EQUITY LIFESTYLE PROPERTIES INC [ELS] Filings

10-Q 1 els-20240630.htm 10-Q els-20240630

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 June 30, 2024


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

For the transition period from to

Commission file number: 1-11718

_________________________________________________________

EQUITY LIFESTYLE PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

_________________________________________________________

Maryland

36-3857664

(State or other jurisdiction of incorporation)

(IRS Employer Identification Number)

Two North Riverside Plaza, Suite 800

Chicago,

Illinois

60606

(Address of Principal Executive Offices)

(Zip Code)

(312) 279-1400

Registrant's telephone number, including area code


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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	ELS	New York Stock Exchange

_________________________________________________________

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

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

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


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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 186,518,496 shares of Common Stock as of July 24, 2024.

Equity LifeStyle Properties, Inc.

Table of Contents


		Page
Part I - Financial Information
Item 1.	Financial Statements (unaudited)
	Index To Financial Statements
	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	3
	Consolidated Statements of Income and Comprehensive Income for the quarters and six months ended June 30 , 2024 and 2023	4
	Consolidated Statements of Changes in Equity for the quarters and six months ended June 30 , 2024 and 2023	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
Part II - Other Information
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	36

Part I – Financial Information

Item 1. Financial Statements

Equity LifeStyle Properties, Inc.

Consolidated Balance Sheets

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


	June 30, 2024		December 31, 2023
	(unaudited)
Assets
Investment in real estate:
Land	$	2,088,682	$	2,088,657
Land improvements	4,490,978		4,380,649
Buildings and other depreciable property	1,225,474		1,236,985
	7,805,134		7,706,291
Accumulated depreciation	(2,544,276)		(2,448,876)
Net investment in real estate	5,260,858		5,257,415
Cash and restricted cash	35,658		29,937
Notes receivable, net	51,504		49,937
Investment in unconsolidated joint ventures	86,439		85,304
Deferred commission expense	54,882		53,641
Other assets, net	156,134		137,499
Total Assets	$	5,645,475	$	5,613,733

Liabilities and Equity
Liabilities:
Mortgage notes payable, net	$	2,959,443	$	2,989,959
Term loans, net	498,007		497,648
Unsecured line of credit	14,000		31,000
Accounts payable and other liabilities	177,819		151,567
Deferred membership revenue	228,099		218,337
Accrued interest payable	11,978		12,657
Rents and other customer payments received in advance and security deposits	152,433		126,451
Distributions payable	93,402		87,493
Total Liabilities	4,135,181		4,115,112
Equity:
Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of June 30, 2024 and December 31, 2023; none issued and outstanding.	—		—
Common stock, $0.01 par value, 600,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 186,516,405 and 186,426,281 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.	1,917		1,917
Paid-in capital	1,646,160		1,644,319
Distributions in excess of accumulated earnings	(213,486)		(223,576)
Accumulated other comprehensive income	5,292		6,061
Total Stockholders’ Equity	1,439,883		1,428,721
Non-controlling interests – Common OP Units	70,411		69,900
Total Equity	1,510,294		1,498,621
Total Liabilities and Equity	$	5,645,475	$	5,613,733

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

Equity LifeStyle Properties, Inc.

Consolidated Statements of Income and Comprehensive Income

(amounts in thousands, except per share data)

(unaudited)


	Quarters Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Rental income	$	300,788	$	288,655	$	617,386	$	585,106
Annual membership subscriptions	16,369		16,189		32,584		32,159
Membership upgrade sales	4,050		3,614		7,997		7,119

Other income	16,197		17,911		31,746		35,625
Gross revenues from home sales, brokered resales and ancillary services	37,565		38,913		67,618		71,046
Interest income	2,420		2,259		4,588		4,347
Income from other investments, net	2,630		2,473		4,668		4,564
Total revenues	380,019		370,014		766,587		739,966
Expenses:
Property operating and maintenance	126,105		122,214		240,888		234,697
Real estate taxes	20,099		18,832		40,886		37,148
Membership sales and marketing	6,126		5,521		11,423		10,359

Property management	19,436		19,359		39,146		38,823
Depreciation and amortization	51,344		51,464		102,452		101,966
Cost of home sales, brokered resales and ancillary services	27,650		29,268		49,617		52,409
Home selling expenses and ancillary operating expenses	7,472		7,170		13,619		14,094
General and administrative	8,985		16,607		20,974		28,268
Casualty-related charges/(recoveries), net	(6,170)		—		(21,013)		—
Other expenses	1,387		1,381		2,718		2,849

Interest and related amortization	36,037		33,122		69,580		65,710
Total expenses	298,471		304,938		570,290		586,323
Income before income taxes and other items	81,548		65,076		196,297		153,643
Loss on sale of real estate and impairment, net	—		—		—		(2,632)
Income tax benefit	—		—		239		—

Equity in income of unconsolidated joint ventures	579		973		862		1,497
Consolidated net income	82,127		66,049		197,398		152,508

Income allocated to non-controlling interests – Common OP Units	(3,822)		(3,121)		(9,188)		(7,209)
Redeemable perpetual preferred stock dividends	(8)		(8)		(8)		(8)
Net income available for Common Stockholders	$	78,297	$	62,920	$	188,202	$	145,291

Consolidated net income	$	82,127	$	66,049	$	197,398	$	152,508
Other comprehensive income (loss):
Adjustment for fair market value of swaps	12		2,186		(769)		(1,792)
Consolidated comprehensive income	82,139		68,235		196,629		150,716
Comprehensive income allocated to non-controlling interests – Common OP Units	(3,823)		(3,225)		(9,152)		(7,124)
Redeemable perpetual preferred stock dividends	(8)		(8)		(8)		(8)
Comprehensive income attributable to Common Stockholders	$	78,308	$	65,002	$	187,469	$	143,584

Earnings per Common Share – Basic	$	0.42	$	0.34	$	1.01	$	0.78

Earnings per Common Share – Fully Diluted	$	0.42	$	0.34	$	1.01	$	0.78

Weighted average Common Shares outstanding – Basic	186,318		186,023		186,303		185,962
Weighted average Common Shares outstanding – Fully Diluted	195,465		195,430		195,505		195,388

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

Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes in Equity

(amounts in thousands)

(unaudited)


	Common Stock		Paid-in Capital		Redeemable Perpetual Preferred Stock		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interests – Common OP Units		Total Equity
Balance as of December 31, 2023	$	1,917	$	1,644,319	$	—	$	(223,576)	$	6,061	$	69,900	$	1,498,621


Issuance of Common Stock through employee stock purchase plan	—		382		—		—		—		—		382

Compensation expenses related to restricted stock and stock options	—		1,716		—		—		—		—		1,716
Repurchase of Common Stock or Common OP Units	—		(1,908)		—		—		—		—		(1,908)
Adjustment for Common OP Unitholders in the Operating Partnership	—		58		—		—		—		(58)		—
Adjustment for fair market value of swap	—		—		—		—		(781)		—		(781)
Consolidated net income	—		—		—		109,905		—		5,366		115,271
Distributions	—		—		—		(89,050)		—		(4,348)		(93,398)
Other	—		(157)		—		—		—		—		(157)
Balance as of March 31, 2024	$	1,917	$	1,644,410	$	—	$	(202,721)	$	5,280	$	70,860	$	1,519,746


Issuance of Common Stock through employee stock purchase plan	—		382		—		—		—		—		382

Compensation expenses related to restricted stock and stock options	—		1,767		—		—		—		—		1,767

Adjustment for Common OP Unitholders in the Operating Partnership	—		(76)		—		—		—		76		—
Adjustment for fair market value of swap	—		—		—		—		12		—		12
Consolidated net income	—		—		8		78,297		—		3,822		82,127
Distributions	—		—		(8)		(89,062)		—		(4,347)		(93,417)
Other	—		(323)		—		—		—		—		(323)
Balance as of June 30, 2024	$	1,917	$	1,646,160	$	—	$	(213,486)	$	5,292	$	70,411	$	1,510,294

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

Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes in Equity (continued)

(amounts in thousands)

(unaudited)


	Common Stock		Paid-in Capital		Redeemable Perpetual Preferred Stock		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling interests – Common OP Units		Total Equity
Balance as of December 31, 2022	$	1,916	$	1,628,618	$	—	$	(204,248)	$	19,119	$	72,080	$	1,517,485
Exchange of Common OP Units for Common Stock	—		198		—		—		—		(198)		—

Issuance of Common Stock through employee stock purchase plan	—		363		—		—		—		—		363

Compensation expenses related to restricted stock and stock options	—		2,549		—		—		—		—		2,549
Repurchase of Common Stock or Common OP Units	—		(1,932)		—		—		—		—		(1,932)
Adjustment for Common OP Unitholders in the Operating Partnership	—		168		—		—		—		(168)		—
Adjustment for fair market value of swap	—		—		—		—		(3,978)		—		(3,978)
Consolidated net income	—		—		—		82,371		—		4,088		86,459
Distributions	—		—		—		(83,326)		—		(4,136)		(87,462)
Other	—		(98)		—		—		—		—		(98)
Balance as of March 31, 2023	$	1,916	$	1,629,866	$	—	$	(205,203)	$	15,141	$	71,666	$	1,513,386


Issuance of Common Stock through employee stock purchase plan	—		504		—		—		—		—		504

Compensation expenses related to restricted stock and stock options	—		8,584		—		—		—		—		8,584

Adjustment for Common OP Unitholders in the Operating Partnership	—		(503)		—		—		—		503		—
Adjustment for fair market value of swap	—		—		—		—		2,186		—		2,186
Consolidated net income	—		—		8		62,920		—		3,121		66,049
Distributions	—		—		(8)		(83,357)		—		(4,135)		(87,500)
Other	—		(97)		—		—		—		—		(97)
Balance as of June 30, 2023	$	1,916	$	1,638,354	$	—	$	(225,640)	$	17,327	$	71,155	$	1,503,112

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

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
Cash Flows From Operating Activities:
Consolidated net income	$	197,398	$	152,508
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Loss on sale of real estate and impairment, net	—		2,632

Depreciation and amortization	105,156		104,673
Amortization of loan costs	2,584		2,418
Debt premium amortization	—		(59)
Equity in income of unconsolidated joint ventures	(862)		(1,497)
Distributions of income from unconsolidated joint ventures	421		981
Proceeds from insurance claims, net	(18,519)		13,022
Compensation expense related to incentive plans	5,045		12,695
Revenue recognized from membership upgrade sales upfront payments	(7,997)		(7,119)
Commission expense recognized related to membership sales	2,238		2,186
Deferred income tax benefit	(239)		—
Changes in assets and liabilities:
Manufactured homes, net	9,960		(30,402)

Notes receivable, net	(1,619)		(2,054)
Deferred commission expense	(3,479)		(3,723)
Other assets, net	(13,162)		(21,719)
Accounts payable and other liabilities	21,212		(3,287)
Deferred membership revenue	17,758		19,618
Rents and other customer payments received in advance and security deposits	25,982		25,953
Net cash provided by operating activities	341,877		266,826
Cash Flows From Investing Activities:
Real estate acquisitions, net	(25)		(9,180)

Investment in unconsolidated joint ventures	(3,852)		(3,310)
Distributions of capital from unconsolidated joint ventures	2,709		2,577
Proceeds from insurance claims, net	13,793		5,309


Capital improvements	(117,231)		(149,002)
Net cash used in investing activities	(104,606)		(153,606)

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

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows (continued)

(amounts in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan	764		867

Distributions:
Common Stockholders	(172,476)		(159,636)
Common OP Unitholders	(8,422)		(7,934)
Preferred Stockholders	(8)		(8)

Share based award tax withholding payments	(1,908)		(1,932)
Principal payments and mortgage debt repayment	(31,913)		(32,814)
Mortgage notes payable financing proceeds	—		88,753


Line of credit repayment	(239,000)		(299,000)
Line of credit proceeds	222,000		306,000
Debt issuance and defeasance costs	(108)		(1,560)
Other	(479)		(196)
Net cash used in financing activities	(231,550)		(107,460)
Net increase in cash and restricted cash	5,721		5,760
Cash and restricted cash, beginning of period	29,937		22,347
Cash and restricted cash, end of period	$	35,658	$	28,107


	Six Months Ended June 30,
	2024		2023
Supplemental Information:
Cash paid for interest, net	$	70,188	$	64,068
Cash paid for the purchase of manufactured homes	$	24,537	$	66,562

Real estate acquisitions:
Investment in real estate	$	(25)	$	(9,911)


Other assets, net	—		13





Rents and other customer payments received in advance and security deposits	—		718
Real estate acquisitions, net	$	(25)	$	(9,180)

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

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 1 – Organization and Basis of Presentation

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

Our Properties are owned primarily by the Operating Partnership and managed internally by affiliates of the Operating Partnership. ELS is the sole general partner of the Operating Partnership, has exclusive responsibility and discretion in management and control of the Operating Partnership and held a 95.3% interest as of June 30, 2024. 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, 2023.

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 of ASC 842, Leases 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.

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.

Revenue 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 June 30, 2024 and December 31, 2023, restricted cash consisted of $22.4 million and $25.7 million, respectively, primarily related to cash reserved for customer deposits and escrows for insurance and real estate taxes.

We carry comprehensive insurance coverage for losses resulting from property damage and environmental liability and business interruption claims on all of our properties. We record the estimated amount of expected insurance proceeds for property damage, clean-up costs and other losses incurred as an asset (typically a receivable from our insurance carriers) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the losses incurred and any amount of insurance recovery related to business interruption are considered a gain contingency and will be recognized in the period in which the insurance proceeds are received. During the six months ended June 30, 2024 and June 30, 2023, we recognized approximately $1.2 million and $10.3 million, respectively, of expense related to debris removal and cleanup related to Hurricane Ian, and we recorded an offsetting insurance recovery revenue accrual of $1.2 million and $10.3 million, respectively, to offset the expenses incurred during the same period. During the six months ended June 30, 2024 and June 30, 2023, we also recorded $21.0 million and zero, respectively, of insurance recovery revenue in excess of expenses and business interruption proceeds related to Hurricane Ian. The debris and cleanup costs and offsetting recovery accrual and reimbursement of capital expenditures are reflected in Casualty-related charges/(recoveries), net on the Consolidated Statements of Income and Comprehensive Income.

(d) New Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of ASU 2023-07 on our consolidated financial statements.

In March 2024, the Securities and Exchange Commission (“SEC”) adopted final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, that requires registrants to provide climate-related disclosures in their annual reports and registration statements. On April 4, 2024, the SEC voluntarily stayed implementation of the final rule pending the completion of judicial review. We are currently evaluating the impact of the rule on our disclosures.

Note 3 – Leases

Lessor

The leases entered into between a 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

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 3 – Leases (continued)

Properties. Rental rate increases at these Properties are primarily a function of increases in the Consumer Price Index, taking into consideration certain other factors. 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 June 30, 2024
2024	$	60,588
2025	119,376
2026	28,439
2027	26,549
2028	24,648
Thereafter	51,211
Total	$	310,811

Lessee

We lease land under non-cancelable operating leases at 10 Properties expiring on various dates between 2028 and 2054. The majority of the leases have terms requiring fixed payments plus additional rents based on a percentage of gross revenues at those Properties. We also have other operating leases, primarily office space, expiring at various dates through 2033. For the quarters ended June 30, 2024 and 2023, total operating lease payments were $1.7 million in both periods. For the six months ended June 30, 2024 and 2023, total operating lease payments were $3.2 million in both periods.

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 June 30, 2024:


	As of June 30, 2024
(amounts in thousands)	Ground Leases		Office and Other Leases		Total
2024	$	409	$	2,543	$	2,952
2025	680		3,758		4,438
2026	684		3,395		4,079
2027	689		3,131		3,820
2028	685		2,955		3,640
Thereafter	3,840		10,745		14,585
Total undiscounted rental payments	6,987		26,527		33,514
Less imputed interest	(1,716)		(4,326)		(6,042)
Total lease liabilities	$	5,271	$	22,201	$	27,472

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 $24.3 million and $27.5 million, respectively, as of June 30, 2024. The weighted average remaining lease term for our operating leases was eight years and the weighted average incremental borrowing rate was 4.0% as of June 30, 2024.

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 $23.6 million and $25.7 million, respectively, as of December 31, 2023. The weighted average remaining lease term for our operating leases was eight years and the weighted average incremental borrowing rate was 3.9% as of December 31, 2023.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 4 – Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per share of common stock (“Common Share”) for the quarters and six months ended June 30, 2024 and 2023:


	Quarters Ended June 30,				Six Months Ended June 30,
(amounts in thousands, except per share data)	2024		2023		2024		2023
Numerators:
Net income available for Common Stockholders – Basic	$	78,297	$	62,920	$	188,202	$	145,291
Amounts allocated to non controlling interest (dilutive securities)	3,822		3,121		9,188		7,209
Net income available for Common Stockholders – Fully Diluted	$	82,119	$	66,041	$	197,390	$	152,500
Denominators:
Weighted average Common Shares outstanding – Basic	186,318		186,023		186,303		185,962
Effect of dilutive securities:
Exchange of Common OP Units for Common Shares	9,105		9,240		9,105		9,251
Stock options and restricted stock	42		167		97		175
Weighted average Common Shares outstanding and OP Units – Fully Diluted	195,465		195,430		195,505		195,388

Earnings per Common Share – Basic	$	0.42	$	0.34	$	1.01	$	0.78

Earnings per Common Share – Fully Diluted	$	0.42	$	0.34	$	1.01	$	0.78

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, 2023:

Distribution Amount Per Share

For the Quarter Ended

Stockholder Record Date

Payment Date

$0.4475

March 31, 2023

April 14, 2023

$0.4475

June 30, 2023

July 14, 2023

$0.4475

September 30, 2023

September 29, 2023

October 13, 2023

$0.4475

December 31, 2023

December 29, 2023

January 12, 2024

$0.4775

March 31, 2024

March 28, 2024

April 12, 2024

$0.4775

June 30, 2024

June 28, 2024

July 12, 2024

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. There were no OP units exchanged for Common Stock during the six months ended June 30, 2024 and 25,496 OP Units exchanged for an equal number of shares of Common Stock during the six months ended June 30, 2023.

Equity Offering Program

On February 28, 2024, we entered into a new at-the-market (“ATM”) equity offering program, 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. As of June 30, 2024, the full capacity of our ATM equity offering program remained available for issuance.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 6 – Investment in Unconsolidated Joint Ventures

The following table summarizes our investments in unconsolidated joint ventures (investment and income/(loss) amounts in thousands):


						Investment as of				Income/(Loss) for the Six Months Ended
Investment	Location	Number of Sites	Economic Interest (a)			June 30, 2024		December 31, 2023		June 30, 2024		June 30, 2023
Meadows	Various	1,077	50	%		$	705	$	534	$	1,370	$	1,272
Lakeshore	Florida	721			(b)	3,708		3,387		424		324
Voyager	Arizona	—	—	%	(c)	—		—		—		694
ECHO JV	Various	—	50	%		2,801		2,773		27		(206)
RVC	Various	1,489	80	%	(d)	63,531		62,441		(547)		(373)
Mulberry Farms	Arizona	200	50	%		10,174		10,546		(507)		15
Hiawassee KOA JV	Georgia	283	50	%		5,520		5,623		95		(229)
		3,770				$	86,439	$	85,304	$	862	$	1,497

_____________________

(a)The percentages shown approximate our economic interest as of June 30, 2024. 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)In March 2023, we sold our 33% interest in the utility plant servicing Voyager RV Resort.

(d)Includes three joint ventures which include eight operating RV communities and one RV property under development.

We received approximately $3.1 million and $3.6 million in distributions from our unconsolidated joint ventures for the six months ended June 30, 2024 and 2023, respectively. Approximately $1.1 million of the distributions made to us exceeded our basis in our unconsolidated joint ventures for both the six months ended June 30, 2024 and 2023, and as such, were recorded as income from unconsolidated joint ventures.

Note 7 – Borrowing Arrangements

Mortgage Notes Payable

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


	As of June 30, 2024				As of December 31, 2023
(amounts in thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgage notes payable, excluding deferred financing costs	$	2,381,378	$	2,985,236	$	2,425,384	$	3,017,149

The weighted average interest rate on our outstanding mortgage indebtedness, including the impact of loan cost amortization on mortgage indebtedness, as of June 30, 2024, was approximately 3.9% per annum. The debt bears interest at stated rates ranging from 2.4% to 5.1% per annum and matures on various dates ranging from 2025 to 2041. The debt encumbered a total of 120 of our Properties as of both June 30, 2024 and December 31, 2023, and the gross carrying value of such Properties was approximately $3,227.1 million and $3,194.1 million, as of June 30, 2024 and December 31, 2023, respectively.

Unsecured Debt

We previously entered into a Third Amended and Restated Credit Agreement (“Credit Agreement”), pursuant to which we have access to a $500.0 million unsecured line of credit (“LOC”) and a $300.0 million senior unsecured term loan (the “$300 million Term Loan”). We have the option to increase the borrowing capacity of the LOC by $200.0 million, subject to certain conditions. The LOC bears interest at a rate of the Secured Overnight Financing Rate (“SOFR”) plus 0.10% plus 1.25% to 1.65% and requires an annual facility fee of 0.20% to 0.35% and matures on April 18, 2025. The $300 million Term Loan has an interest rate of SOFR plus 0.10% plus 1.40% to 1.95% per annum. For both the LOC and the $300 million Term Loan, the spread over SOFR is variable based on leverage throughout the respective loan terms. On July 18, 2024, we modified our LOC to extend the maturity date to July 18, 2028. See Note 13. Subsequent Events for additional information.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 7 - Borrowing Arrangements (continued)

During the year ended December 31, 2022, we entered into a $200.0 million senior unsecured term loan agreement (the “$200.0 million Term Loan”). The maturity date is January 21, 2027, with an interest rate of SOFR plus 0.10% plus 1.20% to 1.70%, depending on leverage levels.

The LOC had a balance of $14.0 million and $31.0 million outstanding as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024, our LOC had a remaining borrowing capacity of $485.9 million.

As of June 30, 2024, we were in compliance in all material respects with the covenants in all our borrowing arrangements.

Note 8 – 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.

In March 2021, we entered into a Swap Agreement (the “2021 Swap”), with a notional amount of $300.0 million allowing us to trade the variable interest rate associated with our $300.0 million Term Loan for a fixed interest rate. In March 2023, we amended the 2021 Swap agreement to reflect the change in the $300.0 million Term Loan interest rate benchmark from LIBOR to SOFR (see Note 7. Borrowing Arrangements). The 2021 Swap had a fixed interest rate of 0.41% per annum. The 2021 Swap matured on March 25, 2024.

In April 2023, we entered into a Swap Agreement (the “2023 Swap”) with a notional amount of $200.0 million allowing us to trade the variable interest rate associated with our $200.0 million Term Loan for a fixed interest rate. The 2023 Swap has a fixed interest rate of 3.68% per annum and matures on January 21, 2027. Based on the leverage as of June 30, 2024, our spread over SOFR was 1.20% resulting in an estimated all-in interest rate of 4.88% per annum.

In April 2024, we entered into three Swap Agreements (“2024 Swaps”) with an aggregate notional value of $300.0 million allowing us to trade the variable interest rate associated with our $300.0 million Term Loan (see Note 7. Borrowing Arrangements) for a fixed interest rate. The 2024 Swaps have a weighted average fixed interest rate of 4.65% per annum and mature on April 17, 2026. Based on the leverage as of June 30, 2024, our spread over SOFR was 1.40% resulting in an estimated weighted average all-in fixed interest rate of 6.05% per annum.

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


		As of June 30,		As of December 31,
(amounts in thousands)	Balance Sheet Location	2024		2023
Interest Rate Swaps	Other assets, net	$	5,292	$	6,061

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


Derivatives in Cash Flow Hedging Relationship	Amount of (gain)/loss recognized in OCI on derivative for the six months ended June 30,				Location of (gain)/ loss reclassified from Accumulated OCI into income	Amount of (gain)/loss reclassified from Accumulated OCI into income for the six months ended June 30,
(amounts in thousands)	2024		2023		(amounts in thousands)	2024		2023
Interest Rate Swaps	$	(5,976)	$	(6,081)	Interest Expense	$	(6,745)	$	(7,874)

During the next twelve months, we estimate that $3.7 million will be reclassified from Accumulated other comprehensive income (loss) as a decrease to interest expense. This estimate may be subject to change as the underlying SOFR changes. We determined that no adjustment was necessary for non-performance risk on our derivative obligation. As of June 30, 2024, we had not posted any collateral related to the 2023 Swap or 2024 Swaps.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 9 - Deferred Revenue from Membership Upgrade Sales and Deferred Commission Expense

The components of the change in deferred revenue from membership upgrades and deferred commission expense were as follows:


(amounts in thousands)	Six Months Ended June 30, 2024		Six Months Ended June 30, 2023
Deferred revenue - upfront payments from membership upgrade sales, beginning	$	206,625	$	185,660
Membership upgrade sales	16,328		17,253
Revenue recognized from membership upgrade sales upfront payments	(7,997)		(7,119)
Net increase in deferred revenue - upfront payments from membership grade sales	8,331		10,134
Deferred revenue - upfront payments from membership upgrade sales, ending (a)	$	214,956	$	195,794

Deferred commission expense, beginning	$	53,641	$	50,441
Deferred commission expense	3,479		3,723
Commission expense recognized	(2,238)		(2,186)
Net increase in deferred commission expense	1,241		1,537
Deferred commission expense, ending	$	54,882	$	51,978

_____________________

(a)Included in Deferred membership revenue on the Consolidated Balance Sheets.

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, 2024, 90,378 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 February 4, 2025, February 3, 2026 and February 7, 2027, respectively, and have a grant date fair value of $3.0 million. The remaining 50% are performance-based awards vesting in equal installments on February 4, 2025, February 3, 2026 and February 7, 2027, respectively, upon meeting performance conditions as established by the Compensation Committee in the year of the vesting period. They are valued using the closing price at the grant date when all the key terms and conditions are known to all parties. The 15,062 shares of restricted stock subject to 2024 performance goals have a grant date fair value of $1.0 million.

Our 2024 Equity Incentive Plan (the “2024 Plan”) was adopted by our Board of Directors on February 6, 2024 and approved by our stockholders on April 30, 2024. The 2024 Plan replaces the 2014 Plan and is the sole plan available to us to provide equity incentive compensation to eligible participants as of its adoption. No further awards will be granted under the 2014 Plan. The 2024 Plan authorizes grants of options, restricted stock, and other forms of equity-based compensation, subject to conditions and restrictions determined by the Compensation Committee. Our Compensation Committee (or our Board of Directors with respect to awards made to our independent directors) determines the terms and conditions of each award at the time of grant, including whether payment of awards may be subject to the achievement of performance goals, consistent with the provisions of the 2024 Plan. A maximum of 3,766,336 shares of common stock are available for grant under the 2024 Plan.

During the quarter ended June 30, 2024, we awarded to certain members of our Board of Directors 16,626 shares of restricted stock at a fair value of approximately $1.0 million and options to purchase 29,855 shares of common stock with an exercise price of $60.29. These are time-based awards subject to various vesting dates between November 1, 2024 and April 30, 2027.

Stock-based compensation expense, reported in General and administrative expense on the Consolidated Statements of Income and Comprehensive Income, was $1.8 million and $8.6 million for the quarters ended June 30, 2024 and 2023, respectively, and $3.5 million and $11.1 million for the six months ended June 30, 2024 and 2023, respectively. Stock-based compensation expense of $11.1 million for the six months ended June 30, 2023 includes accelerated vesting of stock-based compensation expense of $6.3 million recognized during the quarter ended June 30, 2023, as a result of the passing of a member of our Board of Directors.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 11 – Commitments and Contingencies

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

Beginning on August 31, 2023 through December 4, 2023, certain private party plaintiffs filed several putative class actions in the U.S. District Court for the Northern District of Illinois, Eastern Division, against Datacomp Appraisal Systems, Inc. (“Datacomp”) and several owner/operators of manufactured housing communities, including ELS (the “Datacomp Litigation”), alleging that the community owner/operators used JLT Market Reports produced by Datacomp to conspire to raise manufactured home lot rents in violation of Section 1 of the Sherman Act. ELS purchased Datacomp in connection with the MHVillage/Datacomp acquisition during the year ended December 31, 2021. On December 15, 2023, the plaintiffs filed an amended consolidated complaint captioned, In re Manufactured Home Lot Rents Antitrust Litigation, No. 1:23-cv-6715. Plaintiffs seek both injunctive relief and monetary damages, including attorneys’ fees. The defendants filed a motion to dismiss on January 29, 2024.

We believe that the Datacomp Litigation is without merit, and we intend to vigorously defend our interests in this matter. As of June 30, 2024, we have not made an accrual, as we are unable to predict the outcome of this matter or reasonably estimate any possible loss.

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 or six months ended June 30, 2024 or 2023.

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 six months ended June 30, 2024 and 2023:

Quarter Ended June 30, 2024


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	346,987	$	27,982	$	374,969
Operations expenses	(183,051)		(23,837)		(206,888)
Income from segment operations	163,936		4,145		168,081
Interest income	1,759		570		2,329
Depreciation and amortization	(48,852)		(2,492)		(51,344)

Income from operations	$	116,843	$	2,223	$	119,066
Reconciliation to consolidated net income:
Corporate interest income					91
Income from other investments, net					2,630
General and administrative					(8,985)
Casualty-related charges/(recoveries), net					6,170
Other expenses					(1,387)
Interest and related amortization					(36,037)

Equity in income of unconsolidated joint ventures					579

Consolidated net income					$	82,127

Total assets	$	5,391,752	$	253,723	$	5,645,475
Capital improvements	$	58,693	$	3,832	$	62,525

Quarter Ended June 30, 2023


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	336,629	$	28,653	$	365,282
Operations expenses	(177,450)		(24,914)		(202,364)
Income from segment operations	159,179		3,739		162,918
Interest income	1,616		637		2,253
Depreciation and amortization	(48,662)		(2,802)		(51,464)

Income from operations	$	112,133	$	1,574	$	113,707
Reconciliation to consolidated net income:
Corporate interest income					6
Income from other investments, net					2,473
General and administrative					(16,607)
Other expenses					(1,381)
Interest and related amortization					(33,122)
Equity in income of unconsolidated joint ventures					973

Consolidated net income					$	66,049

Total assets	$	5,304,804	$	281,183	$	5,585,987
Capital improvements	$	41,350	$	10,551	$	51,901

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

Six Months Ended June 30, 2024


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	706,723	$	50,608	$	757,331
Operations expenses	(352,456)		(43,123)		(395,579)
Income from segment operations	354,267		7,485		361,752
Interest income	3,445		1,013		4,458
Depreciation and amortization	(97,392)		(5,060)		(102,452)

Income from operations	$	260,320	$	3,438	$	263,758
Reconciliation to consolidated net income:
Corporate interest income					130
Income from other investments, net					4,668
General and administrative					(20,974)
Casualty-related charges/(recoveries), net					21,013
Other expenses					(2,718)
Interest and related amortization					(69,580)
Income tax benefit					239
Equity in income of unconsolidated joint ventures					862

Consolidated net income					$	197,398

Total assets	$	5,391,752	$	253,723	$	5,645,475
Capital improvements	$	110,101	$	7,130	$	117,231

Six Months Ended June 30, 2023


(amounts in thousands)	Property Operations		Home Sales and Rentals Operations		Consolidated
Operations revenues	$	678,366	$	52,689	$	731,055
Operations expenses	(342,473)		(45,057)		(387,530)
Income from segment operations	335,893		7,632		343,525
Interest income	3,182		1,151		4,333
Depreciation and amortization	(96,417)		(5,549)		(101,966)
Loss on sale of real estate and impairment, net	(2,632)		—		(2,632)
Income from operations	$	240,026	$	3,234	$	243,260
Reconciliation to consolidated net income:
Corporate interest income					14
Income from other investments, net					4,564
General and administrative					(28,268)
Other expenses					(2,849)
Interest and related amortization					(65,710)
Equity in income of unconsolidated joint ventures					1,497

Consolidated net income					$	152,508

Total assets	$	5,304,804	$	281,183	$	5,585,987
Capital improvements	$	128,826	$	20,176	$	149,002

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

The following table summarizes our financial information for the Property Operations segment for the quarters and six months ended June 30, 2024 and 2023:


	Quarters Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2024		2023		2024		2023
Revenues:
Rental income	$	297,401	$	284,950	$	610,483	$	577,529
Annual membership subscriptions	16,369		16,189		32,584		32,159
Membership upgrade sales	4,050		3,614		7,997		7,119
Other income	16,197		17,911		31,746		35,625
Gross revenues from ancillary services	12,970		13,965		23,913		25,934
Total property operations revenues	346,987		336,629		706,723		678,366
Expenses:
Property operating and maintenance	124,542		121,055		237,947		232,579
Real estate taxes	20,099		18,832		40,886		37,148
Membership sales and marketing	6,126		5,521		11,423		10,359

Cost of ancillary services	7,008		7,039		12,501		12,336
Ancillary operating expenses	5,840		5,644		10,553		11,228
Property management	19,436		19,359		39,146		38,823
Total property operations expenses	183,051		177,450		352,456		342,473
Income from property operations segment	$	163,936	$	159,179	$	354,267	$	335,893

The following table summarizes our financial information for the Home Sales and Rentals Operations segment for the quarters and six months ended June 30, 2024 and 2023:


	Quarters Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2024		2023		2024		2023
Revenues:
Rental income (1)	$	3,387	$	3,705	$	6,903	$	7,577
Gross revenue from home sales and brokered resales	24,595		24,948		43,705		45,112
Total revenues	27,982		28,653		50,608		52,689
Expenses:
Rental home operating and maintenance	1,563		1,159		2,941		2,118
Cost of home sales and brokered resales	20,642		22,229		37,116		40,073
Home selling expenses	1,632		1,526		3,066		2,866
Total expenses	23,837		24,914		43,123		45,057
Income from home sales and rentals operations segment	$	4,145	$	3,739	$	7,485	$	7,632

______________________

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

Note 13 – Subsequent Events

On July 18, 2024, we entered into a Second Amendment to the Third Amended and Restated Credit Agreement (the “Second Amendment”) which amends and restates the terms of the obligations owing by us under the Credit Agreement. Pursuant to the Credit Agreement, we have access to a $500 million LOC and a $300 million Term Loan. We also have the option to increase the borrowing capacity of the LOC by $200 million, subject to certain conditions. Pursuant to the Second Amendment, the LOC maturity date was extended to July 18, 2028, and this term can be extended for two additional six-month terms, subject to certain conditions. We also have an option to extend the maturity date on the $300 million Term Loan to April 16, 2027. All other material terms, including interest rate terms, remain the same.

Pursuant to the Credit Agreement, the LOC has an interest rate of SOFR plus 0.10% plus 1.25% to 1.65% per annum and requires an annual facility fee of 0.20% to 0.35%. The Term Loan has an interest rate of SOFR plus 0.10% plus 1.40% to 1.95% per annum. For both the LOC and the Term Loan, the spread over SOFR is variable based on leverage throughout the respective loan terms.

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, 2023 (“2023 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 2023 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 June 30, 2024, we owned or had an ownership interest in a portfolio of 452 Properties located throughout the United States and Canada containing 172,866 individual developed areas (“Sites”). These Properties are located in 35 states and British Columbia, with more than 110 Properties with lake, river or ocean frontage and more than 120 Properties within ten miles of the coastal United States.

We invest in properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on delivering an exceptional experience to our residents and guests that results in delivery of value to stockholders. Our business model is intended to provide an opportunity for increased cash flows and appreciation in value. We seek growth in earnings, Funds from Operations (“FFO”), Normalized Funds from Operations (“Normalized FFO”) and cash flows by enhancing the profitability and operation of our Properties and investments. We accomplish this by attracting and retaining high quality customers to our Properties, who take pride in our Properties and in their homes and efficiently managing our Properties by increasing occupancy, maintaining competitive market rents and controlling expenses. We also actively pursue opportunities that fit our acquisition criteria and are currently engaged in various stages of negotiations relating to the possible acquisition of additional properties.

We believe the demand from baby boomers for MH and RV communities will continue to be strong over the long term. It is estimated that approximately 10,000 baby boomers are turning 65 daily through 2029. 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.

Management's Discussion and Analysis (continued)

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


						Total Sites as of June 30, 2024
MH Sites						73,000
RV Sites:
Annual						34,500
Seasonal						11,800
Transient						16,900
Marina Slips						6,900
Membership (1)						26,000
Joint Ventures (2)						3,800
Total						172,900

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(1)Primarily utilized to service approximately 117,100 members. Includes approximately 5,900 Sites rented on an annual basis.

(2)Includes approximately 2,000 annual Sites and 1,800 transient Sites.

In our Home Sales and Rentals Operations business, our revenue streams include home sales, home rentals and brokerage services and ancillary activities. We generate revenue through home sales and rental operations by selling or leasing manufactured homes and cottages that are located in Properties owned and managed by us. We believe renting our vacant homes represents an attractive source of occupancy and an opportunity to convert the renter to a homebuyer in the future. Additionally, home sale brokerage services are offered to our residents who may choose to sell their homes rather than relocate them when moving from a Property. At certain Properties, we operate ancillary facilities, such as golf courses, pro shops, stores and restaurants.

In the manufactured housing industry, options for home financing, also known as chattel financing, are limited. Chattel financing options available today include community owner-funded programs or third-party lender programs that provide subsidized financing to customers and often require the community owner to guarantee customer defaults. Third-party lender programs have stringent underwriting criteria, sizable down payment requirements, short term loan amortization and high interest rates. We have a limited program under which we purchase loans made by an unaffiliated lender to homebuyers at our Properties.

In addition to net income computed in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we assess and measure our overall financial and operating performance using certain Non-GAAP supplemental measures, which include: (i) FFO, (ii) Normalized FFO, (iii) Income from property operations, (iv) Income from property operations, excluding property management, and (v) Core Portfolio income from property operations, excluding property management (operating results for Properties owned and operated in both periods under comparison). We use these measures internally to evaluate the operating performance of our portfolio and provide a basis for comparison with other real estate companies. Definitions and reconciliations of these measures to the most comparable GAAP measures are included below in this discussion.

Results Overview


(amounts in thousands)	Quarters Ended June 30,
	2024		2023		$ Change		% Change (1)
Net Income per fully diluted Common Share	$	0.42	$	0.34	$	0.08	24.3	%
FFO per fully diluted Common Share and OP Unit	$	0.69	$	0.61	$	0.08	13.5	%
Normalized FFO per fully diluted Common Share and OP Unit	$	0.66	$	0.64	$	0.02	2.9	%

	Six Months Ended June 30,
	2024		2023		$ Change		% Change (1)
Net Income per fully diluted Common Share	$	1.01	$	0.78	$	0.23	29.5	%
FFO per fully diluted Common Share and OP Unit	$	1.55	$	1.33	$	0.22	16.6	%
Normalized FFO per fully diluted Common Share and OP Unit	$	1.44	$	1.36	$	0.08	5.9	%

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1.Calculations prepared using actual results without rounding.

Core property operating revenues increased 4.6% and Core income from property operations, excluding property management increased 5.5% for the quarter ended June 30, 2024, compared to the same period in 2023. For the six months ended June 30, 2024, Core property operating revenues increased 5.2% and Core income from property operations, excluding property management increased 6.4% compared to the same period in 2023.

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 94.9% for each of the quarters ended June 30, 2024 and December 31, 2023 and 94.8% for the quarter ended June 30, 2023. For the quarter ended June 30, 2024, our Core Portfolio occupancy increased by 29 sites, which included an increase in homeowner occupancy of 171 sites and a decrease in rental occupancy of 142 compared to March 31, 2024. 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 depending on local market conditions, availability of vacant sites and success with converting renters to homeowners. As of June 30, 2024, we had 2,016 occupied rental homes in our Core MH communities.

RV and marina base rental income in our Core Portfolio increased 2.0% for the quarter ended June 30, 2024, compared to the same period in 2023, driven primarily by an increase in Annual RV rental income. Core RV and marina base rental income from annuals represents 73.9% of total Core RV and marina base rental income and increased 6.6% for the quarter ended June 30, 2024, compared to the same period in 2023 due to an 8.3% increase in rate, offset by a 1.7% decrease in occupancy. Core seasonal and transient RV and marina base rental income decreased 16.7% and 5.6%, respectively, for the quarter ended June 30, 2024, compared to the same period in 2023 due to non-returning Hurricane Ian workers at our Florida properties, decreased reservation extensions at our Sun Belt locations due to a mild winter and returning competitor supply, partially offset by California properties recovering from weather disruption events in the second quarter of 2023.

Demand for our homes and communities remains strong as evidenced by factors including our high occupancy levels. We closed 255 new home sales during the quarter ended June 30, 2024, compared to 226 new home sales during the quarter ended June 30, 2023, an increase of 12.8%. The new home sales during the quarter ended June 30, 2024 were primarily in the Florida market.

Our gross investment in real estate increased $98.8 million to $7,805.1 million as of June 30, 2024 from $7,706.3 million as of December 31, 2023, primarily due to capital improvements during the six months ended June 30, 2024.

The following chart lists the Properties acquired from January 1, 2023 through June 30, 2024 and Sites added through expansion opportunities at our existing Properties:

Location

Type of Property

Transaction Date

Sites

Total Sites as of January 1, 2023 (1)

171,200

Acquisition Properties:

Red Oak Shores Campground

Ocean View, New Jersey

March 28, 2023

223

Expansion Site Development:

Sites added (reconfigured) in 2023

994

Sites added (reconfigured) in 2024

401

Total Sites as of June 30, 2024 (1)

172,900

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(1)Sites are approximate.

Non-GAAP Financial Measures

Management’s discussion and analysis of financial condition and results of operations include certain No