of Hurricane Ian for the quarter and nine months ended September 30, 2022.
(2)Represents transaction/pursuit costs related to unconsummated acquisitions included in Other expenses in the Consolidated Statements of Income.
(3)Represents non-operating expenses associated with the Westwinds ground leases that terminated on August 31, 2022 and is included in General and Administrative expenses in the Consolidated Statement of Income.

28

Management's Discussion and Analysis (continued)

Results of Operations
This section discusses the comparison of our results of operations for the quarters and nine months ended September 30, 2022 and September 30, 2021 and our operating activities, investing activities and financing activities for the nine months ended September 30, 2022 and September 30, 2021. For the comparison of our results of operations for the quarters and nine months ended September 30, 2021 and September 30, 2020 and discussion of our operating activities, investing activities and financing activities for the nine months ended September 30, 2021 and September 30, 2020, refer to Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2021, filed with the SEC on October 26, 2021.
Comparison of the quarter ended September 30, 2022 to the quarter ended September 30, 2021
Income from Property Operations
The following table summarizes certain financial and statistical data for our Core Portfolio and total portfolio for the quarters ended September 30, 2022 and September 30, 2021:
 Core PortfolioTotal Portfolio
Quarters Ended September 30,Quarters Ended September 30,
(amounts in thousands)20222021Variance%
Change
20222021Variance%
Change
MH base rental income (1)
$157,037 $148,337 $8,700 5.9 %$159,045 $151,142 $7,903 5.2 %
Rental home income (1)
3,729 4,136 (407)(9.8)%3,744 4,142 (398)(9.6)%
RV and marina base rental income (1)
96,722 92,878 3,844 4.1 %109,882 100,589 9,293 9.2 %
Annual membership subscriptions16,054 15,126 928 6.1 %16,254 15,127 1,127 7.5 %
Membership upgrades sales current period, gross10,333 10,122 211 2.1 %11,085 10,122 963 9.5 %
Utility and other income (1)
28,239 25,699 2,540 9.9 %32,746 27,616 5,130 18.6 %
Property operating revenues, excluding deferrals312,114 296,298 15,816 5.3 %332,756 308,738 24,018 7.8 %
Property operating and maintenance (1)(2)
114,113 104,679 9,434 9.0 %122,513 109,489 13,024 11.9 %
Real estate taxes16,830 16,303 527 3.2 %17,734 18,408 (674)(3.7)%
Rental home operating and maintenance1,483 1,534 (51)(3.3)%1,489 1,538 (49)(3.2)%
Sales and marketing, gross6,624 6,511 113 1.7 %7,143 6,513 630 9.7 %
Property operating expenses, excluding deferrals and property management139,050 129,027 10,023 7.8 %148,879 135,948 12,931 9.5 %
Income from property operations, excluding deferrals and property management (3)
173,064 167,271 5,793 3.5 %183,877 172,790 11,087 6.4 %
Property management19,003 17,015 1,988 11.7 %19,003 17,015 1,988 11.7 %
Income from property operations, excluding deferrals (3)
154,061 150,256 3,805 2.5 %164,874 155,775 9,099 5.8 %
Membership upgrade sales upfront payments and membership sales commission, deferred, net6,571 5,785 786 13.6 %6,571 5,785 786 13.6 %
Income from property operations (3)
$147,490 $144,471 $3,019 2.1 %$158,303 $149,990 $8,313 5.5 %
_____________________
(1)Rental income consists of the following total portfolio income items in this table: 1) MH base rental income, 2) Rental home income, 3) RV and marina base rental income and 4) Utility income, which is calculated by subtracting Other income on the Consolidated Statements of Income and Comprehensive Income from Utility and other income in this table. The difference between the sum of the total portfolio income items and Rental income on the Consolidated Statements of Income and Comprehensive Income is bad debt expense, which is presented in Property operating and maintenance expense in this table.
(2)Includes bad debt expense for all periods presented.
(3)See Part I. Item 2. Management's Discussion and Analysis—Non-GAAP Financial Measures for definitions and reconciliations of these Non-GAAP measures to Net Income available for Common Shareholders.

Total portfolio income from property operations for the quarter ended September 30, 2022, increased $8.3 million, or 5.5%, from the quarter ended September 30, 2021, driven by an increase of $3.0 million, or 2.1%, from our Core Portfolio and an increase of $5.3 million from our Non-Core Portfolio. The increase in income from property operations from our Core Portfolio was primarily due to higher property operating revenues, excluding deferrals, primarily in MH base rental income and RV and marina base rental income, partially offset by an increase in property operating expenses, excluding deferrals and property management. The increase in income from property operations from our Non-Core Portfolio was primarily attributed to income from properties acquired in 2021 and the first three quarters of 2022.

29

Management's Discussion and Analysis (continued)

Property Operating Revenues
MH base rental income in our Core Portfolio for the quarter ended September 30, 2022 increased $8.7 million, or 5.9%, from the quarter ended September 30, 2021, which reflects 5.5% growth from rate increases and 0.4% growth from occupancy gains. The average monthly base rental income per Site in our Core Portfolio increased to approximately $759 for the quarter ended September 30, 2022 from approximately $720 for the quarter ended September 30, 2021. The average occupancy for our Core Portfolio was 95.2% for the quarter ended September 30, 2022 and 95.0% for the quarter ended September 30, 2021.
RV and marina base rental income is comprised of the following:
 Core PortfolioTotal Portfolio
Quarters Ended September 30,Quarters Ended September 30,
(amounts in thousands)20222021Variance%
Change
20222021Variance%
Change
Annual$58,484 $53,861 $4,623 8.6 %$68,008 $60,435 $7,573 12.5 %
Seasonal8,722 7,195 1,527 21.2 %9,478 7,336 2,142 29.2 %
Transient29,516 31,822 (2,306)(7.2)%32,396 32,818 (422)(1.3)%
RV and marina base rental income$96,722 $92,878 $3,844 4.1 %$109,882 $100,589 $9,293 9.2 %
RV and marina base rental income in our Core Portfolio for the quarter ended September 30, 2022 increased $3.8 million, or 4.1%, from the quarter ended September 30, 2021, driven by an increase in Annual and Seasonal RV and marina base rental income that was partially offset by a decrease in Transient rental income. The increase in Annual RV and marina base rental income of 8.6% was driven by a net increase in Annual RV sites. The increase in Seasonal RV and marina base rental income of 21.2% was driven by increases in all regions except the Northeast, with the South as the largest contributor. The decrease in Transient RV and marina base rental income of 7.2% was primarily due to a decrease in transient RV revenue as a result of a reduction in the number of Transient sites available.
Annual membership subscription revenue in our Core Portfolio for the quarter ended September 30, 2022 increased $0.9 million, or 6.1%, from the quarter ended September 30, 2021. During the quarter ended September 30, 2022 we sold approximately 7,200 Thousand Trails Camping Pass memberships, an increase of 7.5% from the quarter ended September 30, 2021.
Utility and other income in our Core Portfolio for the quarter ended September 30, 2022 increased $2.5 million, or 9.9%, from the quarter ended September 30, 2021. The increase was primarily due to a $1.5 million increase in utility income, which was primarily due to an increase in electric income in the South and West, sewer income in all regions and trash income in the South. The utility recovery rate (utility income divided by utility expenses) for the quarters ended September 30, 2022 and 2021 was approximately 42% and 43%, respectively.
Property Operating Expenses
Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended September 30, 2022 increased $10.0 million, or 7.8%, from the quarter ended September 30, 2021, driven by increases in property operating and maintenance expenses of $9.4 million and real estate taxes of $0.5 million. Core property operating and maintenance expenses were higher in 2022 primarily due to increases in utility expenses of $4.2 million, property payroll of $2.8 million, administrative expenses of $1.3 million, and repair and maintenance of $1.2 million.









30

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)20222021Variance%
Change
Gross revenues from new home sales (1)
$32,850 $26,413 $6,437 24.4 %
Cost of new home sales (1)
29,380 24,519 4,861 19.8 %
Gross profit from new home sales3,470 1,894 1,576 83.2 %
Gross revenues from used home sales972 863 109 12.6 %
Cost of used home sales747 1,328 (581)(43.8)%
Profit (Loss) from used home sales225 (465)690 148.4 %
Gross revenue from brokered resales and ancillary services18,725 17,294 1,431 8.3 %
Cost of brokered resales and ancillary services10,097 8,983 1,114 12.4 %
Gross profit from brokered resales and ancillary services8,628 8,311 317 3.8 %
Home selling and ancillary operating expenses7,080 6,558 522 8.0 %
Income from home sales and other$5,243 $3,182 $2,061 64.8 %
Home sales volumes
Total new home sales (2)
331 338 (7)(2.1)%
 New Home Sales Volume - ECHO JV21 32 (11)(34.4)%
Used home sales81 104 (23)(22.1)%
Brokered home resales223 171 52 30.4 %
_________________________
(1) New home sales gross revenues and costs of new home sales do not include the revenues and costs associated with our ECHO JV.
(2) Total new home sales volume includes home sales from our ECHO JV.
Income from home sales and other operations was $5.2 million for the quarter ended September 30, 2022, an increase of $2.1 million, compared to $3.2 million in the quarter ended September 30, 2021. The increase in income from home sales and other operations was primarily due to an increase in gross profit from new home sales during the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, primarily driven by favorable housing trends in the broader real estate market.











31

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)
20222021Variance%
Change
Rental operations revenue (1)
$10,420 $11,962 $(1,542)(12.9)%
Rental home operating and maintenance expenses1,483 1,534 (51)(3.3)%
Income from rental operations8,937 10,428 (1,491)(14.3)%
Depreciation on rental homes (2)
2,521 2,654 (133)(5.0)%
Income from rental operations, net of depreciation$6,416 $7,774 $(1,358)(17.5)%
Gross investment in new manufactured home rental units (3)
$221,840 $231,705 $(9,865)(4.3)%
Gross investment in used manufactured home rental units$15,226 $16,667 $(1,441)(8.6)%
Net investment in new manufactured home rental units$179,565 $198,200 $(18,635)(9.4)%
Net investment in used manufactured home rental units$6,491 $10,878 $(4,387)(40.3)%
Number of occupied rentals – new, end of period (4)
2,594 3,132 (538)(17.2)%
Number of occupied rentals – used, end of period355 456 (101)(22.1)%
______________________
(1)Consists of Site rental income and home rental income. Approximately $6.7 million and $7.8 million for the quarters ended September 30, 2022 and September 30, 2021, respectively, of Site rental income is included in MH base rental income in the Core Portfolio Income from Property Operations table. The remainder of home rental income is included in rental home income in our Core Portfolio Income from Property Operations table.
(2)Presented in Depreciation and amortization in the Consolidated Statements of Income and Comprehensive Income.
(3)New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was $19.0 million and $17.8 million as of September 30, 2022 and September 30, 2021, respectively.
(4)Includes 165 and 253 homes rented through our ECHO JV as of September 30, 2022 and 2021, respectively.
Income from rental operations, net of depreciation, decreased $1.4 million during the quarter ended September 30, 2022, compared to the quarter ended September 30, 2021, primarily due to a decrease in the number of occupied rentals.
Other Income and Expenses
The following table summarizes other income and expenses, net:
Quarters Ended September 30,
(amounts in thousands, expenses shown as negative)
20222021Variance%
Change
Depreciation and amortization$(52,547)$(44,414)$(8,133)(18.3)%
Interest income1,865 1,805 60 3.3 %
Income from other investments, net2,399 1,238 1,161 93.8 %
General and administrative(11,086)(10,401)(685)(6.6)%
Other expenses(1,627)(797)(830)(104.1)%
Interest and related amortization(29,759)(27,361)(2,398)(8.8)%
Total other income and expenses, net$(90,755)$(79,930)$(10,825)(13.5)%

Total other income and expenses, net increased $10.8 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, primarily due to higher depreciation and amortization and higher interest and related amortization. The increase in depreciation and amortization is due to depreciation on Non-core properties acquired in 2021 and the nine months ended September 30, 2022.

Loss on sale of real estate and impairment, net
During the quarter ended September 30, 2022, we wrote down the carrying value of certain assets at six properties by approximately $3.7 million as a result of property damage caused by Hurricane Ian. For additional information see Part I. Item 2. Management's Discussion and Analysis Results Overview.

32

Management's Discussion and Analysis (continued)

Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021
Income from Property Operations
The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the nine months ended September 30, 2022 and 2021.
 Core PortfolioTotal Portfolio
Nine Months Ended September 30,Nine Months Ended September 30,
(amounts in thousands)20222021Variance%
Change
20222021Variance%
Change
MH base rental income (1)
$467,236 $441,893 $25,343 5.7 %$475,070 $450,261 $24,809 5.5 %
Rental home income (1)
11,487 12,695 (1,208)(9.5)%11,519 12,713 (1,194)(9.4)%
RV and marina base rental income (1)
280,514 254,239 26,275 10.3 %316,984 273,185 43,799 16.0 %
Annual membership subscriptions46,552 43,044 3,508 8.1 %47,003 43,048 3,955 9.2 %
Membership upgrade sales current period, gross26,770 29,343 (2,573)(8.8)%27,771 29,343 (1,572)(5.4)%
Utility and other income (1)
80,675 76,005 4,670 6.1 %92,612 80,539 12,073 15.0 %
Property operating revenues, excluding deferrals913,234 857,219 56,015 6.5 %970,959 889,089 81,870 9.2 %
Property operating and maintenance (1)(2)
318,772 289,857 28,915 10.0 %340,821 302,253 38,568 12.8 %
Real estate taxes50,762 48,703 2,059 4.2 %56,373 54,154 2,219 4.1 %
Rental home operating and maintenance4,091 4,043 48 1.2 %4,117 4,093 24 0.6 %
Sales and marketing, gross17,868 18,983 (1,115)(5.9)%18,466 18,987 (521)(2.7)%
Property operating expenses, excluding deferrals and property management391,493 361,586 29,907 8.3 %419,777 379,487 40,290 10.6 %
Income from property operations, excluding deferrals and property management (3)
521,741 495,633 26,108 5.3 %551,182 509,602 41,580 8.2 %
Property management55,973 48,956 7,017 14.3 %55,973 48,955 7,018 14.3 %
Income from property operations, excluding deferrals (3)
465,768 446,677 19,091 4.3 %495,209 460,647 34,562 7.5 %
Membership upgrade sales upfront payments and membership sales commission, deferred, net15,482 16,729 (1,247)(7.5)%15,482 16,729 (1,247)(7.5)%
Income from property operations (3)
$450,286 $429,948 $20,338 4.7 %$479,727 $443,918 $35,809 8.1 %
__________________________
(1)Rental income consists of the following total portfolio income items: 1) MH base rental income, 2) Rental home income, 3) RV and marina base rental income and 4) Utility income, which is calculated by subtracting Other income on the Consolidated Statements of Income and Comprehensive Income from Utility and other income in this table. The difference between the sum of the total portfolio income items and Rental income on the Consolidated Statements of Income and Comprehensive Income is bad debt expense, which is presented in Property operating maintenance expense in this table.
(2)Includes bad debt expense for all periods presented.
(3)See Part I. Item 2. Management's Discussion and Analysis—Non-GAAP Financial Measures for definitions and reconciliation of these Non-GAAP measures to Net Income available for Common Shareholders.

Total Portfolio income from property operations for the nine months ended September 30, 2022 increased $35.8 million, or 8.1%, from the same period in 2021, driven by an increase of $20.3 million, or 4.7%, from our Core Portfolio and by an increase of $15.5 million from our Non-Core Portfolio. The increase in income from property operations from our Core Portfolio was primarily due to higher property operating revenues, excluding deferrals, primarily in RV and marina base rental income and MH base rental income, partially offset by an increase in property operating expenses, excluding deferrals and property management. The increase in income from property operations from our Non-Core Portfolio was attributed to income from properties acquired in 2021 and the first three quarters of 2022.
Property Operating Revenues
MH base rental income in our Core Portfolio for the nine months ended September 30, 2022 increased $25.3 million, or 5.7%, from the same period in 2021, which reflects 5.3% growth from rate increases and 0.4% growth from occupancy gains. The average monthly base rental income per Site increased to approximately $753 in 2022 from approximately $715 in 2021. The average occupancy for the Core Portfolio was 95.1% for both the nine months ended September 30, 2022 and 2021.



33

Management's Discussion and Analysis (continued)


RV and marina base rental income is comprised of the following:
 Core PortfolioTotal Portfolio
Nine Months Ended September 30,Nine Months Ended September 30,
(amounts in thousands)
20222021Variance%
Change
20222021Variance%
Change
Annual$171,295 $157,497 $13,798 8.8 %$198,994 $173,702 $25,292 14.6 %
Seasonal42,684 29,235 13,449 46.0 %45,576 30,145 15,431 51.2 %
Transient66,535 67,507 (972)(1.4)%72,414 69,338 3,076 4.4 %
RV and marina base rental income$280,514 $254,239 $26,275 10.3 %$316,984 $273,185 $43,799 16.0 %
RV and marina base rental income in our Core Portfolio for the nine months ended September 30, 2022 increased $26.3 million, or 10.3%, from the same period in 2021 primarily due to increases in Annual and Seasonal RV and marina base rental income. The increase in Annual RV and marina base rental income of $13.8 million, or 8.8% was seen across all regions, primarily in the South, West and Northeast. The increase in Seasonal RV and marina base rental income of $13.4 million, or 46.0% was due to the rebound of seasonal demand in the South and West as we welcomed back our Canadian guests and our domestic customers were able to travel without restrictions.
Annual membership subscription revenue in our Core Portfolio for the nine months ended September 30, 2022 increased $3.5 million, or 8.1%, from the same period in 2021, reflecting a 5.7% increase in the number of Thousand Trails Camping members. The increase in annual membership subscription revenue of $3.5 million, or 8.1%, from 2021 was offset by a Membership upgrade sales current period, gross decrease of $2.6 million, or 8.8%, from 2021, as a result of the decrease in the number of upgrades sold primarily due to the introduction of the Adventure product during the quarter ended March 31, 2021.
Utility and other income in our Core Portfolio for the nine months ended September 30, 2022 increased $4.7 million, or 6.1%, from the same period in 2021. The increase was primarily due to an increase in utility income of $4.8 million and pass-through income of $1.2 million, partially offset by a decrease in insurance proceeds of $1.8 million. The increase in utility income was primarily due to an increase in electric income. The utility recovery rate (utility income divided by utility expenses) for both 2022 and 2021 was approximately 44%.
Property Operating Expenses
Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the nine months ended September 30, 2022 increased $29.9 million, or 8.3%, from the same period in 2021, driven by increases in property operating and maintenance expenses of $28.9 million. Core property operating and maintenance expenses were higher during the nine months ended September 30, 2022, compared to the same period in 2021 due to increases in utility expenses of $11.6 million, repairs and maintenance expenses of $6.7 million, and property payroll expenses of $6.2 million.












34

Management's Discussion and Analysis (continued)



Home Sales and Rental Operations
Home Sales and Other
The following table summarizes certain financial and statistical data for Home Sales and Other Operations:
Nine Months Ended September 30,
(amounts in thousands, except home sales volumes)
20222021Variance%
Change
Gross revenues from new home sales (1)
$92,228 $64,071 $28,157 43.9 %
Cost of new home sales (1)
82,726 60,477 22,249 36.8 %
Gross profit from new home sales9,502 3,594 5,908 164.4 %
Gross revenues from used home sales3,337 2,852 485 17.0 %
Cost of used home sales3,594 4,094 (500)(12.2)%
Loss from used home sales(257)(1,242)985 79.3 %
Gross revenue from brokered resales and ancillary services49,372 43,125 6,247 14.5 %
Cost of brokered resales and ancillary services25,574 20,970 4,604 22.0 %
Gross profit from brokered resales and ancillary services23,798 22,155 1,643 7.4 %
Home selling and ancillary operating expenses21,146 17,588 3,558 20.2 %
Income from home sales and other$11,897 $6,919 $4,978 71.9 %
Home sales volumes
Total new home sales (2)
957 825 132 16.0 %
 New Home Sales Volume - ECHO JV72 56 16 28.6 %
Used home sales250 314 (64)(20.4)%
Brokered home resales674 543 131 24.1 %
_________________________
(1) New home sales gross revenues and costs of new home sales do not include the revenues and costs associated with our ECHO JV.
(2) Total new home sales volume includes home sales from our ECHO JV.
The income from home sales and other was $11.9 million for the nine months ended September 30, 2022, an increase of $5.0 million, compared to $6.9 million for the nine months ended September 30, 2021. The increase in income from home sales and other operations was primarily due to an increase in gross profit from new home sales resulting from an increase of 132 new home sales during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by favorable housing trends in the broader real estate market.

35

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)
20222021Variance%
Change
Rental operations revenue (1)
$32,635 $36,714 $(4,079)(11.1)%
Rental home operating and maintenance expenses4,091 4,043 48 1.2 %
Income from rental operations28,544 32,671 (4,127)(12.6)%
Depreciation on rental homes (2)
7,537 7,959 (422)(5.3)%
Income from rental operations, net of depreciation$21,007 $24,712 $(3,705)(15.0)%
Gross investment in new manufactured home rental units (3)
$221,840 $231,705 $(9,865)(4.3)%
Gross investment in used manufactured home rental units$15,226 $16,667 $(1,441)(8.6)%
Net investment in new manufactured home rental units$179,565 $198,200 $(18,635)(9.4)%
Net investment in used manufactured home rental units$6,491 $10,878 $(4,387)(40.3)%
Number of occupied rentals – new, end of period (4)
2,594 3,132 (538)(17.2)%
Number of occupied rentals – used, end of period355 456 (101)(22.1)%
______________________
(1)Rental operations revenue consists of Site rental income and home rental income in our Core Portfolio. Approximately $21.1 million and $24.0 million of Site rental income for the nine months ended September 30, 2022 and 2021, respectively, are included in community base rental income within the Core Portfolio Income from Property Operations table. The remainder of home rental income is included in rental home income within the Core Portfolio Income from Property Operations table.
(2)Presented in Depreciation and amortization in the Consolidated Statements of Income and Comprehensive Income.
(3)Includes both occupied and unoccupied rental homes in our Core Portfolio. New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was $19.0 million and $17.8 million as of September 30, 2022 and 2021, respectively.
(4)Occupied rentals as of the end of the period in our Core Portfolio and includes 165 and 253 homes rented through our ECHO JV as of September 30, 2022 and 2021, respectively.

Income from rental operations, net of depreciation, was $3.7 million lower during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to a decrease in rental operations revenues as a result of a decrease in the number of new occupied rentals.
Other Income and Expenses
The following table summarizes other income and expenses, net:
Nine Months Ended September 30,
(amounts in thousands, expenses shown as negative)
20222021Variance%
Change
Depreciation and amortization$(152,737)$(138,127)$(14,610)(10.6)%
Interest income5,346 5,314 32 0.6 %
Income from other investments, net6,920 3,396 3,524 103.8 %
General and administrative(35,078)(31,141)(3,937)(12.6)%
Other expenses(6,636)(2,295)(4,341)(189.2)%
Early debt retirement(1,156)(2,784)1,628 58.5 %
Interest and related amortization(85,276)(80,767)(4,509)(5.6)%
Total other income and expenses, net$(268,617)$(246,404)$(22,213)(9.0)%

Total other income and expenses, net increased $22.2 million during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to higher depreciation and amortization, interest and related amortization and other expenses. The increase in depreciation and amortization was due to depreciation on Non-Core properties acquired in 2021 and the nine months ended September 30, 2022. The increase in Interest and related amortization was due to higher interest rates. The increase in Other expenses was primarily due to transaction/pursuit costs of $3.4 million related to unconsummated acquisitions.



36

Management's Discussion and Analysis (continued)

Loss on sale of real estate and impairment, net
During the nine months ended September 30, 2022, we wrote down the carrying value of certain assets at six properties by approximately $3.7 million as a result of property damage caused by Hurricane Ian. For additional information see Part 1. Item 2. Management's Discussion and Analysis - Results Overview.

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 LOC and proceeds from issuance of equity and debt securities.
One of our stated objectives is to maintain financial flexibility. Achieving this objective allows us to take advantage of strategic opportunities that may arise. When investing capital, we consider all potential uses, including returning capital to our stockholders or the conditions under which we may repurchase our stock. These conditions include, but are not limited to, market price, balance sheet flexibility, alternative opportunistic capital uses and capital requirements. We believe effective management of our balance sheet, including maintaining various access points to raise capital, managing future debt maturities and borrowing at competitive rates, enables us to meet this objective. Accessing long-term low-cost secured debt continues to be our focus.
On February 24, 2022, we entered into our current at-the-market (“ATM”) equity offering program with certain sales agents, pursuant to which we may sell, from time-to-time, shares of our common stock, par value $0.01 per share, having an aggregate offering price of up to $500.0 million. Prior to the new program, the aggregate offering price was up to $200.0 million.
During the nine months ended September 30, 2022, we sold 328,123 shares of our common stock under our prior ATM equity program for gross cash proceeds of approximately $28.0 million at a weighted average share price of $86.46. As of September 30, 2022, the full capacity of our current ATM equity offering program remained available for issuance.
As of September 30, 2022, we had available liquidity in the form of approximately 413.9 million shares of authorized and unissued common stock, par value $0.01 per share, and 10.0 million shares of authorized and unissued preferred stock registered for sale under the Securities Act of 1933, as amended.
During the nine months ended September 30, 2022, we closed on a $200.0 million senior unsecured term loan. The maturity date is January 21, 2027. The term loan bears interest at a rate of Secured Overnight Financing Rate (“SOFR”), plus approximately 1.30% to 1.80%, depending on leverage levels. We also closed on a secured refinancing transaction generating gross proceeds of $200.0 million. The loan is secured by one MH community, has a fixed interest rate of 3.36% per annum and has a maturity date of May 1, 2034. The net proceeds from the refinancing transaction were used to repay all debt scheduled to mature in 2022 and to repay amounts outstanding on the LOC. See Part I. Item 1. Financial Statements—Note 8. Borrowing Arrangements for further details.
We also utilize interest rate swaps to add stability to our interest expense and to manage our exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The changes in the fair value of the designated derivative are recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets and subsequently reclassified into earnings on the Consolidated Statements of Income and Comprehensive Income in the period that the hedged forecasted transaction affects earnings. For additional information regarding our interest rate swap, see Part I. Item 1. Financial Statements—Note 9. Derivative Instruments and Hedging.
We expect to meet our short-term liquidity requirements, including principal payments, capital improvements and dividend distributions for the next twelve months, generally through available cash, net cash provided by operating activities and our LOC. As of September 30, 2022, our LOC had a borrowing capacity of $405.0 million. As of September 30, 2022, the LOC bears interest at a rate of LIBOR plus 1.25% to 1.65%, carries an annual facility fee of 0.20% to 0.35% and matures on April 18, 2025.
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
37

Management's Discussion and Analysis (continued)

issuance of debt securities or the issuance of equity including under our ATM equity offering program.
We continue to monitor the development and adoption of an alternative index to LIBOR to manage the transition. Given the majority of our current debt is secured and not subject to LIBOR, we do not believe the discontinuation of LIBOR will have a significant impact on our consolidated financial statements.
The impact the COVID-19 pandemic will continue to have on our financial condition and cashflows is uncertain and is dependent upon various factors including the manner in which operations will continue at our Properties, customer payment patterns and operational decisions we have made and may make in the future in response to guidance from public authorities and/or for the health and safety of our employees, residents and guests.
The following table summarizes our cash flows activity:
Nine Months ended September 30,
(amounts in thousands)20222021
Net cash provided by operating activities$487,821 $453,607 
Net cash used in investing activities(398,884)(677,954)
Net cash (used in) provided by financing activities(181,825)240,559 
Net (decrease) increase in cash and restricted cash$(92,888)$16,212 
Operating Activities
Net cash provided by operating activities increased $34.2 million to $487.8 million for the nine months ended September 30, 2022 from $453.6 million for the nine months ended September 30, 2021. The increase in net cash provided by operating activities was primarily due to higher income from property operations of $35.8 million.
Investing Activities
Net cash used in investing activities decreased $279.1 million to $398.9 million for the nine months ended September 30, 2022 from $678.0 million for the nine months ended September 30, 2021. The decrease was due to a decrease in spending on acquisitions of $358.5 million, partially offset by an increase in capital improvement spending of $64.6 million and an increase in investments in unconsolidated joint ventures of $15.5 million.
Capital Improvements
The following table summarizes capital improvements:
Nine Months ended September 30,
(amounts in thousands)20222021
Asset preservation (1)
$32,302 $29,862 
Improvements and renovations(2)
26,950 19,401 
Property upgrades and development97,832 78,422 
New and used home investments (3) (4)
94,761 74,118 
Used home investments (3)
4,588 — 
Total property improvements256,433 201,803 
Corporate12,181 2,234 
Total capital improvements$268,614 $204,037 
______________________
(1)Includes upkeep of property infrastructure including utilities and streets and replacement of community equipment and vehicles.
(2)Includes enhancements to amenities such as buildings, common areas, swimming pools and replacement of furniture and site amenities.
(3)Excludes new home investments associated with our ECHO JV.
(4)Net proceeds from new and used home sale activities are reflected within Operating Activities.
Financing Activities
Net cash used in financing activities was $181.8 million for the nine months ended September 30, 2022. Net cash provided by financing activities was $240.6 million for the nine months ended September 30, 2021. The decrease in net cash provided by financing activities was primarily due to a decrease in net debt proceeds of approximately $432.7 million, partially offset by proceeds from the sale of common stock under our ATM program of approximately $28.4 million.

38

Management's Discussion and Analysis (continued)

Contractual Obligations
Significant ongoing contractual obligations consist primarily of long-term borrowings, interest expense, operating leases, LOC maintenance fees and ground leases. For a summary and complete presentation and description of our ongoing commitments and contractual obligations, see Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations in our 2021 Form 10-K.
Westwinds
The Operating Partnership operated and managed Westwinds, a 720 site mobilehome community, and Nicholson Plaza, an adjacent shopping center, both located in San Jose, California pursuant to ground leases that expired on August 31, 2022 and did not contain extension options. Westwinds provides affordable, rent-controlled homes to numerous residents, including families with children and residents over 65 years of age. For the year ended December 31, 2021, Westwinds and Nicholson Plaza generated approximately $6.0 million of net operating income.
The master lessor of these ground leases, The Nicholson Family Partnership (together with its predecessor in interest, the “Nicholsons”), has expressed a desire to redevelop Westwinds, and in a written communication, they claimed that we were obligated to deliver the property free and clear of any and all subtenancies upon the expiration of the ground leases on August 31, 2022. In connection with any redevelopment, the City of San Jose’s conversion ordinance requires, among other things, that the landowner provide relocation, rental and purchase assistance to the impacted residents. We believe the Nicholsons are unlawfully attempting to impose those obligations upon the Operating Partnership.
Westwinds opened in the 1970s and was developed by the original ground lessee with assistance from the Nicholsons. In 1997, the Operating Partnership acquired the leasehold interest in the ground leases. In addition to rent based on the operations of Westwinds, the Nicholsons received a percentage of gross revenues from the sale of new or used mobile homes in Westwinds.
The Operating Partnership entered into subtenancy agreements with the mobilehome residents of Westwinds. Because the ground leases with the Nicholsons had an expiration date of August 31, 2022, and no further right of extension, the Operating Partnership did not enter into any subtenancy agreements that extended beyond August 31, 2022. However, the mobilehome residents’ occupancy rights continued by operation of California state and San Jose municipal law beyond the expiration date of the ground leases. Notwithstanding this, the Nicholsons made what we believe to be an unlawful demand that the Operating Partnership deliver the property free and clear of any subtenancies upon the expiration of the ground leases by August 31, 2022. We believe the Nicholsons’ demand (i) violated California state and San Jose municipal law because the Nicholsons had demanded that the Operating Partnership remove all residents without just cause and (ii) conflicted with the terms and conditions of the ground leases, which contain no express or implied requirement that the Operating Partnership deliver the property free and clear of all subtenancies at the mobile home park and require, instead, that the Operating Partnership continuously operate the mobilehome park during the lease term.
On December 30, 2019, the Operating Partnership, together with certain interested parties, filed a complaint in California Superior Court for Santa Clara County, seeking declaratory relief pursuant to which it requested that the Court determine, among other things, that the Operating Partnership had no obligation to deliver the property free and clear of the mobilehome residents upon the expiration of the ground leases. The Operating Partnership and the interested parties filed an amended complaint on January 29, 2020.
Following the filing of our lawsuit, the City of San Jose took steps to accelerate the passage of a general plan amendment previously under review by the City to change the designation for Westwinds from its current general plan designation of Urban Residential (which would allow for higher density redevelopment), to a newly created designation of Mobile Home Park. The Nicholsons expressed opposition to this change in designation. However, on March 10, 2020, following significant pressure from residents and advocacy groups, the City Council approved this new designation for all 58 mobilehome communities in the City of San Jose, including Westwinds. In addition to requirements imposed by California state and San Jose municipal law, the change in designation requires, among other things, a further amendment to the general plan to a different land use designation by the City Council prior to any change in use.
The Nicholsons filed a demand for arbitration on January 28, 2020, which they subsequently amended, seeking (i) a declaration that the Operating Partnership, as the “owner and manager” of Westwinds, is “required by the Ground Leases, and State and local law to deliver the Property free of any encumbrances or third-party claims at the expiration of the lease terms,” (ii) that the Operating Partnership anticipatorily breached the ground leases by publicly repudiating any such obligation and (iii) that the Operating Partnership is required to indemnify the Nicholsons with respect to the claims brought by the interested parties in the Superior Court proceeding.
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Management's Discussion and Analysis (continued)

On February 3, 2020, the Nicholsons filed a motion in California Superior Court to compel arbitration and to stay the Superior Court litigation, which motion was heard on June 25, 2020. On July 29, 2020, the Superior Court issued a final order denying the Nicholsons' motion to compel arbitration. The Nicholsons filed a notice of appeal on August 7, 2020, which appeal was heard on February 1, 2022. On February 4, 2022, the California Court of Appeal affirmed the Superior Court’s order denying the Nicholsons' motion to compel arbitration. On February 22, 2022, the Nicholsons filed a petition for rehearing, which the Court of Appeal denied on March 2, 2022. On March 16, 2022, the Nicholsons filed a petition for review with the California Supreme Court, which the California Supreme Court denied on April 20, 2022. On May 18, 2022, the Nicholsons filed a cross complaint alleging that the Operating Partnership is obligated to deliver Westwinds free and clear of encumbrances and in good condition and repair. The cross complaint asserts that it is no longer feasible for the Operating Partnership to cure its alleged breaches given that the ground leases terminate on August 31, 2022. The Nicholsons filed a demurrer to our complaint which was denied by the Superior Court.
On July 19, 2022, the Nicholsons sent two notices of default to the Operating Partnership, one related to Westwinds and the other related to Nicholson Plaza, the adjacent shopping center. The notices generally assert that the Operating Partnership failed to maintain or repair certain infrastructure and improvements at Westwinds and Nicholson Plaza. The Operating Partnership disputes the contention that it did not maintain Westwinds and Nicholson Plaza in compliance with the terms of the applicable ground leases.
The arbitration that was previously stayed pursuant to an agreement between the Operating Partnership and the Nicholsons was set for a hearing on October 31, 2022 with respect to the Nicholsons’ claim that the Operating Partnership is required to indemnify the Nicholsons with respect to the claims brought by the interested parties in the Superior Court proceeding and a claim by the Operating Partnership for recovery of fees incurred in connection with the Nicholsons’ failed motion to compel arbitration.
On October 6, 2022, the parties to the Superior Court proceeding as well as the arbitration entered into a binding agreement pursuant to which, among other things, the parties agreed to dismiss with prejudice all claims pending in the Superior Court and in the arbitration; however, the Nicholsons reserved their rights to pursue their claim that the Operating Partnership failed to maintain or repair certain infrastructure and improvements at Westwinds and Nicholson Plaza. To the extent the Nicholsons pursue such claim, we intend to vigorously defend our interests. The parties are in the process of further documenting and implementing the settlement agreement.
Off-Balance Sheet Arrangements
As of September 30, 2022, we have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Refer to Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K for a discussion of our critical accounting policies. There have been no significant changes to our critical accounting policies and estimates during the quarter ended September 30, 2022.

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 counterparty risk;
our ability to renew our insurance policies at existing rates and on consistent terms;
home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility;
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Management's Discussion and Analysis (continued)

results from home sales and occupancy will continue to be impacted by local economic conditions, including an adequate supply of homes at reasonable costs, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing;
impact of government intervention to stabilize site-built single-family housing and not manufactured housing;
effective integration of recent acquisitions and our estimates regarding the future performance of recent acquisitions;
the completion of future transactions in their entirety, if any, and timing and effective integration with respect thereto;
unanticipated costs or unforeseen liabilities associated with recent acquisitions;
the effect of Hurricane Ian on our business including, but not limited to the following: (i) the timing and cost of recovery, (ii) the impact of the condition of properties and homes on occupancy demand and related rent revenue and (iii) the timing and amount of insurance proceeds;
our ability to obtain financing or refinance existing debt on favorable terms or at all;
the effect of inflation and interest rates;
the effect from any breach of our, or any of our vendors’, data management systems;
the dilutive effects of issuing additional securities;
the outcome of pending or future lawsuits or actions brought by or against us, including those disclosed in our filings with the Securities and Exchange Commission; and
other risks indicated from time to time in our filings with the Securities and Exchange Commission.

In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration of the pandemic, the extent of the adverse health impact on the general population and on our residents, customers, and employees in particular, its impact on the employment rate and the economy, the extent and impact of governmental responses, and the impact of operational changes we have implemented and may implement in response to the pandemic.
These forward-looking statements are based on management’s present expectations and beliefs about future events. 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.
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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 2021 Form 10-K. There have been no material changes in the assumptions used or results obtained regarding market risk since December 31, 2021.

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, 2022. 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, 2022. 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, 2022, 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.


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Part II – Other Information

Item 1.Legal Proceedings
See Part I. 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 Part I. Item 1A. Risk Factors in our 2021 Form 10-K.

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
31.2
32.1
32.2
101.INSXBRL 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.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)



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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 21, 2022
By:/s/ Marguerite Nader
Marguerite Nader
President and Chief Executive Officer
(Principal Executive Officer)
Date: October 21, 2022
By:/s/ Paul Seavey
Paul Seavey
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: October 21, 2022
By:/s/ Valerie Henry
Valerie Henry
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)

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