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~~September 30, 2019



☐	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: ~~91,033,894~~182,080,887 shares of Common Stock as of ~~July 24,~~October 23, 2019.

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~~September 30, 2019 and December 31, 2018	3
	Consolidated Statements of Income and Comprehensive Income for the quarters and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018	4
	Consolidated Statements of Changes in Equity for the quarters and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018	5
	Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3435
Item 4.	Controls and Procedures	3435
Part II - Other Information
Item 1.	Legal Proceedings	3536
Item 1A.	Risk Factors	3536
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3536
Item 3.	Defaults Upon Senior Securities	3536
Item 4.	Mine Safety Disclosures	3536
Item 5.	Other Information	3536
Item 6.	Exhibits	3637

Part I – Financial Information

Item 1. Financial Statements

Equity LifeStyle Properties, Inc.

Consolidated Balance Sheets

(amounts in thousands, except share and per share ~~data)~~data (adjusted for stock split))


	As of			As of			As of			As of
	June 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
Assets
Investment in real estate:
Land	$	1,418,353		$	1,408,832		$	1,516,956		$	1,408,832
Land improvements	3,236,899			3,143,745			3,291,463			3,143,745
Buildings and other depreciable property	781,671			720,900			869,360			720,900
	5,436,923			5,273,477			5,677,779			5,273,477
Accumulated depreciation	(1,704,091		)	(1,631,888		)	(1,739,285		)	(1,631,888		)
Net investment in real estate	3,732,832			3,641,589			3,938,494			3,641,589
Cash and restricted cash	90,457			68,974			42,386			68,974
Notes receivable, net	36,010			35,041			37,228			35,041
Investment in unconsolidated joint ventures	55,195			57,755			20,339			57,755
Deferred commission expense	40,710			40,308			40,953			40,308
Other assets, net	59,274			46,227			58,071			46,227
Assets held for sale, net	—			35,914			—			35,914
Total Assets	$	4,014,478		$	3,925,808		$	4,137,471		$	3,925,808

Liabilities and Equity
Liabilities:
Mortgage notes payable, net	$	2,075,689		$	2,149,726		$	2,062,736		$	2,149,726
Term loan, net	198,787			198,626			198,868			198,626
Unsecured line of credit							120,000			—
Accounts payable and other liabilities	127,051			102,854			144,622			102,854
Deferred revenue – upfront payments from right-to-use contracts (membership upgrade sales)	121,047			116,363			124,577			116,363
Deferred revenue – right-to-use annual payments (membership subscriptions)	13,022			10,055			11,395			10,055
Accrued interest payable	8,187			8,759			8,410			8,759
Rents and other customer payments received in advance and security deposits	104,249			81,114			88,094			81,114
Distributions payable	58,972			52,617			58,976			52,617
Liabilities related to assets held for sale	—			12,350			—			12,350
Total Liabilities	2,707,004			2,732,464			2,817,678			2,732,464
Equity:
Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of June 30, 2019 and December 31, 2018; none issued and outstanding.	—			—
Common stock, $0.01 par value, 400,000,000 and 200,000,000 shares authorized as of June 30, 2019 and December 31, 2018, respectively; 91,032,007 and 89,921,018 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively.	906			896
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of September 30, 2019 and December 31, 2018; none issued and outstanding.							—			—
Common stock, $0.01 par value, 400,000,000 and 200,000,000 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 182,080,186 and 179,842,036 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively.							1,812			1,792
Paid-in capital	1,397,613			1,329,391			1,399,951			1,328,495
Distributions in excess of accumulated earnings	(162,204		)	(211,034		)	(153,505		)	(211,034		)
Accumulated other comprehensive income (loss)	(242		)	2,299			(499		)	2,299
Total Stockholders’ Equity	1,236,073			1,121,552			1,247,759			1,121,552
Non-controlling interests – Common OP Units	71,401			71,792			72,034			71,792
Total Equity	1,307,474			1,193,344			1,319,793			1,193,344
Total Liabilities and Equity	$	4,014,478		$	3,925,808		$	4,137,471		$	3,925,808

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)~~data (adjusted for stock split))

(unaudited)


	Quarters Ended June 30,						Six Months Ended June 30,						Quarters Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
Revenues:
Rental income	$	212,007		$	199,155		$	435,573		$	406,148		$	225,116		$	211,102		$	660,689		$	617,250
Right-to-use annual payments (membership subscriptions)	12,586			11,891			24,902			23,410			13,150			12,206			38,052			35,616
Right-to-use contracts current period, gross (membership upgrade sales)	5,041			3,944			8,879			7,106			5,730			4,863			14,609			11,969
Right-to-use contract upfront payments, deferred, net	(2,912		)	(2,021		)	(4,683		)	(3,306		)	(3,530		)	(2,883		)	(8,213		)	(6,189		)
Other income	10,265			12,536			20,635			25,572			11,263			13,419			31,898			38,991
Gross revenues from home sales	7,825			9,105			14,300			17,414			8,438			9,339			22,738			26,753
Brokered resale and ancillary services revenues, net	872			617			2,431			2,018			2,133			1,362			4,564			3,380
Interest income	1,803			1,862			3,554			3,812			1,831			1,846			5,385			5,658
Income from other investments, net	879			3,413			1,865			4,353			7,029			5,421			8,894			9,774
Total revenues	248,366			240,502			507,456			486,527			271,160			256,675			778,616			743,202
Expenses:
Property operating and maintenance	84,868			81,720			162,816			158,052			90,765			86,349			253,581			244,401
Real estate taxes	15,107			13,440			30,430			27,575			15,166			13,240			45,596			40,815
Sales and marketing, gross	4,214			3,305			7,623			6,117			4,063			3,568			11,686			9,685
Right-to-use contract commissions, deferred, net	(389		)	(262		)	(580		)	(286		)	(313		)	(458		)	(893		)	(744		)
Property management	14,385			13,472			28,070			27,153			14,605			13,589			42,675			40,742
Depreciation and amortization	37,776			34,345			75,753			66,719			37,032			34,980			112,785			101,699
Cost of home sales	8,164			9,632			14,796			18,206			8,434			9,742			23,230			27,948
Home selling expenses	1,102			973			2,185			2,048			1,033			1,101			3,218			3,149
General and administrative	9,225			9,669			19,134			17,707			8,710			8,816			27,844			26,523
Other expenses	540			367			967			710			1,460			386			2,427			1,096
Early debt retirement	1,491			—			1,491			—			—			—			1,491			—
Interest and related amortization	26,024			26,285			52,417			51,988			25,547			26,490			77,964			78,478
Total expenses	202,507			192,946			395,102			375,989			206,502			197,803			601,604			573,792
Gain on sale of real estate, net	—			—			52,507			—			—			—			52,507			—
Income before equity in income of unconsolidated joint ventures	45,859			47,556			164,861			110,538			64,658			58,872			229,519			169,410
Equity in income of unconsolidated joint ventures	3,226			1,613			4,759			2,808			3,518			788			8,277			3,596
Consolidated net income	49,085			49,169			169,620			113,346			68,176			59,660			237,796			173,006

Income allocated to non-controlling interests – Common OP Units	(2,676		)	(3,024		)	(9,902		)	(6,979		)	(3,715		)	(3,590		)	(13,617		)	(10,569		)
Redeemable perpetual preferred stock dividends	(8		)	(8		)	(8		)	(8		)	—			—			(8		)	(8		)
Net income available for Common Stockholders	$	46,401		$	46,137		$	159,710		$	106,359		$	64,461		$	56,070		$	224,171		$	162,429

Consolidated net income	$	49,085		$	49,169		$	169,620		$	113,346		$	68,176		$	59,660		$	237,796		$	173,006
Other comprehensive income (loss):
Adjustment for fair market value of swap	(1,610		)	764			(2,541		)	2,637			(257		)	380			(2,798		)	3,017
Consolidated comprehensive income	47,475			49,933			167,079			115,983			67,919			60,040			234,998			176,023
Comprehensive income allocated to non-controlling interests – Common OP Units	(2,589		)	(3,071		)	(9,759		)	(7,141		)	(3,701		)	(3,613		)	(13,460		)	(10,754		)
Redeemable perpetual preferred stock dividends	(8		)	(8		)	(8		)	(8		)	—			—			(8		)	(8		)
Comprehensive income attributable to Common Stockholders	$	44,878		$	46,854		$	157,312		$	108,834		$	64,218		$	56,427		$	221,530		$	165,261

Earnings per Common Share – Basic	$	0.51		$	0.52		$	1.78		$	1.20		$	0.35		$	0.31		$	1.24		$	0.91

Earnings per Common Share – Fully Diluted	$	0.51		$	0.52		$	1.77		$	1.20		$	0.35		$	0.31		$	1.24		$	0.91

Weighted average Common Shares outstanding – basic	90,156			88,549			89,969			88,537			181,649			178,400			180,515			177,520
Weighted average Common Shares outstanding – fully diluted	95,930			94,623			95,773			94,600			192,400			190,526			191,840			189,654

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)~~thousands; adjusted for stock split)

(unaudited)

Common
Stock Paid-in
Capital Redeemable
Perpetual
Preferred
Stock Distributions
in Excess of
Accumulated
Earnings Accumulated
Other
Comprehensive
Income (Loss) Non-
controlling
Interests –
Common OP
Units Total
Equity
Balance as of December 31, 2018 $ 896
$ 1,329,391
$ —
$ (211,034 ) $ 2,299
$ 71,792
$ 1,193,344
Exchange of Common OP Units for common stock —
66
—
—
—
(66 ) —
Issuance of common stock through exercise of options —
53
—
—
—
—
53
Issuance of common stock through employee stock purchase plan —
652
—
—
—
—
652
Compensation expenses related to restricted stock and stock options —
2,420
—
—
—
—
2,420
Repurchase of common stock or Common OP Units —
(53 ) —
—
—
—
(53 )
Adjustment for Common OP Unitholders in the Operating Partnership —
(56 ) —
—
—
56
—
Adjustment for fair market value of swap —
—
—
—
(931 ) —
(931 )
Consolidated net income —
—
—
113,309
—
7,226
120,535
Distributions —
—
—
(55,123 ) —
(3,516 ) (58,639 )
Other —
(63 ) —
—
—
—
(63 )
Balance as of March 31, 2019 896
1,332,410
$ —
(152,848 ) 1,368
75,492
1,257,318
Exchange of Common OP Units for Common Stock 5
6,430
—
—
—
(6,435 ) —
Issuance of Common Stock through employee stock purchase plan —
587
—
—
—
—
587
Issuance of Common Stock 5
59,314
—
—
—
—
59,319
Compensation expenses related to restricted stock and stock options —
2,625
—
—
—
—
2,625
Adjustment for Common OP Unitholders in the Operating Partnership —
(2,883 ) —
—
—
2,883
—
Adjustment for fair market value of swap —
—
—
—
(1,610 ) —
(1,610 )
Consolidated net income —
—
8
46,401
—
2,676
49,085
Distributions —
—
(8 ) (55,757 ) —
(3,215 ) (58,980 )
Other —
(870 ) —
—
—
—
(870 )
Balance as of June 30, 2019 $ 906
$ 1,397,613
$ —
$ (162,204 ) $ (242 ) $ 71,401
$ 1,307,474



	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, 2018	$	1,792	$	1,328,495		$	—		$	(211,034	)	$	2,299		$	71,792		$	1,193,344
Exchange of Common OP Units for common stock	—		66			—			—			—			(66		)	—
Issuance of common stock through exercise of options	—		53			—			—			—			—			53
Issuance of common stock through employee stock purchase plan	—		652			—			—			—			—			652
Compensation expenses related to restricted stock and stock options	—		2,420			—			—			—			—			2,420
Repurchase of common stock or Common OP Units	—		(53		)	—			—			—			—			(53		)
Adjustment for Common OP Unitholders in the Operating Partnership	—		(56		)	—			—			—			56			—
Adjustment for fair market value of swap	—		—			—			—			(931		)	—			(931		)
Consolidated net income	—		—			—			113,309			—			7,226			120,535
Distributions	—		—			—			(55,123		)	—			(3,516		)	(58,639		)
Other	—		(63		)	—			—			—			—			(63		)
Balance as of March 31, 2019	1,792		1,331,514			$	—		(152,848		)	1,368			75,492			1,257,318
Exchange of Common OP Units for Common Stock	10		6,425			—			—			—			(6,435		)	—
Issuance of Common Stock through employee stock purchase plan	—		587			—			—			—			—			587
Issuance of Common Stock	10		59,309			—			—			—			—			59,319
Compensation expenses related to restricted stock and stock options	—		2,625			—			—			—			—			2,625
Adjustment for Common OP Unitholders in the Operating Partnership	—		(2,883		)	—			—			—			2,883			—
Adjustment for fair market value of swap	—		—			—			—			(1,610		)	—			(1,610		)
Consolidated net income	—		—			8			46,401			—			2,676			49,085
Distributions	—		—			(8		)	(55,757		)	—			(3,215		)	(58,980		)
Other	—		(870		)	—			—			—			—			(870		)
Balance as of June 30, 2019	1,812		1,396,707			$	—		(162,204		)	(242		)	71,401			1,307,474
Exchange of Common OP Units for Common Stock	—		33			—			—			—			(33		)	—
Issuance of Common Stock through employee stock purchase plan	—		698			—			—			—			—			698
Compensation expenses related to restricted stock and stock options	—		2,734			—			—			—			—			2,734
Adjustment for Common OP Unitholders in the Operating Partnership	—		(165		)	—			—			—			165			—
Adjustment for fair market value of swap	—		—			—			—			(257		)	—			(257		)
Consolidated net income	—		—			—			64,461			—			3,715			68,176
Distributions	—		—			—			(55,762		)	—			(3,214		)	(58,976		)
Other	—		(56		)	—			—			—			—			(56		)
Balance as of September 30, 2019	$	1,812	$	1,399,951		$	—		$	(153,505	)	$	(499	)	$	72,034		$	1,319,793

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

Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes in Equity

(amounts in ~~thousands)~~thousands; adjusted for stock split)

(unaudited)


	Common Stock		Paid-in Capital			Redeemable Perpetual Preferred Stock			Distributions in Excess of Accumulated Earnings			Accumulated Other Comprehensive Income (Loss)		Non- controlling interests – Common OP Units			Total Equity			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, 2017	$	883	$	1,242,109		$	—		$	(211,980	)	$	942	$	68,088		$	1,100,042		$	1,766	$	1,241,226		$	—		$	(211,980	)	$	942	$	68,088		$	1,100,042
Cumulative effect of change in accounting principle (ASC 606, Revenue Recognition)	—		—			—			(15,186		)	—		—			(15,186		)	—		—			—			(15,186		)	—		—			(15,186		)
Balance as of January 1, 2018	883		1,242,109			—			(227,166		)	942		68,088			1,084,856			1,766		1,241,226			—			(227,166		)	942		68,088			1,084,856
Exchange of Common OP Units for common stock	—		80			—			—			—		(80		)	—			—		80			—			—			—		(80		)	—
Issuance of common stock through employee stock purchase plan	—		503			—			—			—		—			503			—		503			—			—			—		—			503
Compensation expenses related to restricted stock and stock options	—		1,800			—			—			—		—			1,800			—		1,800			—			—			—		—			1,800
Adjustment for Common OP Unitholders in the Operating Partnership	—		782			—			—			—		(782		)	—			—		782			—			—			—		(782		)	—
Adjustment for fair market value of swap	—		—			—			—			1,873		—			1,873			—		—			—			—			1,873		—			1,873
Consolidated net income	—		—			—			60,222			—		3,955			64,177			—		—			—			60,222			—		3,955			64,177
Distributions	—		—			—			(48,805		)	—		(3,205		)	(52,010		)	—		—			—			(48,805		)	—		(3,205		)	(52,010		)
Other	—		(60		)	—			—			—		—			(60		)	—		(60		)	—			—			—		—			(60		)
Balance as of March 31, 2018	883		1,245,214			—			(215,749		)	2,815		67,976			1,101,139			1,766		1,244,331			—			(215,749		)	2,815		67,976			1,101,139
Exchange of Common OP Units for Common Stock	1		81			—			—			—		(82		)	—			2		80			—			—			—		(82		)	—
Issuance of Common Stock through employee stock purchase plan	—		343			—			—			—		—			343			—		343			—			—			—		—			343
Compensation expenses related to restricted stock and stock options	—		2,741			—			—			—		—			2,741			—		2,741			—			—			—		—			2,741
Adjustment for Common OP Unitholders in the Operating Partnership	—		(57		)	—			—			—		57			—			—		(57		)	—			—			—		57			—
Adjustment for fair market value of swap	—		—			—			—			764		—			764			—		—			—			—			764		—			764
Consolidated net income	—		—			8			46,137			—		3,024			49,169			—		—			8			46,137			—		3,024			49,169
Distributions	—		—			(8		)	(48,841		)	—		(3,201		)	(52,050		)	—		—			(8		)	(48,841		)	—		(3,201		)	(52,050		)
Other	—		(275		)	—			—			—		—			(275		)	—		(275		)	—			—			—		—			(275		)
Balance as of June 30, 2018	$	884	$	1,248,047		$	—		$	(218,453	)	$	3,579	$	67,774		$	1,101,831		1,768		1,247,163			—			(218,453		)	3,579		67,774			1,101,831
Exchange of Common OP Units for Common Stock																				2		857			—			—			—		(859		)	—
Issuance of Common Stock through employee stock purchase plan																				—		765			—			—			—		—			765
Issuance of Common Stock																				20		78,735			—			—			—		—			78,755
Compensation expenses related to restricted stock and stock options																				—		2,746			—			—			—		—			2,746
Adjustment for Common OP Unitholders in the Operating Partnership																				—		(4,414		)	—			—			—		4,414			—
Adjustment for fair market value of swap																				—		—			—			—			380		—			380
Consolidated net income																				—		—			—			56,070			—		3,590			59,660
Distributions																				—		—			—			(49,360		)	—		(3,161		)	(52,521		)
Other																				—		(1,099		)	—			—			—		—			(1,099		)
Balance as of September 30, 2018																				$	1,790	$	1,324,753		$	—		$	(211,743	)	$	3,959	$	71,758		$	1,190,517

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,
2019 2018
Cash Flows From Operating Activities:
Consolidated net income $ 169,620
$ 113,346
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Gain on sale of real estate, net (52,507 ) —
Early debt retirement 1,491
—
Depreciation and amortization 76,648
67,431
Amortization of loan costs 1,768
1,772
Debt premium amortization (232 ) (711 )
Equity in income of unconsolidated joint ventures (4,759 ) (2,808 )
Distributions of income from unconsolidated joint ventures 2,008
1,732
Proceeds from insurance claims, net 4,422
1,809
Compensation expense related to restricted stock and stock options 5,045
4,541
Revenue recognized from right-to-use contract upfront payments (membership upgrade sales) (4,195 ) (3,800 )
Commission expense recognized related to right-to-use contracts 1,867
1,810
Long-term incentive plan compensation (3,608 ) 461
Changes in assets and liabilities:
Notes receivable, net (1,079 ) 642
Deferred commission expense (2,269 ) (2,010 )
Other assets, net (8,275 ) 10,895
Accounts payable and other liabilities 25,962
9,274
Deferred revenue – upfront payments from right-to-use contracts (membership upgrade sales) 8,879
7,106
Deferred revenue – right-to-use annual payments (membership subscriptions) 2,967
2,874
Rents and other customer payments received in advance and security deposits 20,932
15,601
Net cash provided by operating activities 244,685
229,965
Cash Flows From Investing Activities:
Real estate acquisitions, net (38,463 ) (53,289 )
Proceeds from disposition of properties, net 77,746
—
Investment in unconsolidated joint ventures —
(3,791 )
Distributions of capital from unconsolidated joint ventures 5,169
110
Proceeds from insurance claims 1,111
2,335
Repayments of notes receivable —
13,823
Capital improvements (121,444 ) (81,377 )
Net cash used in investing activities (75,881 ) (122,189 )



	Nine Months Ended September 30,
	2019			2018
Cash Flows From Operating Activities:
Consolidated net income	$	237,796		$	173,006
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Gain on sale of real estate, net	(52,507		)	—
Early debt retirement	1,491			—
Depreciation and amortization	114,160			102,798
Amortization of loan costs	2,623			2,675
Debt premium amortization	(359		)	(1,061		)
Equity in income of unconsolidated joint ventures	(8,277		)	(3,596		)
Distributions of income from unconsolidated joint ventures	5,010			2,869
Proceeds from insurance claims, net	(1,742		)	(3,353		)
Compensation expense related to restricted stock and stock options	7,779			7,287
Revenue recognized from right-to-use contract upfront payments (membership upgrade sales)	(6,394		)	(5,780		)
Commission expense recognized related to right-to-use contracts	2,773			2,715
Long-term incentive plan compensation	(3,226		)	819
Changes in assets and liabilities:
Notes receivable, net	(2,441		)	(641		)
Deferred commission expense	(3,418		)	(3,424		)
Other assets, net	1,070			16,666
Accounts payable and other liabilities	35,771			20,055
Deferred revenue – upfront payments from right-to-use contracts (membership upgrade sales)	14,609			11,969
Deferred revenue – right-to-use annual payments (membership subscriptions)	1,340			1,093
Rents and other customer payments received in advance and security deposits	3,290			665
Net cash provided by operating activities	349,348			324,762
Cash Flows From Investing Activities:
Real estate acquisitions, net	(176,296		)	(131,804		)
Proceeds from disposition of properties, net	77,746			—
Investment in unconsolidated joint ventures	(983		)	(3,914		)
Distributions of capital from unconsolidated joint ventures	5,734			168
Proceeds from insurance claims	6,689			6,615
Repayments of notes receivable	—			13,822
Capital improvements	(189,788		)	(128,436		)
Net cash used in investing activities	(276,898		)	(243,549		)

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,						Nine Months Ended September 30,
	2019			2018			2019			2018
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan	1,237			846			1,934			1,610
Gross proceeds from the issuance of common stock	59,319			—			59,319			78,755
Distributions:
Common Stockholders	(104,579		)	(92,008		)	(160,336		)	(140,850		)
Common OP Unitholders	(6,676		)	(6,049		)	(9,891		)	(9,250		)
Preferred Stockholders	(8		)	(8		)	(8		)	(8		)
Principal payments and mortgage debt repayment	(93,982		)	(23,964		)	(107,367		)	(36,308		)
New mortgage notes payable financing proceeds	—			64,014			—			64,014
Line of Credit payoff	—			(97,000		)	(120,000		)	(174,000		)
Line of Credit proceeds	—			67,000			240,000			224,000
Debt issuance and defeasance costs	(1,700		)	(1,688		)	(1,700		)	(1,878		)
Other	(932		)	(335		)	(989		)	(1,433		)
Net cash used in financing activities	(147,321		)	(89,192		)
Net increase in cash and restricted cash	21,483			18,584
Net cash (used in) provided by financing activities							(99,038		)	4,652
Net (decrease) increase in cash and restricted cash							(26,588		)	85,865
Cash and restricted cash, beginning of period	68,974			35,631			68,974			35,631
Cash and restricted cash, end of period	$	90,457		$	54,215		$	42,386		$	121,496

Six Months Ended June 30,
2019 2018
Supplemental Information:
Cash paid for interest $ 51,744
$ 52,658
Net investment in real estate – reclassification of rental homes $ 12,451
$ 15,396
Other assets, net – reclassification of rental homes $ (12,451 ) $ (15,396 )

Real estate acquisitions:
Investment in real estate $ (58,871 ) $ (71,756 )
Other assets, net (412 ) (9 )
Debt assumed 19,212
9,200
Debt financed —
8,786
Other liabilities 1,608
490
Real estate acquisitions, net $ (38,463 ) $ (53,289 )

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



	Nine Months Ended September 30,
	2019			2018
Supplemental Information:
Cash paid for interest	$	76,508		$	76,881
Net investment in real estate – reclassification of rental homes	$	19,241		$	22,973
Other assets, net – reclassification of rental homes	$	(19,241	)	$	(22,973	)

Real estate acquisitions:
Investment in real estate	$	(240,324	)	$	(150,926	)
Investment in unconsolidated joint ventures	35,789			—
Other assets, net	(1,415		)	(9		)
Debt assumed	19,212			9,200
Debt financed	—			8,786
Other liabilities	10,442			1,145
Real estate acquisitions, net	$	(176,296	)	$	(131,804	)

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

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

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 1 – Organization and Basis of Presentation

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

Our Properties are owned primarily by the Operating Partnership and managed internally by wholly-owned affiliates of the Operating Partnership. ELS is the sole general partner of the Operating Partnership, has exclusive responsibility and discretion in management and control of the Operating Partnership and held a ~~94.5%~~94.6% interest as of ~~June~~September 30, 2019. 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 the 2018 Form 10-K.

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

On October 15, 2019, we effected a 2-for-one stock split of our common stock. Pursuant to the anti-dilution provision in the Operating Partnership's Agreement of Limited Partnership, the stock split also affected the common Operating Partnership units ("OP units"). All shares of common stock and common OP units and per share data in the accompanying consolidated financial statements and notes, for all periods presented, have been adjusted to reflect the stock split.

Note 2 – Summary of Significant Accounting Policies

(a) Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ("ASU 2016-02") Leases. This new guidance, including the related subsequently issued ASUs, provides the principles for the recognition, measurement, presentation and disclosure of leases, including the requirement that lessees recognize right-of-use ("ROU") assets and lease liabilities for leases on the Consolidated Balance Sheets.

We adopted the new lease standard effective January 1, 2019 and have elected to use January 1, 2019 as our date of initial application. Results for reporting periods beginning January 1, 2019 are presented under the new lease standard. We made an accounting policy election to not recognize ROU assets and lease liabilities for leases with a term of 12 months or less. We elected the package of practical expedients permitted under the transition guidance within the new standard and were not required to reassess the following upon adoption: (i) whether an expired or existing contract met the definition of a lease, (ii) the lease classification at January 1, 2019 for existing leases and (iii) whether leasing costs previously capitalized as initial direct costs would continue to be amortized. Upon adoption, we did not have an adjustment to the opening balance of retained earnings due to the election of these practical expedients.

As a lessor, we adopted the practical expedient that allowed us not to separate expenses reimbursed by our customers (“utility recoveries”) from the associated rental revenue if certain criteria were met. We assessed these criteria and concluded the timing and pattern of transfer for rental revenue and the associated utility recoveries are the same and as our leases qualify as operating

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (continued)

leases, we accounted for and presented rental revenue and utility recoveries as a single component under Rental income in our Consolidated Statements of Income and Comprehensive Income for 2019 and 2018. In addition, the new standard requires our expected credit loss related to the collectability of lease receivables to be reflected as an adjustment to the line item Rental income prospectively starting from January 1, 2019. For 2018, the credit loss related to the collectability of lease receivables was recognized

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

~~Note 2 – Summary of Significant Accounting Policies (continued)~~

in the line item Property operating and maintenance and was not significant. The guidance regarding capitalization of leasing costs did not have any effect on our consolidated financial statements.

On January 1, 2019, we recognized ROU assets of $17.5 million and lease liabilities of $18.7 million on the Consolidated Balance Sheets, principally for our ground and office space leases, in which we are the lessee.

For more disclosure on the adoption of the new lease accounting standard, see Note 3. Leases.

(b) New Accounting Pronouncements

In August 2018, the FASB issued ("ASU 2018-15") Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 provides clarity on the accounting for implementation costs of a cloud computing arrangement that is a service contract. The project stage (that is, preliminary project stage, application development stage, or post implementation stage) and the nature of the implementation costs determine which costs to capitalize as an asset related to the service contract and which ones to expense. This update also requires the capitalized implementation costs to be expensed over the term of the arrangement and to be presented in the same line item in the consolidated financial statements as the fees associated with the service of the arrangement. ASU 2018-15 is effective in fiscal years beginning after December 15, 2019, including interim periods within those years. ~~Early adoption is permitted.~~ This guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently in the process of evaluating the potential impact, if any, that the adoption of this standard may have on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued (“ASU 2016-13”) Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted. The majority of our revenue follows the lease accounting guidance and is not within the scope of this standard. We ~~are currently in~~do not expect the ~~process of evaluating the potential impact, if any, that~~ adoption of this standard ~~may~~to have a material impact on the consolidated financial statements and related disclosures.

We account for certain revenue streams in accordance with Accounting Standard Codification (ASC) 606, Revenue from Contracts with Customers. Right-to-use contracts (also referred to as 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 in which access to Sites at certain Properties ~~are~~is provided. Right-to-use upgrade contracts 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.

Income from home sales is recognized when the earnings process is complete. The earnings process is complete when the home has been delivered, the purchaser has accepted the home and title has transferred.

(d) Restricted Cash

As of ~~June~~September 30, 2019 and December 31, 2018, restricted cash consists of ~~$27.5~~$30.2 million and $24.1 million, respectively, primarily related to cash reserved for customer deposits and amounts escrowed for insurance and real estate taxes.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 3 – Leases

Lessor

Rental income derived from customers renting our Sites is accounted for in accordance with ASC 842, Leases, and is recognized over the term of the respective operating lease or the length of a customer's stay. Our MH community Sites and annual RV community Sites are leased on an annual basis. Seasonal Sites are leased to customers generally for one to six months. Transient Sites are leased to customers on a short-term basis. In addition, customers may lease homes that are located in our Properties.

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


(amounts in thousands)	As of June 30, 2019		As of September 30, 2019
2019	$	60,067	$	30,435
2020	120,012		120,923
2021	65,321		65,667
2022	34,906		35,372
2023	19,714		20,101
Thereafter	84,254		86,665
Total	$	384,274	$	359,163

Lessee

We lease land under non-cancelable operating leases at 13 Properties expiring at various dates through 2054. The majority of the leases have terms requiring fixed payments plus additional rents based on a percentage of gross revenues at those Properties. We also have other operating leases, primarily office space expiring at various dates through 2026. For the quarters ended ~~June~~September 30, 2019 and 2018, total operating lease payments were $2.3 million and $2.1 million, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, total operating lease payments were ~~$4.6~~$6.9 million and ~~$4.1~~$6.2 million, respectively.

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


(amounts in thousands)	As of June 30, 2019			As of December 31, 2018			As of September 30, 2019			As of December 31, 2018
2019	$	2,770		$	4,921		$	1,575		$	4,921
2020	4,801			4,801			4,918			4,801
2021	4,179			4,179			4,296			4,179
2022	2,103			2,103			2,220			2,103
2023	953			953			1070			953
Thereafter	5,054			5,054			6,294			5,054
Total undiscounted rental payments	19,860			22,011			20,373			22,011
Less imputed interest	(2,895		)	(3,289		)	(3,157		)	(3,289		)
Total lease liabilities	$	16,965		$	18,722		$	17,216		$	18,722

ROU assets and lease liabilities from our operating leases included within Other assets, net and Accounts payable and other liabilities on the Consolidated Balance Sheets were ~~$15.7~~$16.0 million and ~~$17.0~~$17.2 million, respectively, as of ~~June~~September 30, 2019. The weighted average remaining lease term for our operating leases was 7 years and the weighted average incremental borrowing rate was 4.4% at ~~June~~September 30, 2019.

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 common share, as adjusted for the stock split, for the quarters and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	Quarters Ended June 30,				Six Months Ended June 30,				Quarters Ended September 30,				Nine Months Ended September 30,
(amounts in thousands, except per share data)	2019		2018		2019		2018		2019		2018		2019		2018
Numerator:
Net income available for Common Stockholders – Basic	$	46,401	$	46,137	$	159,710	$	106,359	$	64,461	$	56,070	$	224,171	$	162,429
Amounts allocated to dilutive securities	2,676		3,024		9,902		6,979		3,715		3,590		13,617		10,569
Net income available for Common Stockholders – Fully Diluted	$	49,077	$	49,161	$	169,612	$	113,338	$	68,176	$	59,660	$	237,788	$	172,998
Denominator:
Weighted average Common Shares outstanding – Basic	90,156		88,549		89,969		88,537		181,649		178,400		180,515		177,520
Effect of dilutive securities:
Exchange of Common OP Units for Common Shares	5,643		5,826		5,691		5,827		10,496		11,542		11,084		11,618
Restricted stock and stock options	131		248		113		236		255		584		241		516
Weighted average Common Shares outstanding – Fully Diluted	95,930		94,623		95,773		94,600		192,400		190,526		191,840		189,654

Earnings per Common Share – Basic	$	0.51	$	0.52	$	1.78	$	1.20	$	0.35	$	0.31	$	1.24	$	0.91

Earnings per Common Share – Fully Diluted	$	0.51	$	0.52	$	1.77	$	1.20	$	0.35	$	0.31	$	1.24	$	0.91

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 limited partners of the Operating Partnership (the "Common OP Unit holders") since January 1, 2018.~~



~~Distribution Amount Per Share~~	~~For the Quarter Ended~~	~~Stockholder Record Date~~	~~Payment Date~~
~~$0.5500~~	~~March 31, 2018~~	~~March 30, 2018~~	~~April 13, 2018~~
~~$0.5500~~	~~June 30, 2018~~	~~June 29, 2018~~	~~July 13, 2018~~
~~$0.5500~~	~~September 30, 2018~~	~~September 28, 2018~~	~~October 12, 2018~~
~~$0.5500~~	~~December 31, 2018~~	~~December 28, 2018~~	~~January 11, 2019~~
~~$0.6125~~	~~March 31, 2019~~	~~March 29, 2019~~	~~April 12, 2019~~
~~$0.6125~~	~~June 30, 2019~~	~~June 28, 2019~~	~~July 12, 2019~~

Increase in Authorized Shares

On April 30, 2019, our stockholders approved an amendment to our charter to increase the number of shares of our common stock that we are authorized to issue from 200,000,000 to 400,000,000 shares.

Two-for-One Common Stock Split

On October 15, 2019, a 2-for-one stock split of our common stock, effected by and in the form of a stock dividend, was paid to stockholders of record as of October 1, 2019.

Common Stockholder Distribution Activity

The following quarterly distributions, as adjusted for the stock split, have been declared and paid to Common Stockholders and the Common OP Unit holders since January 1, 2018.



Distribution Amount Per Share	For the Quarter Ended	Stockholder Record Date	Payment Date
$0.2750	March 31, 2018	March 30, 2018	April 13, 2018
$0.2750	June 30, 2018	June 29, 2018	July 13, 2018
$0.2750	September 30, 2018	September 28, 2018	October 12, 2018
$0.2750	December 31, 2018	December 28, 2018	January 11, 2019
$0.3063	March 31, 2019	March 29, 2019	April 12, 2019
$0.3063	June 30, 2019	June 28, 2019	July 12, 2019
$0.3063	September 30, 2019	September 27, 2019	October 11, 2019

Equity Offering Program

On October 26, 2018, we entered into our current at-the-market ("ATM") equity offering program with certain sales agents, pursuant to which we may sell, from time-to-time, shares of our Common Stock, par value $0.01 per share, having an aggregate offering price of up to $200.0 million. As of ~~June~~September 30, 2019, we have $140.7 million of common stock available for issuance.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

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

The following table presents the shares that were issued under the current ATM equity offering program during the ~~six~~nine months ended ~~June~~September 30, ~~2019. There was no activity under the ATM equity offering program during the six months ended June 30,~~2019 and 2018.


	Six Months Ended June 30,		Nine Months Ended September 30,
(amounts in thousands, except stock data)	2019
(amounts in thousands, except stock data (as adjusted for the stock split))			2019		2018
Shares of Common Stock sold	505,236		1,010,472		1,722.282
Weighted average price	$	117.41	$	58.71	$	45.73
Total gross proceeds	$	59,319	$	59,319	$	78,755
Commissions paid to sales agents	$	771	$	771	$	1,028

Exchanges

Subject to certain limitations, Common OP Unit holders can request an exchange of any or all of their OP Units for shares of Common Stock at any time. Upon receipt of such a request, we may, in lieu of issuing shares of Common Stock, cause the Operating Partnership to pay cash. During the ~~six~~nine months ended ~~June~~September 30, 2019, ~~495,325~~995,550 OP Units were exchanged for an equal number of shares of Common Stock. During the ~~six~~nine months ended ~~June~~September 30, 2018, ~~13,838~~175,436 OP Units were exchanged for an equal number of shares of Common Stock.

Note 6 – Investment in Real Estate

Acquisitions

On September 10, 2019, we completed the acquisition of the remaining interest in the Loggerhead joint venture that owned 11 marinas for a purchase price of approximately $49.0 million. As part of the acquisition, we also funded the joint venture's repayment of its non-transferable debt of approximately $72.0 million. The transaction was funded with proceeds from our unsecured line of credit. Following the consummation of the transaction, we own 100% of the marinas.

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

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

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

Dispositions

On January 23, 2019, we closed on the sale of ~~five~~5 all-age MH communities located in Indiana and Michigan, collectively containing 1,463 sites, for $89.7 million. The assets and liabilities associated with the transaction were classifieds as held for sale on the Consolidated Balance Sheets as of December 31, 2018. We recognized a gain on sale of these Properties of $52.5 million during the first quarter of 2019.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 7 – Investment in Unconsolidated Joint Ventures

The following table summarizes our investment in unconsolidated joint ventures (investment amounts in thousands with the number of Properties shown parenthetically as of ~~June~~September 30, 2019 and December 31, 2018, respectively):


						Investment as of				Income/(Loss) for Six Months Ended									Investment as of				Income/(Loss) for Nine Months Ended
Investment	Location	Number of Sites ^(a)	Economic Interest ^(b)			June 30, 2019		December 31, 2018		June 30, 2019		June 30, 2018		Location	Number of Sites	Economic Interest ^(a)			September 30, 2019		December 31, 2018		September 30, 2019		September 30, 2018
Meadows	Various (2,2)	1,077	50	%		$	346	$	346	$	800	$	819	Various (2,2)	1,077	50	%		$	246	$	346	$	1,200	$	1,252
Lakeshore	Florida (3,3)	720	(c)			2,154		2,263		122		123		Florida (3,3)	720	(b)			2,553		2,263		183		(62		)
Voyager	Arizona (1,1)	1,801	50	%	^(d)	414		3,135		2,925		883		Arizona (1,1)	1,801	50	%	^(c)	863		3,135		2,938		866
Loggerhead	Florida	2,343	49	%		35,789		35,789		642		689		Florida	2,343	49	%	^(d)	—		35,789		3,501		1,089
ECHO JV	Various	—	50	%		16,492		16,222		270		294		Various	—	50	%		16,677		16,222		455		451
		5,941				$	55,195	$	57,755	$	4,759	$	2,808		5,941				$	20,339	$	57,755	$	8,277	$	3,596

_____________________


(a)	~~Loggerhead sites represent marina slip count.~~


~~(b)~~	The percentages shown approximate our economic interest as of ~~June~~September 30, ~~2019.~~2019 (see note (d) below on Loggerhead). Our legal ownership interest may differ.


~~(c)~~(b)	Includes ~~two~~2 joint ventures in which we own a 65% interest and Crosswinds joint venture in which we own a 49% interest.


~~(d)~~(c)	Voyager joint venture primarily consists of a 50% interest in Voyager RV Resort and a 33% interest in the utility plant servicing the Property.


(d)	On September 10, 2019, we completed the acquisition of the remaining interest in the Loggerhead joint venture (see Note 6. Investment in Real Estate). Loggerhead sites represent marina slip count.

We ~~received~~recognized approximately ~~$7.2~~$10.7 million and ~~$1.8~~$3.0 million inof income from distributions from our unconsolidated joint ventures for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. Approximately ~~$2.7~~$3.2 million and $0.1 million of the distributions ~~made to us~~ exceeded our basis in unconsolidated joint ventures for the ~~six~~nine months ended ~~June~~September 30, 2019 and September 30, 2018, respectively, and as such were recorded as income from unconsolidated joint ventures. ~~None of the distributions made to us exceeded our basis in joint ventures for the six months ended June 30, 2018.~~

Note 8 – Borrowing Arrangements

Mortgage Notes Payable

2019 Activity

During the three months ended March 31, 2019, we defeased mortgage debt of $11.2 million in conjunction with the disposition of the ~~five~~5 MH Properties as disclosed in Note 6. Investment in Real Estate. These loans had a weighted average interest rate of 5.0% per annum.

During the three months ended June 30, 2019, we prepaid ~~four~~4 loans secured by ~~four~~4 properties ~~(three~~(3 MH and ~~one~~1 RV), which were scheduled to mature in 2020. The loans had an outstanding principal balance of $66.8 million and a weighted average interest rate of 6.9% per annum. As part of the transaction, we incurred $1.4 million of prepayment penalties. We used the proceeds from the ATM and our available cash to fund the loan payments.

In connection with the acquisitions that closed during the ~~six~~nine months ended ~~June~~September 30, 2019, we assumed mortgage debt of $18.6 million, excluding mortgage note premium of $0.6 million. These loans carry a weighted average interest rate of 5.4% per annum and mature between 2022 and 2024.

2018 Activity

During the ~~three~~nine months ended ~~March 31,~~September 30, 2018, we closed on ~~one~~1 loan, secured by ~~two~~2 RV communities, for gross proceeds of approximately $64.0 million. The loan carries an interest rate of 4.8% per annum and matures in 2038.

In connection with the Serendipity acquisition that closed during the ~~three~~nine months ended ~~March 31,~~September 30, 2018, we assumed a loan of approximately $9.2 million and obtained additional financing of $8.8 million for total mortgage debt, secured by the MH community, of $18.0 ~~million with an~~million. These loans carry a weighted average interest rate of 4.8% ~~that matures~~and mature in 2039.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Borrowing Arrangements (continued)~~

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

As of June 30, 2019 As of December 31, 2018
(amounts in thousands) Fair Value Carrying Value Fair Value Carrying Value
Mortgage notes payable, excluding deferred financing costs $ 2,203,298
$ 2,099,714
$ 2,164,563
$ 2,174,715
Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 8 – Borrowing Arrangements (continued)



	As of September 30, 2019				As of December 31, 2018
(amounts in thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgage notes payable, excluding deferred financing costs	$	2,285,061	$	2,086,202	$	2,164,563	$	2,174,715

The weighted average interest rate on our outstanding mortgage indebtedness, including the impact of premium/discount amortization and loan cost amortization on mortgage indebtedness, as of ~~June~~September 30, 2019, was approximately 4.5% per annum. The debt bears interest at stated rates ranging from 3.5% to 8.9% per annum and matures on various dates ranging from 2020 to 2041. The debt encumbered a total of 116 and 118 of our Properties as of ~~June~~September 30, 2019 and December 31, 2018, respectively, and the carrying value of such Properties was approximately ~~$2,475.4~~$2,488.9 million and $2,489.8 million, as of ~~June~~September 30, 2019 and December 31, 2018, respectively.

Unsecured Line of Credit

During the ~~six~~nine months ended ~~June~~September 30, 2019, we ~~did not borrow or pay~~paid off and borrowed amounts on our unsecured Line of Credit ("LOC")~~. During the six months ended June 30, 2018, we paid off our unsecured line~~, leaving a balance of ~~credit balance, including approximately $30.0~~$120.0 million outstanding as of ~~December 31, 2017.~~September 30, 2019. As of ~~June~~September 30, 2019, ~~the full capacity on~~ our LOC ~~remained available.~~has a remaining borrowing capacity of $280.0 million with the option to increase the borrowing capacity by $200.0 million, subject to certain conditions.

As of ~~June~~September 30, 2019, we were in compliance in all material respects with the covenants in all our borrowing arrangements.

Note 9 – Derivative Instruments and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

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 connection with our $200.0 million senior unsecured term loan (the “Term Loan”), which has an interest rate of LIBOR plus 1.20% to 1.90% per annum, we entered into a three-year LIBOR Swap Agreement (the "Swap") allowing us to trade the variable interest rate on the Term Loan for a fixed interest rate. The Swap has a notional amount of $200.0 million of outstanding principal with an underlying LIBOR of 1.85% per annum and matures on November 1, 2020. Based on the leverage as of ~~June~~September 30, 2019, our spread over LIBOR was 1.20% resulting in an estimated all-in interest rate of 3.05% per annum.

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


		As of June 30,		As of December 31,			As of September 30,		As of December 31,
(amounts in thousands)	Balance Sheet Location	2019		2018		Balance Sheet Location	2019		2018
Interest Rate Swap	Other assets, net	$	—	$	2,299	Other assets, net	$	—	$	2,299
Interest Rate Swap	Accounts payable and other liabilities	$	242	$	—	Accounts payable and other liabilities	$	499	$	—

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,					Amount of (gain)/loss recognized in OCI on derivative for the nine months ended September 30,					Location of (gain)/ loss reclassified from accumulated OCI into income	Amount of (gain)/loss reclassified from accumulated OCI into income for the nine months ended September 30,
(amounts in thousands)	2019		2018			(amounts in thousands)	2019			2018		2019		2018			(amounts in thousands)	2019			2018
Interest Rate Swap	$	1,901	$	(2,544	)	Interest Expense	$	(640	)	$	93	$	1,957	$	(3,044	)	Interest Expense	$	(841	)	$	(28	)

During the next twelve months through September 30, 2020, we estimate that an additional $0.4 million will be reclassified as an increase to interest expense. This estimate may be subject to change as the underlying LIBOR changes. We determined that

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 9 – Derivative Instruments and Hedging Activities (continued)

~~During the next twelve months through June 30, 2020, we estimate no material changes to interest expense. This estimate may be subject to change as the underlying LIBOR changes. We determined that~~ no adjustment was necessary for non-performance risk on our derivative obligation. As of ~~June~~September 30, 2019, we did not post any collateral related to this agreement.

Note 10 – Equity Incentive Awards

Shares data below has been adjusted to reflect the stock split.

Our 2014 Equity Incentive Plan (the “2014 Plan”) was adopted by our Board of Directors on March 11, 2014 and approved by our stockholders on May 13, 2014. During the quarter ended March 31, 2019, ~~61,200~~122,400 shares of restricted stock (adjusted for the stock split) were awarded to certain members of our management team. Of these shares, 50% are time-based awards, vesting in equal installments over a three-year period on January 31, 2020, January 29, 2021, and January 31, 2022, respectively, and have a grant date fair value of $3.2 million. The remaining 50% are performance-based awards, and are valued using the closing price at the grant date when all the key terms and conditions are known to all parties. The ~~10,201~~20,402 shares of restricted stock (adjusted for the stock split) awarded in 2019 subject to 2019 performance goals have a grant date fair value of $1.1 million. Additionally, ~~11,711~~23,422 shares of restricted stock (adjusted for the stock split) awarded in 2018 subject to 2019 performance goals have a grant date fair value of $1.3 million.

During the quarter ended June 30, 2019, we awarded to certain members of our Board of Directors ~~35,431~~70,862 shares of restricted stock at a fair value of approximately $4.1 million. These shares are time-based awards subject to various vesting dates between October 30, 2019 and April 30, 2022.

Compensation expense related to restricted stock and stock options, reported in General and administrative on the Consolidated Statements of Income and Comprehensive Income, for the quarters ended ~~June~~September 30, 2019 and 2018, was ~~$2.6~~$2.7 million and $2.7 million, respectively, and for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, was approximately ~~$5.0~~$7.8 million and ~~$4.5~~$7.3 million, respectively.

Note 11 – Commitments and Contingencies

We are involved in various legal and regulatory proceedings ("Proceedings") arising in the ordinary course of business. The Proceedings include, but are not limited to, legal claims made by employees, vendors and customers, and notices, consent decrees, information requests, and 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.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 12 – Reportable Segments

We have identified ~~two~~2 reportable segments which are: (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 was no customer who contributed 10% or more of our total revenues during the quarters and ~~six~~nine months ended ~~June~~September 30, 2019 or 2018.

The following tables summarize our segment financial information for the quarters and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:

Quarter Ended ~~June~~September 30, 2019


(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated			Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	233,848		$	11,836		$	245,684		$	249,632		$	12,668		$	262,300
Operations expenses	(116,893		)	(10,558		)	(127,451		)	(122,683		)	(11,070		)	(133,753		)
Income from segment operations	116,955			1,278			118,233			126,949			1,598			128,547
Interest income	950			846			1,796			985			840			1,825
Depreciation and amortization	(35,197		)	(2,579		)	(37,776		)	(34,273		)	(2,759		)	(37,032		)
Income (loss) from operations	$	82,708		$	(455	)	$	82,253		$	93,661		$	(321	)	$	93,340
Reconciliation to consolidated net income:
Corporate interest income							$	7								$	6
Income from other investments, net							879									7,029
General and administrative							(9,225		)							(8,710		)
Other expenses							(540		)							(1,460		)
Interest and related amortization							(26,024		)							(25,547		)
Equity in income of unconsolidated joint ventures							3,226									3,518
Early debt retirement							(1,491		)
Consolidated net income							$	49,085								$	68,176

Total assets	$	3,766,573		$	247,905		$	4,014,478		$	3,871,379		$	266,092		$	4,137,471
Capital improvements	$	28,501		$	40,502		$	69,003		$	26,000		$	42,344		$	68,344

Quarter Ended ~~June~~September 30, 2018


(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated			Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	222,167		$	13,060		$	235,227		$	236,204		$	13,204		$	249,408
Operations expenses	(110,046		)	(12,234		)	(122,280		)	(114,384		)	(12,747		)	(127,131		)
Income from segment operations	112,121			826			112,947			121,820			457			122,277
Interest income	823			1,033			1,856			863			978			1,841
Depreciation and amortization	(31,954		)	(2,391		)	(34,345		)	(32,549		)	(2,431		)	(34,980		)
Income (loss) from operations	$	80,990		$	(532	)	$	80,458		$	90,134		$	(996	)	$	89,138
Reconciliation to consolidated net income:
Corporate interest income							$	6								$	5
Income from other investments, net							3,413									5,421
General and administrative							(9,669		)							(8,816		)
Other expenses							(367		)							(386		)
Interest and related amortization							(26,285		)							(26,490		)
Equity in income of unconsolidated joint ventures							1,613									788
Consolidated net income							$	49,169								$	59,660

Total assets	$	3,477,455		$	222,734		$	3,700,189		$	3,630,136		$	224,901		$	3,855,037
Capital improvements	$	26,602		$	23,459		$	50,061		$	21,722		$	25,339		$	47,061

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 12 – Reportable Segments (continued)

~~Six~~Nine Months Ended ~~June~~September 30, 2019


(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated			Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	479,864		$	22,173		$	502,037		$	729,496		$	34,841		$	764,337
Operations expenses	(225,863		)	(19,477		)	(245,340		)	(348,546		)	(30,547		)	(379,093		)
Income from segment operations	254,001			2,696			256,697			380,950			4,294			385,244
Interest income	1,844			1,696			3,540			2,829			2,535			5,364
Depreciation and amortization	(70,740		)	(5,013		)	(75,753		)	(105,013		)	(7,772		)	(112,785		)
Gain on sale of real estate, net	52,507			—			52,507			52,507			—			52,507
Income (loss) from operations	$	237,612		$	(621	)	$	236,991		$	331,273		$	(943	)	$	330,330
Reconciliation to consolidated net income:
Corporate interest income							$	14								$	21
Income from other investments, net							1,865									8,894
General and administrative							(19,134		)							(27,844		)
Other expenses							(967		)							(2,427		)
Interest and related amortization							(52,417		)							(77,964		)
Equity in income of unconsolidated joint ventures							4,759									8,277
Early debt retirement							(1,491		)							(1,491		)
Consolidated net income							$	169,620								$	237,796

Total assets	$	3,766,573		$	247,905		$	4,014,478		$	3,871,379		$	266,092		$	4,137,471
Capital improvements	$	52,906		$	68,538		$	121,444		$	78,907		$	110,881		$	189,788

~~Six~~Nine Months Ended ~~June~~September 30, 2018


(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated			Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	453,183		$	25,179		$	478,362		$	689,387		$	38,383		$	727,770
Operations expenses	(215,558		)	(23,307		)	(238,865		)	(329,942		)	(36,054		)	(365,996		)
Income from segment operations	237,625			1,872			239,497			359,445			2,329			361,774
Interest income	1,631			1,940			3,571			2,494			2,918			5,412
Depreciation and amortization	(56,029		)	(10,690		)	(66,719		)	(94,377		)	(7,322		)	(101,699		)
Income (loss) from operations	$	183,227		$	(6,878	)	$	176,349		$	267,562		$	(2,075	)	$	265,487
Reconciliation to consolidated net income:
Corporate interest income							$	241								$	246
Income from other investments, net							4,353									9,774
General and administrative							(17,707		)							(26,523		)
Other expenses							(710		)							(1,096		)
Interest and related amortization							(51,988		)							(78,478		)
Equity in income of unconsolidated joint venture							2,808									3,596
Consolidated net income							$	113,346								$	173,006

Total assets	$	3,477,455		$	222,734		$	3,700,189		$	3,630,136		$	224,901		$	3,855,037
Capital Improvements	$	47,870		$	33,507		$	81,377		$	69,591		$	58,845		$	128,436

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~~nine months ended ~~June~~September 30, 2019 and 2018:


	Quarters Ended June 30,						Six Months Ended June 30,						Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2019			2018			2019			2018			2019			2018			2019			2018
Revenues:
Rental income	$	208,375		$	195,594		$	428,357		$	399,072		$	221,306		$	207,595		$	649,663		$	606,667
Right-to-use annual payments (membership subscriptions)	12,586			11,891			24,902			23,410			13,150			12,206			38,052			35,616
Right-to-use contracts current period, gross (membership upgrade sales)	5,041			3,944			8,879			7,106			5,730			4,863			14,609			11,969
Right-to-use contract upfront payments, deferred, net	(2,912		)	(2,021		)	(4,683		)	(3,306		)	(3,530		)	(2,883		)	(8,213		)	(6,189		)
Other income	10,265			12,536			20,635			25,572			11,263			13,419			31,898			38,991
Ancillary services revenues, net	493			223			1,774			1,329			1,713			1,004			3,487			2,333
Total property operations revenues	233,848			222,167			479,864			453,183			249,632			236,204			729,496			689,387
Expenses:
Property operating and maintenance	83,576			80,091			160,320			154,999			89,162			84,445			249,482			239,444
Real estate taxes	15,107			13,440			30,430			27,575			15,166			13,240			45,596			40,815
Sales and marketing, gross	4,214			3,305			7,623			6,117			4,063			3,568			11,686			9,685
Right-to-use contract commissions, deferred, net	(389		)	(262		)	(580		)	(286		)	(313		)	(458		)	(893		)	(744		)
Property management	14,385			13,472			28,070			27,153			14,605			13,589			42,675			40,742
Total property operations expenses	116,893			110,046			225,863			215,558			122,683			114,384			348,546			329,942
Income from property operations segment	$	116,955		$	112,121		$	254,001		$	237,625		$	126,949		$	121,820		$	380,950		$	359,445

The following table summarizes our financial information for the Home Sales and Rentals Operations segment for the quarters and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018:


	Quarters Ended June 30,				Six Months Ended June 30,				Quarters Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	2019		2018		2019		2018		2019		2018		2019		2018
Revenues:
Rental income ^(a)	$	3,632	$	3,561	$	7,216	$	7,076	$	3,810	$	3,507	$	11,026	$	10,583
Gross revenue from home sales	7,825		9,105		14,300		17,414		8,438		9,339		22,738		26,753
Brokered resale revenues, net	379		369		657		651		420		358		1,077		1,009
Ancillary services revenues, net	—		25		—		38		—		—		—		38
Total revenues	11,836		13,060		22,173		25,179		12,668		13,204		34,841		38,383
Expenses:
Property operating and maintenance	1,292		1,629		2,496		3,053		1,603		1,904		4,099		4,957
Cost of home sales	8,164		9,632		14,796		18,206		8,434		9,742		23,230		27,948
Home selling expenses	1,102		973		2,185		2,048		1,033		1,101		3,218		3,149
Total expenses	10,558		12,234		19,477		23,307		11,070		12,747		30,547		36,054
Income from home sales and rentals operations segment	$	1,278	$	826	$	2,696	$	1,872	$	1,598	$	457	$	4,294	$	2,329

______________________


(a)	Segment information includes income related to rental homes. Income related to Site rent on rental homes is included within property operations.

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 related notes included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2018 ("2018 Form 10-K"), as well as information in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 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 and operator of lifestyle-oriented properties (“Properties”) consisting primarily of manufactured home ("MH") and recreational vehicle ("RV") communities. As of ~~June~~September 30, 2019, we owned or had an ownership interest in a portfolio of 413 Properties located throughout the United States and Canada containing ~~155,973~~156,081 Sites. These Properties are located

~~Management's Discussion and Analysis (continued)~~

in 33 states and British Columbia, with more than 90 Properties with lake, river or ocean frontage and more than 120 Properties within 10 miles of the coastal United States.

We invest in Properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on delivering value for both customers and stockholders. We seek growth in earnings, funds from operations ("FFO") and cash flows by enhancing the profitability and operation of our Properties and investments. We seek to accomplish this by attracting and retaining high quality customers, 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 believe that demand from baby boomers for manufactured housing and RV communities will continue to outpace supply for several years. In addition, exposure to the Millennial and Generation X demographic will contribute to our future long-term customer pipeline as the Millennials currently represent 26% of RV buyers and Millennials and Generation X combined represent more than half of RV buyers. We believe these individuals, seeking an active lifestyle, will continue to drive the market for second-home sales as vacation properties, investment opportunities, or retirement retreats. The entitlement process to develop new MH and RV communities is extremely restrictive. As a result, there have been few new communities developed in our target geographic markets. We believe 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 that our Properties and our business model provide an opportunity for increased cash flows and appreciation in value. These may be achieved through increasing occupancy and maintaining market rents, as well as expense controls, expansion of existing Properties and opportunistic acquisitions. We actively seek to acquire and are currently engaged in various stages of negotiations relating to the possible acquisition of additional properties, which may include contracts outstanding to acquire such properties that are subject to the satisfactory completion of our due diligence review.

We generate the majority of our ~~revenues~~revenue from customers renting our individual developed areas ("Sites"), or entering into right-to-use contracts (also referred to as membership subscriptions), which provide our customers access to specific Properties for limited stays. Our MH community Sites and annual RV community Sites are leased on an annual basis. Seasonal Sites are leased to customers generally for one to six months. Transient 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 slips. 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~~September 30, 2019
MH Community Sites		~~72,000~~72,100
~~RV Community~~Resort Sites:
Annual		30,400
Seasonal		11,300
Transient		12,100
~~Thousand Trails portfolio~~Marina slips ⁽¹⁾		2,300
Right-to-use Membership ⁽²⁾		24,300
Joint Ventures ⁽²⁾⁽³⁾		~~5,900~~3,600
		~~156,000~~156,100

_________________________


⁽¹⁾	On September 10, 2019, we completed the acquisition of the remaining interest in the Loggerhead joint venture.


⁽²⁾	Primarily utilized to service the approximately ~~115,400~~117,600 membership customers who have entered into right-to-use contracts (membership subscriptions). Includes approximately ~~5,800~~5,900 Sites rented on an annual basis.


⁽²⁾⁽³⁾	Includes approximately 2,700 annual Sites, 400 seasonal Sites and 500 transient ~~Sites and approximately 2,300 marina slips.~~Sites.

In our Home Sales and ~~Rental~~Rentals Operations business, our revenue streams include home sales, home rentals, brokerage services and ancillary activities. We generate revenue through home sales and rental operations by selling or leasing factory-built homes that are located in Properties owned and managed by us. We ~~continue to focus on~~selectively consider rental opportunities in our ~~rental operations,~~communities, as we believe renting our vacant homes represents an attractive source of occupancy and an opportunity to convert the renter to a homebuyer in the future. We also sell and rent homes through our joint venture, ECHO Financing, LLC (the "ECHO JV"). We offer home sale brokerage services to residents of our Properties who move from a Property but do not relocate their home. In addition, we operate ancillary activities at certain Properties, 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

~~Management's Discussion and Analysis (continued)~~

stringent underwriting criteria, sizable down payment requirements, short loan amortization and high interest rates. We have a limited program under which we purchase loans made by an unaffiliated lender to purchasers of homes at our Properties.

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

Results Overview

For the quarter ended ~~June~~September 30, 2019, Net income available for Common Stockholders increased ~~$0.3 million to $46.4~~$8.4 million, or ~~$0.51~~$0.04 per fully diluted Common Share, to $64.5 million, or $0.35 per fully diluted Common Share, compared to ~~$46.1~~$56.1 million, or ~~$0.52~~$0.31 per fully diluted Common Share, for the same period in 2018. For the ~~six~~nine months ended ~~June~~September 30, 2019, Net income available for Common Stockholders increased ~~$53.3~~$61.8 million, or ~~$0.57~~$0.33 per fully diluted Common Share, to ~~$159.7~~$224.2 million, or ~~$1.77~~$1.24 per fully diluted Common Share, compared to ~~$106.4~~$162.4 million, or ~~$1.20~~$0.91 per fully diluted Common Share, for the same period in 2018.

For the quarter ended ~~June~~September 30, 2019, FFO available for Common Stock and OP Unit holders increased ~~$4.2~~$10.9 million, or ~~$0.04~~$0.05 per fully diluted Common Share, to ~~$89.8~~$108.6 million, or ~~$0.94~~$0.56 per fully diluted Common Share, compared to ~~$85.6~~$97.7 million, or ~~$0.90~~$0.51 per fully diluted Common Share, for the same period in 2018. For the ~~six~~nine months ended ~~June~~September 30, 2019, FFO available for Common Stock and OP Unit holders increased ~~$14.0~~$24.9 million, or ~~$0.13~~$0.12 per fully diluted Common Share, to ~~$197.8~~$306.4 million or ~~$2.07~~$1.60 per fully diluted Common Share, compared to ~~$183.8~~$281.5 million or ~~$1.94~~$1.48 per fully diluted Common Share, for the same period in 2018.

For the quarter ended ~~June~~September 30, 2019, Normalized FFO available for Common Stock and OP Unit holders increased ~~$8.1~~$8.8 million, or ~~$0.07~~$0.04 per fully diluted Common Share, to ~~$91.9~~$102.7 million, or ~~$0.96~~$0.53 per fully diluted Common Share, compared to ~~$83.8~~$93.9 million, or ~~$0.89~~$0.49 per fully diluted Common Share, for the same period in 2018. For the ~~six~~nine months ended ~~June~~ September

Management's Discussion and Analysis (continued)

30, 2019, Normalized FFO available for Common Stock and OP Unit holders increased ~~$17.9~~$26.7 million, or ~~$0.16~~$0.13 per fully diluted Common Share, to ~~$199.6~~$302.3 million, or ~~$2.08~~$1.58 per fully diluted Common Share, compared to ~~$181.7~~$275.6 million, or ~~$1.92~~$1.45 per fully diluted Common Share, for the same period in 2018.

For the quarter ended ~~June~~September 30, 2019, our Core Portfolio property operating revenues, excluding deferrals, increased ~~4.9%~~4.8% and property operating expenses, excluding deferrals and property management, increased ~~4.5%~~4.4%, from the same period in 2018, resulting in an increase in income from property operations, excluding deferrals and property management, of ~~5.2%~~5.1% compared to the same period in 2018. For the ~~six~~nine months ended ~~June~~September 30, 2019, our Core Portfolio property operating revenues, excluding deferrals, increased ~~4.4%~~4.6% and property operating expenses, excluding deferrals and property management, increased ~~3.5%~~3.8% from the same period in 2018, resulting in an increase in income from property operations, excluding deferrals and property management, of 5.1% compared to the same period in 2018.

We focus on the quality of occupancy growth by increasing the number of manufactured homeowners in our Core Portfolio over the long term. There may be fluctuations in the sources of occupancy gains depending on local market conditions, availability of vacant sites and success with converting renters to home owners. Our Core Portfolio average occupancy includes both homeowners and renters in our MH communities and was 95.4% for the quarter ended ~~June~~September 30, 2019, compared to ~~95.3% for the quarter ended March 31, 2019 and 94.9%~~95.4% for the quarter ended June 30, 2019 and 95.0% for the quarter ended September 30, 2018. As of ~~June~~September 30, 2019, our Core Portfolio occupancy increased ~~126~~58 Sites with an increase in homeowner occupancy of 7985 Sites compared to occupancy as of ~~March 31,~~June 30, 2019. By comparison, as of September 30, 2018, our Core Portfolio occupancy increased 6170 Sites with an increase in homeowner occupancy of ~~145 Sites from the same period in 2018.~~139 Sites. Additionally, for both the quarter and ~~six~~nine months ended ~~June~~September 30, 2019, we have experienced rental rate increases, contributing to a ~~4.5%~~ growth of 4.7% and 4.6%, respectively, in community base rent compared to the same ~~period~~periods in 2018.

We continue to grow RV rental income in our Core Portfolio as a result of our ability to increase rates and occupancy. RV rental income in our Core Portfolio for the quarter ended ~~June~~September 30, 2019 was ~~4.1%~~4.5% higher than the same period in 2018. Annual, seasonal and ~~seasonal~~transient rental income for the quarter ended ~~June~~September 30, 2019 increased ~~6.0%~~6.2%, 3.9% and ~~4.0%~~1.8%, respectively. ~~Transient rental income declined 1.1% for the quarter ended June 30, 2019 compared to the same period in 2018.~~ RV rental income in our Core Portfolio for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~4.2%~~4.3% higher than the same period in 2018. Annual, seasonal and ~~seasonal~~transient rental income for the ~~six~~nine months ended ~~June~~September 30, 2019 increased 6.1%, 3.2% and ~~3.1%~~0.5%, respectively. ~~Transient rental income declined 0.8% for the six months ended June 30, 2019 compared~~

We continue to ~~the same period in 2018. The decrease in transient rental income for both the quarter and six months ended June 30, 2019 was mainly due to weather related events at a limited number of Properties.~~

~~Management's Discussion and Analysis (continued)~~

~~We experienced growth~~experience strong performance in our membership base within our Thousand Trails ~~portfolio during the quarter ended June 30, 2019.~~portfolio. We sold approximately ~~6,600~~5,900 and 16,200 Thousand Trails camping passes infor the quarter and ~~10,200~~the nine months ended September 30, 2019, respectively, an increase in sales of 9.5% and 12.4% over the same periods in 2018. In addition, we sold 859 membership upgrades for the ~~six months~~quarter ended ~~June~~September 30, 2019, an increase of ~~13.2% and 14.2%~~10.0% over the ~~quarter~~same period in 2018 and ~~six~~2,242 membership upgrades for the nine months ended ~~June 30, 2018, respectively. In addition, we sold 749 membership upgrades during the quarter ended June~~September 30, 2019, ~~19.8% more than~~an increase of 12.8% over the same period in 2018. Our customers are increasingly choosing self-service options to complete their transactions with us. ~~During~~For the quarter ended ~~June~~September 30, 2019, our total Core RV rental income booked through ~~digital channels~~our website increased ~~21.0%~~19% and our sales of online camping passes increased ~~27.6%~~approximately 25% compared to the same period in 2018.

Demand for our homes and communities remains strong as evidenced by factors including our high occupancy levels. We closed ~~117~~128 new home sales ~~during~~for the quarter ended ~~June~~September 30, 2019 compared to ~~146 during~~141 for the same period in 2018. The decline in new home sales compared to the quarter ended ~~June~~September 30, 2018 ~~and 208~~was primarily due to timing of the availability of home inventory ready for sale. We closed on 336 new home sales ~~during~~for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to ~~276 during~~417 for the ~~six~~same period in 2018. Compared to the nine months ended in ~~June~~September 30, ~~2018. The decrease~~2018, the decline in new home sales ~~from the same period in the prior year~~ was ~~mainly~~primarily due to certain areas of our portfolio reaching historically high occupancy levels. We continue to believe renting our vacant homes represents an attractive source of occupancy and an opportunity to convert the renter to a homebuyer in the future.

As of ~~June~~September 30, 2019, we had ~~4,013~~3,986 occupied rental homes in our Core MH communities, including ~~298~~294 homes rented through our ECHO JV. Our Core Portfolio income from rental operations, net of depreciation, was ~~$7.6 million for the quarter ended June 30, 2019 and~~ $7.3 million for the quarter ended ~~June~~September 30, 2019 and $6.7 million for the quarter ended September 30, 2018. Approximately $7.8 million and $7.6 million of rental operations revenue related to Site rental was included within community base rental income in our Core Portfolio for ~~both~~ the quarters ended ~~June~~September 30, 2019 and ~~2018.~~2018, respectively. Our Core Portfolio income from rental operations, net of depreciation, was ~~$15.2~~$22.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~$14.7~~$21.4 million for the ~~six~~nine months ended ~~June~~September 30, 2018. Approximately ~~$15.5~~$23.4 million and ~~$15.6~~$23.3 million of rental operations revenue related to Site rental was included in community base rental income in our Core Portfolio for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively.

Our gross investment in real estate increased approximately ~~$163.4~~$404.3 million to ~~$5,436.9~~$5,677.8 million as of ~~June~~September 30, 2019 from $5,273.5 million as of December 31, 2018, primarily due to new acquisitions and capital expenditures.

Management's Discussion and Analysis (continued)

The following chart lists the Properties acquired or sold from January 1, 2018 through ~~June~~September 30, 2019 and Sites added through expansion opportunities at our existing Properties.



Property	Location	Type of Property	Transaction Date	Sites

Total Sites as of January 1, 2018⁽¹⁾				151,323
Acquisitions:
Kingswood	Riverview, Florida	MH	March 8, 2018	229
Serendipity	Clearwater, Florida	MH	March 15, 2018	425
Holiday Travel Park	Holiday, Florida	RV	April 20, 2018	613
Everglades Lakes	Fort Lauderdale, Florida	MH	July 20, 2018	612
Sunseekers RV Resort	North Fort Myers, Florida	RV	September 21, 2018	241
Timber Creek RV Resort	Westerly, Rhode Island	RV	November 20, 2018	364
Palm Lake	Riviera Beach, Florida	MH	December 13, 2018	915
King Nummy Trail Campground	Cape May Court House, New Jersey	RV	December 20, 2018	313
Drummer Boy Camping Resort	Gettysburg, Pennsylvania	RV	March 25, 2019	465
Lake of the Woods Campground	Wautoma, Wisconsin	RV	March 25, 2019	303
Round Top RV Campground	Gettysburg, Pennsylvania	RV	April 10, 2019	391
White Oak Shores Camping and RV Resort	Stella, North Carolina	RV	May 29, 2019	455

Expansion Site Development:
Sites added in 2018				419
Sites added in 2019				~~373~~460

Site Reconfigured, net				~~(5)~~16

Dispositions:
Hoosier Estates	Lebanon, Indiana	MH	January 23, 2019	(288)
Lake in the Hills	Auburn Hills, Michigan	MH	January 23, 2019	(238)
North Glen Village	Westfield, Indiana	MH	January 23, 2019	(282)
Oak Tree Village	Portage, Indiana	MH	January 23, 2019	(361)
Swan Creek	Ypsilanti, Michigan	MH	January 23, 2019	(294)
Total Sites as of ~~June~~September 30, 2019				~~155,973~~156,081

______________________

~~Management's Discussion and Analysis (continued)~~

⁽¹⁾Includes the Loggerhead marina slip count.

Non-GAAP Financial Measures

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

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

Income from Property Operations and Core Portfolio

We use Income from property operations and Income from property operations, excluding deferrals and property management, and Core Portfolio income from property operations, excluding deferrals and property management, as alternative measures to evaluate the operating results of our MH and RV communities. Income from property operations represents rental income, utility and other income and right-to-use income less property and rental home operating and maintenance expenses, real estate taxes, sales and marketing expenses and property management expenses. Income from property operations, excluding deferrals and property management, represents income from property operations excluding property management expenses and the impact of the GAAP deferral of right-to-use contract upfront payments and related commissions, net. For comparative purposes, we present bad debt expense within Property operating, maintenance and real estate taxes in the current and prior periods.

Management's Discussion and Analysis (continued)

Our Core Portfolio consists of our Properties owned and operated since January 1, 2018. Core Portfolio income from property operations, excluding deferrals and property management, is useful to investors for annual comparison as it removes the fluctuations associated with acquisitions, dispositions and significant transactions or unique situations. Our Non-Core Portfolio includes all Properties that were not owned and operated during all of 2018 and 2019, including Fiesta Key and Sunshine Key RV communities.

Funds from Operations ("FFO") and Normalized Funds from Operations ("Normalized FFO")

We define FFO as net income, computed in accordance with GAAP, excluding gains or losses from sales of properties, depreciation and amortization related to real estate, impairment charges, and adjustments to reflect our share of FFO of unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with our interpretation of standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. We receive upfront non-refundable payments from the entry of right-to-use contracts. In accordance with GAAP, the upfront non-refundable payments and related commissions are deferred and amortized over the estimated customer life. Although the NAREIT definition of FFO does not address the treatment of non-refundable right-to-use payments, we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO.

We define Normalized FFO as FFO excluding the following non-operating income and expense items: a) gains and losses from early debt extinguishment, including prepayment penalties and defeasance costs, and b) other miscellaneous non-comparable items. Normalized FFO presented herein is not necessarily comparable to Normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same methodology for computing this amount.

We believe that FFO and Normalized FFO are helpful to investors as supplemental measures of the performance of an equity REIT. We believe that by excluding the effect of gains or losses from sales of properties, depreciation and amortization related to real estate and impairment charges, which are based on historical costs and may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. We further believe that Normalized FFO provides useful information to investors, analysts and our management because it allows them to compare our operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences not related to our operations. For example, we believe that excluding the early extinguishment of debt, including prepayment penalties and defeasance costs from Normalized FFO allows investors, analysts and our management to assess the sustainability of operating performance in future periods because these costs do not affect the future operations of the properties. In some cases, we provide information about identified non-cash components of FFO and Normalized FFO because it allows investors, analysts and our management to assess the impact of those items.

~~Management's Discussion and Analysis (continued)~~

Income from Rental Operations, Net of Depreciation

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

Our definitions and calculations of these Non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These Non-GAAP financial and operating measures do not represent cash generated from operating activities in accordance with GAAP, nor do they represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

Management's Discussion and Analysis (continued)

The following table reconciles Net income available for Common Stockholders to income from property operations:


	Quarters Ended June 30,						Six Months Ended June 30,						Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2019			2018			2019			2018			2019			2018			2019			2018
Computation of Income from Property Operations:
Net income available for Common Stockholders	$	46,401		$	46,137		$	159,710		$	106,359		$	64,461		$	56,070		$	224,171		$	162,429
Redeemable preferred stock dividends	8			8			8			8			—			—			8			8
Income allocated to non-controlling interests – Common OP Units	2,676			3,024			9,902			6,979			3,715			3,590			13,617			10,569
Equity in income of unconsolidated joint ventures	(3,226		)	(1,613		)	(4,759		)	(2,808		)	(3,518		)	(788		)	(8,277		)	(3,596		)
Income before equity in income of unconsolidated joint ventures	45,859			47,556			164,861			110,538			64,658			58,872			229,519			169,410
Gain on sale of real estate, net	—			—			(52,507		)	—			—			—			(52,507		)	—
Total other expenses, net	72,374			65,391			144,343			128,959			63,889			63,405			208,232			192,364
Loss/(Income) from home sales operations and other	569			883			250			822			(1,104		)	142			(854		)	964
Income from property operations	$	118,802		$	113,830		$	256,947		$	240,319		$	127,443		$	122,419		$	384,390		$	362,738

The following table presents a calculation of FFO and Normalized FFO available for Common Stock and OP Unit holders:


	Quarters Ended June 30,						Six Months Ended June 30,						Quarters Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2019			2018			2019			2018			2019			2018			2019			2018
Computation of FFO and Normalized FFO:
Net income available for Common Stockholders	$	46,401		$	46,137		$	159,710		$	106,359		$	64,461		$	56,070		$	224,171		$	162,429
Income allocated to non-controlling interests – Common OP Units	2,676			3,024			9,902			6,979			3,715			3,590			13,617			10,569
Right-to-use contract upfront payments, deferred, net	2,912			2,021			4,683			3,306			3,530			2,883			8,213			6,189
Right-to-use contract commissions, deferred, net	(389		)	(262		)	(580		)	(286		)	(313		)	(458		)	(893		)	(744		)
Depreciation and amortization	37,776			34,345			75,753			66,719			37,032			34,980			112,785			101,699
Depreciation on unconsolidated joint ventures	441			367			873			739			174			651			1,047			1,390
Gain on sale of real estate, net	—			—			(52,507		)	—			—			—			(52,507		)	—
FFO available for Common Stock and OP Unit holders	89,817			85,632			197,834			183,816			108,599			97,716			306,433			281,532
Early debt retirement ⁽¹⁾	2,085			—			2,085			—			—			—			2,085			—
Insurance proceeds due to catastrophic weather event ⁽²⁾⁽¹⁾	—			(1,806		)	(349		)	(2,092		)	(5,856		)	(3,833		)	(6,205		)	(5,925		)
Normalized FFO available for Common Stock and OP Unit holders	$	91,902		$	83,826		$	199,570		$	181,724		$	102,743		$	93,883		$	302,313		$	275,607
Weighted average Common Shares outstanding – Fully Diluted(2)	95,930			94,623			95,773			94,600			192,400			190,526			191,840			189,654

______________________

⁽¹⁾ ~~Includes our portion of early debt retirement costs incurred by unconsolidated joint ventures.~~

⁽²⁾Represents insurance recovery revenue from reimbursement for capital expenditures related to Hurricane Irma.

⁽²⁾ Adjusted for the stock split.

Management's Discussion and Analysis (continued)

Results of Operations

Comparison of the Quarter Ended ~~June~~September 30, 2019 to the Quarter Ended ~~June~~September 30, 2018

Income from Property Operations

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the quarters ended ~~June~~September 30, 2019 and 2018. ~~Core Portfolio growth~~Growth percentages exclude the impact of GAAP deferrals of upfront payments from ~~right-to-use contracts~~membership upgrade sales and related commissions.


	Core Portfolio									Total Portfolio									Core Portfolio									Total Portfolio
	Quarters Ended June 30,									Quarters Ended June 30,									Quarters Ended September 30,									Quarters Ended September 30,
(amounts in thousands)	2019		2018		Variance			% Change		2019		2018		Variance			% Change		2019		2018		Variance			% Change		2019		2018		Variance			% Change
Community base rental income	$	132,406	$	125,879	$	6,527		5.2	%	$	136,213	$	128,579	$	7,634		5.9	%	$	133,757	$	126,889	$	6,868		5.4	%	$	137,596	$	130,746	$	6,850		5.2	%
Rental home income	3,631		3,274		357			10.9	%	3,632		3,561		71			2.0	%	3,800		3,209		591			18.4	%	3,810		3,507		303			8.6	%
Resort base rental income	56,181		53,952		2,229			4.1	%	60,997		55,231		5,766			10.4	%	65,527		62,681		2,846			4.5	%	71,665		64,351		7,314			11.4	%
Right-to-use annual payments (membership subscriptions)	12,579		11,891		688			5.8	%	12,586		11,891		695			5.8	%	13,140		12,206		934			7.7	%	13,150		12,206		944			7.7	%
Right-to-use contracts current period, gross (membership upgrade sales)	5,041		3,944		1,097			27.8	%	5,041		3,944		1,097			27.8	%	5,730		4,863		867			17.8	%	5,730		4,863		867			17.8	%
Utility and other income	21,817		21,909		(92		)	(0.4	)%	22,250		24,320		(2,070		)	(8.5	)%	23,355		24,261		(906		)	(3.7	)%	24,252		25,917		(1,665		)	(6.4	)%
Property operating revenues, excluding deferrals	231,655		220,849		10,806			4.9	%	240,719		227,526		13,193			5.8	%	245,309		234,109		11,200			4.8	%	256,203		241,590		14,613			6.0	%

Property operating and maintenance	80,277		78,105		2,172			2.8	%	84,396		80,091		4,305			5.4	%	84,937		81,933		3,004			3.7	%	90,106		84,445		5,661			6.7	%
Real estate taxes	14,357		12,920		1,437			11.1	%	15,107		13,440		1,667			12.4	%	14,257		13,182		1,075			8.2	%	15,166		13,240		1,926			14.5	%
Rental home operating and maintenance	1,282		1,515		(233		)	(15.4	)%	1,292		1,629		(337		)	(20.7	)%	1,602		1,795		(193		)	(10.8	)%	1,603		1,904		(301		)	(15.8	)%
Sales and marketing, gross	4,214		3,305		909			27.5	%	4,214		3,305		909			27.5	%	4,061		3,567		494			13.8	%	4,063		3,568		495			13.9	%
Property operating expenses, excluding deferrals and property management	100,130		95,845		4,285			4.5	%	105,009		98,465		6,544			6.6	%	104,857		100,477		4,380			4.4	%	110,938		103,157		7,781			7.5	%
Income from property operations, excluding deferrals and property management	131,525		125,004		6,521			5.2	%	135,710		129,061		6,649			5.2	%	140,452		133,632		6,820			5.1	%	145,265		138,433		6,832			4.9	%
Property management	14,383		13,472		911			6.8	%	14,385		13,472		913			6.8	%	14,605		13,587		1,018			7.5	%	14,605		13,589		1,016			7.5	%
Income from property operations, excluding deferrals	117,142		111,532		5,610			5.0	%	121,325		115,589		5,736			5.0	%	125,847		120,045		5,802			4.8	%	130,660		124,844		5,816			4.7	%
Right-to-use contracts, deferred and sales and marketing, deferred, net	2,523		1,759		764			43.4	%	2,523		1,759		764			43.4	%	3,217		2,425		792			32.7	%	3,217		2,425		792			32.7	%
Income from property operations ⁽¹⁾	$	114,619	$	109,773	$	4,846		4.4	%	$	118,802	$	113,830	$	4,972		4.4	%	$	122,630	$	117,620	$	5,010		4.3	%	$	127,443	$	122,419	$	5,024		4.1	%

__________________________

⁽¹⁾ Non-GAAP measure. See the Results Overview section of the Management's Discussion and Analysis for Non-GAAP Financial Measure Definitions and reconciliations of these Non-GAAP measures to Net Income available to Common Shareholders.

Total portfolio income from property operations for 2019 increased $5.0 million, or ~~4.4%~~4.1%, from 2018, ~~comprised~~primarily as a result of an increase ~~of $4.8 million, or 4.4%,~~ from our Core ~~Portfolio and an~~Portfolio. The increase of ~~$0.2~~$5.0 million, ~~from our Non-Core Portfolio. The increase~~or 4.3%, in income from property operations from our Core Portfolio was primarily ~~due to~~driven by higher community base rental income and resort base rental income, partially offset by higher property operating expenses. The increase in income from property operations from our Non-Core Portfolio was partially offset by a decrease in income due to the sale of five all-age MH communities located in Indiana and Michigan during the first quarter of 2019.

Property Operating Revenues

Community base rental income in our Core Portfolio for 2019 increased ~~$6.5~~$6.9 million, or ~~5.2%~~5.4%, from 2018, which reflects ~~4.5%~~4.7% growth from rate increases and 0.7% growth from occupancy gains. The average monthly base rental income per Site in our Core Portfolio increased to approximately ~~$665~~$671 in 2019 from approximately ~~$636~~$640 in the same period in 2018. The average occupancy for our Core Portfolio increased to 95.4% in 2019 from ~~94.9%~~95.0% in the same period in 2018.

Management's Discussion and Analysis (continued)

Resort base rental income in our Core Portfolio for 2019 increased ~~$2.2~~$2.8 million, or ~~4.1%~~4.5%, from 2018, primarily driven by higher rental rates. The decrease in transient rental income from 2018 was mainly due to weather related events at a limited number of Properties, which was offset by an increase in number of membership subscriptions sold in 2019.

Resort base rental income is comprised of the following:


	Core Portfolio									Total Portfolio								Core Portfolio								Total Portfolio
	Quarters Ended June 30,									Quarters Ended June 30,								Quarters Ended September 30,								Quarters Ended September 30,
(amounts in thousands)	2019		2018		Variance			% Change		2019		2018		Variance		% Change		2019		2018		Variance		% Change		2019		2018		Variance		% Change
Annual	$	38,257	$	36,077	$	2,180		6.0	%	$	40,790	$	36,595	$	4,195	11.5	%	$	38,996	$	36,710	$	2,286	6.2	%	$	42,581	$	37,424	$	5,157	13.8	%
Seasonal	5,135		4,939		196			4.0	%	5,713		5,206		507		9.7	%	4,658		4,482		176		3.9	%	5,424		4,838		586		12.1	%
Transient	12,789		12,936		(147		)	(1.1	)%	14,494		13,430		1,064		7.9	%	21,873		21,489		384		1.8	%	23,660		22,089		1,571		7.1	%
Resort base rental income	$	56,181	$	53,952	$	2,229		4.1	%	$	60,997	$	55,231	$	5,766	10.4	%	$	65,527	$	62,681	$	2,846	4.5	%	$	71,665	$	64,351	$	7,314	11.4	%

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for 2019 increased ~~$4.3~~$4.4 million, or ~~4.5%~~4.4%, from 2018, mainly due to an increase in property operating and maintenance expenses of ~~$2.2~~$3.0 million and an increase in property taxes of ~~$1.4~~$1.1 million. The increase in property operating and maintenance expenses was primarily driven by an increase in repairs and maintenance of ~~$1.0~~$0.8 million, an increase in utility expense of $0.6 million due to higher trash, electric and water usage and an increase in property payroll ~~due to wage increases and an increase~~ of ~~$0.9 million~~$0.6 million. Property taxes in ~~insurance expense. The increase in property taxes was primarily~~2018 were lower as a result of a favorable resolution of appeals in certain ~~states in 2018.~~states.

Home Sales and Rental Operations

Home Sales and Other

The following table summarizes certain financial and statistical data for Home Sales and Other.


	Quarters Ended June 30,											Quarters Ended September 30,
(amounts in thousands, except home sales volumes)	2019			2018			Variance			% Change		2019			2018			Variance			% Change
Gross revenues from new home sales ⁽¹⁾	$	6,064		$	6,859		$	(795	)	(11.6	)%	$	6,864		$	7,048		$	(184	)	(2.6	)%
Cost of new home sales ⁽¹⁾	(5,984		)	(6,800		)	816			12.0	%	6,499			6,946			(447		)	(6.4	)%
Gross profit from new home sales	80			59			21			35.6	%	365			102			263			257.8	%

Gross revenues from used home sales	1,761			2,246			(485		)	(21.6	)%	1,574			2,291			(717		)	(31.3	)%
Cost of used home sales	(2,180		)	(2,832		)	652			23.0	%	1,935			2,796			(861		)	(30.8	)%
Loss from used home sales	(419		)	(586		)	167			28.5	%	(361		)	(505		)	144			28.5	%

Brokered resale and ancillary services revenues, net	872			617			255			41.3	%	2,133			1,362			771			56.6	%
Home selling expenses	(1,102		)	(973		)	(129		)	(13.3	)%	1,033			1,101			(68		)	(6.2	)%

Income (loss) from home sales and other	$	(569	)	$	(883	)	$	314		35.6	%	$	1,104		$	(142	)	$	1,246		877.5	%

Home sales volumes
Total new home sales ⁽²⁾	117			146			(29		)	(19.9	)%	128			141			(13		)	(9.2	)%
New Home Sales Volume - ECHO JV	18			25			(7		)	(28.0	)%	19			31			(12		)	(38.7	)%
Used home sales	210			297			(87		)	(29.3	)%	198			304			(106		)	(34.9	)%
Brokered home resales	237			253			(16		)	(6.3	)%	270			231			39			16.9	%

_________________________

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

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

~~Loss~~Income from home sales and other was ~~$0.6~~$1.1 million for 2019 compared to ~~$0.9~~a loss of $0.1 million for 2018. The ~~decrease~~increase in ~~loss~~Income (loss) from home sales and other was due to ~~a decrease in loss from used home sales and~~ an increase in brokered resale and ancillary services revenues, net.

Management's Discussion and Analysis (continued)

Rental Operations

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


	Quarters Ended June 30,											Quarters Ended September 30,
(amounts in thousands, except rental unit volumes)	2019			2018			Variance			% Change		2019		2018		Variance			% Change
Manufactured homes:
Rental operations revenue ⁽¹⁾	$	11,422		$	11,064		$	358		3.2	%	$	11,646	$	10,818	$	828		7.7	%
Rental home operating and maintenance	(1,282		)	(1,515		)	233			15.4	%
Rental home operating and maintenance expense												1,602		1,795		(193		)	(10.8	)%
Income from rental operations	10,140			9,549			591			6.2	%	10,044		9,023		1,021			11.3	%
Depreciation on rental homes ⁽²⁾	(2,544		)	(2,251		)	(293		)	(13.0	)%	2,720		2,286		434			19.0	%
Income from rental operations, net of depreciation	$	7,596		$	7,298		$	298		4.1	%	$	7,324	$	6,737	$	587		8.7	%

Gross investment in new manufactured home rental units ⁽³⁾	$	191,975		$	135,886		$	56,089		41.3	%	$	216,185	$	146,982	$	69,203		47.1	%
Gross investment in used manufactured home rental units	$	25,103		$	34,476		$	(9,373	)	(27.2	)%	$	23,371	$	32,121	$	(8,750	)	(27.2	)%

Net investment in new manufactured home rental units	$	159,950		$	110,298		$	49,652		45.0	%	$	182,441	$	125,499	$	56,942		45.4	%
Net investment in used manufactured home rental units	$	11,563		$	24,538		$	(12,975	)	(52.9	)%	$	10,432	$	16,329	$	(5,897	)	(36.1	)%

Number of occupied rentals – new, end of period ⁽⁴⁾	3,006			2,547			459			18.0	%	3,073		2,622		451			17.2	%
Number of occupied rentals – used, end of period	1,007			1,467			(460		)	(31.4	)%	913		1,323		(410		)	(31.0	)%

______________________

⁽¹⁾

Rental operations revenue consists of Site rental income and home rental income in our Core Portfolio. Approximately $7.8 million and $7.6 million of Site rental income for ~~both~~ the quarters ended ~~June~~September 30, 2019 and 2018, respectively, is included in community base rental income within the Core Portfolio Income from Property Operations table. The remainder of home rental income is included in rental home income within the Core Portfolio Income from Property Operations table.


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


⁽³⁾	Includes both occupied and unoccupied rental homes in our Core Portfolio. New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was ~~$16.5~~$16.7 million and ~~$15.9~~$16.1 million as of ~~June~~September 30, 2019 and 2018, respectively.


⁽⁴⁾	Occupied rentals as of the end of the period in our Core Portfolio and includes ~~298~~294 and ~~264~~265 homes rented through our ECHO JV ~~during the quarters ended June~~as of September 30, 2019 and 2018, respectively.

The increase in income from rental operations, net of depreciation, in our Core Portfolio was primarily due to an increase in the number of new occupied rental units at a higher rental rate, partially offset by a decrease in the number of used occupied rental units.

Other Income and Expenses

The following table summarizes other income and expenses, net.


	Quarters Ended June 30,											Quarters Ended September 30,
(amounts in thousands, expenses shown as negative)	2019			2018			Variance			% Change		2019			2018			Variance			% Change
Depreciation and amortization	$	(37,776	)	$	(34,345	)	$	(3,431	)	(10.0	)%	$	(37,032	)	$	(34,980	)	$	(2,052	)	(5.9	)%
Interest income	1,803			1,862			(59		)	(3.2	)%	1,831			1,846			(15		)	(0.8	)%
Income from other investments, net	879			3,413			(2,534		)	(74.2	)%	7,029			5,421			1,608			29.7	%
General and administrative	(9,225		)	(9,669		)	444			4.6	%	(8,710		)	(8,816		)	106			1.2	%
Other expenses	(540		)	(367		)	(173		)	(47.1	)%	(1,460		)	(386		)	(1,074		)	(278.2	)%
Early debt retirement	(1,491		)	—			(1,491		)	—	%
Interest and related amortization	(26,024		)	(26,285		)	261			1.0	%	(25,547		)	(26,490		)	943			3.6	%
Total other income and (expenses), net	$	(72,374	)	$	(65,391	)	$	(6,983	)	(10.7	)%	$	(63,889	)	$	(63,405	)	$	(484	)	(0.8	)%

Total other income and (expenses), net increased ~~$7.0~~$0.5 million during 2019 compared to 2018, primarily due to an increase in depreciation and amortization and ~~a decrease~~other expenses partially offset by an increase in income from other investments, ~~net.~~net and other expenses. The ~~decrease~~increase in income from other investments, net was ~~mainly due to $1.8 million of~~driven by higher insurance recovery revenue ~~from~~of $2.0 million for reimbursement ~~for~~of capital expenditures related to Hurricane ~~Irma~~Irma.

Equity in ~~2018. Additionally, we incurred $1.5~~income of unconsolidated joint ventures

Equity in income of unconsolidated joint ventures increased $2.7 million ~~of early debt retirement costs~~from 2018 due to an increase in ~~2019.~~

income recognized from distributions from our unconsolidated joint ventures.

Management's Discussion and Analysis (continued)

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, 2019 to the ~~Six~~Nine Months Ended ~~June~~September 30, 2018

Income from Property Operations

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018. ~~Core Portfolio growth~~Growth percentages exclude the impact of GAAP deferrals of upfront payments from ~~right-to-use contracts~~membership upgrade sales and related commissions.


	Core Portfolio									Total Portfolio									Core Portfolio									Total Portfolio
	Six Months Ended June 30,									Six Months Ended June 30,									Nine Months Ended September 30,									Nine Months Ended September 30,
(amounts in thousands)	2019		2018		Variance			% Change		2019		2018		Variance			% Change		2019		2018		Variance			% Change		2019		2018		Variance			% Change
Community base rental income	$	263,444	$	250,669	$	12,775		5.1	%	$	271,495	$	255,318	$	16,177		6.3	%	$	397,201	$	377,558	$	19,643		5.2	%	$	409,091	$	386,064	$	23,027		6.0	%
Rental home income	7,121		6,506		615			9.5	%	7,216		7,076		140			2.0	%	10,921		9,715		1,206			12.4	%	11,026		10,583		443			4.2	%
Resort base rental income	122,115		117,235		4,880			4.2	%	133,165		119,485		13,680			11.4	%	187,642		179,916		7,726			4.3	%	204,830		183,836		20,994			11.4	%
Right-to-use annual payments (membership subscriptions)	24,889		23,409		1,480			6.3	%	24,902		23,410		1,492			6.4	%	38,029		35,615		2,414			6.8	%	38,052		35,616		2,436			6.8	%
Right-to-use contracts current period, gross (membership upgrade sales)	8,879		7,108		1,771			24.9	%	8,879		7,106		1,773			25.0	%	14,609		11,972		2,637			22.0	%	14,609		11,969		2,640			22.1	%
Utility and other income	44,434		45,970		(1,536		)	(3.3	)%	46,001		49,841		(3,840		)	(7.7	)%	67,789		70,233		(2,444		)	(3.5	)%	70,253		75,758		(5,505		)	(7.3	)%
Property operating revenues, excluding deferrals	470,882		450,897		19,985			4.4	%	491,658		462,236		29,422			6.4	%	716,191		685,009		31,182			4.6	%	747,861		703,826		44,035			6.3	%

Property operating and maintenance	154,575		151,241		3,334			2.2	%	161,989		154,999		6,990			4.5	%	239,512		233,172		6,340			2.7	%	252,095		239,444		12,651			5.3	%
Real estate taxes	28,931		26,743		2,188			8.2	%	30,430		27,575		2,855			10.4	%	43,188		39,925		3,263			8.2	%	45,596		40,815		4,781			11.7	%
Rental home operating and maintenance	2,464		2,873		(409		)	(14.2	)%	2,496		3,053		(557		)	(18.2	)%	4,066		4,668		(602		)	(12.9	)%	4,099		4,957		(858		)	(17.3	)%
Sales and marketing, gross	7,627		6,118		1,509			24.7	%	7,623		6,117		1,506			24.6	%	11,688		9,685		2,003			20.7	%	11,686		9,685		2,001			20.7	%
Property operating expenses, excluding deferrals and property management	193,597		186,975		6,622			3.5	%	202,538		191,744		10,794			5.6	%	298,454		287,450		11,004			3.8	%	313,476		294,901		18,575			6.3	%
Income from property operations, excluding deferrals and property management	277,285		263,922		13,363			5.1	%	289,120		270,492		18,628			6.9	%	417,737		397,559		20,178			5.1	%	434,385		408,925		25,460			6.2	%
Property management	28,067		27,151		916			3.4	%	28,070		27,153		917			3.4	%	42,673		40,738		1,935			4.7	%	42,675		40,742		1,933			4.7	%
Income from property operations, excluding deferrals	249,218		236,771		12,447			5.3	%	261,050		243,339		17,711			7.3	%	375,064		356,821		18,243			5.1	%	391,710		368,183		23,527			6.4	%
Right-to-use contracts, deferred and sales and marketing, deferred, net	4,103		3,020		1,083			35.9	%	4,103		3,020		1,083			35.9	%	7,320		5,445		1,875			34.4	%	7,320		5,445		1,875			34.4	%
Income from property operations ⁽¹⁾	$	245,115	$	233,751	$	11,364		4.9	%	$	256,947	$	240,319	$	16,628		6.9	%	$	367,744	$	351,376	$	16,368		4.7	%	$	384,390	$	362,738	$	21,652		6.0	%

__________________________

Total Portfolio income from property operations for 2019 increased ~~$16.6~~$21.7 million, or ~~6.9%~~6.0%, from 2018, primarily as a result of an increase of ~~$11.4~~$16.4 million, or ~~4.9%~~4.7%, from our Core Portfolio and an increase of ~~$5.2~~$5.3 million from our Non-Core Portfolio. The increase in income from property operations from our Core Portfolio was primarily due to an increase in community base rental income and resort base rental income, partially offset by an increase in property operating expenses. The increase in income from property operations from our Non-Core Portfolio was driven by acquisition properties partially offset by ~~a decrease in income due to~~ the sale of five all-age MH communities located in Indiana and Michigan during the first quarter of 2019.

Property Operating Revenues

Community base rental income in our Core Portfolio for 2019 increased ~~$12.8~~$19.6 million, or ~~5.1%~~5.2%, from 2018, which reflects ~~4.5%~~4.6% growth from rate increases and 0.6% growth from occupancy gains. The average monthly base rental income per Site increased to approximately ~~$662~~$665 in 2019 from approximately ~~$633~~$636 in 2018. The average occupancy for the Core Portfolio increased to 95.3% in 2019 from 94.9% in the same period in 2018.

Management's Discussion and Analysis (continued)

Resort base rental income in our Core Portfolio for 2019 increased ~~$4.9~~$7.7 million, or ~~4.2%~~4.3%, from 2018, primarily driven by higher rental rates. The decrease in transient rental income from 2018 was mainly due to weather related events at a limited number of Properties, which was offset by an increase in number of membership subscriptions sold in 2019.

Resort base rental income is comprised of the following:


	Core Portfolio									Total Portfolio								Core Portfolio								Total Portfolio
	Six Months Ended June 30,									Six Months Ended June 30,								Nine Months Ended September 30,								Nine Months Ended September 30,
(amounts in thousands)	2019		2018		Variance			% Change		2019		2018		Variance		% Change		2019		2018		Variance		% Change		2019		2018		Variance		% Change
Annual	$	75,606	$	71,274	$	4,332		6.1	%	$	79,874	$	71,751	$	8,123	11.3	%	$	114,602	$	107,983	$	6,619	6.1	%	$	122,455	$	109,175	$	13,280	12.2	%
Seasonal	24,319		23,597		722			3.1	%	26,798		24,229		2,569		10.6	%	28,977		28,079		898		3.2	%	32,222		29,067		3,155		10.9	%
Transient	22,190		22,364		(174		)	(0.8	)%	26,493		23,505		2,988		12.7	%	44,063		43,854		209		0.5	%	50,153		45,594		4,559		10.0	%
Resort base rental income	$	122,115	$	117,235	$	4,880		4.2	%	$	133,165	$	119,485	$	13,680	11.4	%	$	187,642	$	179,916	$	7,726	4.3	%	$	204,830	$	183,836	$	20,994	11.4	%

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for 2019 increased ~~$6.6~~$11.0 million, or ~~3.5%~~3.8%, from 2018, mainly due to an increase in property operating and maintenance expenses of ~~$3.3~~$6.3 million and an increase in property taxes of ~~$2.2~~$3.3 million. The increase in property operating and maintenance expenses was primarily driven by an increase in insurance expense of $2.4 million, an increase in property payroll of $2.3 million as a result of salary increases and an increase in utility expense of $1.4 million due to higher electric and trash expenses in California and the South. ~~The increase~~Property taxes in ~~property taxes was primarily~~2018 were lower as a result of a favorable resolution of appeals in certain ~~states in 2018.~~states.

Home Sales and Rental Operations

Home Sales and Other

The following table summarizes certain financial and statistical data for Home Sales and Other.


	Six Months Ended June 30,											Nine Months Ended September 30,
(amounts in thousands, except home sales volumes)	2019			2018			Variance			% Change		2019			2018			Variance			% Change
Gross revenues from new home sales ⁽¹⁾	$	10,628		$	13,595		$	(2,967	)	(21.8	)%	$	17,492		$	20,643		$	(3,151	)	(15.3	)%
Cost of new home sales ⁽¹⁾	(10,378		)	(13,310		)	2,932			22.0	%	16,877			20,256			(3,379		)	(16.7	)%
Gross profit from new home sales	250			285			(35		)	(12.3	)%	615			387			228			58.9	%

Gross revenues from used home sales	3,672			3,819			(147		)	(3.8	)%	5,246			6,110			(864		)	(14.1	)%
Cost of used home sales	(4,418		)	(4,896		)	478			9.8	%	6,353			7,692			(1,339		)	(17.4	)%
Loss from used home sales	(746		)	(1,077		)	331			30.7	%	(1,107		)	(1,582		)	475			30.0	%

Brokered resale and ancillary services revenues, net	2,431			2,018			413			20.5	%	4,564			3,380			1,184			35.0	%
Home selling expenses	(2,185		)	(2,048		)	(137		)	(6.7	)%	3,218			3,149			69			2.2	%

Income (loss) from home sales and other	$	(250	)	$	(822	)	$	572		69.6	%	$	854		$	(964	)	$	1,818		188.6	%

Home sales volumes
Total new home sales ⁽²⁾	208			276			(68		)	(24.6	)%	336			417			(81		)	(19.4	)%
New Home Sales Volume - ECHO JV	31			43			(12		)	(27.9	)%	50			74			(24		)	(32.4	)%
Used home sales	429			538			(109		)	(20.3	)%	627			842			(215		)	(25.5	)%
Brokered home resales	405			446			(41		)	(9.2	)%	675			677			(2		)	(0.3	)%

_________________________

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

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

~~Loss~~Income from home sales and other was ~~$0.3~~$0.9 million for 2019 compared to ~~$0.8~~a loss of $1.0 million for 2018. The ~~decrease~~increase in ~~loss~~Income (loss) from home sales and other was primarily due to ~~a decrease in the loss from used home sales and~~ an increase in brokered resale ancillary services revenues, net.

Management's Discussion and Analysis (continued)

Rental Operations

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


	Six Months Ended June 30,											Nine Months Ended September 30,
(amounts in thousands, except rental unit volumes)	2019			2018			Variance			% Change		2019		2018		Variance			% Change
Manufactured homes:
Rental operations revenue ⁽¹⁾	$	22,633		$	22,152		$	481		2.2	%	$	34,279	$	32,970	$	1,309		4.0	%
Rental home operating and maintenance	(2,464		)	(2,873		)	409			14.2	%
Rental home operating and maintenance expense												4,066		4,668		(602		)	(12.9	)%
Income from rental operations	20,169			19,279			890			4.6	%	30,213		28,302		1,911			6.8	%
Depreciation on rental homes ⁽²⁾	(4,957		)	(4,605		)	(352		)	(7.6	)%	7,677		$	6,890	787			11.4	%
Income from rental operations, net of depreciation	$	15,212		$	14,674		$	538		3.7	%	$	22,536	$	21,412	$	1,124		5.2	%

Gross investment in new manufactured home rental units ⁽³⁾	$	191,975		$	135,886		$	56,089		41.3	%	$	216,185	$	146,982	$	69,203		47.1	%
Gross investment in used manufactured home rental units	$	25,103		$	34,476		$	(9,373	)	(27.2	)%	$	23,371	$	32,121	$	(8,750	)	(27.2	)%

Net investment in new manufactured home rental units	$	159,950		$	110,298		$	49,652		45.0	%	$	182,441	$	125,499	$	56,942		45.4	%
Net investment in used manufactured home rental units	$	11,563		$	24,538		$	(12,975	)	(52.9	)%	$	10,432	$	16,329	$	(5,897	)	(36.1	)%

Number of occupied rentals – new, end of period ⁽⁴⁾	3,006			2,547			459			18.0	%	3,073		2,622		451			17.2	%
Number of occupied rentals – used, end of period	1,007			1,467			(460		)	(31.4	)%	913		1,323		(410		)	(31.0	)%

______________________

⁽¹⁾

Rental operations revenue consists of Site rental income and home rental income in our Core Portfolio. Approximately ~~$15.5~~$23.4 million and ~~$15.6~~$23.3 million of Site rental income for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively, are included in community base rental income within the Core Portfolio Income from Property Operations table. The remainder of home rental income is included in rental home income within the Core Portfolio Income from Property Operations table.


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


⁽³⁾	Includes both occupied and unoccupied rental homes in our Core Portfolio. New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was ~~$16.5~~$16.7 million and ~~$15.9~~$16.1 million as of ~~June~~September 30, 2019 and 2018, respectively.


⁽⁴⁾	Occupied rentals as of the end of the period in our Core Portfolio and includes ~~298~~294 and ~~264~~265 homes rented through our ECHO JV ~~during the six months ended June~~as of September 30, 2019 and 2018, respectively.

Other Income and Expenses

The following table summarizes other income and expenses, net.


	Six Months Ended June 30,											Nine Months Ended September 30,
(amounts in thousands, expenses shown as negative)	2019			2018			Variance			% Change		2019			2018			Variance			% Change
Depreciation and amortization	$	(75,753	)	$	(66,719	)	$	(9,034	)	(13.5	)%	$	(112,785	)	$	(101,699	)	$	(11,086	)	(10.9	)%
Interest income	3,554			3,812			(258		)	(6.8	)%	5,385			5,658			(273		)	(4.8	)%
Income from other investments, net	1,865			4,353			(2,488		)	(57.2	)%	8,894			9,774			(880		)	(9.0	)%
General and administrative	(19,134		)	(17,707		)	(1,427		)	(8.1	)%	(27,844		)	(26,523		)	(1,321		)	(5.0	)%
Other expenses	(967		)	(710		)	(257		)	(36.2	)%	(2,427		)	(1,096		)	(1,331		)	(121.4	)%
Early debt retirement	(1,491		)	—			(1,491		)	—	%	(1,491		)	—			(1,491		)	—	%
Interest and related amortization	(52,417		)	(51,988		)	(429		)	(0.8	)%	(77,964		)	(78,478		)	514			0.7	%
Total other income and (expenses), net	$	(144,343	)	$	(128,959	)	$	(15,384	)	(11.9	)%	$	(208,232	)	$	(192,364	)	$	(15,868	)	(8.2	)%

Total other income and (expenses), net increased ~~$15.4~~$15.9 million ~~for~~during 2019 compared to ~~2018. The increase was~~2018, primarily due to an increase in depreciation and amortization and ~~a decrease in income from~~ other investments, net. The decrease in income from other investments, net was mainly due to $2.1 million of insurance recovery revenue from reimbursement for capital expenditures related to Hurricane Irma in 2018.expenses. Additionally, we incurred $1.5 million of early debt retirement costs in 2019.

Gain on Sale of Real Estate, Net

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

Management's Discussion and Analysis (continued)

Equity in income of unconsolidated joint ventures

Equity in income of unconsolidated joint ventures increased $4.7 million from 2018 due to an increase in income recognized from distributions from our unconsolidated joint ventures.

Liquidity and Capital Resources

Liquidity

Our primary demands for liquidity include payment of operating expenses, dividend distributions, debt service, including principal and interest, capital improvements on Properties, home purchases and property acquisitions. We expect similar demand for liquidity will continue for the short-term and long-term. Our primary sources of cash include operating cash flows, proceeds from financings, borrowings under our unsecured Line of Credit ("LOC") and proceeds from issuance of equity and debt securities.

Our at-the-market (“ATM”) equity offering program allows us to sell, from time-to-time, shares of our common stock, par value $0.01 per share, having an aggregate offering price of up to $200.0 million. As of ~~June~~September 30, 2019, we have $140.7 million of common stock available for issuance.

On April 30, 2019, our stockholders approved an amendment to our charter to increase the number of shares of our common stock that we are authorized to issue from 200,000,000 to 400,000,000 shares. As of ~~June~~September 30, 2019, we have available liquidity in the form of approximately ~~309.0~~217.9 million shares of authorized and unissued common stock and 10.0 million shares of authorized and unissued preferred stock registered for sale under the Securities Act of 1933, as amended.

One of our stated objectives is to maintain financial flexibility. Achieving this objective allows us to take advantage of strategic opportunities that may arise. We believe effective management of our balance sheet, including maintaining various access points to raise capital, managing future debt maturities and borrowing at competitive rates, enables us to meet this objective. Our financing objectives continue to focus on accessing long-term low-cost secured debt.

We also utilize interest rate swaps to add stability to our interest expense and to manage our exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The changes in the fair value of the designated derivative are recorded in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets and subsequently reclassified into earnings on the Consolidated Statements of Income and Comprehensive Income in the period that the hedged forecasted transaction affects earnings. For additional information regarding our interest rate swap, see Item 1. Financial Statements—Note 9. Derivative Instruments and Hedging Activities.

We expect to meet our short-term liquidity requirements, including principal payments, capital improvements and dividend distributions for the next twelve months, mainly through available cash as well as net cash provided by operating activities. ~~Our~~As of September 30, 2019, our LOC has a remaining borrowing capacity of ~~$400.0~~$280.0 million with the option to increase the borrowing capacity by $200.0 million, subject to certain conditions. The LOC bears interest at a rate of LIBOR plus 1.10% to 1.55%, requires an annual facility fee of 0.15% to 0.35% and matures on October 27, 2021.

As part of our Unsecured Credit Facility, our LOC arrangement will mature prior to the expected discontinuation of LIBOR subsequent to 2021 and our $200.0 million term loan is scheduled to mature in April 2023. We continue to monitor the development and adoption of an alternative index to LIBOR to manage the transition and as it pertains to new arrangements to be entered in the future. Given over ~~90%~~80% of our current debt is secured and not subject to LIBOR, we do not believe the discontinuation of LIBOR will have a significant impact on our consolidated financial statements.

We expect to meet certain long-term liquidity requirements, including scheduled debt maturities, property acquisitions and capital improvements by use of our long-term collateralized and uncollateralized borrowings including the existing LOC and the issuance of debt securities or additional equity securities. We have no debt maturing in 2019 and approximately ~~$48.9~~$48.6 million of scheduled debt matures in 2020 (excluding scheduled principal payments on debt maturing in 2020 and beyond).

For information regarding our debt activities and related borrowing arrangements, see Item 1. Financial Statements—Note 8. Borrowing Arrangements.

Management's Discussion and Analysis (continued)

The table below summarizes our cash flow activity:

Six Months Ended June 30,
(amounts in thousands) 2019 2018
Net cash provided by operating activities $ 244,685
$ 229,965
Net cash used in investing activities (75,881 ) (122,189 )
Net cash used in financing activities (147,321 ) (89,192 )
Net increase in cash and restricted cash $ 21,483
$ 18,584

~~Management's Discussion and Analysis (continued)~~



	Nine Months Ended September 30,
(amounts in thousands)	2019			2018
Net cash provided by operating activities	$	349,348		$	324,762
Net cash used in investing activities	(276,898		)	(243,549		)
Net cash (used in) provided by financing activities	(99,038		)	4,652
Net (decrease) increase in cash and restricted cash	$	(26,588	)	$	85,865

Operating Activities

Net cash provided by operating activities increased ~~$14.7~~$24.6 million to ~~$244.7~~$349.3 million for the ~~six~~nine months ended ~~June~~September 30, 2019 from ~~$230.0~~$324.8 million for the ~~six~~nine months ended ~~June~~September 30, 2018. The increase in net cash provided by operating activities was primarily due to higher income from property operations of ~~$16.6~~$21.7 million and an increase in rents and other customer payments received in advance and security deposits of ~~approximately $5.3 million, partially offset by long term incentive compensation of approximately $4.2 million paid during the first quarter of 2019 and a net decrease~~$2.6 million. The increase in ~~other assets and~~ accounts payable and other liabilities ~~of approximately of $2.5 million.~~was mostly offset by the decrease in other assets, net.

Investing Activities

Net cash used in investing activities was ~~$75.9~~$276.9 million for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to ~~$122.2~~$243.5 million for the ~~six~~nine months ended ~~June~~September 30, 2018. The ~~decrease~~increase in net cash used in investing activities was primarily due to an increase in capital improvements of $61.4 million and an increase in real estate acquisitions of $44.5 million. The net cash used in investing activities were partially offset by proceeds received of $77.7 million as a result of the sale of five MH properties during the first quarter of 2019 and higher distributions of capital from unconsolidated joint ventures of ~~$5.2~~$5.6 million. ~~This was partially offset by an increase of $40.1 million in capital improvements.~~

Capital Improvements

The table below summarizes capital improvement activities:


	Six Months Ended June 30,				Nine Months Ended September 30,
(amounts in thousands)	2019		2018		2019		2018
Recurring capital expenditures ⁽¹⁾	$	22,913	$	21,175	$	37,271	$	32,965
Property upgrades and development⁽²⁾	28,915		25,580		40,429		35,200
New home investments⁽³⁾⁽⁴⁾	67,086		31,701		108,845		56,182
Used home investments ⁽⁴⁾	1,452		1,807		2,036		2,663
Total property	120,366		80,263		188,581		127,010
Corporate	1,078		1,114		1,207		1,426
Total capital improvements	$	121,444	$	81,377	$	189,788	$	128,436

______________________


⁽¹⁾	Recurring capital expenditures are primarily comprised of common area improvements, furniture and mechanical improvements.


⁽²⁾	Includes $2.5 million and ~~$9.5~~$12.3 million of restoration and improvement capital expenditures related to Hurricane Irma for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively.


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


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

Financing Activities

Net cash used in financing activities ~~increased $58.1 million to $147.3~~was $99.0 million for the ~~six~~nine months ended ~~June~~September 30, 2019 ~~from $89.2~~and $4.7 million for the ~~six~~nine months ended ~~June~~September 30, 2018. The increase in cash used in financing activities was primarily due to an increase in debt repayments and distributions paid of ~~$70.0~~$71.1 million and ~~$13.2~~$20.1 million, respectively, ~~during~~for the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the same period in 2018. Additionally, during the ~~prior year. Proceeds~~nine months ended September 30, 2019, there were lower mortgage debt proceeds of ~~$59.3~~$64.0 million ~~received~~and lower proceeds from the sale of our common stock under our ATM equity offering program ~~for~~of $19.4 million compared to the ~~six months ended June 30, 2019 was offset by debt proceeds received during the six months ended June 30, 2018. These increases~~same period in ~~cash used in financing activities during the six months ended June 30, 2019~~2018, which were partially offset by a ~~$30.0 million~~higher net ~~payment related to~~borrowing on the LOC ~~during the six months ended June 30, 2018.~~of $70.0 million.

Management's Discussion and Analysis (continued)

Contractual Obligations

Significant ongoing contractual obligations consist primarily of long-term borrowings, interest expense, operating leases, LOC maintenance fees and ground leases. For a summary and complete presentation and description of our ongoing commitments and contractual obligations, see the Contractual Obligations section of the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Form 10-K.

Off-Balance Sheet Arrangements

As of ~~June~~September 30, 2019, we have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Refer to the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2018 Form 10-K for a discussion of our critical accounting policies. There have been no significant changes to our critical accounting policies and estimates during the ~~six~~nine months ended ~~June~~September 30, 2019.

~~Management's Discussion and Analysis (continued)~~

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2019 includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as “anticipate,” “expect,” “believe,” “project,” “intend,” “may be” and “will be” and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements and may include without limitation, information regarding our expectations, goals or intentions regarding the future, and the expected effect of our acquisitions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:

our ability to control costs and real estate market conditions, our ability to retain customers, the actual use of Sites by customers and our success in acquiring new customers at our Properties (including those that we may acquire);

our ability to maintain historical or increase future rental rates and occupancy with respect to properties currently owned or that we may acquire;

our ability to retain and attract customers renewing, upgrading and entering right-to-use contracts;

our assumptions about rental and home sales markets;

our ability to manage counterparty risk;

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

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

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

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

effective integration of recent acquisitions and our estimates regarding the future performance of recent acquisitions;

the completion of future transactions in their entirety, if any, and timing and effective integration with respect thereto;

unanticipated costs or unforeseen liabilities associated with recent acquisitions;

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

the effect of interest rates;

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

the dilutive effects of issuing additional securities;

the outcome of pending or future lawsuits or actions brought against us, including those disclosed in our filings with the Securities and Exchange Commission; and

other risks indicated from time to time in our filings with the Securities and Exchange Commission.

These forward-looking statements are based on management's present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

We disclosed a quantitative and qualitative analysis regarding market risk in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2018 Form 10-K. There have been no material changes in the assumptions used or results obtained regarding market risk since December 31, 2018.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to us that would potentially be subject to disclosure under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder as of ~~June~~September 30, 2019. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Control Over Financial Reporting

During the quarter ended ~~June~~September 30, 2019, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information


Item 1.	Legal Proceedings

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


Item 1A.	Risk Factors

There have been no material changes to the risk factors discussed in “Item 1A. Risk Factors” in our 2018 Form 10-K.


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

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

None.


Item 5.	Other Information

None.


Item 6.	Exhibits



~~3.1~~	~~Articles of Amendment of Equity LifeStyle Properties, Inc. effective May 2, 2019 (Included as an exhibit to our Report on Form 8-K dated May 2, 2019 and incorporated herein by reference).~~
31.1	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)

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



	EQUITY LIFESTYLE PROPERTIES, INC.

Date: ~~July 30,~~October 29, 2019	By:	/s/ Marguerite Nader
		Marguerite Nader
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~July 30,~~October 29, 2019	By:	/s/ Paul Seavey
		Paul Seavey
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Date: ~~July 30,~~October 29, 2019	By:	/s/ Valerie Henry
		Valerie Henry
		Vice President, Chief Accounting Officer
		(Principal Accounting Officer)

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