UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________

FORM 10-Q

_________________________________________________________



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

For the quarterly period ended ~~June 30, 2017~~March 31, 2018



o	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 or Organization)	(I.R.S. Employer Identification No.)

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)

_________________________________________________________

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

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	x	Accelerated filer	o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o
		Emerging growth company	o

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 o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

~~87,005,128~~88,739,990 shares of Common Stock as of ~~July 24, 2017.~~April 27, 2018.

Equity LifeStyle Properties, Inc.

Table of Contents



		Page
Part I - Financial Information
Item 1.	Financial Statements
Index To Financial Statements
Consolidated Balance Sheets as of ~~June 30, 2017~~March 31, 2018 (unaudited) and December 31, ~~2016~~2017		3
Consolidated Statements of Income and Comprehensive Income for the quarters ended March 31, 2018 and ~~six months ended June 30,~~ 2017 ~~and 2016~~ (unaudited)		4
Consolidated Statement of Changes in Equity for the ~~six months~~quarter ended ~~June 30, 2017~~March 31, 2018 (unaudited)		6
Consolidated Statements of Cash Flows for the ~~six months~~quarters ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (unaudited)		7
Notes to Consolidated Financial Statements		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3330
Item 4.	Controls and Procedures	3330
Part II - Other Information
Item 1.	Legal Proceedings	3431
Item 1A.	Risk Factors	3431
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3431
Item 3.	Defaults Upon Senior Securities	3431
Item 4.	Mine Safety ~~Disclosure~~Disclosures	3431
Item 5.	Other Information	3431
Item 6.	Exhibits	3532

Part I – Financial Information

Item 1. Financial Statements

Equity LifeStyle Properties, Inc.

Consolidated Balance Sheets

As of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017

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


	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(unaudited)						(unaudited)
Assets
Investment in real estate:
Land	$	1,167,510		$	1,163,987		$	1,249,414		$	1,221,375
Land improvements	2,922,201			2,893,759			3,077,835			3,045,221
Buildings and other depreciable property	641,931			627,590			658,735			649,217
	4,731,642			4,685,336			4,985,984			4,915,813
Accumulated depreciation	(1,459,931		)	(1,399,531		)	(1,547,574		)	(1,516,694		)
Net investment in real estate	3,271,711			3,285,805			3,438,410			3,399,119
Cash	67,740			56,340
Cash and restricted cash							73,891			31,085
Notes receivable, net	48,253			34,520			34,913			49,477
Investment in unconsolidated joint ventures	21,766			19,369			57,491			53,080
Deferred commission expense	31,453			31,375			39,550			31,443
Escrow deposits, goodwill, and other assets, net	44,435			51,578			45,828			45,828
Total Assets	$	3,485,358		$	3,478,987		$	3,690,083		$	3,610,032
Liabilities and Equity
Liabilities:
Mortgage notes payable, net	$	1,855,028		$	1,891,900		$	2,040,506		$	1,971,715
Term loan	199,483			199,379			198,383			198,302
Unsecured lines of credit	—			—
Unsecured line of credit							—			30,000
Accrued expenses and accounts payable	93,451			89,864			85,666			80,744
Deferred revenue – upfront payments from right-to-use contracts	83,580			81,484			110,267			85,596
Deferred revenue – right-to-use annual payments	12,559			9,817			13,111			9,932
Accrued interest payable	8,044			8,379			8,501			8,387
Rents and other customer payments received in advance and security deposits	88,543			76,906			80,500			79,267
Distributions payable	45,259			39,411			52,010			46,047
Total Liabilities	2,385,947			2,397,140			2,588,944			2,509,990
Equity:
Stockholders’ Equity:
Preferred stock, $0.01 par value, 9,945,539 shares authorized as of June 30, 2017 and December 31, 2016; none issued and outstanding.	—			—
6.75% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value, 54,461 shares authorized and 54,458 issued and outstanding as of June 30, 2017 and December 31, 2016 at liquidation value	136,144			136,144
Common stock, $0.01 par value, 200,000,000 shares authorized as of June 30, 2017 and December 31, 2016; 87,004,507 and 85,529,386 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	868			854
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of December 31, 2017 and March 31, 2018; none issued and outstanding.							—			—
Common stock, $0.01 par value, 200,000,000 shares authorized as of March 31, 2018 and December 31, 2017; 88,738,205 and 88,585,160 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively							883			883
Paid-in capital	1,121,307			1,103,048			1,245,214			1,242,109
Distributions in excess of accumulated earnings	(219,641		)	(231,276		)	(215,749		)	(211,980		)
Accumulated other comprehensive loss/(income)	30			(227		)
Accumulated other comprehensive income							2,815			942
Total Stockholders’ Equity	1,038,708			1,008,543			1,033,163			1,031,954
Non-controlling interests – Common OP Units	60,703			73,304			67,976			68,088
Total Equity	1,099,411			1,081,847			1,101,139			1,100,042
Total Liabilities and Equity	$	3,485,358		$	3,478,987		$	3,690,083		$	3,610,032

The accompanying notes are an integral part of these Consolidated Financial Statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Income and Comprehensive Income

For the Quarters Ended March 31, 2018 and ~~Six Months Ended June 30,~~ 2017 ~~and 2016~~

(amounts in thousands, except per share data)

(unaudited)

Quarters Ended Six Months Ended
June 30,
2017 June 30,
2016 June 30,
2017 June 30,
2016
Revenues:
Community base rental income $ 121,964
$ 115,385
$ 242,656
$ 229,461
Rental home income 3,632
3,543
7,237
7,088
Resort base rental income 50,055
44,732
111,123
100,166
Right-to-use annual payments 11,350
11,187
22,602
22,241
Right-to-use contracts current period, gross 3,798
3,086
7,004
5,618
Right-to-use contract upfront payments, deferred, net (1,321 ) (798 ) (2,096 ) (1,100 )
Utility and other income 20,650
19,523
42,776
40,316
Gross revenues from home sales 7,833
9,130
14,860
17,344
Brokered resale revenues and ancillary services revenues, net 444
398
2,105
1,816
Interest income 1,798
1,625
3,568
3,285
Income from other investments, net 1,109
2,270
1,866
3,993
Total revenues 221,312
210,081

453,701

430,228
Expenses:
Property operating and maintenance 72,901
66,647
140,955
129,601
Rental home operating and maintenance 1,657
1,581
3,208
3,106
Real estate taxes 13,943
12,869
27,980
26,067
Sales and marketing, gross 2,894
2,931
5,584
5,424
Right-to-use contract commissions, deferred, net (112 ) (116 ) (196 ) (12 )
Property management 13,023
12,044
25,583
23,807
Depreciation on real estate assets and rental homes 30,247
29,029
60,357
57,684
Amortization of in-place leases 958
428
1,990
763
Cost of home sales 7,895
9,481
15,014
17,762
Home selling expenses 929
805
1,854
1,639
General and administrative 8,461
8,255
15,834
15,663
Property rights initiatives and other, net 271
527
490
1,181
Interest and related amortization 24,822
25,561
49,701
51,195
Total expenses 177,889
170,042

348,354

333,880
Income before equity in income of unconsolidated joint ventures 43,423
40,039

105,347

96,348
Equity in income of unconsolidated joint ventures 1,040
765
2,190
1,646
Consolidated net income 44,463
40,804

107,537

97,994

Income allocated to non-controlling interests – Common OP Units (2,649 ) (2,998 ) (6,539 ) (7,308 )
Series C Redeemable Perpetual Preferred Stock Dividends (2,316 ) (2,316 ) (4,613 ) (4,613 )
Net income available for Common Stockholders $ 39,498
$ 35,490

$ 96,385

$ 86,073

Consolidated net income $ 44,463
$ 40,804
$ 107,537
$ 97,994
Other comprehensive income (loss) (“OCI”):
Adjustment for fair market value of swap 30
(36 ) 257
(644 )
Consolidated comprehensive income 44,493
40,768

107,794

97,350
Comprehensive income allocated to non-controlling interests – Common OP Units (2,651 ) (2,995 ) (6,555 ) (7,257 )
Series C Redeemable Perpetual Preferred Stock Dividends (2,316 ) (2,316 ) (4,613 ) (4,613 )
Comprehensive income attributable to Common Stockholders $ 39,526
$ 35,457

$ 96,626

$ 85,480



	Quarters Ended
	March 31, 2018			March 31, 2017
Revenues:
Community base rental income	$	126,739		$	120,692
Rental home income	3,515			3,605
Resort base rental income	64,254			61,068
Right-to-use annual payments	11,519			11,252
Right-to-use contracts current period, gross	3,162			3,206
Right-to-use contract upfront payments, deferred, net	(1,285		)	(775		)
Utility and other income	25,521			22,126
Gross revenues from home sales	8,309			7,027
Brokered resale revenues and ancillary services revenues, net	1,401			1,661
Interest income	1,950			1,770
Income from other investments, net	940			757
Total revenues	246,025			232,389
Expenses:
Property operating and maintenance	74,908			68,054
Rental home operating and maintenance	1,424			1,551
Real estate taxes	14,135			14,037
Sales and marketing, gross	2,812			2,690
Right-to-use contract commissions, deferred, net	(24		)	(84		)
Property management	13,681			12,560
Depreciation on real estate assets and rental homes	31,322			30,109
Amortization of in-place leases	1,052			1,032
Cost of home sales	8,574			7,119
Home selling expenses	1,075			925
General and administrative	8,038			7,373
Other expenses	343			219
Interest and related amortization	25,703			24,879
Total expenses	183,043			170,464
Income before equity in income of unconsolidated joint ventures	62,982			61,925
Equity in income of unconsolidated joint ventures	1,195			1,150
Consolidated net income	64,177			63,075

Income allocated to non-controlling interests – Common OP Units	(3,955		)	(3,890		)
Series C Redeemable Perpetual preferred stock dividends	—			(2,297		)
Net income available for Common Stockholders	$	60,222		$	56,888

Consolidated net income	$	64,177		$	63,075
Other comprehensive income:
Adjustment for fair market value of swap	1,873			226
Consolidated comprehensive income	66,050			63,301
Comprehensive income allocated to non-controlling interests – Common OP Units	(4,070		)	(3,904		)
Series C Redeemable Perpetual preferred stock dividends	—			(2,297		)
Comprehensive income attributable to Common Stockholders	$	61,980		$	57,100

The accompanying notes are an integral part of these Consolidated Financial Statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Income and Comprehensive Income (Continued)

For the Quarters Ended ~~June 30, 2017~~March 31, 2018 and ~~2016~~2017

(amounts in thousands, except per share data)

(unaudited)


	Quarters Ended				Six Months Ended				Quarters Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		March 31, 2018		March 31, 2017
Earnings per Common Share – Basic:
Net income available for Common Stockholders	$	0.46	$	0.42	$	1.12	$	1.02	$	0.68	$	0.66
Earnings per Common Share – Fully Diluted:
Net income available for Common Stockholders	$	0.45	$	0.42	$	1.11	$	1.01	$	0.68	$	0.65

Distributions declared per Common Share outstanding	$	0.488	$	0.425	$	0.975	$	0.850	$	0.550	$	0.488
Weighted average Common Shares outstanding – basic	86,763		84,516		86,408		84,419		88,524		86,048
Weighted average Common Shares outstanding – fully diluted	93,063		92,264		93,041		92,163		94,577		93,011

The accompanying notes are an integral part of these Consolidated Financial Statements.

Equity LifeStyle Properties, Inc.

Consolidated Statement of Changes in Equity

For the ~~Six Months~~Quarter Ended ~~June 30, 2017~~March 31, 2018

(amounts in thousands)

(unaudited)

Common
Stock

Paid-in
Capital

6.75% Series C Cumulative
Redeemable
Perpetual
Preferred Stock

Distributions
in Excess of
Accumulated
Earnings

Non-
controlling
interests –
Common OP
Units

Accumulated
Other
Comprehensive
Loss/(Income)

Total
Equity
Balance, December 31, 2016 $ 854
$ 1,103,048
$ 136,144
$ (231,276 ) $ 73,304
$ (227 ) $ 1,081,847
Conversion of Common OP Units to Common Stock 14
16,423
—
—
(16,437 ) —
—
Issuance of Common Stock through employee stock purchase plan —
764
—
—
—
—
764
Compensation expenses related to restricted stock —
4,257
—
—
—
—
4,257
Adjustment for Common OP Unitholders in the Operating Partnership —
(3,037 ) —
—
3,037
—
—
Adjustment for fair market value of swap —
—
—
—
—
257
257
Net income —
—
4,613
96,385
6,539
—
107,537
Distributions —
—
(4,613 ) (84,750 ) (5,740 ) —
(95,103 )
Other —
(148 ) —
—
—
—
(148 )
Balance, June 30, 2017 $ 868
$ 1,121,307
$ 136,144
$ (219,641 ) $ 60,703
$ 30
$ 1,099,411



	Common Stock		Paid-in Capital			Distributions in Excess of Accumulated Earnings			Accumulated Other Comprehensive Loss/(Income)		Non- controlling interests – Common OP Units			Total Equity
Balance, December 31, 2017	$	883	$	1,242,109		$	(211,980	)	$	942	68,088			$	1,100,042
Cumulative effect of change in accounting principle (as described in Note 2)	—		—			(15,186		)	—		—			(15,186		)
Balance, January 1, 2018	$	883	$	1,242,109		$	(227,166	)	$	942	$	68,088		$	1,084,856
Conversion of Common OP Units to Common Stock	—		80			—			—		(80		)	—
Issuance of Common Stock through employee stock purchase plan	—		503			—			—		—			503
Compensation expenses related to restricted stock and stock options	—		1,800			—			—		—			1,800
Adjustment for Common OP Unitholders in the Operating Partnership	—		782			—			—		(782		)	—
Adjustment for fair market value of swap	—		—			—			1,873		—			1,873
Net income	—		—			60,222			—		3,955			64,177
Distributions	—		—			(48,805		)	—		(3,205		)	(52,010		)
Other	—		(60		)	—			—		—			(60		)
Balance, March 31, 2018	$	883	$	1,245,214		$	(215,749	)	$	2,815	$	67,976		$	1,101,139

The accompanying notes are an integral part of these Consolidated Financial Statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows

For the ~~Six Months~~Quarters Ended ~~June 30, 2017~~March 31, 2018 and ~~2016~~2017

(amounts in thousands)

(unaudited)

June 30,
2017 June 30,
2016
Cash Flows From Operating Activities:
Consolidated net income $ 107,537
$ 97,994
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation 60,960
58,242
Amortization of in-place leases 1,990
763
Amortization of loan costs 1,788
1,876
Debt premium amortization (1,166 ) (1,730 )
Equity in income of unconsolidated joint ventures (2,190 ) (1,646 )
Distributions of income from unconsolidated joint ventures 1,800
1,041
Stock-based compensation 4,257
4,393
Revenue recognized from right-to-use contract upfront payments (4,908 ) (4,518 )
Commission expense recognized related to right-to-use contracts 2,202
2,019
Long term incentive plan compensation 674
(3,852 )
Recovery for uncollectible rents receivable 214
(679 )
Changes in assets and liabilities:
Notes receivable activity, net (282 ) 361
Deferred commission expense (2,280 ) (2,238 )
Escrow deposits, goodwill and other assets 21,814
13,137
Accrued expenses and accounts payable 316
2,453
Deferred revenue – upfront payments from right-to-use contracts 7,004
5,618
Deferred revenue – right-to-use annual payments 2,742
3,139
Rents received in advance and security deposits 11,630
10,434
Net cash provided by operating activities 214,102
186,807
Cash Flows From Investing Activities:
Real estate acquisition (2,053 ) (76,203 )
Investment in unconsolidated joint ventures (2,267 ) (5,000 )
Repayments of notes receivable 5,054
5,176
Issuance of notes receivable (18,696 ) (4,356 )
Capital improvements (53,464 ) (55,707 )
Net cash used in investing activities (71,426 ) (136,090 )
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan 764
5,331
Share based award tax withholding —
(98 )
Gross proceeds from sale of Common Stock —
50,000
Distributions:
Common Stockholders (78,699 ) (67,565 )
Common OP Unitholders (5,942 ) (5,766 )
Preferred Stockholders (4,613 ) (4,613 )
Principal payments and mortgage debt payoff (42,637 ) (32,564 )
Debt issuance and defeasance costs —
(5 )
Other (149 ) (824 )
Net cash used in financing activities (131,276 ) (56,104 )
Net increase (decrease) in cash 11,400
(5,387 )
Cash, beginning of period 56,340
80,258
Cash, end of period $ 67,740
$ 74,871




	March 31, 2018			March 31, 2017
Cash Flows From Operating Activities:
Consolidated net income	$	64,177		$	63,075
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation	31,666			30,398
Amortization of in-place leases	1,052			1,032
Amortization of loan costs	871			898
Debt premium amortization	(357		)	(655		)
Equity in income of unconsolidated joint ventures	(1,195		)	(1,150		)
Distributions of income from unconsolidated joint ventures	490			1,115
Proceeds from insurance claims, net	3,031			4,625
Stock-based compensation	1,800			1,755
Revenue recognized from right-to-use contract upfront payments	(1,877		)	(2,426		)
Commission expense recognized related to right-to-use contracts	901			1,090
Long-term incentive plan compensation	238			337
Recovery for uncollectible rents receivable	(337		)	(53		)
Changes in assets and liabilities:
Notes receivable activity, net	320			(45		)
Deferred commission expense	(812		)	(1,072		)
Escrow deposits, goodwill and other assets	8,151			7,483
Accrued expenses and accounts payable	2,761			224
Deferred revenue – upfront payments from right-to-use contracts	3,162			3,206
Deferred revenue – right-to-use annual payments	3,179			3,499
Rents received in advance and security deposits	1,233			492
Net cash provided by operating activities	118,454			113,828
Cash Flows From Investing Activities:
Real estate acquisition	(29,929		)	—
Investment in unconsolidated joint ventures	(3,791		)	—
Proceeds from insurance claims	265			458
Repayments of notes receivable	16,115			2,461
Issuance of notes receivable	(1,974		)	(2,212		)
Capital improvements	(31,316		)	(24,354		)
Net cash used in investing activities	(50,630		)	(23,647		)
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan	503			403
Distributions:
Common Stockholders	(43,202		)	(36,364		)
Common OP Unitholders	(2,844		)	(3,047		)
Preferred Stockholders	—			(2,297		)
Principal payments and mortgage debt payoff	(11,787		)	(31,887		)
New mortgage notes payable financing proceeds	64,014			—
Line of Credit payoff	(77,000		)	—
Line of Credit proceeds	47,000			—
Debt issuance and defeasance costs	(1,645		)	(49		)
Other	(57		)	(32		)
Net cash used in financing activities	(25,018		)	(73,273		)
Net increase in Cash and restricted cash	42,806			16,908
Cash and restricted cash, beginning of period	31,085			56,340
Cash and restricted cash, end of period	$	73,891		$	73,248

The accompanying notes are an integral part of these Consolidated Financial Statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows (continued)

For the ~~Six Months~~Quarters Ended ~~June 30, 2017~~March 31, 2018 and ~~2016~~2017

(amounts in thousands)

(unaudited)


	June 30, 2017			June 30, 2016			March 31, 2018			March 31, 2017
Supplemental Information:
Cash paid during the period for interest	$	51,135		$	53,121		$	25,943		$	25,618
Capital improvements – used homes acquired by repossessions	192			445
Net repayments of notes receivable – used homes acquired by repossessions	(192		)	(445		)
Building and other depreciable property – reclassification of rental homes	15,322			15,986			9,385			6,967
Escrow deposits and other assets – reclassification of rental homes	(15,322		)	(15,986		)	(9,385		)	(6,967		)

Real estate acquisitions:
Investment in real estate, fair value	$	(7,985	)	$	(100,148	)	$	(48,186	)	$	—
Escrow deposits and other assets	—			(20		)
Debt assumed	5,900			22,010			9,200			—
Debt financed							8,786			—
Accrued expenses and accounts payable	32			1,955			271			—
Real estate acquisitions, net	$	(2,053	)	$	(76,203	)	$	(29,929	)	$	—

The accompanying notes are an integral part of these Consolidated Financial Statements.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

Equity LifeStyle Properties, Inc., a Maryland corporation, together with MHC Operating Limited Partnership (the “Operating Partnership”) and other consolidated subsidiaries (“Subsidiaries”), are referred to herein as “we,” “us,” and “our.” We are a fully integrated owner and operator of lifestyle-oriented properties ("Properties") consisting primarily of manufactured home ("MH") communities and recreational vehicle ("RV") resorts and campgrounds. We provide our customers the opportunity to place factory built homes, cottages, cabins or RVs either permanently or 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.

Capitalized terms used but not defined herein are as defined in our Annual Report on Form 10-K ~~(“2016 Form 10-K”)~~ for the year ended December 31, ~~2016.~~2017 (“2017 Form 10-K”). These unaudited Consolidated Financial Statements have been prepared pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. 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 financial statements and notes thereto included in the ~~2016~~2017 Form 10-K.

The following notes to the Consolidated Financial Statements highlight significant changes to the notes included in the ~~2016~~2017 Form 10-K and present interim disclosures as required by the SEC. The accompanying Consolidated Financial Statements reflect, in the opinion of management, all adjustments and estimates necessary for a fair presentation of the interim financial statements, which are of a normal, recurring nature. Revenues and expenses are subject to seasonal fluctuations and accordingly, quarterly interim results may not be indicative of full year results.

Note 2 – Summary of Significant Accounting Policies


(a)	Consolidation

We consolidate our majority-owned Subsidiaries in which we have the ability to control the operations and all variable interest entities ("VIE") with respect to which we are the primary beneficiary. We have determined the Operating Partnership, which is our sole significant asset, meets the definition of a VIE. Therefore, we consolidate the Operating Partnership. We also consolidate entities in which we have a direct or indirect controlling or voting interest. All significant intercompany balances and transactions have been eliminated in consolidation.

~~Effective January 1, 2016, we adopted (“ASU 2015-02”)~~ ~~Consolidation (Topic 810): Amendments to the Consolidation Analysis~~. ASU 2015-02 required us to evaluate whether we should consolidate certain legal entities. The adoption of this standard did not result in any changes to our accounting of interests in less than wholly-owned joint ventures; however, the Operating Partnership now meets the criteria as a VIE. We concluded that the Operating Partnership is a VIE because we are the general partner and controlling owner of approximately 93.7% of the Operating Partnership and the limited partners do not have substantive kick-out or participating rights. Our sole significant asset is our investment in the Operating Partnership, and consequently, substantially all of our assets and liabilities represent those assets and liabilities of the Operating Partnership. The Company has the power to direct the VIE's activities and the obligation to absorb its losses or the right to receive its benefits, which are significant to the VIE. Accordingly, we are the primary beneficiary and we will continue to consolidate the Operating Partnership under this new guidance.

We apply the equity method of accounting to entities in which we do not have a direct or indirect controlling interest or for variable interest entities where we are not considered the primary beneficiary, but can exercise influence over the entity with respect to its operations and major decisions.


(b)	Identified Intangibles and Goodwill

As of both ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the gross carrying amount of identified intangible assets and goodwill, a component of ~~escrow~~Escrow deposits, goodwill and other assets, net on our consolidated balance sheets, was approximately $12.1 million. As of both ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, this amount was comprised of approximately $4.3 million of identified intangible assets and approximately $7.8 million of goodwill. Accumulated amortization of identified intangible assets was approximately $2.9 million ~~and $2.8 million~~ as of ~~June 30, 2017~~both March 31, 2018 and December 31, ~~2016, respectively.~~2017.

As of ~~both June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the gross carrying amount of in-place lease intangible assets, a component of buildings and other depreciable property on our consolidated balance sheets, was approximately $79.7 million and $76.7 ~~million.~~million, respectively. Accumulated amortization of in-place lease intangible assets was approximately ~~$75.9~~$76.6 million and ~~$74.0~~$76.5 million as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.


(c)	Restricted Cash

Cash as of both ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 included approximately $5.3 million of restricted cash for the payment of capital improvements, insurance or real estate taxes.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (continued)


(d)	Fair Value of Financial Instruments

Our financial instruments include notes receivable, accounts receivable, accounts payable, other accrued expenses, interest rate swaps and mortgage notes payable. We disclose the estimated fair value of our financial instruments according to a fair value hierarchy (Level 1, 2 and 3).

Our mortgage notes payable and term loan, excluding deferred financing costs of approximately ~~$17.8~~$24.7 million and ~~$18.9~~$23.7 million as of March 31, 2018 and December 31, 2017, respectively, had an aggregate carrying value of approximately ~~$2,072.3~~$2,263.6 million and ~~$2,110.2~~$2,193.7 million as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, and a fair value of approximately ~~$2,106.4~~$2,239.2 million and ~~$2,081.2~~$2,184.0 million as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. The fair value was measured using quoted prices and observable inputs from similar liabilities (Level 2). At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, our cash flow hedge of interest rate risk included in ~~accrued expenses~~Escrow deposits, goodwill and ~~accounts payable~~other assets, net was measured using quoted prices and observable inputs from similar assets and liabilities (Level 2). We consider our own credit risk as well as the credit risk of our counterparties when evaluating the fair value of our derivative. The fair values of our notes receivable approximate their carrying or contract values. We also utilize Level 2 and Level 3 inputs as part of our determination of the purchase price allocation for our acquisitions.


(e)	~~New~~Revenue Recognition

Our revenue streams are predominantly derived from customers renting our Sites and are accounted for in accordance with ("ASC 840"), Leases, which include the following classifications on our Consolidated Statements of Income and Comprehensive Income: Community base rental income; Rental home income; Resort base rental income; and Utility and other income. Customers lease the Site in which their home is located, and either own or lease their home. Lease revenues for Sites and homes are accounted for as operating leases and recognized over the term of the respective lease or the length of a customer’s stay. A typical lease for the rental of a Site between us and the owner or renter of a home is month-to-month or for a one-year term, renewable upon the consent of both parties, or in some instances, as provided by statute.

All other classifications on our Consolidated Statements of Income and Comprehensive Income are accounted for under other applicable accounting standards.

We enter into right-to-use contracts that give the customer the right to a set schedule of usage at a specified group of Properties. Payments are deferred and recognized ratably over the one year period in which access to Sites at certain Properties are provided. Right-to-use upgrade contracts grant certain additional access rights to the customer and require upfront non-refundable payments. The right-to-use upfront non-refundable payments are recognized on a straight-line basis over 20 years. On January 1, 2018, we adopted (“ASU 2014-09”), Revenue from Contracts with Customers. See Recently Adopted Accounting Pronouncements within Note 2 for further discussion.

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.


(f)	Recently Adopted Accounting Pronouncements

InOn January ~~2017,~~1, 2018, the ~~FASB issued~~Company adopted on a prospective basis ("ASU 2017-01") Business Combinations ~~(Topic 805)~~: Clarifying the Definition of a Business (Topic 805). ~~ASU 2017-01~~This guidance clarifies the definition of a business ~~with the objective~~and provides a screen to determine when an integrated set of ~~adding guidance to assist entities with evaluating whether transactions should be~~assets and activities is not considered a business and, thus, is accounted for as an asset acquisition rather than a business combination. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not considered a business. Under this new guidance, transaction costs associated with asset acquisitions ~~(or disposals)~~are capitalized, while transaction costs associated with business combinations are expensed as incurred. All of ~~assets or businesses.~~ the acquisitions completed subsequent to January 1, 2018 met the screen and, thus, were accounted for as asset acquisitions and, as such, the related transaction costs of $1.0 million were capitalized.

On January 1, 2018, the Company adopted (“ASU ~~2017-01 will be effective for annual reporting beginning after December 15, 2017. We are currently in~~2016-18”) Statement of Cash Flows: Restricted Cash (Topic 230). ASU 2016-18 requires companies to include restricted cash with cash and cash equivalents when reconciling the ~~process~~beginning-of-period and end-of-period total amounts shown on the statement of ~~evaluating the potential impact that the~~cash flows. The adoption of this ~~standard may~~guidance did not have any effect on ~~our consolidated financial statements and related disclosures.~~the Company's Consolidated Financial Statements.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (continued)

~~In August 2016,~~On January 1, 2018, the ~~FASB issued~~Company adopted (“ASU 2016-15”) Statement of Cash ~~Flows~~Flows: Classification of Certain Cash Receipts and Cash Payments (Topic 230). on a retrospective basis. ASU 2016-15 ~~provides~~adds or clarifies guidance on ~~how~~the classification of certain cash receipts and ~~cash~~ payments ~~are to be presented and classified~~ in the statement of cash flows. The adoption of ASU 2016-15 ~~will~~impacted our classification of proceeds from the settlement of insurance claims. The retrospective adoption of this guidance resulted in the reclassification of $0.5 million of insurance proceeds from Operating Activities to Investing Activities in our Statement of Cash Flows for the quarter ended March 31, 2017.

On January 1, 2018, we adopted ASU 2014-09, which is a comprehensive new revenue recognition model that requires revenue to be ~~effective~~recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for ~~annual~~those goods or services. We applied the modified retrospective method to our right-to-use upgrade contracts and related commissions that were not fully amortized as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASU 2014-09, while prior period amounts are not adjusted and continue to be reported under the previous accounting standards. As a result of the cumulative impact of adopting this guidance, we recorded a net reduction to retained earnings of approximately $15.2 million as of January 1, 2018 in Distributions in excess of accumulated earnings in the Consolidated Statement of Changes in Equity. There was not a material impact to revenues as a result of applying ASU 2014-09 for the three months ended March 31, 2018, and there have not been significant changes to our business processes, systems, or internal controls as a result of implementing the standard. In addition to the information included within Note 2 regarding the impact of ASU 2014-09, also see Note 10, Reportable Segments, for further disaggregation of our various revenue streams by major source.

The cumulative effect adjustments resulting from the adoption of ASU 2014-09 as of January 1, 2018 were as follows:



	Balance at December 31, 2017			Adjustment due to ASU 2014-09 Adoption			Balance at January 1, 2018
Assets
Deferred commission expense	$	31,443		$	8,200		$	39,643
Liabilities
Deferred revenue-upfront payment from right-to-use contracts	$	85,596		$	23,386		$	108,982
Equity
Distribution in excess of accumulated earnings	$	(211,980	)	$	(15,186	)	$	(227,166	)

The impact of ASU 2014-09 on the Company’s Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2018 was as follows:



	As Reported			Balances Without Adoption of ASU 2014-09 (a)			Effect of Change Higher/(Lower)
Revenues
Right-to-use contract upfront payments, deferred, net	$	(1,285	)	$	(551	)	$	734
Total revenues	$	246,025		$	246,759		$	734

Expenses
Right-to-use contract commissions, deferred, net	$	(24	)	$	207		$	231
Total expenses	$	183,043		$	183,274		$	231
	62,982			63,485			503
Consolidated net income	$	64,177		$	64,680		$	503
Net income available for Common Stockholders	$	60,222		$	60,694		$	472
Earnings per Common Share - Basic	$	0.68		$	0.69		$	0.01
Earnings per Common Share - Fully Diluted	$	0.68		$	0.68		$	—

_____________________

(a) Represents the amounts that would have been reported under GAAP that existed prior to the January 1, 2018 adoption of ASU 2014-09.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 2 – Summary of Significant Accounting Policies (continued)


(g)	New Accounting Pronouncements

In August 2017, the FASB issued ("ASU 2017-12") Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (Topic 815). ASU 2017-12 provides guidance about income statement classification and eliminates the requirement to separately measure and report hedge ineffectiveness. The entire change in fair value for qualifying hedge instruments including ineffectiveness will be recorded in other comprehensive income ("OCI") and amounts deferred in OCI will be reclassified to earnings in the same income statement line item in which the earnings effect of the hedged item is reported. The new guidance also amends the presentation and disclosure requirements. The intention is to align hedge accounting with companies' risk management strategies more closely, thereby simplifying the application of hedge accounting and increasing transparency as to the scope and results of hedging programs. ASU 2017-12 is effective in fiscal years beginning after December 15, ~~2017.~~2018, including interim periods within those years. Early adoption is permitted. We are currently in the process of evaluating the potential impact, if any, that the adoption of this standard may have on our ~~consolidated financial statements~~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 will be effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted. We are currently in the process of evaluating the potential impact, if any, that adoption of this standard may have on our ~~consolidated financial statements~~Consolidated Financial Statements and related disclosures.

In February 2016, the FASB issued ("ASU 2016-02") Leases. ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. ASU 2016-02 will be effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. We are currently in the process of evaluating the potential impact, if any, this standard may have on our ~~consolidated financial statements~~Consolidated Financial Statements and related disclosures.

~~In May 2014, the FASB issued ("ASU 2014-09")~~ ~~Revenue from Contracts with Customers~~ which along with related subsequent amendments will replace most existing revenue recognition guidance in GAAP. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The new standard will be effective for the Company beginning on January 1, 2018. The standard permits the use of either the full retrospective or modified retrospective transition method.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

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

We expect to adopt ASU 2014-09 on January 1, 2018, using the modified retrospective transition method. We are evaluating the complete impact of the adoption to our consolidated financial results. Our primary source of revenue is generated through leasing arrangements, which are excluded from ASU 2014-09. We continue to evaluate and are in the process of quantifying the impact, if any, the adoption of ASU 2014-09 will have on our non-lease revenue streams, including right-to-use annual payments, right-to-use contracts, and utility and other income.

Note 3 – Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per Common Share for the quarters ended March 31, 2018 and ~~six months ended June 30,~~ 2017 ~~and 2016~~ (amounts in thousands, except per share data):


	Quarters Ended				Six Months Ended				Quarters Ended
	June 30,				June 30,				March 31,
	2017		2016		2017		2016		2018		2017
Numerator:
Net Income Available for Common Stockholders:
Net income available for Common Stockholders – basic	$	39,498	$	35,490	$	96,385	$	86,073	$	60,222	$	56,888
Amounts allocated to dilutive securities	2,649		2,998		6,539		7,308		3,955		3,890
Net income available for Common Stockholders – fully diluted	$	42,147	$	38,488	$	102,924	$	93,381	$	64,177	$	60,778
Denominator:
Weighted average Common Shares outstanding – basic	86,763		84,516		86,408		84,419		88,524		86,048
Effect of dilutive securities:
Conversion of Common OP Units to Common Shares	5,886		7,205		6,235		7,206
Exchange of Common OP Units to Common Shares									5,828		6,588
Stock options and restricted shares	414		543		398		538		225		375
Weighted average Common Shares outstanding – fully diluted	93,063		92,264		93,041		92,163		94,577		93,011

Earnings per Common Share – Basic:
Net income available for Common Stockholders	$	0.46	$	0.42	$	1.12	$	1.02	$	0.68	$	0.66

Earnings per Common Share – Fully Diluted:
Net income available for Common Stockholders	$	0.45	$	0.42	$	1.11	$	1.01	$	0.68	$	0.65

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 4 – Common Stock and Other Equity Related Transactions

~~Dividends~~

~~The following quarterly distributions have been declared on our depositary shares (each representing 1/100 of a share of our Series C Preferred Stock) and paid to our preferred stockholders for the~~ ~~six months endedJune 30, 2017~~.

Distribution Amount Per Share For the Quarter Ended Stockholder Record Date Payment Date
$ 0.421875
March 31, 2017 March 10, 2017 March 31, 2017
$ 0.421875
June 30, 2017 June 15, 2017 June 30, 2017
Common Stockholder Distribution Activity

The following quarterly ~~distributions have~~distribution has been declared and paid to common stockholders and common operating partnership unit ("OP ~~Unit~~Unit") non-controlling holders for the ~~six~~three months ended ~~June 30, 2017.~~March 31, 2018.

Distribution Amount Per Share

For the Quarter Ended

Stockholder Record Date

Payment Date

Distribution Amount Per Share

For the Quarter Ended

Stockholder Record Date

Payment Date

0.4875

March 31, 2017

April 14, 2017

0.5500

March 31, 2018

March 30, 2018

April 13, 2018

0.4875

June 30, 2017

July 14, 2017

No shares were issued under the at-the-market (“ATM”) equity offering program during the quarter ended March 31, 2018 or the quarter ended March 31, 2017. As of March 31, 2018, approximately $150.0 million of Common Stock remained available for issuance under the ATM equity offering program.

Conversions

Subject to certain limitations, holders of ~~Common Operating Partnership units ("~~OP ~~units")~~Units can ~~convert~~request an exchange of any or all of their ~~units to~~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 months~~quarter ended ~~June 30, 2017, 1,334,747~~March 31, 2018,6,838 OP units were ~~converted to~~exchanged for an equal number of shares of Common Stock.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

Note 5 – Real Estate Acquisitions

On ~~May 10, 2017,~~March 8, 2018, we completed the acquisition of ~~Paradise Park Largo,~~Kingswood, a ~~108-site~~229-site manufactured home community located in ~~Largo,~~Riverview, Florida. The purchase price was $17.5 million, including $0.4 million of ~~approximately $8.0~~transaction costs, and was funded with available cash.

On March 15, 2018, we completed the acquisition of Serendipity, a 425-site manufactured home community located in Clearwater, Florida. The purchase price was $30.7 million, including $0.6 million of transaction costs, and was funded with available cash, a loan assumption of $9.2 million and ~~an assumed loan. The $5.9 million~~new loan ~~has an interest rate~~proceeds of ~~4.6% that matures in 2040.~~$8.8 million.

Note 6 – Investment in Unconsolidated Joint Ventures

On June 15, 2017, we entered into a joint venture agreement to purchase Crosswinds Mobile Home Park, a 376-site manufactured home community located in St. Petersburg, Florida. The purchase price of the Property was $18.4 million. We contributed $2.2 million for a 49% equity interest in the joint venture. The joint venture is accounted for under the equity method of accounting. As part of the transaction, we issued a short term loan of $13.8 million to the joint venture. The loan bears interest at 5% per annum, can be repaid with no penalty prior to maturity and matures on December 12, 2017.

The following table summarizes our investment in unconsolidated joint ventures (investment amounts in thousands with the number of Properties shown parenthetically as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016)~~2017):


						Investment as of				Joint Venture Income/(Loss) for the Six Months Ended										Investment as of				Joint Venture Income/(Loss) for the Three Months Ended
Investment	Location	Number of Sites	Economic Interest ^(a)			June 30, 2017		December 31, 2016		June 30, 2017		June 30, 2016			Location	Number of Sites ^(a)	Economic Interest ^(b)			March 31, 2018		December 31, 2017		March 31, 2018		March 31, 2017
Meadows	Various (2,2)	1,077	50	%		$	240	$	510	$	1,130	$	577		Various (2,2)	1,077	50	%		$	425	$	307	$	418	$	548
Lakeshore	Florida (3,2)	720	(b)			2,321		56		147		160			Florida (3,2)	720	(c)			2,484		2,530		45		77
Voyager	Arizona (1,1)	1,801	50	%	^(c)	3,799		3,376		800		917			Arizona (1,1)	1,801	50	%	^(d)	3,591		3,205		571		500
Loggerhead															Florida	2,343	49	%		35,205		31,414		—		—
ECHO JV	Various	—	50	%		15,406		15,427		113		(8		)	Various	—	50	%		15,786		15,624		161		25
		3,598				$	21,766	$	19,369	$	2,190	$	1,646			5,941				$	57,491	$	53,080	$	1,195	$	1,150

_____________________


(a)	Loggerhead sites represent marina slip count.


(b)	The percentages shown approximate our economic interest as of ~~June 30, 2017.~~March 31, 2018. Our legal ownership interest may differ.


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


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

On March 29, 2018, the Crosswinds joint venture repaid a a short-term loan to us in the amount of $13.8 million. We provided the loan to Crosswinds in conjunction with the formation of the joint venture in June 2017.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 6 – Investment in Unconsolidated Joint Ventures (continued)

We received approximately ~~$1.8~~$0.5 million and ~~$1.0~~$1.1 million in distributions from these joint ventures for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively. None of the distributions made to us exceeded our basis in joint ventures for the three months ended March 31, 2018. Approximately ~~$0.3 million and $0.5~~$0.2 million of the distributions made to us exceeded our basis in joint ventures for the ~~quarter and six~~three months ended ~~June 30,~~March 31, 2017, 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 quarter and six months ended June 30, 2016.~~

Note 7 – Borrowing Arrangements

Mortgage Notes Payable

~~As of June 30, 2017 and December~~During the quarter ended March 31, ~~2016,~~2018, we ~~had outstanding mortgage indebtedness~~closed on one loan, secured by two RV resorts for gross proceeds of approximately ~~$1,855.0 million~~$64.0 million. The loan carries an interest rate of 4.83% per annum and ~~$1,891.9 million, respectively, net of deferred financing costs.~~matures in 2038.

In connection with the ~~Paradise Park Largo~~Serendipity acquisition during the quarter, ~~ended June 30, 2017,~~ we assumed a loan of approximately ~~$5.9~~$9.2 million and obtained additional financing of $8.8 million for a total mortgage debt, secured by the manufactured home community, of $18.0 million with an interest rate of ~~4.6%~~4.75% that matures in ~~2040. During the quarter ended~~2039.

As of March 31, 2018 and December 31, 2017, we ~~paid off one maturing~~had outstanding mortgage ~~loan~~indebtedness of approximately ~~$21.1~~$2,040.5 million ~~with a weighted average interest rate~~and $1,971.7 million, respectively, net of ~~5.76% per annum, secured by one manufactured home Property.~~deferred financing costs.

The weighted average interest rate on our outstanding mortgage indebtedness, including the impact of premium/discount amortization and loan cost amortization on mortgage indebtedness, for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 was approximately ~~4.9%~~4.7% per annum. The debt bears interest at stated rates ranging from ~~3.5%~~3.1% to 8.9% per annum and matures on various dates ranging from ~~2017~~2018 to 2041. The debt encumbered a total of ~~126~~124 and 120 of our Properties as of ~~both June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, and the carrying value of such Properties was approximately ~~$2,282.1~~$2,491.4 million and ~~$2,296.6~~$2,323.1 million, as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.

Unsecured Line of Credit

During the quarter ended March 31, 2018, we paid off our unsecured line of credit balance of approximately $30.0 million.

As of ~~June 30, 2017,~~March 31, 2018, we are in compliance in all material respects with the covenants in our borrowing arrangements.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

Note 8 – Equity Incentive Awards

Stock-based compensation expense, reported in general and administrative on the Consolidated Statements of Income and Comprehensive Income, for both of the quarters ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ was approximately ~~$2.5 million and for the six months ended June 30, 2017 and 2016 was approximately $4.3 million and $4.4 million respectively.~~$1.8 million.

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. Pursuant to the 2014 Plan, our officers, directors, employees and consultants may be awarded (i) shares of common stock (“Restricted Stock”), (ii) options to acquire shares of common stock (“Options”), including non-qualified stock options and incentive stock options within the meaning of Section 422 of the Internal Revenue Code, and (iii) other forms of equity awards, subject to conditions and restrictions determined by the Compensation, Nominating, and Corporate Governance Committee of our Board of Directors (the “Compensation Committee”). The Compensation Committee will determine the vesting schedule, if any, of each ~~Restricted Stock Grant~~restricted stock grant or ~~Option~~stock option grant and the term of each ~~Option,~~stock option, which term shall not exceed ten years from the date of grant. Shares that do not vest are forfeited. Dividends paid on restricted stock are not returnable, even if the underlying stock does not entirely vest. A maximum of 3,750,000 shares of common stock were originally available for grant under the 2014 Plan. As of ~~June 30, 2017, 3,126,885~~March 31, 2018, 2,986,198 shares remained available for grant.

Grants under the 2014 Plan are approved by the Compensation Committee, which determines the individuals eligible to receive awards, the types of awards, and the terms, conditions and restrictions applicable to any award, except grants to directors which are approved by the Board of Directors.

On ~~May 2, 2017,~~February 1, 2018, we awarded ~~to certain members of our Board of Directors, 55,238~~70,250 shares of ~~Restricted Stock~~restricted stock (the “2018 Awards”) at a fair market value of approximately $4.5 million and Options to purchase 6,930 shares of common stock with an exercise price of $81.15 per share. The shares of common stock covered by these awards are subject to multiple tranches that vest between November 2, 2017 and May 2, 2020.

~~On February 1, 2017, we awarded 75,000 shares of Restricted Stock at a fair market value of approximately $5.4~~$5.9 million to certain members of our senior management for their service in 2017. These restricted stock grants will vest over a three-year vesting period, with one-third vesting on December 28, 2018 and the remaining two-thirds vesting on each of December 28, 2019 and December 28, 2020, respectively (the “Extended Vesting Portion”). One-half of the Extended Vesting Portion of the 2018 Awards provide solely for time-based vesting and will vest in equal installments on December 28, 2019 and December 28, 2020. The remaining one-half of the Extended Vesting Portion of the 2018 Awards provide for performance-based vesting and will vest, subject to the satisfaction of the performance conditions to be established by the Compensation Committee in the year of the vesting period, in equal installments on December 28, 2019 and December 28, 2020.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 8 – Equity Incentive Awards (continued)

Additionally, on February 1, 2018, we awarded a one-time transition award of time-based restricted stock (the "Transition Awards") as a transition from our prior practice of granting annual restricted stock awards which vest in full on December 31 ~~2017.~~of the relevant grant year. On February 1, 2018, we awarded Transition Awards for 70,250 shares of common stock at a fair market value of approximately $5.9 million to certain members of our senior management. These Transition Awards are intended to mitigate the impact of a reduction in the realized pay for certain members of our senior management in 2018 and 2019 resulting from the three-year vesting period for the 2018 Awards. Two-thirds of each Transition Award will vest on December 28, 2018, and the remaining one-third will vest on December 28, 2019. The Transition Awards are not subject to performance goals. The Compensation Committee does not view these awards as a continuing feature of the 2018 Restricted Stock Award Program, and there is no intent to replicate these Transition Awards in future years.

The fair market value of our restricted stock grants was determined by using the closing share price of our common stock on the date the shares were ~~issued and is~~issued. Time-based restricted stock awards are recorded as stock-based compensation expense and paid in capital over the vesting period. Stock-based compensation for restricted stock awards with performance conditions will be recognized using the closing price of our common stock at the grant date when the key terms and conditions are known to all parties.

Note 9 – Commitments and Contingencies

~~California Rent Control Litigation~~

As part of our effort to realize the value of our Properties subject to rent control, we previously initiated lawsuits against certain localities in California with the goal of achieving a level of regulatory fairness in California's rent control jurisdictions, and in particular those jurisdictions that prohibit increasing rents to market upon turnover. Such regulations allow tenants to sell their homes for a price that includes a premium above the intrinsic value of the homes. The premium represents the value of the future discounted rent-controlled rents, which is fully capitalized into the prices of the homes sold. In our view, such regulations result in a transfer to the tenants of the value of our land, which would otherwise be reflected in market rents. We have discovered through the litigation process that certain municipalities considered condemning our Properties at values well below the value of the underlying land. In our view, a failure to articulate market rents for Sites governed by restrictive rent control would put us at risk for condemnation or eminent domain proceedings based on artificially reduced rents. Such a physical taking, should it occur, could represent substantial lost value to stockholders. We are cognizant of the need for affordable housing in the jurisdictions, but assert that restrictive rent regulation does not promote this purpose because tenants pay to their sellers as part of the purchase price of the home all the future rent savings that are expected to result from the rent control regulations, eliminating any supposed improvement in the affordability of housing. In a more well-balanced regulatory environment, we would receive market rents that would eliminate the price premium for homes, which would trade at or near their intrinsic value. Such efforts have included the following matters:

We sued the City of San Rafael on October 13, 2000 in the U.S. District Court for the Northern District of California, challenging its rent control ordinance on constitutional grounds. While the District Court found the rent control ordinance unconstitutional, the United States Court of Appeals for the Ninth Circuit reversed the District Court and ruled that the ordinance had not unconstitutionally taken our property. On September 3, 2013, we filed a petition for review by the U.S. Supreme Court, which was denied.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

~~Note 9 – Commitments and Contingencies (continued)~~

On January 31, 2012, we sued the City of Santee in the United States District for the Southern District of California challenging its rent control ordinance on constitutional grounds. On September 26, 2013, we entered a settlement agreement with the City pursuant to which we are able to increase Site rents at the Meadowbrook community through January 1, 2034 as follows: (a) a one-time 2.5% rent increase on all Sites in January 2014; plus (b) annual rent increases of 100% of the consumer price index (CPI) beginning in 2014; and (c) a 10% increase in the rent on a site upon turnover of that site. Absent the settlement, the rent control ordinance limited us to annual rent increases of at most 70% of CPI with no increases on turnover of a site.

~~Settlement of California Lawsuits~~

On January 18, 2017, we entered into agreements pursuant to which we agreed to settle three California lawsuits related to our California Hawaiian property in San Jose, our Monte del Lago property in Castroville and our Santiago Estates property in Sylmar. Each of the three plaintiff groups was represented by the same law firm and alleged that the Company failed to properly maintain the respective properties. The settlement agreements provided for $9.9 million to be paid to settle the California Hawaiian matter, $1.5 million to be paid to settle the Monte del Lago matter and $1.9 million to be paid to settle the Santiago Estates matter. As a result, a litigation settlement payable was recorded in Accrued expenses and accounts payable as of December 31, 2016. In addition, an insurance receivable was recorded in escrow deposits, goodwill and other assets, net as of December 31, 2016, resulting in a net settlement of approximately $2.4 million reflected as a component of property rights initiatives and other, net on the consolidated statement of income for the year ended December 31, 2016. During the quarter ended March 31, 2017, the settlements were finalized, the settlement payments were made and the insurance payments were received. These settlements resolved all pending matters brought by plaintiffs’ counsel against us or any of our affiliates. Pursuant to the settlement agreements, all plaintiffs provided full releases to each of the defendants and their affiliates including with respect to the claims alleged in the lawsuits, and each of the lawsuits and related appeals were dismissed with prejudice. The settlements do not constitute an admission of liability by us or any of our affiliates and were made to avoid the costs, risks and uncertainties inherent in litigation.

Civil Investigation by Certain California District Attorneys

In November 2014, we received a civil investigative subpoena from the office of the District Attorney for Monterey County, California ("MCDA"), seeking information relating to, among other items, statewide compliance with asbestos and hazardous waste regulations dating back to 2005 primarily in connection with demolition and renovation projects performed by third-party contractors at our California Properties. We responded by providing the information required by the subpoena.

On October 20, 2015, we attended a meeting with representatives of the MCDA and certain other District Attorneys' offices at which the MCDA reviewed the preliminary results of their investigation including, among other things, (i) alleged violations of asbestos and related regulations associated with approximately 200 historical demolition and renovation projects in California; (ii) potential exposure to civil penalties and unpaid fees; and (iii) next steps with respect to a negotiated resolution of the alleged violations. No legal proceedings have been instituted to date and we are involved in settlement discussions with the District Attorneys' offices. We continue to assess the allegations and the underlying facts, and at this time we are unable to predict the outcome of the investigation or reasonably estimate any possible loss.

Other

In addition to legal matters discussed above, we are involved in various other legal and regulatory proceedings ("Other Proceedings") arising in the ordinary course of business. ~~The~~ Other Proceedings include, but are not limited to, 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 Other 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 10 – Reportable Segments

We have identified two 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.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

~~Note 10 - Reportable Segments (Continued)~~

All revenues are from external customers and there is no customer who contributed 10% or more of our total revenues during the quarters ~~and six months~~ ended ~~June 30, 2017~~March 31, 2018 or ~~2016.~~2017.

The following tables summarize our segment financial information for the quarters ~~and six months~~ ended ~~June 30,~~March 31, ~~2017~~2018 and ~~2016~~2017 (amounts in thousands):

Quarter Ended ~~June 30, 2017~~March 31, 2018


	Property Operations			Home Sales and Rentals Operations			Consolidated			Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	206,594		$	11,811		$	218,405		$	231,016		$	12,119		$	243,135
Operations expenses	(102,649		)	(10,481		)	(113,130		)	(105,512		)	(11,073		)	(116,585		)
Income from segment operations	103,945			1,330			105,275			125,504			1,046			126,550
Interest income	754			1,041			1,795			808			907			1,715
Depreciation on real estate assets and rental homes	(27,609		)	(2,638		)	(30,247		)	(28,822		)	(2,500		)	(31,322		)
Amortization of in-place leases	(958		)	—			(958		)	(1,052		)	—			(1,052		)
Income (loss) from operations	$	76,132		$	(267	)	$	75,865		$	96,438		$	(547	)	$	95,891
Reconciliation to Consolidated net income:
Reconciliation to consolidated net income:
Corporate interest income							3									235
Income from other investments, net							1,109									940
General and administrative							(8,461		)							(8,038		)
Property rights initiatives and other							(271		)
Other expenses																(343		)
Interest and related amortization							(24,822		)							(25,703		)
Equity in income of unconsolidated joint ventures							1,040									1,195
Consolidated net income							$	44,463								$	64,177

Total assets	$	3,267,947		$	217,411		$	3,485,358		$	3,547,466		$	142,617		$	3,690,083
Capital improvements										$	21,267		$	10,049		$	31,316

~~Quarter Ended June 30, 2016~~

Property
Operations

Home Sales
and Rentals
Operations
Consolidated
Operations revenues $ 193,184
$ 13,002
$ 206,186
Operations expenses (94,375 ) (11,867 ) (106,242 )
Income from segment operations 98,809
1,135
99,944
Interest income 736
867
1,603
Depreciation on real estate assets and rental homes (26,317 ) (2,712 ) (29,029 )
Amortization of in-place leases (428 ) —
(428 )
Income (loss) from operations $ 72,800
$ (710 ) $ 72,090
Reconciliation to Consolidated net income:
Corporate interest income 22
Income from other investments, net 2,270
General and administrative (8,255 )
Property rights initiatives and other (527 )
Interest and related amortization (25,561 )
Equity in income of unconsolidated joint ventures 765
Consolidated net income $ 40,804

Total assets $ 3,249,375
$ 236,200
$ 3,485,575

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 10 -– Reportable Segments ~~(Continued)~~(continued)

~~Six Months~~Quarter Ended ~~June 30,~~March 31, 2017

Property
Operations

Home Sales
and Rentals
Operations
Consolidated
Operations revenues $ 425,582
$ 22,685
$ 448,267
Operations expenses (199,906 ) (20,076 ) (219,982 )
Income from segment operations 225,676
2,609
228,285
Interest income 1,484
2,079
3,563
Depreciation on real estate assets and rental homes (55,062 ) (5,295 ) (60,357 )
Amortization of in-place leases (1,990 ) —
(1,990 )
Income (loss) from operations $ 170,108
$ (607 ) $ 169,501
Reconciliation to Consolidated net income:
Corporate interest income 5
Income from other investments, net 1,866
General and administrative (15,834 )
Property rights initiatives and other (490 )
Interest and related amortization (49,701 )
Equity in income of unconsolidated joint ventures 2,190
Consolidated net income $ 107,537

Total assets $ 3,267,947
$ 217,411
$ 3,485,358
Capital improvements $ 31,731
$ 21,733
$ 53,464

~~Six Months Ended June 30, 2016~~

Property
Operations

Home Sales
and Rentals
Operations
Consolidated
Operations revenues $ 397,910
$ 25,040
$ 422,950
Operations expenses (184,887 ) (22,507 ) (207,394 )
Income from segment operations 213,023
2,533
215,556
Interest income 1,453
1,785
3,238
Depreciation on real estate assets and rental homes (52,281 ) (5,403 ) (57,684 )
Amortization of in-place leases (763 ) —
(763 )
Income (loss) from operations $ 161,432
$ (1,085 ) $ 160,347
Reconciliation to Consolidated net income:
Corporate interest income 47
Income from other investments, net 3,993
General and administrative (15,663 )
Property rights initiatives and other (1,181 )
Interest and related amortization (51,195 )
Equity in income of unconsolidated joint ventures 1,646
Consolidated net income $ 97,994

Total assets $ 3,249,375
$ 236,200
$ 3,485,575

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

~~Note 10 - Reportable Segments (Continued)~~



	Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	218,988		$	10,874		$	229,862
Operations expenses	(97,257		)	(9,595		)	(106,852		)
Income from segment operations	121,731			1,279			123,010
Interest income	729			1,038			1,767
Depreciation on real estate assets and rental homes	(27,410		)	(2,699		)	(30,109		)
Amortization of in-place leases	(1,032		)	—			(1,032		)
Income (loss) from operations	$	94,018		$	(382	)	$	93,636
Reconciliation to Consolidated net income:
Corporate interest income							3
Income from other investments, net							757
General and administrative							(7,373		)
Other expenses							(219		)
Interest and related amortization							(24,879		)
Equity in income of unconsolidated joint ventures							1,150
Consolidated net income							$	63,075

Total assets	$	3,247,523		$	223,518		$	3,471,041
Capital improvements	$	13,198		$	11,156		$	24,354

The following table summarizes our financial information for the Property Operations segment for the quarters ~~and six months~~ ended ~~June 30,~~March 31, ~~2017~~2018 and ~~2016~~2017 (amounts in thousands):


	Quarters Ended						Six Months Ended						Quarters Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			March 31, 2018			March 31, 2017
Revenues:
Community base rental income	$	121,964		$	115,385		$	242,656		$	229,461		$	126,739		$	120,692
Resort base rental income	50,055			44,732			111,123			100,166			64,254			61,068
Right-to-use annual payments	11,350			11,187			22,602			22,241			11,519			11,252
Right-to-use contracts current period, gross	3,798			3,086			7,004			5,618			3,162			3,206
Right-to-use contract upfront payments, deferred, net	(1,321		)	(798		)	(2,096		)	(1,100		)	(1,285		)	(775		)
Utility and other income	20,650			19,523			42,776			40,316			25,521			22,126
Ancillary services revenues, net	98			69			1,517			1,208			1,106			1,419
Total property operations revenues	206,594			193,184			425,582			397,910			231,016			218,988
Expenses:
Property operating and maintenance	72,901			66,647			140,955			129,601			74,908			68,054
Real estate taxes	13,943			12,869			27,980			26,067			14,135			14,037
Sales and marketing, gross	2,894			2,931			5,584			5,424			2,812			2,690
Right-to-use contract commissions, deferred, net	(112		)	(116		)	(196		)	(12		)	(24		)	(84		)
Property management	13,023			12,044			25,583			23,807			13,681			12,560
Total property operations expenses	102,649			94,375			199,906			184,887			105,512			97,257
Income from property operations segment	$	103,945		$	98,809		$	225,676		$	213,023		$	125,504		$	121,731

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 10 – Reportable Segments (continued)

The following table summarizes our financial information for the Home Sales and Rentals Operations segment for the quarters ended March 31, 2018 and ~~six months ended June 30,~~ 2017 ~~and 2016~~ (amounts in thousands):


	Quarters Ended				Six Months Ended				Quarters Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		March 31, 2018		March 31, 2017
Revenues:
Gross revenue from home sales	$	7,833	$	9,130	$	14,860	$	17,344	$	8,309	$	7,027
Brokered resale revenues, net	346		329		588		608		282		242
Rental home income ^(a)	3,632		3,543		7,237		7,088		3,515		3,605
Ancillary services revenues, net									13		—
Total revenues	11,811		13,002		22,685		25,040		12,119		10,874
Expenses:
Cost of home sales	7,895		9,481		15,014		17,762		8,574		7,119
Home selling expenses	929		805		1,854		1,639		1,075		925
Rental home operating and maintenance	1,657		1,581		3,208		3,106		1,424		1,551
Total expenses	10,481		11,867		20,076		22,507		11,073		9,595
Income from home sales and rentals operations segment	$	1,330	$	1,135	$	2,609	$	2,533	$	1,046	$	1,279

______________________


(a)	Segment information does not include Site rental income included in Community base rental income.

Note 11 - Subsequent Events

On April 20, 2018, we completed the acquisition of Holiday Travel Park, a 613-site RV Resort in Holiday, Florida. The purchase price was $22.3 million and was funded with available cash and proceeds from our line of credit.

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 elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, and with the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Overview and Outlook

We are a self-administered, 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") communities and recreational vehicle ("RV") resorts and campgrounds. As of ~~June 30, 2017,~~March 31, 2018, we owned or had an ownership interest in a portfolio of ~~393~~408 Properties located throughout the United States and Canada containing ~~147,107~~152,045 Sites. These properties are located in 32 states and British Columbia, with more than 8090 Properties with lake, river or ocean frontage and more than 100 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 increasing operating cash flows. 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 high- quality customers to our Properties and retaining these customers who take pride in the Property and in their homes and efficiently managing our Properties to increase operating margins by increasing occupancy, maintaining competitive market rents and controlling expenses.

We believe that demand from baby boomers for manufactured housing and RV resorts will continue to outpace supply for several years. We believe these individuals will continue to drive the market for second home sales as vacation properties, investment opportunities, or retirement retreats. We believe it is likely that over the next decade we will continue to see high levels of second home sales and that resort 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 increases in rental and occupancy rates, 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 from customers renting our Sites, or entering into right-to-use contracts (also referred to as membership products), which provide our customers access to specific Properties for limited stays. Our MH community Sites and annual RV resort 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. Sites designated as right-to-use Sites are primarily utilized to service the approximately 106,500 customers who have entered into right-to-use contracts (otherwise referred to as "memberships" or "membership dues"). We also have interests in joint venture Properties for which revenue is classified as Equity in income from unconsolidated joint ventures in the Consolidated Statements of Income and Comprehensive Income.

The breakdown of our Sites by type are as follows (amounts are approximate):



	Total Sites as of ~~June 30, 2017~~March 31, 2018
Community Sites	~~71,100~~71,800
Resort Sites:
Annual	~~26,600~~27,800
Seasonal	11,200
Transient	~~10,500~~11,200
Right-to-use⁽¹⁾	24,100
Joint Ventures ⁽²⁾	~~3,600~~5,900
	~~147,100~~152,000

_________________________


⁽¹⁾	Primarily utilized to service the approximately 106,900 membership customers who have entered into a Thousand Trails Camping Pass ("TTC"). Includes approximately ~~5,700~~5,800 Sites rented on an annual basis.


⁽²⁾	Joint ventures have approximately 2,700 annual Sites, ~~approximately~~ 400 seasonal Sites, and ~~approximately~~ 500 transient Sites and includes ~~Crosswinds Mobile Home Park joint venture that we entered into during the quarter ended June 30, 2017.~~approximately 2,300 marina slips.

Management's Discussion (continued)

In our Home Sales and Rental 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 Site Set homes that are located in Properties owned and managed by us. We continue to focus on our rental operations, as we believe renting our vacant new homes ~~may represent~~represents an attractive source of occupancy and the opportunity to convert to a new homebuyer in the future. We also sell and rent homes through our joint venture, ECHO Financing, LLC (the "ECHO JV"). We provide 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 chattel financing options are limited. Financing options available today include community ~~owner funded~~owner-funded programs or ~~third party~~third-party lender programs that provide subsidized financing to customers and often require the community owner to guarantee customer defaults. ~~Third party~~Third-party lender programs have stringent underwriting criteria, sizable down payment requirements, short loan amortization and high interest rates. We have a limited program under which we purchase loans made by an unaffiliated lender to purchasers of homes at our Properties.

We invest in Properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on increasing operating cash flows. 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 high quality customers to our Properties and retaining these customers who take pride in the Property and in their homes and efficiently

~~Management's Discussion (continued)~~

~~managing our Properties to increase operating margins by increasing occupancy, maintaining competitive market rents and controlling expenses.~~

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.

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 ("~~NFFO"~~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

Net income available for Common Stockholders increased ~~$4.0~~$3.3 million, to ~~$39.5~~$60.2 million for the quarter ended ~~June 30, 2017,~~March 31, 2018, compared to ~~$35.5~~$56.9 million for the quarter ended June 30, 2016. Net income available for Common Stockholders increased $10.3 million, to $96.4 million for the six months ended June 30, 2017, compared to $86.1 million for the six months ended June 30, 2016. Both FFO per diluted share and NFFO per diluted share for the quarter ended June 30, 2017 were $0.81 compared to $0.75 for the quarter ended June 30, 2016 driven by improved Core and Non-Core income from property operations. Both FFO per diluted share and NFFO per diluted share for the six months ended June 30, 2017 were $1.81 compared to $1.67 for the six months ended June 30, 2016.

March 31, 2017.

For the quarter ended ~~June 30, 2017~~March 31, 2018, FFO available for Common Stock and OP Unit holders increased $5.1 million, or $0.04 per Common Share, to $98.2 million or $1.04 per Common Share, compared to $93.1 million, or $1.00 per Common Share, for the same period in 2017.

For the quarter ended March 31, 2018, Normalized FFO available for Common Stock and OP Unit holders increased $4.7 million, or $0.04 per Common Share, to $97.9 million, or $1.04 per Common Share, compared to $93.2 million, or $1.00 per Common Share, for the same period in 2017.

For the quarter ended March 31, 2018 property operating revenues in our Core Portfolio, excluding deferrals, were up ~~5.5%~~$12.3 million, or 5.6% and property operating expenses in our Core Portfolio, excluding deferrals and property management, were up ~~6.5%~~$6.5 million, or 7.6% from the quarter ended ~~June 30, 2016,~~March 31, 2017, resulting in an increase in our income from property operations ~~before~~excluding deferrals and property management of ~~4.8%~~$5.8 million, or 4.4%, from the quarter ended June 30, 2016. For the six months ended June 30, 2017 property operating revenues in our Core Portfolio, excluding deferrals, were up 4.9% and property operating expenses in our Core Portfolio, excluding deferrals and property management, were up 5.9% from the six months ended June 30, 2016, resulting in an increase in our income from property operations before deferrals and property management of 4.3%, from the six months ended June 30, 2016.March 31, 2017.

We continue to focus on the quality of occupancy growth by increasing the number of manufactured homeowners in our Core Portfolio. Our Core Portfolio average occupancy consists of occupied home sites in our MH communities (both homeowners and renters) and was ~~94.2%~~94.6% for the quarter ended ~~June 30,~~March 31, 2018, compared to 94.5% for the quarter ended December 31, 2017 ~~compared to~~and 94.0% for the quarter ended March 31, ~~2017 and 93.3% for the quarter ended June 30, 2016.~~2017. During the quarter ended ~~June 30, 2017,~~March 31, 2018, we increased occupancy of manufactured homes within our Core Portfolio by ~~114~~65 sites with an increase in homeowner occupancy of ~~204~~113 sites compared to occupancy as of ~~March~~December 31, 2017. By comparison, as of ~~June 30, 2016,~~March 31, 2017, our Core Portfolio occupancy increased ~~128~~144 sites with an increase in homeowner occupancy of ~~229~~131 sites compared to occupancy at ~~March~~December 31, 2016.

We continue to experience growth in revenues in our Core RV Portfolio as a result of our ability to increase rental rates and occupancy. RV revenues in our Core Portfolio for the quarter ended ~~June 30, 2017~~March 31, 2018 were ~~8.1%~~7.5% higher than the quarter ended ~~June 30, 2016.~~March 31, 2017. Annual, seasonal and transient revenues for the quarter ended ~~June 30, 2017~~March 31, 2018 increased ~~6.0%~~6.8%, ~~13.7%~~9.0% and ~~12.3%~~7.1%, respectively, from the quarter ended June 30, 2016. RV revenues in our Core Portfolio for the six months ended June 30, 2017 were 5.3% higher than the six months ended June 30, 2016. Annual, seasonal and transient revenues for the six months ended June 30, 2017 increased 5.3%, 3.8% and 6.7%, respectively, from the six months ended June 30, 2016.March 31, 2017.

We continue to ~~offer the Thousand Trails Camping Pass (“TTC”)~~build on our successful multi-channel marketing campaigns, incorporating social media and as a customer acquisition tool we have relationships with a network of RV dealers to provide them with a free one-year TTC membership to give to their customers in connection with the purchase of an RV.advanced marketing analytics. During the quarter ended ~~June 30, 2017~~March 31, 2018, our RV revenue through digital channels increased 12% and our sales of online ~~TTC sales~~camping passes increased ~~45% from~~42% compared to the quarter ended ~~June 30, 2016. During~~March 31, 2017. We are now focused on our 100 days of camping marketing campaign for the quarter ended June 30, 2017 we sold approximately 4,700 TTCs and activated approximately 5,700 RV dealer TTCs. For the six months ended June 30, 2017 we sold approximately 7,300 TTCs and activated approximately 9,200 RV dealer TTCs.

Our social media presence continues to increase within our RV customer base and we continue to be successful at providing a venue for our customers to promote our Properties by encouraging them to share their memories of their experiences at our resorts. Year-over-year we have seen an increase in social media fans of 30%. Through our summer ~~marketing campaigns, we have~~season.

Management's Discussion (continued)

~~increased the awareness of our product offering and our customers are increasingly choosing the web as a vehicle to transact with us.~~

We ~~continue to~~ see high demand for our homes and communities. We closed ~~120~~130 new home sales in the quarter ended ~~June 30, 2017~~March 31, 2018 compared to ~~180~~120 during the quarter ended ~~June 30, 2016 and 240 new home sales in the six months ended June 30, 2017 compared to 301 during the six months ended June 30, 2016.~~March 31, 2017. The new home sales during the quarter ~~and six months~~ ended ~~June 30, 2017~~March 31, 2018 were primarily in our Arizona, Florida, Colorado and ~~Colorado~~California communities.

As of ~~June 30, 2017,~~March 31, 2018, we had ~~4,674~~4,369 occupied rental homes in our MH communities. ~~For the quarters ended June 30, 2017 and 2016, home~~Home rental program net operating income was approximately ~~$8.2~~$7.9 million, ~~and $8.3 million, respectively,~~ net of rental asset depreciation expense of approximately ~~$2.6~~$2.5 million for the quarter ended ~~June 30, 2017~~March 31, 2018, and approximately $8.1 million, net of rental asset depreciation expense of approximately $2.7 million for the quarter ended ~~June 30, 2016.~~March 31, 2017. Approximately ~~$8.8~~$8.3 million and ~~$9.0~~$8.8 million of home rental operations revenue was included in ~~community~~Community base rental income for the quarters ended ~~June 30,~~March 31, 2018 and 2017, and June 30, 2016, respectively. For the six months ended June 30, 2017 and 2016, home rental program net operating income was approximately $16.4 million and $16.8 million, respectively, net of rental asset depreciation expense of approximately $5.3 million for both the six months ended June 30, 2017 and six months ended June 30, 2016. Approximately $17.7 million and $18.1 million of home rental operations revenue was included in community base rental income for the six months ended June 30, 2017 and six months ended June 30, 2016, respectively.

~~On May 10, 2017, we completed the acquisition of Paradise Park Largo, a 108-site manufactured home community located in Largo, Florida for a purchase price of approximately $8.0 million.~~ Our gross investment in real estate has increased approximately ~~$46.3~~$70.2 million to ~~$4,731.6~~$4,986.0 million as of ~~June 30, 2017~~March 31, 2018 from ~~$4,685.3~~$4,915.8 million as of December 31, ~~2016~~2017, primarily due to the ~~acquisition~~acquisitions of ~~Paradise Park Largo~~Kingswood and ~~increased~~Serendipity as well as capital ~~expenditures.~~expenditures during the first quarter of 2018.

The following chart lists both the Properties acquired or invested in from January 1, ~~2016~~2017 through ~~June 30, 2017,~~March 31, 2018, which represents ~~our~~ Non-Core ~~Portfolio;~~Properties; and Sites added through expansion opportunities at our existing Properties.



Property	Location	Type of Property	Transaction Date	Sites^(a)

Total Sites as of January 1, ~~2016~~2017				~~143,938~~146,610
Acquisitions:
~~Rose Bay~~	~~Port Orange, Florida~~	RV	~~January 27, 2016~~	~~303~~
~~Portland Fairview~~	~~Fairview, Oregon~~	RV	~~May 26, 2016~~	~~407~~
~~Forest Lake Estates~~	~~Zephryhills, Florida~~	~~RV, MH~~	~~June 15, 2016~~	~~1,168~~
~~Riverside RV~~	~~Arcadia, Florida~~	RV	~~October 13, 2016~~	~~499~~
Paradise Park - Largo	Largo, Florida	MH	May 10, 2017	108
Bethpage Camp Resort	Urbanna, Virginia	RV	November 15, 2017	1,034
Grey's Point Camp	Topping, Virginia	RV	November 15, 2017	728
Kingswood	Riverview, Florida	MH	March 8, 2018	229
Serendipity	Clearwater, Florida	MH	March 15, 2018	425
Joint Venture:
Crosswinds	St. Petersburg, Florida	MH	June 15, 2017	376
Loggerhead	Multiple, Florida	Marina	August 8, 2017	2,343
Expansion Site Development and other:
Net Sites added (reconfigured) in ~~2016~~				~~295~~
~~Net Sites added (reconfigured) in~~ 2017				13124
~~Total~~Net Sites ~~as of June 30, 2017~~added (reconfigured) in 2018				~~147,107~~68
Total Sites as of March 31, 2018				152,045


(a)	Loggerhead sites represent 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 we believe are meaningful as they allow the investor 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 Operation, 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~~income from property operations and ~~Income~~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 manufactured home and RV communities. Income from property operations represents rental income, utility income and right-to-use income less property operating and maintenance expenses, real estate tax, 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. Our Core Portfolio consists of our Properties owned and operated since December 31, ~~2015.~~2016. Core Portfolio income from property operations, excluding deferrals and property

Management's Discussion (continued)

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 (or Acquisitions) includes all Properties that were not owned and operated during ~~2016~~all of 2017 and ~~2017.~~

~~Management's Discussion (continued)~~

2018. This includes, but is not limited to, two properties acquired during 2018, three properties acquired during 2017 and Fiesta Key and Sunshine Key RV Resorts.

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

We define FFO as net income, computed in accordance with GAAP, excluding gains and actual or estimated losses from sales of properties, plus real estate related depreciation and amortization, impairments, if any, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and 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 ~~up-front~~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 ~~NFFO~~Normalized FFO as FFO excluding the following non-operating income and expense items: a) ~~the financial impact of contingent consideration; b)~~ gains and losses from early debt extinguishment, including prepayment penalties and defeasance costs; ~~c) property~~b) acquisition and other transaction costs related to ~~mergers~~business combinations; and ~~acquisitions; and d)~~c) other miscellaneous non-comparable items. ~~NFFO~~Normalized FFO presented herein is not necessarily comparable to ~~NFFO~~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 depreciation, amortization, impairments, if any, and actual or estimated gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. We further believe that Normalized FFO provides useful information to investors, analysts and our management because it allows them to compare our operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences not related to our operations. For example, we believe that excluding the early extinguishment of debt, property acquisition and other transaction costs related to ~~mergers and acquisitions~~business combinations from ~~NFFO~~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 ~~NFFO~~Normalized FFO because it allows investors, analysts and our management to assess the impact of those items.

Income from Rental Operations, Net of Depreciation

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

Our definitions and calculations of these non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These non-GAAP financial and operating measures do not represent cash generated from operating activities in accordance with GAAP, nor do they represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash 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 (continued)

The following table reconciles Net income available for Common Stockholders to Income from property operations for the quarters ended March 31, 2018 and ~~six months ended June 30,~~March 31, 2017 ~~and June 30, 2016~~ (amounts in thousands):


	Quarters ended June 30,						Six Months Ended June 30,						Quarters ended March 31,
	2017			2016			2017			2016			2018			2017
Computation of Income from Property Operations:
Net income available for Common Stockholders	$	39,498		$	35,490		$	96,385		$	86,073		$	60,222		$	56,888
Series C Redeemable Perpetual Preferred Stock Dividends	2,316			2,316			4,613			4,613
Perpetual preferred stock dividends													—			2,297
Income allocated to non-controlling interests - Common OP Units	2,649			2,998			6,539			7,308			3,955			3,890
Equity in income of unconsolidated joint ventures	(1,040		)	(765		)	(2,190		)	(1,646		)	(1,195		)	(1,150		)
Income before equity in income of unconsolidated joint ventures	43,423			40,039			105,347			96,348			62,982			61,925
Total other expenses, net	61,852			59,905			122,938			119,208			63,568			61,085
Income from home sales operations and other	547			758			(97		)	241			(61		)	(644		)
Income from property operations	$	105,822		$	100,702		$	228,188		$	215,797		$	126,489		$	122,366

The following table presents a calculation of FFO available for Common Stock and OP Unit holders and Normalized FFO available for Common Stock and OP Unit holders for the quarters ended March 31, 2018 and ~~six months ended June 30,~~March 31, 2017 ~~and June 30, 2016~~ (amounts in thousands):


	Quarters ended June 30,						Six Months Ended June 30,						Quarters ended March 31,
	2017			2016			2017			2016			2018			2017
Computation of FFO and Normalized FFO:
Net income available for Common Stockholders	$	39,498		$	35,490		$	96,385		$	86,073		$	60,222		$	56,888
Income allocated to common OP units	2,649			2,998			6,539			7,308
Income allocated to non-controlling interests - Common OP units													3,955			3,890
Right-to-use contract upfront payments, deferred, net(1)	1,321			798			2,096			1,100			1,285			775
Right-to-use contract commissions, deferred, net	(112		)	(116		)	(196		)	(12		)	(24		)	(84		)
Depreciation on real estate assets	27,608			26,362			55,061			52,370			28,821			27,452
Depreciation on rental homes	2,639			2,667			5,296			5,314			2,501			2,657
Amortization of in-place leases	958			428			1,990			763			1,052			1,032
Depreciation on unconsolidated joint ventures	364			305			811			595			373			447
FFO available for Common Stock and OP Unit holders	74,925			68,932			167,982			153,511			98,185			93,057
Transaction costs(2)	220			398			324			598			—			104
Insurance proceeds due to catastrophic weather event													(286		)	—
Normalized FFO available for Common Stock and OP Unit holders	$	75,145		$	69,330		$	168,306		$	154,109		$	97,899		$	93,161
Weighted average Common Shares outstanding – fully diluted	93,063			92,264			93,041			92,163			94,577			93,011

______________________

22⁽¹⁾The company adopted ASU 2014-09, Revenue from Contracts with Customers, and all related amendments, effective January 1, 2018. Upon adoption, right-to-use upfront nonrefundable payments will be recognized on a straight-line basis over 20 years to reflect our current estimated customer life for the majority of our upgrade contracts. Results for reporting periods beginning after January 1, 2018 are presented under ASU 2014-09, while prior period amounts are not adjusted and continue to be reported under the previous accounting standards.

⁽²⁾The Company adopted ASU 2017-01, Business Combinations, effective January 1, 2018. Upon adoption, transaction costs related to asset acquisitions are capitalized. All acquisitions completed subsequent to January 1, 2018 were determined by the Company to be asset acquisitions and, as such, the related transaction costs were capitalized. Transaction costs related to 2017 acquisitions, occurring prior to the adoption of this guidance, are included in General and administrative on the Consolidated Income Statement

Management's Discussion (continued)

Results of Operations

Comparison of the Quarter Ended ~~June 30, 2017~~March 31, 2018 to the Quarter Ended ~~June 30, 2016~~March 31, 2017

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 30, 2017~~March 31, 2018 and ~~2016~~2017 (amounts in thousands). The Core Portfolio in this discussion includes all Properties acquired on or before December 31, ~~2015~~2016 and which we have owned and operated continuously since January 1, ~~2016~~.2017. Core Portfolio growth percentages exclude the impact of GAAP deferrals of upfront payments from right-to-use contracts and related commissions.


	Core Portfolio									Total Portfolio									Core Portfolio									Total Portfolio
	2017		2016		Variance			% Change		2017		2016		Variance			% Change		2018		2017		Variance			% Change		2018		2017		Variance			% Change
Community base rental income	$	120,699	$	115,188	$	5,511		4.8	%	$	121,964	$	115,385	$	6,579		5.7	%	$	126,323	$	120,692	$	5,631		4.7	%	$	126,739	$	120,692	$	6,047		5.0	%
Rental home income	3,632		3,543		89			2.5	%	3,632		3,543		89			2.5	%	3,515		3,605		(90		)	(2.5	)%	3,515		3,605		(90		)	(2.5	)%
Resort base rental income	47,753		44,173		3,580			8.1	%	50,055		44,732		5,323			11.9	%	61,989		57,686		4,303			7.5	%	64,254		61,068		3,186			5.2	%
Right-to-use annual payments	11,350		11,187		163			1.5	%	11,350		11,187		163			1.5	%	11,516		11,252		264			2.3	%	11,519		11,252		267			2.4	%
Right-to-use contracts current period, gross	3,798		3,086		712			23.1	%	3,798		3,086		712			23.1	%	3,162		3,206		(44		)	(1.4	)%	3,162		3,206		(44		)	(1.4	)%
Utility and other income	20,319		19,468		851			4.4	%	20,650		19,523		1,127			5.8	%	24,136		21,933		2,203			10.0	%	25,521		22,126		3,395			15.3	%
Property operating revenues, excluding deferrals	207,551		196,645		10,906			5.5	%	211,449		197,456		13,993			7.1	%	230,641		218,374		12,267			5.6	%	234,710		221,949		12,761			5.7	%

Property operating and maintenance	71,096		66,363		4,733			7.1	%	72,901		66,647		6,254			9.4	%	73,135		66,694		6,441			9.7	%	74,908		68,054		6,854			10.1	%
Rental home operating and maintenance	1,657		1,581		76			4.8	%	1,657		1,581		76			4.8	%	1,425		1,551		(126		)	(8.1	)%	1,424		1,551		(127		)	(8.2	)%
Real estate taxes	13,462		12,781		681			5.3	%	13,943		12,869		1,074			8.3	%	13,993		13,969		24			0.2	%	14,135		14,037		98			0.7	%
Sales and marketing, gross	2,894		2,931		(37		)	(1.3	)%	2,894		2,931		(37		)	(1.3	)%	2,812		2,690		122			4.5	%	2,812		2,690		122			4.5	%
Property operating expenses, excluding deferrals and Property management	89,109		83,656		5,453			6.5	%	91,395		84,028		7,367			8.8	%	91,365		84,904		6,461			7.6	%	93,279		86,332		6,947			8.0	%
Income from property operations, excluding deferrals and Property management ⁽¹⁾	118,442		112,989		5,453			4.8	%	120,054		113,428		6,626			5.8	%	139,276		133,470		5,806			4.4	%	141,431		135,617		5,814			4.3	%
Property management	13,023		12,044		979			8.1	%	13,023		12,044		979			8.1	%	13,681		12,560		1,121			8.9	%	13,681		12,560		1,121			8.9	%
Income from property operations, excluding deferrals⁽¹⁾	105,419		100,945		4,474			4.4	%	107,031		101,384		5,647			5.6	%	125,595		120,910		4,685			3.9	%	127,750		123,057		4,693			3.8	%
Right-to-use contracts, deferred and sales and marketing, deferred, net	1,209		682		527			77.3	%	1,209		682		527			77.3	%	1,261		691		570			82.5	%	1,261		691		570			82.5	%
Income from property operations ⁽¹⁾	$	104,210	$	100,263	$	3,947		3.9	%	$	105,822	$	100,702	$	5,120		5.1	%	$	124,334	$	120,219	$	4,115		3.4	%	$	126,489	$	122,366	$	4,123		3.4	%

__________________________

⁽¹⁾ Non-GAAP ~~measure.~~measure, see the Results Overview section of the Management 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, which includes ~~recently acquired properties,~~Core and Non-Core portfolios, for the quarter ended ~~June 30, 2017~~March 31, 2018 increased ~~$5.1~~$4.1 million, or ~~5.1%~~3.4%, from the quarter ended ~~June 30, 2016,~~March 31, 2017, driven by an increase of ~~$3.9~~$4.1 million, or ~~3.9%~~3.4%, in our Core Portfolio income from property ~~operations and a $1.2 million increase in our~~operations. Non-Core Portfolio income from property ~~operations.~~operations was flat to the quarter ended March 31, 2017.

Property Operating Revenues

Community base rental income in our Core Portfolio for the quarter ended ~~June 30, 2017~~March 31, 2018 increased ~~$5.5~~$5.6 million, or ~~4.8%~~4.7% from the quarter ended ~~June 30, 2016,~~March 31, 2017, which reflects ~~3.9%~~4.0% growth from rate increases and approximately ~~0.9%~~0.7% growth from occupancy gains. The average monthly base rental income per Site increased to approximately ~~$611~~$628 for the quarter ended ~~June 30, 2017~~March 31, 2018 from approximately ~~$588~~$604 for the quarter ended ~~June 30, 2016.~~March 31, 2017. The average occupancy for the Core Portfolio increased to ~~94.2%~~94.6% for the quarter ended ~~June 30, 2017~~March 31, 2018 from ~~93.3%~~94.0% for the quarter ended ~~June 30, 2016.~~

~~Management's Discussion (continued)~~

March 31, 2017.

Resort base rental income in our Core Portfolio for the quarter ended ~~June 30, 2017~~March 31, 2018 increased ~~$3.6~~$4.3 million, or ~~8.1%~~7.5%, from the quarter ended ~~June 30, 2016 primarily~~March 31, 2017 driven by increases in annual, seasonal and transient revenues. Annual revenues increased due to increased ~~rates.~~ rates and occupancy gains across the portfolio. Seasonal revenues increased due to an increase in rate and an increase in the number of night stays.

Management's Discussion (continued)

Resort base rental income is comprised of the following (amounts in thousands):


	Core Portfolio								Total Portfolio								Core Portfolio								Total Portfolio
	2017		2016		Variance		% Change		2017		2016		Variance		% Change		2018		2017		Variance		% Change		2018		2017		Variance			% Change
Annual	$	31,884	$	30,089	$	1,795	6.0	%	$	32,869	$	30,360	$	2,509	8.3	%	$	33,920	$	31,774	$	2,146	6.8	%	$	35,156	$	32,096	$	3,060		9.5	%
Seasonal	4,481		3,942		539		13.7	%	4,902		4,114		788		19.2	%	18,660		17,124		1,536		9.0	%	19,023		18,499		524			2.8	%
Transient	11,388		10,142		1,246		12.3	%	12,284		10,258		2,026		19.8	%	9,409		8,788		621		7.1	%	10,075		10,473		(398		)	(3.8	)%
Resort base rental income	$	47,753	$	44,173	$	3,580	8.1	%	$	50,055	$	44,732	$	5,323	11.9	%	$	61,989	$	57,686	$	4,303	7.5	%	$	64,254	$	61,068	$	3,186		5.2	%

Right-to-use contracts current period, gross, net of sales and marketing, gross, increased by $0.7 million, primarily as a result of an increase in the average price per upgrade sale and a higher number of upgrade sales during the quarter ended June 30, 2017 compared to the quarter ended June 30, 2016. During the quarter ended June 30, 2017 there were 635 upgrade sales with an average price per upgrade sale of $5,980. This compares to 626 upgrade sales with an average price per upgrade sale of $4,930 during the quarter ended June 30, 2016.

~~The increase in utility~~Utility and other income isin our Core Portfolio increased by $2.2 million primarily ~~due to~~driven by insurance ~~recovery revenue~~proceeds related to ~~California storm events~~Hurricane Irma, which were offset by debris removal and ~~increased electric, water, gas, and sewer income recovery.~~cleanup costs (see Property Operating Expenses below).

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended ~~June 30, 2017~~March 31, 2018 increased ~~$5.5~~$6.5 million, or ~~6.5%~~7.6%, from the quarter ended ~~June 30, 2016~~March 31, 2017, primarily driven by an increase in ~~utility~~property operating and maintenance expenses of $6.4 million. The increase in property operating and maintenance expenses was primarily due to an increase in repairs and maintenance expenses related to cleanup costs from Hurricane Irma. The increase in property operating and maintenance expenses was also due to an increase in property payroll, primarily as a result of 2018 salary increases and ~~repairs and maintenance. The~~an increase in utility expense, ~~was driven by~~primarily due to increases in ~~electric,~~water and sewer ~~and gas~~ expenses, which iswas partially offset by an increase in utility income recovery. The increase in property payroll expense primarily resulted from 2017 salary increases. The increase in repairs and maintenance expense was primarily due to clean-up costs as a result of California storm events.

Home Sales and Rental Operations

Home Sales and Other

The following table summarizes certain financial and statistical data for Home Sales for the quarters ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (amounts in thousands, except home sales volumes).


	2017			2016			Variance			% Change		2018			2017			Variance			% Change
Gross revenues from new home sales ⁽¹⁾	$	4,548		$	6,044		$	(1,496	)	(24.8	)%	$	6,736		$	4,943		$	1,793		36.3	%
Cost of new home sales ⁽¹⁾	(4,419		)	(6,246		)	1,827			29.3	%	(6,510		)	(4,772		)	(1,738		)	(36.4	)%
Gross profit (loss) from new home sales	129			(202		)	331			163.9	%
Gross profit from new home sales												226			171			55			32.2	%

Gross revenues from used home sales	3,285			3,086			199			6.4	%	1,573			2,084			(511		)	(24.5	)%
Cost of used home sales	(3,476		)	(3,235		)	(241		)	(7.4	)%	(2,064		)	(2,347		)	283			12.1	%
Loss from used home sales	(191		)	(149		)	(42		)	(28.2	)%	(491		)	(263		)	(228		)	(86.7	)%

Brokered resale revenues and ancillary services revenues, net	444			398			46			11.6	%	1,401			1,661			(260		)	(15.7	)%
Home selling expenses	(929		)	(805		)	(124		)	(15.4	)%	(1,075		)	(925		)	(150		)	(16.2	)%
Loss from home sales and other	$	(547	)	$	(758	)	$	211		27.8	%
Income from home sales and other												$	61		$	644		$	(583	)	(90.5	)%

Home sales volumes
Total new home sales ⁽²⁾	120			180			(60		)	(33.3	)%	130			120			10			8.3	%
New Home Sales Volume - ECHO JV	41			63			(22		)	(34.9	)%	18			37			(19		)	(51.4	)%
Used home sales	338			342			(4		)	(1.2	)%	241			285			(44		)	(15.4	)%
Brokered home resales	252			217			35			16.1	%	193			168			25			14.9	%

_________________________

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

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

Management's Discussion (continued)

Loss from home sales and other was $0.5 million and $0.8 million for the quarters ended June 30, 2017 and 2016, respectively. The decrease in loss from home sales and other from the quarter ended June 30, 2016 was primarily due to an increase in the gross profit from new home sales, partially offset by an increase in home selling expenses.

Rental Operations

The following table summarizes certain financial and statistical data for ~~manufactured~~manufactured home Rental Operations for the quarters ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (amounts in thousands, except rental unit volumes).


	2017			2016			Variance			% Change		2018			2017			Variance			% Change
Manufactured homes:
New Home	$	6,985		$	6,332		$	653		10.3	%	$	7,543		$	6,563		$	980		14.9	%
Used Home	5,483			6,250			(767		)	(12.3	)%	4,244			5,785			(1,541		)	(26.6	)%
Rental operations revenue ⁽¹⁾	12,468			12,582			(114		)	(0.9	)%	11,787			12,348			(561		)	(4.5	)%
Rental home operating and maintenance	(1,657		)	(1,581		)	(76		)	(4.8	)%	(1,424		)	(1,551		)	127			8.2	%
Income from rental operations	10,811			11,001			(190		)	(1.7	)%	10,363			10,797			(434		)	(4.0	)%
Depreciation on rental homes ⁽²⁾	(2,639		)	(2,667		)	28			1.0	%	(2,501		)	(2,657		)	156			5.9	%
Income from rental operations, net of depreciation	$	8,172		$	8,334		$	(162	)	(1.9	)%	$	7,862		$	8,140		$	(278	)	(3.4	)%

Gross investment in new manufactured home rental units ⁽³⁾	$	129,868		$	120,708		$	9,160		7.6	%	$	135,843		$	128,301		$	7,542		5.9	%
Gross investment in used manufactured home rental units	$	48,182		$	54,675		$	(6,493	)	(11.9	)%	$	40,932		$	49,991		$	(9,059	)	(18.1	)%

Net investment in new manufactured home rental units	$	104,710		$	99,428		$	5,282		5.3	%	$	108,350		$	104,208		$	4,142		4.0	%
Net investment in used manufactured home rental units	$	28,182		$	36,690		$	(8,508	)	(23.2	)%	$	21,392		$	30,081		$	(8,689	)	(28.9	)%

Number of occupied rentals – new, end of period ⁽⁴⁾	2,517			2,267			250			11.0	%	2,592			2,467			125			5.1	%
Number of occupied rentals – used, end of period	2,157			2,595			(438		)	(16.9	)%	1,777			2,297			(520		)	(22.6	)%

______________________

⁽¹⁾

Rental operations revenue consists of Site rental income and home rental income. Approximately ~~$8.8~~$8.3 million and ~~$9.0~~$8.8 million for the quarters ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively, of Site rental income are included in Community base rental income in the Income from Property Operations table. The remainder of home rental income is included in Rental home income in the Income from Property Operations table.


⁽²⁾	Included in depreciation on real estate and other costs in the Consolidated Statements of Income and Comprehensive Income.


⁽³⁾	New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was ~~$15.4~~$15.8 million ~~at both June 30,~~and $15.3 million as of March 31, 2018 and 2017, ~~and December 31, 2016.~~respectively.


⁽⁴⁾	Occupied rentals as of the end of the period in our Core Portfolio and includes ~~257~~276 and ~~143~~228 homes rented through our ECHO JV during the quarters ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively.

The decrease in income from rental operations ~~net of depreciation,~~ was primarily due to a decrease in the number of used occupied rental ~~units,~~units. This was partially offset ~~by the change in the mix of occupied rentals, driven~~ by an increase in the number of new occupied ~~new rental homes~~rentals at a higher rental rate.

Other Income and Expenses

The following table summarizes other income and expenses, net for the quarters ended ~~June 30, 2017~~March 31, 2018 and ~~2016~~2017 (amounts in thousands, expenses shown as negative).


	2017			2016			Variance			% Change		2018			2017			Variance			% Change
Depreciation on real estate and rental homes	$	(30,247	)	$	(29,029	)	$	(1,218	)	(4.2	)%	$	(31,322	)	$	(30,109	)	$	(1,213	)	(4.0	)%
Amortization of in-place leases	(958		)	(428		)	(530		)	(123.8	)%	(1,052		)	(1,032		)	(20		)	(1.9	)%
Interest income	1,798			1,625			173			10.6	%	1,950			1,770			180			10.2	%
Income from other investments, net	1,109			2,270			(1,161		)	(51.1	)%	940			757			183			24.2	%
General and administrative (excluding transaction costs)	(8,241		)	(7,857		)	(384		)	(4.9	)%
General and administrative												(8,038		)	(7,269		)	(769		)	(10.6	)%
Transaction costs	(220		)	(398		)	178			44.7	%	—			(104		)	104			100.0	%
Property rights initiatives and other	(271		)	(527		)	256			48.6	%
Other expenses												(343		)	(219		)	(124		)	(56.6	)%
Interest and related amortization	(24,822		)	(25,561		)	739			2.9	%	(25,703		)	(24,879		)	(824		)	(3.3	)%
Total other income and expenses, net	$	(61,852	)	$	(59,905	)	$	(1,947	)	(3.3	)%	$	(63,568	)	$	(61,085	)	$	(2,483	)	(4.1	)%

Other expenses, net increased ~~$1.9~~$2.5 million for the quarter ended ~~June 30, 2017,~~March 31, 2018, compared to the quarter ended ~~June 30, 2016.~~March 31, 2017. The increase from the quarter ended ~~June 30, 2016~~March 31, 2017 was primarily due to ~~an increase in depreciation on real estate and rental~~

~~Management's Discussion (continued)~~

~~homes and amortization of in-place leases due to 2016 acquisition activity and a decrease in income from other investments, net, due to the termination of the Tropical Palms RV ground lease in 2016.~~

This was partially offset by a decrease in interest and related amortization as a result of the refinancing activities completed during 2016 (see Note 7 to the Consolidated Financial Statements for additional detail regarding borrowing arrangements).

~~Comparison of the Six Months Ended June 30, 2017 to the Six Months Ended June 30, 2016~~

~~Income from Property Operations~~

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the six months ended June 30, 2017 and 2016 (amounts in thousands). The Core Portfolio in this discussion includes all Properties acquired on or before December 31, 2015 and which we have owned and operated continuously since January 1, 2016. Core Portfolio growth percentages exclude the impact of GAAP deferrals of upfront payments from right-to-use contracts and related commissions.

Core Portfolio Total Portfolio
2017 2016 Variance
%
Change
2017 2016 �� Variance
%
Change
Community base rental income $ 240,278
$ 229,264
$ 11,014
4.8 % $ 242,656
$ 229,461
$ 13,195
5.8 %
Rental home income 7,237
7,089
148
2.1 % 7,237
7,088
149
2.1 %
Resort base rental income 104,603
99,380
5,223
5.3 % 111,123
100,166
10,957
10.9 %
Right-to-use annual payments 22,602
22,241
361
1.6 % 22,602
22,241
361
1.6 %
Right-to-use contracts current period, gross 7,004
5,618
1,386
24.7 % 7,004
5,618
1,386
24.7 %
Utility and other income 42,003
40,249
1,754
4.4 % 42,776
40,316
2,460
6.1 %
Property operating revenues, excluding deferrals 423,727
403,841
19,886
4.9 % 433,398
404,890
28,508
7.0 %

Property operating and maintenance 137,429
129,186
8,243
6.4 % 140,955
129,601
11,354
8.8 %
Rental home operating and maintenance 3,208
3,105
103
3.3 % 3,208
3,106
102
3.3 %
Real estate taxes 27,032
25,957
1,075
4.1 % 27,980
26,067
1,913
7.3 %
Sales and marketing, gross 5,583
5,426
157
2.9 % 5,584
5,424
160
2.9 %
Property operating expenses, excluding deferrals and Property management 173,252
163,674
9,578
5.9 % 177,727
164,198
13,529
8.2 %
Income from property operations, excluding deferrals and Property management ⁽¹⁾
250,475
240,167
10,308
4.3 % 255,671
240,692
14,979
6.2 %
Property management 25,583
23,807
1,776
7.5 % 25,583
23,807
1,776
7.5 %
Income from property operations, excluding deferrals⁽¹⁾
224,892
216,360
8,532
3.9 % 230,088
216,885
13,203
6.1 %
Right-to-use contracts, deferred and sales and marketing, deferred, net 1,900
1,088
812
74.6 % 1,900
1,088
812
74.6 %
Income from property operations ⁽¹⁾
$ 222,992
$ 215,272
$ 7,720
3.6 % $ 228,188
$ 215,797
$ 12,391
5.7 %

~~__________________________~~

⁽¹⁾ ~~Non-GAAP measure.~~

Total Portfolio income from property operations, which includes recently acquired properties, for the six months ended June 30, 2017 increased $12.4 million, or 5.7%, from the six months ended June 30, 2016, driven by an increase of $7.7 million, or 3.6%, in our Core Portfolio income from property operations and a $4.7 million increase in our Non-Core income from property operations.

~~Property Operating Revenues~~

Community base rental income in our Core Portfolio for the six months ended June 30, 2017 increased $11.0 million, or 4.8% from the six months ended June 30, 2016, which reflects 3.9% growth from rate increases and approximately 0.9% growth from occupancy gains. The average monthly base rental income per Site increased to approximately $608 for the six months ended June 30, 2017 from approximately $586 for the six months ended June 30, 2016. The average occupancy for the Core Portfolio increased to 94.1% for the six months ended June 30, 2017 from 93.2% for the six months ended June 30, 2016.

~~Management's Discussion (continued)~~

Resort base rental income in our Core Portfolio for the six months ended June 30, 2017 increased $5.2 million, or 5.3%, from the quarter ended June 30, 2016 primarily due to an increase in annual and transient revenues as a result of increased rates. Resort base rental income is comprised of the following (amounts in thousands):

Core Portfolio Total Portfolio
2017 2016 Variance
%
Change
2017 2016 Variance
%
Change
Annual $ 63,123
$ 59,953
$ 3,170
5.3 % $ 64,965
$ 60,370
$ 4,595
7.6 %
Seasonal 20,864
20,100
764
3.8 % 23,401
20,329
3,072
15.1 %
Transient 20,616
19,327
1,289
6.7 % 22,757
19,467
3,290
16.9 %
Resort base rental income $ 104,603
$ 99,380
$ 5,223
5.3 % $ 111,123
$ 100,166
$ 10,957
10.9 %

Right-to-use contracts current period, gross, net of sales and marketing, gross, increased by $1.4 million, primarily as a result of a higher average price per upgrade sale and higher upgrade sales during the six months ended June 30, 2017 compared to the six months ended June 30, 2016. During the six months ended June 30, 2017 there were 1,260 upgrade sales with an average price per upgrade sale of $5,557. This compares to 1,152 upgrade sales with an average price per upgrade sale of $4,877 for the six months ended June 30, 2016.

~~The increase in utility and other income is primarily due to insurance recovery revenue related to California storm events and increased electric, water, gas, and sewer income recovery.~~

~~Property Operating Expenses~~

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the six months ended June 30, 2017 increased $9.6 million, or 5.9%, from the six months ended June 30, 2016. The increase was primarily due to an increase in utility expenses, property payroll and repairs and maintenance. The increase in utility expense was driven by increases in electric, sewer, trash and gas expenses, which was partially offset by increased utility income recovery. The increase in property payroll expense resulted from 2017 salary increases. The increase in repairs and maintenance expense was primarily due to clean-up costs as a result of California storm events and the hurricanes in Florida in 2016, and an increase in landscaping costs.

~~Home Sales and Rental Operations~~

~~Home Sales and Other~~

~~The following table summarizes certain financial and statistical data for Home Sales for the six months ended June 30, 2017 and June 30, 2016 (amounts in thousands, except home sales volumes).~~

2017 2016 Variance
%
Change
Gross revenues from new home sales ⁽¹⁾
$ 9,491
$ 11,443
$ (1,952 ) (17.1 )%
Cost of new home sales ⁽¹⁾
(9,191 ) (11,698 ) 2,507
21.4 %
Gross profit (loss) from new home sales 300
(255 ) 555
217.6 %

Gross revenues from used home sales 5,369
5,901
(532 ) (9.0 )%
Cost of used home sales (5,823 ) (6,064 ) 241
4.0 %
Loss from used home sales (454 ) (163 ) (291 ) (178.5 )%

Brokered resale revenues and ancillary services revenues, net 2,105
1,816
289
15.9 %
Home selling expenses (1,854 ) (1,639 ) (215 ) (13.1 )%
Income (loss) from home sales and other $ 97
$ (241 ) $ 338
140.2 %

Home sales volumes
Total new home sales ⁽²⁾
240
301
(61 ) (20.3 )%
New Home Sales Volume - ECHO JV 78
97
(19 ) (19.6 )%
Used home sales 623
653
(30 ) (4.6 )%
Brokered home resales 420
403
17
4.2 %

~~_________________________~~

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

⁽²⁾ ~~Total new home sales volume includes home sales from our ECHO JV for the six months ended June 30, 2017 and June 30, 2016, respectively.~~

~~Management's Discussion (continued)~~

~~The increase in income from home sales and other was primarily due to an increase in the gross profit from new home sales, partially offset by an increase in the loss from used home sales.~~

~~Rental Operations~~

The following table summarizes certain financial and statistical data for manufactured home Rental Operations for the six months ended June 30, 2017 and June 30, 2016 (amounts in thousands, except rental unit volumes).

2017 2016 Variance
%
Change
Manufactured homes:
New Home $ 13,618
$ 12,473
$ 1,145
9.2 %
Used Home 11,267
12,715
(1,448 ) (11.4 )%
Rental operations revenue ⁽¹⁾
24,885
25,188
(303 ) (1.2 )%
Rental home operating and maintenance (3,208 ) (3,106 ) (102 ) (3.3 )%
Income from rental operations 21,677
22,082
(405 ) (1.8 )%
Depreciation on rental homes ⁽²⁾
(5,296 ) (5,314 ) 18
0.3 %
Income from rental operations, net of depreciation $ 16,381
$ 16,768
$ (387 ) (2.3 )%

Gross investment in new manufactured home rental units ⁽³⁾
$ 129,868
$ 120,708
$ 9,160
7.6 %
Gross investment in used manufactured home rental units $ 48,182
$ 54,675
$ (6,493 ) (11.9 )%

Net investment in new manufactured home rental units $ 104,710
$ 99,428
$ 5,282
5.3 %
Net investment in used manufactured home rental units $ 28,182
$ 36,690
$ (8,508 ) (23.2 )%

Number of occupied rentals – new, end of period ⁽⁴⁾
2,517
2,267
250
11.0 %
Number of occupied rentals – used, end of period 2,157
2,595
(438 ) (16.9 )%

~~______________________~~

⁽¹⁾

Rental operations revenue consists of Site rental income and home rental income. Approximately 17.7 million and $18.1 million for the six months ended June 30, 2017 and June 30, 2016, respectively, of Site rental income are included in Community base rental income in the Income from Property Operations table. The remainder of home rental income is included in Rental home income in the Income from Property Operations table.


⁽²⁾	~~Included in depreciation on real estate and other costs in the Consolidated Statements of Income and Comprehensive Income.~~


⁽³⁾	~~New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was $15.4 million at both June 30, 2017 and December 31, 2016.~~


⁽⁴⁾	~~Occupied rentals as of the end of the period in our Core Portfolio and includes 257 and 143 homes rented through our ECHO JV during the six months ended June 30, 2017 and June 30, 2016, respectively.~~

The decrease in income from rental operations, net of depreciation, was primarily due to a decrease in the number of occupied rental units, which was partially offset by the change in the mix of occupied rentals, driven by an increased number of occupied new homes at a higher rental rate.

~~Other Income and Expenses~~

~~The following table summarizes other income and expenses for the six months ended June 30, 2017 and June 30, 2016 (amounts in thousands, expenses shown as negative).~~

2017 2016 Variance
%
Change
Depreciation on real estate and rental homes $ (60,357 ) $ (57,684 ) $ (2,673 ) (4.6 )%
Amortization of in-place leases (1,990 ) (763 ) (1,227 ) (160.8 )%
Interest income 3,568
3,285
283
8.6 %
Income from other investments, net 1,866
3,993
(2,127 ) (53.3 )%
General and administrative (excluding transaction costs) (15,510 ) (15,065 ) (445 ) (3.0 )%
Transaction costs (324 ) (598 ) 274
45.8 %
Property rights initiatives and other (490 ) (1,181 ) 691
58.5 %
Interest and related amortization (49,701 ) (51,195 ) 1,494
2.9 %
Total other income and expenses, net $ (122,938 ) $ (119,208 ) $ (3,730 ) (3.1 )%

Other expenses, net increased $3.7 million for the six months ended June 30, 2017, compared to the six months ended June 30, 2016. The increase in other expenses, net from the six months ended June 30, 2016 was primarily due to an increase in depreciation on real estate and rental homes and ~~amortization of in-place leases~~interest and related amortization. The increase was also due to ~~2016 acquisition activity~~an increase in general and ~~a a decrease in income from other investments, net,~~administrative costs primarily due to ~~the termination of the Tropical Palms RV ground lease in 2016.~~payroll and employer related costs.

Management's Discussion (continued)

Liquidity and Capital Resources

Liquidity

Our primary demands for liquidity include payment of operating expenses, debt service, including principal and interest, capital improvements on properties, purchasing both new and pre-owned homes, acquisitions of new Properties and distributions. 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.

We have entered into an at-the-market (“ATM”) offering program, pursuant to which we may sell, from time-to-time, shares of our common stock, par value $0.01 per share, having an aggregate offering price of up to ~~$125.0~~$200.0 million. As of ~~June 30, 2017, $75.0~~March 31, 2018, $150.0 million of common stock remained available for issuance under the ATM equity offering program.

In addition, we have available liquidity in the form of ~~authorized and unissued preferred stock of~~ approximately ~~9.9 million shares and approximately 113.0~~111.3 million shares of authorized but unissued common stock and authorized unissued preferred stock of approximately 10.0 million shares registered for sale under the Securities Act of 1933, as amended, by a shelf registration statement which was automatically effective when filed with the SEC. Our charter allows us to issue up to 200.0 million shares of common stock, par value $0.01 per share, and up to 10.0 million shares of preferred stock, par value $0.01 per share.

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, ~~manage~~managing future debt maturities and ~~borrow~~borrowing at competitive rates enables us to meet this objective. We believe that as of ~~June 30, 2017,~~March 31, 2018, we have sufficient liquidity, in the form of ~~$62.5~~$68.6 million in ~~available cash, net of restricted~~unrestricted cash, and $400.0 million available on our LOC, to satisfy our near term obligations. Our LOC has a borrowing capacity of $400.0 million with the option to increase the borrowing capacity by ~~$100.0~~$200.0 million, subject to certain conditions. The LOC bears interest at a rate of LIBOR plus ~~1.20%~~1.10% to ~~1.65%~~1.55%, requires an annual facility fee of ~~0.20%~~0.15% to 0.35% and matures on ~~July 17, 2018, with an option to extend for one additional year, subject to certain conditions.~~October 27, 2021.

We expect to meet our short-term liquidity requirements, including distributions for the next twelve months, generally through available cash as well as net cash provided by operating activities and availability under our existing LOC. We consider these resources to be adequate to meet our operating requirements for capital improvements, amortizing debt and payment of dividends and distributions.

We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, property acquisitions and capital improvements by use of our current cash balance, long-term collateralized and uncollateralized borrowings including borrowings under the existing LOC and the issuance of debt securities or additional equity securities, in addition to net cash provided by operating activities. As of ~~June 30, 2017,~~March 31, 2018, we have approximately ~~$6.9~~$3.0 million of scheduled debt maturities in ~~2017~~2018 (excluding scheduled principal payments on debt maturing in ~~2017~~2018 and beyond). We expect to satisfy our ~~2017~~2018 maturities with existing cash and anticipated operating cash flow.

During the ~~six months~~quarter ended ~~June 30, 2017~~March 31, 2018, we ~~paid off~~closed on one ~~maturing mortgage~~ loan, ~~and assumed debt in the purchase~~secured by two RV resorts for gross proceeds of ~~Paradise Park Largo.~~approximately $64.0 million. The ~~mortgage~~ loan ~~we paid off was approximately $21.1 million, with a weighted average~~carries an interest rate of ~~5.76%~~4.83% per annum ~~secured by one manufactured home Property.~~and matures in 2038. In connection with the ~~Paradise Park Largo~~Serendipity acquisition, ~~during the quarter ended June 30, 2017,~~ we assumed a loan of approximately ~~$5.9~~$9.2 million and obtained additional financing of $8.8 million for a total mortgage debt, secured by the manufactured home community, of $18.0 million with an interest rate of ~~4.6%~~4.75% that matures in ~~2040.~~2039.

During the three months ended March 31, 2018, we paid off our unsecured LOC balance of approximately $30.0 million.

The table below summarizes cash flow activity for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (amounts in thousands):


	Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Net cash provided by operating activities	$	214,102		$	186,807		$	118,454		$	113,828
Net cash used in investing activities	(71,426		)	(136,090		)	(50,630		)	(23,647		)
Net cash used in financing activities	(131,276		)	(56,104		)	(25,018		)	(73,273		)
Net increase (decrease) in cash	$	11,400		$	(5,387	)
Net increase in cash and restricted cash							$	42,806		$	16,908

Management's Discussion (continued)

Operating Activities

Net cash provided by operating activities increased ~~$27.3~~$4.7 million to ~~$214.1~~$118.5 million for the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, from ~~$186.8~~$113.8 million for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017. The increase in net cash provided by operating activities was primarily due to higher income from property operations of ~~$12.4~~$4.1 million, receipt of insurance proceeds of $10.8 million related to the California failure to maintain lawsuits, long term incentive plan payments of $4.3 million during the first quarter of 2016, increase of $1.2 million in rents received in advance andincluding an increase ~~of $0.8 million~~ in ~~distributions from unconsolidated joint ventures. These increases were~~insurance proceeds, partially offset by ~~the litigation settlement payment of $13.3 million related to the California failure to maintain lawsuits.~~an increase in escrow deposits paid.

Investing Activities

Net cash used in investing activities was ~~$71.4~~$50.6 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$136.1~~$23.6 million for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017. The ~~decrease~~increase in net cash used in investing activities was primarily due to ~~the~~an increase in real estate acquisitions ~~of Forest Lake Estates, Portland Fairview~~ and ~~Rose Bay during the six months ended June 30, 2016,~~investment in unconsolidated joint ventures and an increase in capital improvements. These increases were partially offset by receipt of $13.8 million during three months ended March 31, 2018 as a result of the repayment of the short-term loan ~~of $13.8 million~~we issued to the Crosswinds joint venture ~~during~~at the ~~second quarter~~time of ~~2017.~~closing.

Capital Improvements

The table below summarizes capital improvement activity for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (amounts in thousands):


	Six Months Ended June 30, ⁽¹⁾				Three Months Ended March 31,
	2017		2016		2018		2017
Recurring Capital Expenditures ⁽²⁾	$	18,808	$	18,317
Recurring capital expenditures ⁽¹⁾					$	8,764	$	7,160
Property upgrades and site development(2)	11,870		5,961		12,078		5,423
New home investments⁽³⁾⁽⁴⁾	19,542		27,774		9,372		10,151
Used home investments ⁽⁴⁾	2,191		3,210		677		928
Total Property	52,411		55,262
Total property					30,891		23,662
Corporate	1,053		445		425		692
Total Capital improvements	$	53,464	$	55,707
Total capital improvements					$	31,316	$	24,354

______________________

⁽¹⁾ ~~Excludes non-cash activity of approximately $0.2 million and $0.4 million of used homes acquired through foreclosure of Chattel Loans for the six months ended June 30, 2017 and 2016, respectively.~~

⁽²⁾Recurring capital expenditures are primarily comprised of common area improvements, furniture, and mechanical improvements.

⁽²⁾Includes $4.8 million of restoration and improvement capital expenditures related to Hurricane Irma for the quarter ended March 31, 2018.

⁽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 was ~~$131.3~~$25.0 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to net cash used in financing activities of ~~$56.1~~$73.3 million for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017. The ~~increase~~decrease in net cash used in financing activities was primarily due to an increase in new mortgage debt proceeds, net, compared to the ~~$50.0~~three months ended March 31, 2017, partially offset by an increase in distributions and the line of credit payoff of $30.0 million ~~of cash proceeds received~~ during the ~~six~~three months ended ~~June 30, 2016 as a result of the sale of stock under the ATM equity offering program.~~

~~Management's Discussion (continued)~~

March 31, 2018.

Contractual Obligations

AsSignificant 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 ~~June 30,~~Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2017~~, we were subject to certain contractual payment obligations as described in~~ filed with the ~~table below (amounts in thousands):~~

Total ⁽⁵⁾
2017 2018 2019 2020 2021 Thereafter
Long Term Borrowings ⁽¹⁾
$ 2,068,016
$ 28,900
$ 239,608
$ 234,920
$ 352,089
$ 211,650
$ 1,000,849
Interest Expense ⁽²⁾
605,441
48,266
87,925
73,013
57,639
49,742
288,856
Operating Lease 9,444
1,090
2,221
2,062
2,011
1,711
349
LOC Maintenance Fee ⁽³⁾
849
409
440
—
—
—
—
Ground Lease ⁽⁴⁾
16,035
993
1,980
1,983
1,984
1,987
7,108
Total Contractual Obligations $ 2,699,785
$ 79,658
$ 332,174
$ 311,978
$ 413,723
$ 265,090
$ 1,297,162
Weighted average interest rates - Long Term Borrowings 4.41 % 4.69 % 4.61 % 4.40 % 4.49 % 4.39 % 4.25 %


⁽¹⁾	Balance excludes note premiums of $4.3 million and deferred financing costs of approximately $17.8 million. Balances include debt maturing, scheduled periodic principal payments, and Paradise Park Largo mortgage debt of $5.9 million.


⁽²⁾	~~Amounts include interest expected to be incurred on our secured debt and Term Loan based on obligations outstanding as of June 30, 2017.~~


⁽³⁾	~~As of June 30, 2017, assumes we will not exercise our one year extension option on July 17, 2018 and assumes we will maintain our current leverage ratios as defined by the LOC.~~


⁽⁴⁾	We also lease land under non-cancelable operating leases at certain of the Properties expiring in various years from 2017 to 2054. The majority of the lease terms require twelve equal payments per year plus additional rents calculated as a percentage of gross revenues.


⁽⁵⁾	~~We do not include insurance, property taxes and cancelable contracts in the contractual obligations table.~~

~~We believe that we will be able to refinance our maturing debt obligations~~SEC on a secured or unsecured basis; however, to the extent we are unable to refinance our debt as it matures, we believe that we will be able to repay such maturing debt through available cash as well as operating cash flow, asset sales and/or the proceeds from equity issuances. With respect to any refinancing of maturing debt, our future cash flow requirements could be impacted by significant changes in interest rates or other debt terms, including required amortization payments.February 28, 2018.

Inflation

Substantially all of the leases at the Properties allow for monthly or annual rent increases which provide us with the opportunity to achieve increases, where justified by the market, as each lease matures. Such types of leases generally minimize our risks of inflation. In addition, our resort Properties are not generally subject to leases and rents are established for these Sites on an annual basis. Our right-to-use contracts generally provide for an annual dues increase, but dues may be frozen under the terms of certain contracts if the customer is over 61 years ~~of age.~~old.

~~Off Balance~~Off-Balance Sheet Arrangements

As of ~~June 30, 2017,~~March 31, 2018, we have no ~~off balance~~off-balance sheet arrangements.

~~Critical Accounting Policies and Estimates~~

Refer to the 2016 Form 10-K for a discussion of our critical accounting policies, which includes impairment of real estate assets and investments, revenue recognition and business combinations. There have been no changes to these policies during the quarter ended June 30, 2017.

Management's Discussion (continued)

~~Forward Looking~~Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2018 compared with those contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2017 , except that we updated our revenue recognition policy related to right-to-use contracts pursuant to the adoption of ASU 2014-09 (see "Recently Adopted Accounting Pronouncements" within Note 2.

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2017~~March 31, 2018 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, ~~the actual rate of decline in~~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~~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 dilutive effects of issuing additional securities;

the effect of changes in accounting for ~~the entry of contracts with customers representing a right-to-use the Properties~~Leases set forth under the Codification Topic "~~Revenue Recognition"~~Leases";

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 ~~Disclosure of~~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 on Form 10-K for the year ended December 31, ~~2016.~~2017. There have been no material changes in the assumptions used or results obtained regarding market risk since December 31, ~~2016.~~2017.


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 and accounting officer), has evaluated the effectiveness of our disclosure controls and procedures as of ~~June 30, 2017~~.March 31, 2018. 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 30, 2017~~.March 31, 2018.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within us to disclose material information otherwise required to be set forth in our periodic reports.

Changes in Internal Control Over Financial Reporting

During the quarter ended ~~June 30, 2017,~~March 31, 2018, 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 Note 9 of the Consolidated Financial Statements contained herein.


Item 1A.	Risk Factors

There have been no material changes to the risk factors discussed in “Item 1A. Risk Factors” in our ~~Annual Report on~~2017 Form 10-K.

Other Risk Factors Affecting Our Business

We included a risk factor in our 2017 Form 10-K ~~for the year ended December 31, 2016~~related to our insurance coverage - Some Potential Losses Are Not Covered by Insurance, whereby we disclosed that our then current property and casualty insurance policies were to expire on April 1, 2018 and that we planned to renew those policies. Those policies that were in ~~our Quarterly Report~~effect on ~~Form 10-Q for the quarter ended~~ March 31, ~~2017.~~2018, were renewed on April 1, 2018. We continue to have a $100 million loss limit with respect to our all-risk property insurance program including named windstorms, which include, for example, hurricanes. This loss limit is subject to additional sub-limits as set forth in the policy form, including, among others, a continued $25 million aggregate loss limit for earthquake(s) in California. Policy deductibles primarily range from a $500,000 minimum to 5% per unit of insurance for most catastrophic events. For most catastrophic events, there is a one-time $500,000 aggregate retention that applies in addition to the applicable deductible. A deductible indicates our maximum exposure, subject to policy limits and sub-limits, in the event of a loss.


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

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety ~~Disclosure~~Disclosures

None.


Item 5.	Other Information

~~None.~~

None.


Item 6.	~~Exhibit Index~~Exhibits



31.1	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
101	The following materials from Equity LifeStyle Properties, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2017~~March 31, 2018 formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Changes in Equity, (iv) Consolidated Statements of Cash Flow and (v) Notes to Consolidated Financial Statements, filed herewith.

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 26, 2017~~May 2, 2018	By:	/s/ Marguerite Nader
		Marguerite Nader
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~July 26, 2017~~May 2, 2018	By:	/s/ Paul Seavey
		Paul Seavey
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

3633



	Common Stock		Paid-in Capital			6.75% Series C Cumulative Redeemable Perpetual Preferred Stock			Distributions in Excess of Accumulated Earnings			Non- controlling interests – Common OP Units			Accumulated Other Comprehensive Loss/(Income)			Total Equity
Balance, December 31, 2016	$	854	$	1,103,048		$	136,144		$	(231,276	)	$	73,304		$	(227	)	$	1,081,847
Conversion of Common OP Units to Common Stock	14		16,423			—			—			(16,437		)	—			—
Issuance of Common Stock through employee stock purchase plan	—		764			—			—			—			—			764
Compensation expenses related to restricted stock	—		4,257			—			—			—			—			4,257
Adjustment for Common OP Unitholders in the Operating Partnership	—		(3,037		)	—			—			3,037			—			—
Adjustment for fair market value of swap	—		—			—			—			—			257			257
Net income	—		—			4,613			96,385			6,539			—			107,537
Distributions	—		—			(4,613		)	(84,750		)	(5,740		)	—			(95,103		)
Other	—		(148		)	—			—			—			—			(148		)
Balance, June 30, 2017	$	868	$	1,121,307		$	136,144		$	(219,641	)	$	60,703		$	30		$	1,099,411



	Total ⁽⁵⁾			2017			2018			2019			2020			2021			Thereafter
Long Term Borrowings ⁽¹⁾	$	2,068,016		$	28,900		$	239,608		$	234,920		$	352,089		$	211,650		$	1,000,849
Interest Expense ⁽²⁾	605,441			48,266			87,925			73,013			57,639			49,742			288,856
Operating Lease	9,444			1,090			2,221			2,062			2,011			1,711			349
LOC Maintenance Fee ⁽³⁾	849			409			440			—			—			—			—
Ground Lease ⁽⁴⁾	16,035			993			1,980			1,983			1,984			1,987			7,108
Total Contractual Obligations	$	2,699,785		$	79,658		$	332,174		$	311,978		$	413,723		$	265,090		$	1,297,162
Weighted average interest rates - Long Term Borrowings	4.41		%	4.69		%	4.61		%	4.40		%	4.49		%	4.39		%	4.25		%