Equity LifeStyle Properties(ELS) - 2022 Q3 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements of Equity LifeStyle Properties, Inc. for the quarter and nine months ended September 30, 2022, including balance sheets, income statements, statements of changes in equity, and cash flow statements, along with detailed notes on accounting policies, leases, equity transactions, real estate investments, borrowing arrangements, and segment information Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity for Q3 2022 and FY 2021 Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 | Metric | Sep 30, 2022 (unaudited) ($ thousands) | Dec 31, 2021 ($ thousands) | | :---------------------------------- | :----------------------------------- | :------------------------- | | Assets: | | | | Net investment in real estate | 5,056,811 | 4,885,290 | | Cash and restricted cash | 30,510 | 123,398 | | Total Assets | 5,405,446 | 5,307,871 | | Liabilities: | | | | Mortgage notes payable, net | 2,708,751 | 2,627,783 | | Term loan, net | 496,595 | 297,436 | | Unsecured line of credit | 94,984 | 349,000 | | Total Liabilities | 3,886,057 | 3,821,700 | | Equity: | | | | Total Stockholders' Equity | 1,447,174 | 1,415,110 | | Total Equity | 1,519,389 | 1,486,171 | | Total Liabilities and Equity | 5,405,446 | 5,307,871 | - Total Assets increased by $97.575 million (1.84%) from December 31, 2021, to September 30, 2022, primarily driven by an increase in net investment in real estate[7] - Cash and restricted cash significantly decreased by $92.888 million (-75.28%) from December 31, 2021, to September 30, 2022[7] Consolidated Statements of Income and Comprehensive Income Reports the company's financial performance, including revenues, expenses, and net income, for Q3 and 9M periods Consolidated Statements of Income and Comprehensive Income for the quarters and nine months ended September 30, 2022 and 2021 | Metric | Q3 2022 ($ thousands) | Q3 2021 ($ thousands) | 9M 2022 ($ thousands) | 9M 2021 ($ thousands) | | :------------------------------------------ | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Total revenues | 380,969 | 347,235 | 1,106,476 | 981,067 | | Total expenses | 308,178 | 273,993 | 883,469 | 776,634 | | Consolidated net income | 70,509 | 74,093 | 222,149 | 207,160 | | Net income available for Common Stockholders | 67,163 | 70,625 | 211,578 | 196,916 | | 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 | - Total revenues increased by $33.734 million (9.71%) for Q3 2022 YoY and $125.409 million (12.78%) for 9M 2022 YoY[11] - Consolidated net income decreased by $3.584 million (-4.84%) for Q3 2022 YoY but increased by $14.989 million (7.23%) for 9M 2022 YoY[11] Consolidated Statements of Changes in Equity Outlines changes in the company's equity, including stockholder and non-controlling interests, from FY 2021 to Q3 2022 Consolidated Statements of Changes in Equity as of September 30, 2022 and December 31, 2021 | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | | :------------------------------------------ | :------------------------- | :------------------------- | | Total Stockholders' Equity | 1,447,174 | 1,415,110 | | Non-controlling interests – Common OP Units | 72,215 | 71,061 | | Total Equity | 1,519,389 | 1,486,171 | - Total Equity increased by $33.218 million (2.23%) from December 31, 2021, to September 30, 2022[7][14] - Accumulated Other Comprehensive Income increased significantly from $3.524 million at December 31, 2021, to $20.476 million at September 30, 2022, primarily due to adjustments for the fair market value of swaps[7][14] Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 | Metric | 9M 2022 ($ thousands) | 9M 2021 ($ thousands) | | :------------------------------------------ | :-------------------- | :-------------------- | | 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 | | Cash and restricted cash, end of period | 30,510 | 40,272 | - Net cash provided by operating activities increased by $34.214 million (7.54%) for 9M 2022 YoY[21][24] - Net cash used in investing activities decreased significantly by $279.070 million (-41.17%) for 9M 2022 YoY, primarily due to lower real estate acquisitions[21][24] - Net cash from financing activities shifted from a $240.559 million inflow in 9M 2021 to a $181.825 million outflow in 9M 2022, a decrease of $422.384 million, mainly due to changes in debt proceeds and repayments[21][24] Notes to Consolidated Financial Statements Provides detailed explanations of accounting policies, significant transactions, and financial statement line items Note 1 – Organization and Basis of Presentation Describes Equity LifeStyle Properties, Inc. as a REIT, its business model, and consolidation principles - Equity LifeStyle Properties, Inc. (ELS) is a self-administered and self-managed REIT, primarily owning and operating manufactured home (MH) and recreational vehicle (RV) communities and marinas, with ELS consolidating MHC Operating Limited Partnership, holding a 95.3% interest as of September 30, 2022[28] - The company's business model involves leasing land to customers who own manufactured homes, cottages, RVs, or boats, either long-term or short-term, or through membership subscriptions[28] Note 2 – Summary of Significant Accounting Policies Outlines key accounting policies, including revenue recognition for site rentals and membership subscriptions - Revenue is predominantly derived from operating leases for site rentals (MH, RV, marina) and membership subscriptions, recognized over the lease term or subscription period[29][33] - Membership upgrade sales, which grant additional access rights, involve non-refundable upfront payments recognized on a straight-line basis over 20 years[33] - Restricted cash as of September 30, 2022, was $23.2 million, primarily for customer deposits and escrows for insurance and real estate taxes, down from $29.3 million at December 31, 2021[34] Note 3 – Leases Details future minimum rents from tenant leases and minimum future rental payments for operating leases Future Minimum Rents Expected to be Received Under Long-Term Non-Cancelable Tenant Leases (as of Sep 30, 2022) | Year | Amount ($ thousands) | | :--- | :------------------- | | 2022 | 42,224 | | 2023 | 170,732 | | 2024 | 105,054 | | 2025 | 40,852 | | 2026 | 21,909 | | Thereafter | 67,992 | | Total | 448,763 | Minimum Future Rental Payments for Operating Leases (as of Sep 30, 2022) | Category | Ground Leases ($ thousands) | Office and Other Leases ($ thousands) | Total ($ thousands) | | :------------------------------- | :-------------------------- | :------------------------------------ | :------------------ | | Total undiscounted rental payments | 6,980 | 26,794 | 33,774 | | Less imputed interest | (1,705) | (4,137) | (5,842) | | Total lease liabilities | 5,275 | 22,657 | 27,932 | - The weighted average remaining lease term for operating leases was nine years with a weighted average incremental borrowing rate of 3.7% at September 30, 2022[39] Note 4 – Earnings Per Common Share Presents basic and fully diluted earnings per common share for the reported quarterly and nine-month periods Earnings Per Common Share | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net income available for Common Stockholders – Basic | $0.36 | $0.38 | $1.14 | $1.08 | | Net income available for Common Stockholders – Fully Diluted | $0.36 | $0.38 | $1.14 | $1.08 | | Weighted average Common Shares outstanding – Basic | 185,814 | 183,469 | 185,758 | 182,590 | | Weighted average Common Shares outstanding – Fully Diluted | 195,269 | 192,736 | 195,248 | 192,689 | - Basic and Fully Diluted EPS decreased by $0.02 for Q3 2022 YoY but increased by $0.06 for 9M 2022 YoY[40] Note 5 – Common Stock and Other Equity Related Transactions Details common stock distributions, equity offering programs, and OP Unit exchanges Quarterly Distributions Declared and Paid to Common Stockholders | Distribution Amount Per Share | For the Quarter Ended | Payment Date | | :---------------------------- | :-------------------- | :----------- | | $0.3625 | March 31, 2021 | April 9, 2021 | | $0.3625 | June 30, 2021 | July 9, 2021 | | $0.3625 | September 30, 2021 | October 8, 2021 | | $0.3625 | December 31, 2021 | January 14, 2022 | | $0.4100 | March 31, 2022 | April 8, 2022 | | $0.4100 | June 30, 2022 | July 8, 2022 | | $0.4100 | September 30, 2022 | October 14, 2022 | - The company increased its quarterly distribution per share from $0.3625 to $0.4100 starting in Q1 2022[44] - An at-the-market (ATM) equity offering program was initiated on February 24, 2022, allowing for the sale of up to $500.0 million in common stock, with 328,123 shares sold for $28.370 million gross proceeds in Q1 2022 under the prior program[45][47] - During the nine months ended September 30, 2022, 34,680 OP Units were exchanged for an equal number of Common Stock shares, significantly lower than 1,451,710 OP Units exchanged in the same period of 2021[48] Note 6 – Investment in Real Estate Reports on real estate acquisitions and the impact of Hurricane Ian on property assets - In 2022, the company completed several acquisitions, including RV communities and vacant land parcels, totaling approximately $119.7 million[49][50][51][54][55] - Hurricane Ian, which made landfall on September 28, 2022, caused significant damage to six properties in the Fort Myers area, leading to a $3.7 million write-down of certain assets[56] Note 7 – Investments in Unconsolidated Joint Ventures Summarizes investments in unconsolidated joint ventures, including their locations, sites, and economic interests Investment in Unconsolidated Joint Ventures | Investment | Location | Number of Sites | Economic Interest | Investment as of Sep 30, 2022 ($ thousands) | Investment as of Dec 31, 2021 ($ thousands) | | :---------------- | :--------------- | :-------------- | :---------------- | :------------------------------------------ | :------------------------------------------ | | Meadows | Various | 1,077 | 50% | 150 | — | | Lakeshore | Florida | 721 | (b) | 2,596 | 2,638 | | Voyager | Arizona | — | 33% | 138 | 141 | | ECHO JV | Various | — | 50% | 18,979 | 18,136 | | RVC | Various | 1,282 | 80% | 57,779 | 49,397 | | Mulberry Farms | Various | — | 50% | 8,710 | — | | Total | | 3,080 | | 88,352 | 70,312 | - Total investment in unconsolidated joint ventures increased by $18.040 million (25.66%) from December 31, 2021, to September 30, 2022, reaching $88.352 million[57] - Income from unconsolidated joint ventures for the nine months ended September 30, 2022, was $2.889 million, up from $2.786 million in the prior year[57] - Distributions received from unconsolidated joint ventures increased to $3.9 million for 9M 2022 from $2.4 million for 9M 2021[58] Note 8 – Borrowing Arrangements Details mortgage notes payable, term loans, and the unsecured line of credit Mortgage Notes Payable Fair Value | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | | :------------------------------------------ | :------------------------- | :------------------------- | | Fair Value | 2,027,030 | 2,743,527 | | Carrying Value | 2,734,310 | 2,654,086 | - The weighted average interest rate on outstanding mortgage indebtedness was approximately 3.7% per annum as of September 30, 2022, with rates ranging from 2.4% to 8.9% and maturities from 2023 to 2041[61] - During 9M 2022, the company repaid $14.2 million of principal on two mortgage loans and entered into a $200.0 million secured refinancing transaction at a fixed interest rate of 3.36%[62][63] - A new $200.0 million senior unsecured term loan was entered into with a maturity of January 21, 2027, and an interest rate of SOFR plus 1.30% to 1.80%[64] - The unsecured line of credit balance decreased from $349.0 million at December 31, 2021, to $95.0 million at September 30, 2022, with a remaining borrowing capacity of $405.0 million[65] Note 9 – Derivative Instruments and Hedging Explains the company's use of interest rate swaps to manage risk and their fair value changes - The company uses a three-year LIBOR Swap Agreement with a notional amount of $300.0 million to manage interest rate risk, fixing the rate at 0.39% per annum (estimated all-in rate of 1.79% as of Sep 30, 2022)[67] Fair Value of Derivative Financial Instrument (Interest Rate Swap) | Balance Sheet Location | As of Sep 30, 2022 ($ thousands) | As of Dec 31, 2021 ($ thousands) | | :--------------------- | :------------------------------- | :------------------------------- | | Other assets, net | 20,474 | 3,524 | - The fair value of the interest rate swap increased significantly from $3.524 million at December 31, 2021, to $20.474 million at September 30, 2022[67] - An estimated $11.7 million is expected to be reclassified as a decrease to interest expense over the next twelve months[70] Note 10 – Equity Incentive Awards Reports on restricted stock awards, stock options, and related stock-based compensation expenses - During Q1 2022, 79,078 shares of restricted stock were awarded to management, with 50% time-based and 50% performance-based, having a grant date fair value of $3.0 million and $1.0 million respectively[72] - In Q2 2022, 51,522 restricted stock shares (fair value ~$4.1 million) and options for 7,210 common stock shares were awarded to Board members[73] - Stock-based compensation expense was $2.6 million for Q3 2022 (down from $2.8 million in Q3 2021) and $7.9 million for 9M 2022 (down from $8.2 million in 9M 2021)[73] Note 11 – Commitments and Contingencies Discusses legal and regulatory proceedings, including the Westwinds ground lease dispute - The company is involved in various legal and regulatory proceedings in the ordinary course of business, which management believes do not represent a material liability[74] - A significant legal dispute involves the Westwinds mobile home community and Nicholson Plaza, where ground leases expired on August 31, 2022, with the master lessor demanding the property be delivered free of subtenancies, which the Operating Partnership disputes, citing state and local laws protecting residents' occupancy rights[75][78] - On October 6, 2022, parties entered a binding agreement to dismiss all claims in the Superior Court and arbitration, except for the Nicholsons' right to pursue claims regarding maintenance and repair failures[82] Note 12 – Reportable Segments Provides financial information for the Property Operations and Home Sales and Rentals Operations segments - The company operates in two reportable segments: Property Operations (owning and operating land lease properties) and Home Sales and Rentals Operations (purchasing, selling, and leasing homes at properties)[83] Segment Financial Information (Q3 2022 vs Q3 2021, $ thousands) | Metric | Property Operations (2022) | Home Sales & Rentals Operations (2022) | Consolidated (2022) | Property Operations (2021) | Home Sales & Rentals Operations (2021) | Consolidated (2021) | | :------------------------------------------ | :------------------------- | :------------------------------------- | :------------------ | :------------------------- | :------------------------------------- | :------------------ | | Operations revenues | 338,208 | 38,497 | 376,705 | 312,239 | 31,954 | 344,193 | | Income from segment operations | 158,433 | 5,113 | 163,546 | 150,005 | 3,167 | 153,172 | | Total assets | 5,160,230 | 245,216 | 5,405,446 | 4,723,386 | 258,474 | 4,981,860 | | Capital improvements | 49,585 | 37,994 | 87,579 | 52,146 | 32,169 | 84,315 | Segment Financial Information (9M 2022 vs 9M 2021, $ thousands) | Metric | Property Operations (2022) | Home Sales & Rentals Operations (2022) | Consolidated (2022) | Property Operations (2021) | Home Sales & Rentals Operations (2021) | Consolidated (2021) | | :------------------------------------------ | :------------------------- | :------------------------------------- | :------------------ | :------------------------- | :------------------------------------- | :------------------ | | Operations revenues | 984,535 | 109,675 | 1,094,210 | 891,166 | 81,191 | 972,357 | | Income from segment operations | 477,796 | 13,828 | 491,624 | 442,734 | 8,103 | 450,837 | | Total assets | 5,160,230 | 245,216 | 5,405,446 | 4,723,386 | 258,474 | 4,981,860 | | Capital improvements | 169,265 | 99,349 | 268,614 | 129,919 | 74,118 | 204,037 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting key operational drivers, the impact of external factors like COVID-19 and Hurricane Ian, and a detailed comparison of financial results for the quarter and nine months ended September 30, 2022, against the prior year. It also discusses liquidity, capital resources, and significant legal contingencies Overview and Outlook Provides an overview of ELS's business, property portfolio, and market demand outlook - Equity LifeStyle Properties, Inc. (ELS) is a REIT owning 445 lifestyle-oriented properties (MH, RV, marinas) across 35 states and British Columbia, with 170,245 developed sites as of September 30, 2022[104] - The company anticipates strong long-term demand from baby boomers and younger generations (Millennials, Gen Z) for MH and RV communities, driven by active lifestyles and second-home alternatives, expecting demand to outpace limited new supply[106] Total Sites as of September 30, 2022 (approximate) | Site Type | Count | | :----------------- | :---- | | MH Sites | 72,700 | | RV Sites: | | | Annual | 34,400 | | Seasonal | 12,700 | | Transient | 14,600 | | Marina Slips | 6,900 | | Membership | 25,800 | | Joint Ventures | 3,100 | | Total | 170,200 | COVID-19 Pandemic Update Discusses the pandemic's impact on business performance and ongoing monitoring - The company attributes its solid performance during the pandemic to its business model, property locations, and the outdoor lifestyle offered, which appeals to customers in a COVID-19 impacted environment[113] - The company continues to monitor the evolving COVID-19 situation and may take further actions to prioritize safety, but the extent of future impact on business, financial condition, and cash flows remains uncertain[113] Results Overview Summarizes key financial performance metrics, including net income, FFO, and property operations Key Financial Performance Metrics (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | Change ($M) | Change (%) | | :------------------------------------------ | :------ | :------ | :---------- | :--------- | | Net income available for Common Stockholders | $67.2M | $70.6M | $(3.4) | (4.8%) | | EPS (Fully Diluted) | $0.36 | $0.38 | $(0.02) | (5.3%) | | FFO available for Common Stock and OP Unit holders | $134.4M | $124.5M | $9.9 | 7.9% | | FFO per share (Fully Diluted) | $0.69 | $0.65 | $0.04 | 6.2% | | Normalized FFO available for Common Stock and OP Unit holders | $136.8M | $124.5M | $12.3 | 9.9% | | Normalized FFO per share (Fully Diluted) | $0.70 | $0.65 | $0.05 | 7.7% | Key Financial Performance Metrics (9M 2022 vs 9M 2021) | Metric | 9M 2022 | 9M 2021 | Change ($M) | Change (%) | | :------------------------------------------ | :------ | :------ | :---------- | :--------- | | Net income available for Common Stockholders | $211.6M | $196.9M | $14.7 | 7.5% | | EPS (Fully Diluted) | $1.14 | $1.08 | $0.06 | 5.6% | | FFO available for Common Stock and OP Unit holders | $396.9M | $362.6M | $34.3 | 9.5% | | FFO per share (Fully Diluted) | $2.03 | $1.88 | $0.15 | 8.0% | | Normalized FFO available for Common Stock and OP Unit holders | $403.5M | $365.4M | $38.1 | 10.4% | | Normalized FFO per share (Fully Diluted) | $2.07 | $1.90 | $0.17 | 8.9% | - Core Portfolio property operating revenues (excluding deferrals) increased 5.3% for Q3 2022 YoY and 6.5% for 9M 2022 YoY, while expenses increased 7.8% and 8.3% respectively, leading to income from property operations growth of 3.5% and 5.3%[118] - Hurricane Ian caused significant damage to six properties in the Fort Myers area, leading to temporary closures and a $3.7 million write-down of assets, with the company expecting to resume operations in Q4 and anticipating insurance coverage[119][120][121] - Core Portfolio average occupancy for MH communities was 95.2% for Q3 2022, up from 95.0% in Q3 2021, with homeowner occupancy increasing by 190 sites QoQ[124] - Core RV and marina base rental income increased 4.1% for Q3 2022 YoY and 10.3% for 9M 2022 YoY, driven by annual (8.6% and 8.8% increases) and seasonal (21.2% and 46.0% increases) rentals, partially offset by a decrease in transient income[125] - New home sales decreased 2.1% for Q3 2022 YoY (331 sales) but increased 16.0% for 9M 2022 YoY (957 sales), primarily in Florida and Arizona[127] Non-GAAP Financial Measures Explains the company's use of Non-GAAP measures like FFO and Normalized FFO to assess performance - The company uses Non-GAAP measures like FFO, Normalized FFO, Income from property operations, and Core Portfolio income from property operations to evaluate financial and operating performance, providing insights beyond GAAP net income[135][136] - FFO is defined as GAAP net income excluding gains/losses from property sales, real estate depreciation/amortization, impairment charges, and adjustments for unconsolidated joint ventures, while Normalized FFO further excludes non-operating items like early debt extinguishment costs and transaction/pursuit costs[140][141] Reconciliation of Net Income to Income from Property Operations ($ thousands) | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net income available for Common Stockholders | 67,163 | 70,625 | 211,578 | 196,916 | | Income from property operations | 158,303 | 149,990 | 479,727 | 443,918 | Reconciliation of Net Income to FFO and Normalized FFO ($ thousands) | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Net income available for Common Stockholders | 67,163 | 70,625 | 211,578 | 196,916 | | FFO available for Common Stock and OP Unit holders | 134,409 | 124,472 | 396,918 | 362,614 | | Normalized FFO available for Common Stock and OP Unit holders | 136,784 | 124,472 | 403,531 | 365,398 | Results of Operations Analyzes the company's financial performance by comparing revenues and expenses for Q3 and 9M periods Comparison of Q3 2022 to Q3 2021 Compares the company's financial results for Q3 2022 against the prior year Income from Property Operations (Q3 2022 vs Q3 2021) Analyzes changes in core property operating revenues and expenses for Q3 2022 YoY Core Portfolio Property Operating Revenues (excluding deferrals) (Q3 2022 vs Q3 2021, $ thousands) | Revenue Type | Q3 2022 | Q3 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | MH base rental income | 157,037 | 148,337 | 8,700 | 5.9% | | RV and marina base rental income | 96,722 | 92,878 | 3,844 | 4.1% | | Annual membership subscriptions | 16,054 | 15,126 | 928 | 6.1% | | Utility and other income | 28,239 | 25,699 | 2,540 | 9.9% | | Total Property operating revenues, excluding deferrals | 312,114 | 296,298 | 15,816 | 5.3% | Core Portfolio Property Operating Expenses (excluding deferrals and property management) (Q3 2022 vs Q3 2021, $ thousands) | Expense Type | Q3 2022 | Q3 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Property operating and maintenance | 114,113 | 104,679 | 9,434 | 9.0% | | Real estate taxes | 16,830 | 16,303 | 527 | 3.2% | | Total Property operating expenses, excluding deferrals and property management | 139,050 | 129,027 | 10,023 | 7.8% | - Core Portfolio MH base rental income increased 5.9% YoY, driven by 5.5% rate growth and 0.4% occupancy gains, with average monthly base rental income per site rising to $759[156] - Core RV and marina base rental income increased 4.1% YoY, with annual up 8.6% and seasonal up 21.2%, while transient decreased 7.2% due to fewer available sites[157] - Core property operating and maintenance expenses increased 9.0% YoY, primarily due to higher utility expenses ($4.2 million), property payroll ($2.8 million), administrative expenses ($1.3 million), and repair and maintenance ($1.2 million)[160] Home Sales and Rental Operations (Q3 2022 vs Q3 2021) Compares performance of home sales and rental operations for Q3 2022 YoY Home Sales and Other Operations (Q3 2022 vs Q3 2021, $ thousands) | Metric | Q3 2022 | Q3 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Gross revenues from new home sales | 32,850 | 26,413 | 6,437 | 24.4% | | Gross profit from new home sales | 3,470 | 1,894 | 1,576 | 83.2% | | Income from home sales and other | 5,243 | 3,182 | 2,061 | 64.8% | | Total new home sales (volume) | 331 | 338 | (7) | (2.1%) | | Used home sales (volume) | 81 | 104 | (23) | (22.1%) | | Brokered home resales (volume) | 223 | 171 | 52 | 30.4% | - Income from home sales and other operations increased by $2.1 million (64.8%) YoY, primarily due to an 83.2% increase in gross profit from new home sales, despite a 2.1% decrease in new home sales volume[162] MH Rental Operations (Q3 2022 vs Q3 2021, $ thousands) | Metric | Q3 2022 | Q3 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Rental operations revenue | 10,420 | 11,962 | (1,542) | (12.9%) | | Income from rental operations, net of depreciation | 6,416 | 7,774 | (1,358) | (17.5%) | | Number of occupied rentals – new, end of period | 2,594 | 3,132 | (538) | (17.2%) | | Number of occupied rentals – used, end of period | 355 | 456 | (101) | (22.1%) | - Income from rental operations, net of depreciation, decreased by $1.4 million (17.5%) YoY, mainly due to a decrease in the number of occupied rental homes (new down 17.2%, used down 22.1%)[164] Other Income and Expenses (Q3 2022 vs Q3 2021) Examines changes in depreciation, interest, and other income and expenses for Q3 2022 YoY Other Income and Expenses, Net (Q3 2022 vs Q3 2021, $ thousands) | Metric | Q3 2022 | Q3 2021 | Variance | % Change | | :------------------------------------------ | :-------- | :-------- | :--------- | :--------- | | Depreciation and amortization | (52,547) | (44,414) | (8,133) | (18.3%) | | Income from other investments, net | 2,399 | 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 by $10.8 million (13.5%) YoY, primarily due to higher depreciation and amortization (from non-core properties) and increased interest and related amortization[165] Loss on sale of real estate and impairment, net (Q3 2022 vs Q3 2021) Reports the net loss from real estate sales and impairment charges for Q3 2022 - A $3.7 million write-down of assets was recorded during Q3 2022 due to property damage caused by Hurricane Ian[166] Comparison of 9M 2022 to 9M 2021 Compares the company's financial results for 9M 2022 against the prior year Income from Property Operations (9M 2022 vs 9M 2021) Analyzes changes in core property operating revenues and expenses for 9M 2022 YoY Core Portfolio Property Operating Revenues (excluding deferrals) (9M 2022 vs 9M 2021, $ thousands) | Revenue Type | 9M 2022 | 9M 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | MH base rental income | 467,236 | 441,893 | 25,343 | 5.7% | | RV and marina base rental income | 280,514 | 254,239 | 26,275 | 10.3% | | Annual membership subscriptions | 46,552 | 43,044 | 3,508 | 8.1% | | Utility and other income | 80,675 | 76,005 | 4,670 | 6.1% | | Total Property operating revenues, excluding deferrals | 913,234 | 857,219 | 56,015 | 6.5% | Core Portfolio Property Operating Expenses (excluding deferrals and property management) (9M 2022 vs 9M 2021, $ thousands) | Expense Type | 9M 2022 | 9M 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Property operating and maintenance | 318,772 | 289,857 | 28,915 | 10.0% | | Real estate taxes | 50,762 | 48,703 | 2,059 | 4.2% | | Total Property operating expenses, excluding deferrals and property management | 391,493 | 361,586 | 29,907 | 8.3% | - Core Portfolio income from property operations increased by $20.3 million (4.7%) YoY, driven by higher RV and marina base rental income (up 10.3%) and MH base rental income (up 5.7%), partially offset by an 8.3% increase in operating expenses[169] - Core RV and marina base rental income increased by $26.3 million (10.3%) YoY, with annual up 8.8% and seasonal up 46.0%, benefiting from the return of Canadian guests and unrestricted domestic travel[173] - Core property operating and maintenance expenses increased by $28.9 million (10.0%) YoY, primarily due to higher utility expenses ($11.6 million), repairs and maintenance ($6.7 million), and property payroll ($6.2 million)[176] Home Sales and Rental Operations (9M 2022 vs 9M 2021) Compares performance of home sales and rental operations for 9M 2022 YoY Home Sales and Other Operations (9M 2022 vs 9M 2021, $ thousands) | Metric | 9M 2022 | 9M 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Gross revenues from new home sales | 92,228 | 64,071 | 28,157 | 43.9% | | Gross profit from new home sales | 9,502 | 3,594 | 5,908 | 164.4% | | Income from home sales and other | 11,897 | 6,919 | 4,978 | 71.9% | | Total new home sales (volume) | 957 | 825 | 132 | 16.0% | | Used home sales (volume) | 250 | 314 | (64) | (20.4%) | | Brokered home resales (volume) | 674 | 543 | 131 | 24.1% | - Income from home sales and other operations increased by $5.0 million (71.9%) YoY, driven by a 164.4% increase in gross profit from new home sales and a 16.0% increase in new home sales volume[178] MH Rental Operations (9M 2022 vs 9M 2021, $ thousands) | Metric | 9M 2022 | 9M 2021 | Variance | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Rental operations revenue | 32,635 | 36,714 | (4,079) | (11.1%) | | Income from rental operations, net of depreciation | 21,007 | 24,712 | (3,705) | (15.0%) | | Number of occupied rentals – new, end of period | 2,594 | 3,132 | (538) | (17.2%) | | Number of occupied rentals – used, end of period | 355 | 456 | (101) | (22.1%) | - Income from rental operations, net of depreciation, decreased by $3.7 million (15.0%) YoY, primarily due to an 11.1% decrease in rental operations revenues and a reduction in occupied new rental homes[181] Other Income and Expenses (9M 2022 vs 9M 2021) Examines changes in depreciation, interest, and other income and expenses for 9M 2022 YoY Other Income and Expenses, Net (9M 2022 vs 9M 2021, $ thousands) | Metric | 9M 2022 | 9M 2021 | Variance | % Change | | :------------------------------------------ | :-------- | :-------- | :--------- | :--------- | | Depreciation and amortization | (152,737) | (138,127) | (14,610) | (10.6%) | | Income from other investments, net | 6,920 | 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 by $22.2 million (9.0%) YoY, primarily due to higher depreciation and amortization, increased interest and related amortization, and higher other expenses (including $3.4 million in transaction/pursuit costs)[182] Loss on sale of real estate and impairment, net (9M 2022 vs 9M 2021) Reports the net loss from real estate sales and impairment charges for 9M 2022 - A $3.7 million write-down of assets was recorded during 9M 2022 due to property damage caused by Hurricane Ian[184] Liquidity and Capital Resources Discusses the company's sources and uses of cash, including operating activities and financing - Primary liquidity demands include operating expenses, dividends, debt service, capital improvements, home purchases, and property acquisitions, with sources including operating cash flows, financings, unsecured line of credit (LOC), and equity/debt issuances[185] - The company entered a new ATM equity offering program for up to $500.0 million in common stock, with $28.0 million raised under the prior program in 9M 2022[187][188] - New financing activities in 9M 2022 included a $200.0 million senior unsecured term loan and a $200.0 million secured refinancing transaction, with proceeds used to repay maturing debt and LOC balances[190] - As of September 30, 2022, the LOC had a remaining borrowing capacity of $405.0 million, and the company expects to meet short-term liquidity needs through available cash, operating cash flows, and the LOC[192] Cash Flow Activities (9M 2022 vs 9M 2021, $ thousands) | Metric | 9M 2022 | 9M 2021 | Variance | | :------------------------------------------ | :------ | :------ | :------- | | Net cash provided by operating activities | 487,821 | 453,607 | 34,214 | | Net cash used in investing activities | (398,884) | (677,954) | 279,070 | | Net cash (used in) provided by financing activities | (181,825) | 240,559 | (422,384) | | Net (decrease) increase in cash and restricted cash | (92,888) | 16,212 | (109,100) | Capital Improvements (9M 2022 vs 9M 2021, $ thousands) | Category | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------ | | Asset preservation | 32,302 | 29,862 | | Improvements and renovations | 26,950 | 19,401 | | Property upgrades and development | 97,832 | 78,422 | | New and used home investments | 94,761 | 74,118 | | Used home investments | 4,588 | — | | Corporate | 12,181 | 2,234 | | Total capital improvements | 268,614 | 204,037 | Contractual Obligations Outlines significant contractual obligations including long-term borrowings and operating leases - Significant contractual obligations include long-term borrowings, interest expense, operating leases, LOC maintenance fees, and ground leases[202] Westwinds Legal Dispute Details the legal dispute concerning the Westwinds ground leases and its recent binding agreement - The Operating Partnership's ground leases for Westwinds mobile home community and Nicholson Plaza in San Jose, California, expired on August 31, 2022, without extension options[203] - The master lessor demanded the property be delivered free of subtenancies, which the Operating Partnership disputes as unlawful and conflicting with state/municipal laws protecting mobile home residents' occupancy rights[204][206] - A binding agreement was reached on October 6, 2022, to dismiss all pending claims in Superior Court and arbitration, though the Nicholsons reserved rights to pursue claims regarding maintenance and repair failures[214] Off-Balance Sheet Arrangements Confirms the absence of any off-balance sheet arrangements as of September 30, 2022 - As of September 30, 2022, the company had no off-balance sheet arrangements[215] Critical Accounting Policies and Estimates States that there have been no significant changes to critical accounting policies and estimates - There have been no significant changes to the company's critical accounting policies and estimates during the quarter ended September 30, 2022[216] Forward-Looking Statements Highlights that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to numerous assumptions, risks, and uncertainties, including real estate market conditions, ability to retain customers, rental rates, occupancy, acquisition integration, financing, inflation, interest rates, data breaches, and legal outcomes[217][219] - Risks related to the COVID-19 pandemic, such as its duration, health impact, economic effects, and governmental responses, also affect forward-looking statements[220] Item 3. Quantitative and Qualitative Disclosures About Market Risk States no material changes in market risk disclosures since December 31, 2021 - No material changes in market risk assumptions or results have occurred since December 31, 2021[223] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures and no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022, providing reasonable assurance for timely information collection and disclosure[224] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[225] Part II - Other Information Item 1. Legal Proceedings Refers to Note 11 for detailed discussion of legal proceedings - Legal proceedings are discussed in detail in Note 11, Commitments and Contingencies, within Part I, Item 1. Financial Statements[228] Item 1A. Risk Factors Directs readers to the comprehensive description of risk factors in the 2021 Form 10-K - A description of the risk factors associated with the business is discussed in Part I, Item 1A. Risk Factors in the 2021 Form 10-K[229] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds States there were no unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities and use of proceeds[230] Item 3. Defaults Upon Senior Securities Confirms no defaults upon senior securities occurred during the reporting period - There were no defaults upon senior securities[231] Item 4. Mine Safety Disclosures States that there are no mine safety disclosures to report - There are no mine safety disclosures[232] Item 5. Other Information Confirms that there is no other information to report - There is no other information to report[233] Item 6. Exhibits Lists the exhibits filed as part of the Form 10-Q, including certifications and XBRL documents List of Exhibits | Exhibit No. | Description | | :---------- | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | 31.1 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | 31.2 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | 32.1 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. | | 32.2 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. | | 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because are embedded within the Inline XBRL document. | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 104 | Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document) |