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 ~~September~~June 30, ~~2018~~2019



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~~other jurisdiction of ~~Incorporation or Organization)~~ incorporation)	~~(I.R.S. Employer~~ ~~Identification No.)~~
		(IRS Employer Identification Number)
Two North Riverside Plaza, Suite 800	Chicago,	Illinois	60606
(Address of Principal Executive Offices)			(Zip Code)

~~(312) 279-1400~~

(~~Registrant’s Telephone Number, Including Area Code)~~312) 279-1400

Registrant's telephone number, including area code



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

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

_________________________________________________________

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx☒ 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 ☐	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:

~~89,747,439~~ 91,033,894 shares of Common Stock as of ~~October 19, 2018.~~July 24, 2019.

Equity LifeStyle Properties, Inc.

Table of Contents



		Page
Part I - Financial Information
Item 1.	Financial Statements (unaudited)
	Index To Financial Statements
	Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	3
	Consolidated Statements of Income and Comprehensive Income for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4
	Consolidated Statements of Changes in Equity for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	65
	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	87
	Notes to Consolidated Financial Statements	109
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2419
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3934
Item 4.	Controls and Procedures	3934
Part II - Other Information
Item 1.	Legal Proceedings	4035
Item 1A.	Risk Factors	4035
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4035
Item 3.	Defaults Upon Senior Securities	4035
Item 4.	Mine Safety Disclosures	4035
Item 5.	Other Information	4035
Item 6.	Exhibits	4136

Part I – Financial Information

Item 1. Financial Statements

Equity LifeStyle Properties, Inc.

Consolidated Balance Sheets

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


	As of			As of			As of			As of
	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
Assets
Investment in real estate:
Land	$	1,342,925		$	1,221,375		$	1,418,353		$	1,408,832
Land improvements	3,114,815			3,045,221			3,236,899			3,143,745
Buildings and other depreciable property	708,600			649,217			781,671			720,900
	5,166,340			4,915,813			5,436,923			5,273,477
Accumulated depreciation	(1,613,158		)	(1,516,694		)	(1,704,091		)	(1,631,888		)
Net investment in real estate	3,553,182			3,399,119			3,732,832			3,641,589
Cash and restricted cash	112,410			31,085			90,457			68,974
Notes receivable, net	35,889			49,477			36,010			35,041
Investment in unconsolidated joint ventures	57,366			53,080			55,195			57,755
Deferred commission expense	40,352			31,443			40,710			40,308
Escrow deposits, goodwill, and other assets, net	55,838			45,828
Other assets, net							59,274			46,227
Assets held for sale, net							—			35,914
Total Assets	$	3,855,037		$	3,610,032		$	4,014,478		$	3,925,808

Liabilities and Equity
Liabilities:
Mortgage notes payable, net	$	2,016,257		$	1,971,715		$	2,075,689		$	2,149,726
Term loan	198,545			198,302
Unsecured line of credit	80,000			30,000
Accrued expenses and accounts payable	102,620			80,744
Deferred revenue – upfront payments from right-to-use contracts	115,172			85,596
Deferred revenue – right-to-use annual payments	11,025			9,932
Term loan, net							198,787			198,626
Accounts payable and other liabilities							127,051			102,854
Deferred revenue – upfront payments from right-to-use contracts (membership upgrade sales)							121,047			116,363
Deferred revenue – right-to-use annual payments (membership subscriptions)							13,022			10,055
Accrued interest payable	8,369			8,387			8,187			8,759
Rents and other customer payments received in advance and security deposits	80,011			79,267			104,249			81,114
Distributions payable	52,521			46,047			58,972			52,617
Liabilities related to assets held for sale							—			12,350
Total Liabilities	2,664,520			2,509,990			2,707,004			2,732,464
Equity:
Stockholders’ Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of September 30, 2018 and December 31, 2017; none issued and outstanding.	—			—
Common stock, $0.01 par value, 200,000,000 shares authorized as of September 30, 2018 and December 31, 2017; 89,746,747 and 88,585,160 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively.	895			883
Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of June 30, 2019 and December 31, 2018; none issued and outstanding.							—			—
Common stock, $0.01 par value, 400,000,000 and 200,000,000 shares authorized as of June 30, 2019 and December 31, 2018, respectively; 91,032,007 and 89,921,018 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively.							906			896
Paid-in capital	1,325,648			1,242,109			1,397,613			1,329,391
Distributions in excess of accumulated earnings	(211,743		)	(211,980		)	(162,204		)	(211,034		)
Accumulated other comprehensive income	3,959			942
Accumulated other comprehensive income (loss)							(242		)	2,299
Total Stockholders’ Equity	1,118,759			1,031,954			1,236,073			1,121,552
Non-controlling interests – Common OP Units	71,758			68,088			71,401			71,792
Total Equity	1,190,517			1,100,042			1,307,474			1,193,344
Total Liabilities and Equity	$	3,855,037		$	3,610,032		$	4,014,478		$	3,925,808

The accompanying notes are an integral part of ~~these Consolidated Financial Statements.~~the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Income and Comprehensive Income

(amounts in thousands, except per share data)

(unaudited)


	Quarters Ended September 30,						Nine Months Ended September 30,						Quarters Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenues:
Community base rental income	$	130,746		$	123,177		$	386,064		$	365,833
Rental home income	3,507			3,592			10,583			10,829
Resort base rental income	64,351			58,471			183,836			169,594
Right-to-use annual payments	12,206			11,531			35,616			34,133
Right-to-use contracts current period, gross	4,863			4,208			11,969			11,212
Rental income													$	212,007		$	199,155		$	435,573		$	406,148
Right-to-use annual payments (membership subscriptions)													12,586			11,891			24,902			23,410
Right-to-use contracts current period, gross (membership upgrade sales)													5,041			3,944			8,879			7,106
Right-to-use contract upfront payments, deferred, net	(2,883		)	(1,670		)	(6,189		)	(3,766		)	(2,912		)	(2,021		)	(4,683		)	(3,306		)
Utility and other income	25,917			26,295			75,758			69,071
Other income													10,265			12,536			20,635			25,572
Gross revenues from home sales	9,339			10,012			26,753			24,872			7,825			9,105			14,300			17,414
Brokered resale and ancillary services revenues, net	1,362			1,983			3,380			4,088			872			617			2,431			2,018
Interest income	1,846			1,974			5,658			5,542			1,803			1,862			3,554			3,812
Income from other investments, net	5,421			2,052			9,774			3,918			879			3,413			1,865			4,353
Total revenues	256,675			241,625			743,202			695,326			248,366			240,502			507,456			486,527
Expenses:
Property operating and maintenance	84,445			80,164			239,444			221,119			84,868			81,720			162,816			158,052
Rental home operating and maintenance	1,904			1,704			4,957			4,912
Real estate taxes	13,240			14,006			40,815			41,986			15,107			13,440			30,430			27,575
Sales and marketing, gross	3,568			3,277			9,685			8,861			4,214			3,305			7,623			6,117
Right-to-use contract commissions, deferred, net	(458		)	(176		)	(744		)	(372		)	(389		)	(262		)	(580		)	(286		)
Property management	13,589			13,160			40,742			38,743			14,385			13,472			28,070			27,153
Depreciation on real estate assets and rental homes	32,856			30,493			96,630			90,849
Amortization of in-place leases	2,124			138			5,069			2,128
Depreciation and amortization													37,776			34,345			75,753			66,719
Cost of home sales	9,742			10,377			27,948			25,391			8,164			9,632			14,796			18,206
Home selling expenses	1,101			1,447			3,149			3,301			1,102			973			2,185			2,048
General and administrative	8,816			7,505			26,523			23,339			9,225			9,669			19,134			17,707
Other expenses	386			324			1,096			814			540			367			967			710
Early debt retirement													1,491			—			1,491			—
Interest and related amortization	26,490			25,027			78,478			74,728			26,024			26,285			52,417			51,988
Total expenses	197,803			187,446			573,792			535,799			202,507			192,946			395,102			375,989
Gain on sale of real estate, net													—			—			52,507			—
Income before equity in income of unconsolidated joint ventures	58,872			54,179			169,410			159,527			45,859			47,556			164,861			110,538
Equity in income of unconsolidated joint ventures	788			686			3,596			2,876			3,226			1,613			4,759			2,808
Consolidated net income	59,660			54,865			173,006			162,403			49,085			49,169			169,620			113,346

Income allocated to non-controlling interests – Common OP Units	(3,590		)	(3,286		)	(10,569		)	(9,825		)	(2,676		)	(3,024		)	(9,902		)	(6,979		)
Redeemable perpetual preferred stock dividends and original issuance costs	—			(3,054		)	(8		)	(7,667		)
Redeemable perpetual preferred stock dividends													(8		)	(8		)	(8		)	(8		)
Net income available for Common Stockholders	$	56,070		$	48,525		$	162,429		$	144,911		$	46,401		$	46,137		$	159,710		$	106,359

Consolidated net income	$	59,660		$	54,865		$	173,006		$	162,403		$	49,085		$	49,169		$	169,620		$	113,346
Other comprehensive income:
Other comprehensive income (loss):
Adjustment for fair market value of swap	380			(30		)	3,017			227			(1,610		)	764			(2,541		)	2,637
Consolidated comprehensive income	60,040			54,835			176,023			162,630			47,475			49,933			167,079			115,983
Comprehensive income allocated to non-controlling interests – Common OP Units	(3,613		)	(3,237		)	(10,754		)	(9,792		)	(2,589		)	(3,071		)	(9,759		)	(7,141		)
Redeemable perpetual preferred stock dividends and original issuance costs	—			(3,054		)	(8		)	(7,667		)
Redeemable perpetual preferred stock dividends													(8		)	(8		)	(8		)	(8		)
Comprehensive income attributable to Common Stockholders	$	56,427		$	48,544		$	165,261		$	145,171		$	44,878		$	46,854		$	157,312		$	108,834

Earnings per Common Share – Basic													$	0.51		$	0.52		$	1.78		$	1.20

Earnings per Common Share – Fully Diluted													$	0.51		$	0.52		$	1.77		$	1.20

Weighted average Common Shares outstanding – basic													90,156			88,549			89,969			88,537
Weighted average Common Shares outstanding – fully diluted													95,930			94,623			95,773			94,600

The accompanying notes are an integral part of ~~these Consolidated Financial Statements.~~the consolidated financial statements.

~~Equity LifeStyle Properties, Inc.~~

~~Consolidated Statements of Income and Comprehensive Income (Continued)~~

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

~~(unaudited)~~

Quarters Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Earnings per Common Share – Basic:
Net income available for Common Stockholders $ 0.63
$ 0.56
$ 1.83
$ 1.67
Earnings per Common Share – Fully Diluted:
Net income available for Common Stockholders $ 0.63
$ 0.56
$ 1.82
$ 1.66

Weighted average Common Shares outstanding – basic 89,200
87,037
88,760
86,620
Weighted average Common Shares outstanding – fully diluted 95,263
93,324
94,827
93,135

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

Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes in Equity

(amounts in thousands)

(unaudited)


	Common Stock		Paid-in Capital			Redeemable Perpetual Preferred Stock			Distributions in Excess of Accumulated Earnings			Accumulated Other Comprehensive Loss/(Income)		Non- controlling interests – Common OP Units			Total Equity			Common Stock		Paid-in Capital			Redeemable Perpetual Preferred Stock			Distributions in Excess of Accumulated Earnings			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests – Common OP Units			Total Equity
Balance, 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
Exchange of Common OP Units for Common Stock	—		80			—			—			—		(80		)	—
Issuance of Common Stock through employee stock purchase plan	—		503			—			—			—		—			503
Balance as of December 31, 2018																				$	896	$	1,329,391		$	—		$	(211,034	)	$	2,299		$	71,792		$	1,193,344
Exchange of Common OP Units for common stock																				—		66			—			—			—			(66		)	—
Issuance of common stock through exercise of options																				—		53			—			—			—			—			53
Issuance of common stock through employee stock purchase plan																				—		652			—			—			—			—			652
Compensation expenses related to restricted stock and stock options	—		1,800			—			—			—		—			1,800			—		2,420			—			—			—			—			2,420
Repurchase of common stock or Common OP Units																				—		(53		)	—			—			—			—			(53		)
Adjustment for Common OP Unitholders in the Operating Partnership	—		782			—			—			—		(782		)	—			—		(56		)	—			—			—			56			—
Adjustment for fair market value of swap	—		—			—			—			1,873		—			1,873			—		—			—			—			(931		)	—			(931		)
Consolidated net income	—		—			—			60,222			—		3,955			64,177			—		—			—			113,309			—			7,226			120,535
Distributions	—		—			—			(48,805		)	—		(3,205		)	(52,010		)	—		—			—			(55,123		)	—			(3,516		)	(58,639		)
Other	—		(60		)	—			—			—		—			(60		)	—		(63		)	—			—			—			—			(63		)
Balance, March 31, 2018	883		1,245,214			—			(215,749		)	2,815		67,976			1,101,139
Exchange of Common OP Units for Common Stock	1		81			—			—			—		(82		)	—
Issuance of Common Stock through employee stock purchase plan	—		343			—			—			—		—			343
Compensation expenses related to restricted stock and stock options	—		2,741			—			—			—		—			2,741
Adjustment for Common OP Unitholders in the Operating Partnership	—		(57		)	—			—			—		57			—
Adjustment for fair market value of swap	—		—			—			—			764		—			764
Consolidated net income	—		—			8			46,137			—		3,024			49,169
Distributions	—		—			(8		)	(48,841		)	—		(3,201		)	(52,050		)
Other	—		(275		)	—			—			—		—			(275		)
Balance, June 30, 2018	884		1,248,047			—			(218,453		)	3,579		67,774			1,101,831
Balance as of March 31, 2019																				896		1,332,410			$	—		(152,848		)	1,368			75,492			1,257,318
Exchange of Common OP Units for Common Stock	1		858			—			—			—		(859		)	—			5		6,430			—			—			—			(6,435		)	—
Issuance of Common Stock through employee stock purchase plan	—		765			—			—			—		—			765			—		587			—			—			—			—			587
Issuance of Common Stock	10		78,745			—			—			—		—			78,755			5		59,314			—			—			—			—			59,319
Compensation expenses related to restricted stock and stock options	—		2,746			—			—			—		—			2,746			—		2,625			—			—			—			—			2,625
Adjustment for Common OP Unitholders in the Operating Partnership	—		(4,414		)	—			—			—		4,414			—			—		(2,883		)	—			—			—			2,883			—
Adjustment for fair market value of swap	—		—			—			—			380		—			380			—		—			—			—			(1,610		)	—			(1,610		)
Consolidated net income	—		—			—			56,070			—		3,590			59,660			—		—			8			46,401			—			2,676			49,085
Distributions	—		—			—			(49,360		)	—		(3,161		)	(52,521		)	—		—			(8		)	(55,757		)	—			(3,215		)	(58,980		)
Other	—		(1,099		)	—			—			—		—			(1,099		)	—		(870		)	—			—			—			—			(870		)
Balance, September 30, 2018	$	895	$	1,325,648		$	—		$	(211,743	)	$	3,959	$	71,758		$	1,190,517
Balance as of June 30, 2019																				$	906	$	1,397,613		$	—		$	(162,204	)	$	(242	)	$	71,401		$	1,307,474

The accompanying notes are an integral part of ~~these Consolidated Financial Statements.~~the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes in Equity

(amounts in thousands)

(unaudited)


	Common Stock		Paid-in Capital			Redeemable Perpetual Preferred Stock			Distributions in Excess of Accumulated Earnings			Accumulated Other Comprehensive Loss/(Income)			Non- controlling interests – Common OP Units			Total Equity			Common Stock		Paid-in Capital			Redeemable Perpetual Preferred Stock			Distributions in Excess of Accumulated Earnings			Accumulated Other Comprehensive Income (Loss)		Non- controlling interests – Common OP Units			Total Equity
Balance, January 1, 2017	$	854	$	1,103,048		$	136,144		$	(231,276	)	$	(227	)	$	73,304		$	1,081,847
Balance as of December 31, 2017																					$	883	$	1,242,109		$	—		$	(211,980	)	$	942	$	68,088		$	1,100,042
Cumulative effect of change in accounting principle (ASC 606, Revenue Recognition)																					—		—			—			(15,186		)	—		—			(15,186		)
Balance as of January 1, 2018																					883		1,242,109			—			(227,166		)	942		68,088			1,084,856
Exchange of Common OP Units for 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
Consolidated net income																					—		—			—			60,222			—		3,955			64,177
Distributions																					—		—			—			(48,805		)	—		(3,205		)	(52,010		)
Other																					—		(60		)	—			—			—		—			(60		)
Balance as of March 31, 2018																					883		1,245,214			—			(215,749		)	2,815		67,976			1,101,139
Exchange of Common OP Units for Common Stock	12		15,339												(15,351		)	—			1		81			—			—			—		(82		)	—
Issuance of Common Stock through employee stock purchase plan	—		403			—			—			—			—			403			—		343			—			—			—		—			343
Compensation expenses related to restricted stock and stock options	—		1,755			—			—			—			—			1,755			—		2,741			—			—			—		—			2,741
Adjustment for Common OP Unitholders in the Operating Partnership	—		(2,885		)	—			—			—			2,885			—			—		(57		)	—			—			—		57			—
Adjustment for fair market value of swap	—		—			—			—			226			—			226			—		—			—			—			764		—			764
Consolidated net income	—		—			2,297			56,888			—			3,890			63,075			—		—			8			46,137			—		3,024			49,169
Distributions	—		—			(2,297		)	(42,335		)	—			(2,895		)	(47,527		)	—		—			(8		)	(48,841		)	—		(3,201		)	(52,050		)
Other	—		(32		)	—			(1		)	—			—			(33		)	—		(275		)	—			—			—		—			(275		)
Balance, March 31, 2017	866		1,117,628			136,144			(216,724		)	(1		)	61,833			1,099,746
Exchange of Common OP Units for Common Stock	1		1,085			—			—			—			(1,086		)	—
Issuance of Common Stock through employee stock purchase plan	—		361			—			—			—			—			361
Compensation expenses related to restricted stock and stock options	—		2,502			—			—			—			—			2,502
Adjustment for Common OP Unitholders in the Operating Partnership	—		(152		)	—			—			—			152			—
Adjustment for fair market value of swap	—		—			—			—			31			—			31
Consolidated net income	—		—			2,316			39,497			—			2,649			44,462
Distributions	—		—			(2,316		)	(42,415		)	—			(2,845		)	(47,576		)
Other	—		(116		)	—			1			—			—			(115		)
Balance, June 30, 2017	867		1,121,308			136,144			(219,641		)	30			60,703			1,099,411
Exchange of Common OP Units for Common Stock	—		5			—			—			—			(5		)	—
Issuance of Common Stock through employee stock purchase plan	—		851			—			—			—			—			851
Issuance of Common Stock	5		42,032			—			—			—			—			42,037
Compensation expenses related to restricted stock and stock options	—		2,556			—			—			—			—			2,556
Adjustment for Common OP Unitholders in the Operating Partnership	—		(2,276		)	—			—			—			2,276			—
Adjustment for fair market value of swap	—		—			—			—			(30		)	—			(30		)
Consolidated net income	—		—			3,054			48,525			—			3,286			54,865
Distributions	—		—			(2,297		)	(42,655		)	—			(2,844		)	(47,796		)
Series C Preferred stock redemption	—		—			(136,144		)	—			—			—			(136,144		)
Series C Preferred stock original issuance costs	—		757			(757		)	—			—			—			—
Other	—		(575		)	—			—			—			—			(575		)
Balance, September 30, 2017	$	872	$	1,164,658		$	—		$	(213,771	)	$	—		$	63,416		$	1,015,175





Balance as of June 30, 2018																					$	884	$	1,248,047		$	—		$	(218,453	)	$	3,579	$	67,774		$	1,101,831

The accompanying notes are an integral part of ~~these Consolidated Financial Statements.~~the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

Nine Months Ended September 30,
2018 2017
Cash Flows From Operating Activities:
Consolidated net income $ 173,006
$ 162,403
Adjustments to reconcile Consolidated net income to Net cash provided by operating activities:
Depreciation 97,729
91,781
Amortization of in-place leases 5,069
2,128
Amortization of loan costs 2,675
2,676
Debt premium amortization (1,061 ) (1,664 )
Equity in income of unconsolidated joint ventures (3,596 ) (2,876 )
Distributions of income from unconsolidated joint ventures 2,869
2,071
Proceeds from insurance claims, net (3,353 ) (134 )
Compensation expenses related to restricted stock and stock options 7,287
6,813
Revenue recognized from right-to-use contract upfront payments (5,780 ) (7,440 )
Commission expense recognized related to right-to-use contracts 2,715
3,327
Long-term incentive plan compensation 819
1,011
Provision for (recovery of) uncollectible rents receivable 412
(52 )
Changes in assets and liabilities:
Notes receivable activity, net 280
(337 )
Deferred commission expense (3,424 ) (3,560 )
Escrow deposits, goodwill and other assets 17,910
21,822
Accrued expenses and accounts payable 13,858
16,752
Deferred revenue – upfront payments from right-to-use contracts 11,969
11,210
Deferred revenue – right-to-use annual payments 1,093
696
Rents received in advance and security deposits 665
(3,305 )
Net cash provided by operating activities 321,142
303,322
Cash Flows From Investing Activities:
Real estate acquisitions, net (131,804 ) (2,163 )
Investment in unconsolidated joint ventures (3,914 ) (33,479 )
Distributions of capital from unconsolidated joint ventures 168
640
Proceeds from insurance claims 6,615
1,547
Repayments of notes receivable 21,618
7,643
Issuance of notes receivable (8,716 ) (22,297 )
Capital improvements (128,436 ) (87,877 )
Net cash used in investing activities (244,469 ) (135,986 )
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan 1,610
1,615
Gross proceeds from sale of Common Stock 78,755
42,037
Distributions:
Common Stockholders (140,850 ) (121,114 )
Common OP Unitholders (9,250 ) (8,786 )
Perpetual Preferred Stockholders (8 ) (6,910 )
Principal payments and mortgage debt payoff (36,308 ) (60,392 )
New mortgage notes payable financing proceeds 64,014
146,000
Line of Credit payoff (174,000 ) —
Line of Credit proceeds 224,000
—
Redemption of preferred stock —
(136,144 )
Debt issuance and defeasance costs (1,878 ) (1,864 )
Other (1,433 ) (723 )
Net cash provided by (used in) financing activities 4,652
(146,281 )
Net increase in Cash and restricted cash 81,325
21,055
Cash and restricted cash, beginning of period 31,085
56,340
Cash and restricted cash, end of period $ 112,410
$ 77,395



	Six Months Ended June 30,
	2019			2018
Cash Flows From Operating Activities:
Consolidated net income	$	169,620		$	113,346
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Gain on sale of real estate, net	(52,507		)	—
Early debt retirement	1,491			—
Depreciation and amortization	76,648			67,431
Amortization of loan costs	1,768			1,772
Debt premium amortization	(232		)	(711		)
Equity in income of unconsolidated joint ventures	(4,759		)	(2,808		)
Distributions of income from unconsolidated joint ventures	2,008			1,732
Proceeds from insurance claims, net	4,422			1,809
Compensation expense related to restricted stock and stock options	5,045			4,541
Revenue recognized from right-to-use contract upfront payments (membership upgrade sales)	(4,195		)	(3,800		)
Commission expense recognized related to right-to-use contracts	1,867			1,810
Long-term incentive plan compensation	(3,608		)	461
Changes in assets and liabilities:
Notes receivable, net	(1,079		)	642
Deferred commission expense	(2,269		)	(2,010		)
Other assets, net	(8,275		)	10,895
Accounts payable and other liabilities	25,962			9,274
Deferred revenue – upfront payments from right-to-use contracts (membership upgrade sales)	8,879			7,106
Deferred revenue – right-to-use annual payments (membership subscriptions)	2,967			2,874
Rents and other customer payments received in advance and security deposits	20,932			15,601
Net cash provided by operating activities	244,685			229,965
Cash Flows From Investing Activities:
Real estate acquisitions, net	(38,463		)	(53,289		)
Proceeds from disposition of properties, net	77,746			—
Investment in unconsolidated joint ventures	—			(3,791		)
Distributions of capital from unconsolidated joint ventures	5,169			110
Proceeds from insurance claims	1,111			2,335
Repayments of notes receivable	—			13,823
Capital improvements	(121,444		)	(81,377		)
Net cash used in investing activities	(75,881		)	(122,189		)

The accompanying notes are an integral part of ~~these Consolidated Financial Statements.~~the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows (continued)

(amounts in thousands)

(unaudited)

Nine Months Ended September 30,
2018 2017
Supplemental Information:
Cash paid during the period for interest $ 76,881
$ 76,713
Building and other depreciable property – reclassification of rental homes 29,170
25,852
Escrow deposits and other assets – reclassification of rental homes (29,170 ) (25,852 )

Real estate acquisitions:
Investment in real estate, fair value $ (150,926 ) $ (7,985 )
Investment in real estate, cost —
(110 )
Escrow deposits and other assets (9 ) —
Debt assumed 9,200
5,900
Debt financed 8,786
—
Accrued expenses and accounts payable 1,066
32
Rents and other customer payments received in advance and security deposits 79
—
Real estate acquisitions, net $ (131,804 ) $ (2,163 )



	Six Months Ended June 30,
	2019			2018
Cash Flows From Financing Activities:
Proceeds from stock options and employee stock purchase plan	1,237			846
Gross proceeds from the issuance of common stock	59,319			—
Distributions:
Common Stockholders	(104,579		)	(92,008		)
Common OP Unitholders	(6,676		)	(6,049		)
Preferred Stockholders	(8		)	(8		)
Principal payments and mortgage debt repayment	(93,982		)	(23,964		)
New mortgage notes payable financing proceeds	—			64,014
Line of Credit payoff	—			(97,000		)
Line of Credit proceeds	—			67,000
Debt issuance and defeasance costs	(1,700		)	(1,688		)
Other	(932		)	(335		)
Net cash used in financing activities	(147,321		)	(89,192		)
Net increase in cash and restricted cash	21,483			18,584
Cash and restricted cash, beginning of period	68,974			35,631
Cash and restricted cash, end of period	$	90,457		$	54,215



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

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

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

The accompanying notes are an integral part of ~~these Consolidated Financial Statements.~~the consolidated financial statements.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 1 – Organization and Basis of Presentation

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

~~Capitalized terms used~~Our Properties are owned primarily by the Operating Partnership and managed internally by wholly-owned affiliates of the Operating Partnership. ELS is the sole general partner of the Operating Partnership, has exclusive responsibility and discretion in management and control of the Operating Partnership and held a 94.5% interest as of June 30, 2019. As the general partner with control, ELS is the primary beneficiary of, and therefore consolidates, the Operating Partnership.

Equity method of accounting is applied to entities in which ELS does not have a controlling interest or for variable interest entities in which ELS is not considered the primary beneficiary, but ~~not defined herein~~with respect to which it can exercise significant influence over operations and major decisions. Our exposure to losses associated with unconsolidated joint ventures is primarily limited to the carrying value of these investments. Accordingly, distributions from a joint venture in excess of our carrying value are ~~as defined~~recognized in ~~our Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”). These~~earnings.

The accompanying unaudited interim ~~Consolidated Financial Statements~~consolidated financial statements have been prepared pursuant to Securities and Exchange Commission (“SEC”) rules and ~~regulations.~~regulations for Quarterly Reports on Form 10-Q. Accordingly, they do not include all of the information and note disclosures required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the ~~2017~~2018 Form 10-K.

~~The following notes~~Intercompany balances and transactions have been eliminated. All adjustments to the ~~unaudited~~ interim ~~Consolidated Financial Statements highlight significant changes to the notes included in the 2017 Form 10-K~~consolidated financial statements are of a normal, recurring nature and, ~~present interim disclosures as required by the SEC. The accompanying Consolidated Financial Statements reflect,~~ in the opinion of management, ~~all adjustments and estimates~~are necessary for a fair presentation of ~~the~~results for these interim ~~financial statements, which are of a normal, recurring nature.~~periods. Revenues and expenses are subject to seasonal fluctuations and accordingly, quarterly interim results may not be indicative of full year results. Certain prior period amounts have been reclassified on our interim consolidated financial statements to conform with current year presentation.

Note 2 – Summary of Significant Accounting Policies


~~(a)~~	~~Consolidation~~

(a) Recently Adopted Accounting Pronouncements

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

We ~~consolidate~~adopted the new lease standard effective January 1, 2019 and have elected to use January 1, 2019 as our ~~majority-owned Subsidiaries in which we have~~date of initial application. Results for reporting periods beginning January 1, 2019 are presented under the ~~ability~~new lease standard. We made an accounting policy election to ~~control~~not recognize ROU assets and lease liabilities for leases with a term of 12 months or less. We elected the ~~operations~~package of practical expedients permitted under the transition guidance within the new standard and ~~all variable interest entities ("VIEs") with respect~~were not required to ~~which we are~~reassess the ~~primary beneficiary. We have determined the Operating Partnership, which is our sole significant asset, meets~~following upon adoption: (i) whether an expired or existing contract met the definition of a ~~VIE. Therefore,~~lease, (ii) the lease classification at January 1, 2019 for existing leases and (iii) whether leasing costs previously capitalized as initial direct costs would continue to be amortized. Upon adoption, we 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.

~~We apply the equity method of accounting to entities in which we do~~did not have a direct or indirect controlling interest or for variable interest entities where we are not considered the primary beneficiary, but can exercise significant influence over the entity with respect to its operations and major decisions. We apply the cost method of accounting when our investment is (i) minimal (typically less than 5.0%) and (ii) passive. Our exposure to losses associated with unconsolidated joint ventures is primarily limitedan adjustment to the ~~carrying value~~opening balance of retained earnings due to the election of these ~~investments. Accordingly, distributions from a joint venture in excess of our carrying value are recognized in earnings.~~


~~(b)~~	~~Identified Intangibles and Goodwill~~

As of both September 30, 2018 and December 31, 2017, the gross carrying amount of identified intangible assets and goodwill, a component of Escrow deposits, goodwill and other assets, net on the Consolidated Balance Sheets, was approximately $12.1 million. As of both September 30, 2018 and December 31, 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 $3.0 million and $2.9 million as of September 30, 2018 and December 31, 2017, respectively.practical expedients.

As a lessor, we adopted the practical expedient that allowed us not to separate expenses reimbursed by our customers (“utility recoveries”) from the associated rental revenue if certain criteria were met. We assessed these criteria and concluded the timing and pattern of ~~September 30,~~transfer for rental revenue and the associated utility recoveries are the same and as our leases qualify as operating leases, we accounted for and presented rental revenue and utility recoveries as a single component under Rental income in our Consolidated Statements of Income and Comprehensive Income for 2019 and 2018. In addition, the new standard requires our expected credit loss related to the collectability of lease receivables to be reflected as an adjustment to the line item Rental income prospectively starting from January 1, 2019. For 2018, ~~and December 31, 2017,~~ the ~~gross carrying amount~~credit loss related to the collectability of ~~in-place~~ lease ~~intangible assets, a component of Buildings and other depreciable property on the Consolidated Balance Sheets,~~receivables was approximately $84.9 million and $76.7 million, respectively. Accumulated amortization of in-place lease intangible assets was approximately $81.7 million and $76.5 million as of September 30, 2018 and December 31, 2017, respectively.recognized


~~(c)~~	~~Restricted Cash~~

As of both September 30, 2018 and December 31, 2017, Cash and restricted cash included approximately $5.3 million of restricted cash for the payment of capital improvements, insurance or real estate taxes pursuant to certain loan agreements.

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~~in the line item Property operating and ~~mortgage notes payable. We disclose the estimated fair value~~maintenance and was not significant. The guidance regarding capitalization 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~~leasing costs of approximately $23.6 million and $23.7 million as of September 30, 2018 and December 31, 2017, respectively, had an aggregate carrying value of approximately $2,238.4 million and $2,193.7 million as of September 30, 2018 and December 31, 2017, respectively, and a fair value of approximately $2,200.8 million and $2,184.0 million as of September 30, 2018 and December 31, 2017, respectively. The fair value was measured using quoted prices and observable inputs from similar liabilities (Level 2). At September 30, 2018 and December 31, 2017, our cash flow hedge of interest rate risk included in Escrow deposits, goodwill and 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 inputs as part of our determination of the purchase price allocation for our acquisitions.


~~(e)~~	~~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 the 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 on 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 the 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~~

~~On January 1, 2018, we adopted on a prospective basis ("ASU 2017-01")~~ ~~Business Combinations~~: ~~Clarifying the Definition of a Business (Topic 805)~~. This guidance clarifies the definition of a business and provides a screen to determine when an integrated set of 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 are capitalized, while transaction costs associated with business combinations are expensed as incurred. All of the acquisitions completed subsequent to January 1, 2018 met the screen and, therefore, were accounted for as asset acquisitions and, as such, the related transaction costs of $1.5 million were capitalized for the nine months ended September 30, 2018.

~~On January 1, 2018, we adopted (“ASU 2016-18”)~~ ~~Statement of Cash Flows: Restricted Cash (Topic 230)~~. This guidance requires companies to include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The adoption of this guidance did not have any effect on ~~the Consolidated Financial Statements.~~

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

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

~~On January 1, 2018, we adopted (“ASU 2016-15”)~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (Topic 230)~~ on a retrospective basis. This update adds or clarifies guidance on the classification of certain cash receipts and payments on the Consolidated Statements of Cash Flows. The adoption of ASU 2016-15 impacted our classification of proceeds from the settlement of insurance claims and distributions received from equity method investments. The retrospective adoption of this guidance resulted in the reclassification of $1.5 million of insurance proceeds from Operating Activities to Investing Activities and $0.6 million of distributions from equity method investments from Operating Activities to Investing Activities on the Consolidated Statement of Cash Flows for the nine months ended September 30, 2017.consolidated financial statements.

On January 1, ~~2018,~~2019, we ~~adopted ASU 2014-09, which is a comprehensive new revenue recognition model that requires revenue to be~~ recognized ~~in a manner to depict the transfer~~ROU assets of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. We applied the modified retrospective method to our right-to-use upgrade contracts$17.5 million and ~~related commissions that were not fully amortized as~~lease liabilities 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$18.7 million ~~as of January 1, 2018 in Distributions in excess of accumulated earnings~~ on the Consolidated ~~Statement of Changes~~Balance Sheets, principally for our ground and office space leases, in ~~Equity. There have not been significant changes to our business processes, systems, or internal controls as a result of implementing~~which we are 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.lessee.

~~The cumulative effect adjustments resulting from~~For more disclosure on the adoption of ~~ASU 2014-09 as of January 1, 2018 were as follows:~~the new lease accounting standard, see Note 3. Leases.

(b) New Accounting Pronouncements

(amounts in thousands) 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 quarter ended September 30, 2018 was as follows:~~

(amounts in thousands, except per share data) As Reported Balances Without Adoption of ASU 2014-09 (a) Effect of Change Higher/(Lower)
Revenues
Right-to-use contract upfront payments, deferred, net $ (2,883 ) $ (2,131 ) $ 752
Total revenues $ 256,675
$ 257,427
$ (752 )

Expenses

Right-to-use contract commissions, deferred, net $ (458 ) $ (245 ) $ 213
Total expenses $ 197,803
$ 198,016
$ (213 )

Consolidated net income $ 59,660
$ 60,189
$ (529 )
Net income available for Common Stockholders $ 56,070
$ 56,567
$ (497 )
Earnings per Common Share - Basic $ 0.63
$ 0.63
$ —
Earnings per Common Share - Fully Diluted $ 0.63
$ 0.63
$ —

~~_____________________~~

~~(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)~~

~~The impact of ASU 2014-09 on the Company’s Consolidated Statements of Income and Comprehensive Income for the nine months ended September 30, 2018 was as follows:~~

(amounts in thousands, except per share data) As Reported Balances Without Adoption of ASU 2014-09 (a) Effect of Change Higher/(Lower)
Revenues
Right-to-use contract upfront payments, deferred, net $ (6,189 ) $ (3,968 ) $ 2,221
Total revenues $ 743,202
$ 745,423
$ (2,221 )

Expenses

Right-to-use contract commissions, deferred, net $ (744 ) $ (81 ) $ 663
Total expenses $ 573,792
$ 574,455
$ (663 )

Consolidated net income $ 173,006
$ 174,554
$ (1,548 )
Net income available for Common Stockholders $ 162,429
$ 163,890
$ (1,461 )
Earnings per Common Share - Basic $ 1.83
$ 1.85
$ (0.02 )
Earnings per Common Share - Fully Diluted $ 1.82
$ 1.84
$ (0.02 )

~~_____________________~~

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


~~(g)~~	~~New Accounting Pronouncements~~

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

~~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, 2018, including interim periods within those years. We are currently in the process of evaluating the potential impact, if any, that the adoption of this standard may have on the Consolidated Financial Statements and related disclosures.

In June 2016, the FASB issued (“ASU 2016-13”) Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ASU 2016-13 ~~will be~~is 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 the ~~Consolidated Financial Statements~~consolidated financial statements and related disclosures.

~~In February 2016,~~(c) Revenue Recognition

We account for certain revenue streams in accordance with Accounting Standard Codification (ASC) 606, Revenue from Contracts with Customers. Right-to-use contracts (also referred to as membership subscriptions), provide our customers access to specific Properties for limited stays at a specified group of Properties.Payments are deferred and recognized on a straight-line basis over the ~~FASB issued ("ASU 2016-02")~~ ~~Leases,~~ ~~regarding~~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 ~~accounting~~customer and require non-refundable upfront payments. The non-refundable upfront payments are recognized on a straight-line basis over 20 years.

(d) Restricted Cash

As of June 30, 2019 and December 31, 2018, restricted cash consists of $27.5 million and $24.1 million, respectively, primarily related to cash reserved for ~~leases~~customer deposits and amounts escrowed for ~~both lessees~~insurance and lessors. The pronouncement generally requires lessees to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. In July 2018, ASU 2016-02 was amended, providing another transitionreal estate taxes.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note ~~2 - Summary~~3 – Leases

Lessor

Rental income derived from customers renting our Sites is accounted for in accordance with ASC 842, Leases, and is recognized over the term of ~~Significant Accounting Policies (continued)~~

the respective operating lease or the length of a customer's stay. Our MH community Sites and annual RV community Sites are leased on an annual basis. Seasonal Sites are leased to customers generally for one to six months. Transient Sites are leased to customers on a short-term basis. In addition, customers may lease homes that are located in our Properties.

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



(amounts in thousands)	As of June 30, 2019
2019	$	60,067
2020	120,012
2021	65,321
2022	34,906
2023	19,714
Thereafter	84,254
Total	$	384,274

Lessee

We lease land under non-cancelable operating leases at 13 Properties expiring at various dates through 2054. The majority of the leases have terms requiring fixed payments plus additional rents based on a ~~cumulative-effect adjustment to~~percentage of gross revenues at those Properties. We also have other operating leases, primarily office space expiring at various dates through 2026. For the ~~opening balance sheet of retained earnings, if necessary. The~~quarters ended June 30, 2019 and 2018, total operating lease ~~standard amendment also provided a practical expedient for an accounting policy election for lessors, by class of underlying asset, to not separate nonlease components from~~payments were $2.3 million and $2.1 million, respectively. For the ~~associated~~six months ended June 30, 2019 and 2018, total operating lease ~~components, if certain requirements are met. The new guidance is effective for public companies for annual reporting periods~~payments were $4.6 million and ~~interim periods within those annual periods beginning after December 15, 2018.~~$4.1 million, respectively.

The ~~Company expects to adopt this new guidance on January 1, 2019 using the modified retrospective approach,~~following table summarizes our future minimum rental payments, excluding variable costs, which will result in a cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2019. Upon adoption, the Company will recognize a right of use asset and corresponding lease liability for operating leases where it is the lessee, such as ground leases and office leases. The Company is in the process of evaluating the inputs requiredare discounted by our incremental borrowing rate to calculate the amounts that will be recorded on its balance sheet for each lease. For leases with a term of 12 months or less, the Company expects to make an accounting policy election by class of underlying asset to not recognize lease liabilities for our operating leases:



(amounts in thousands)	As of June 30, 2019			As of December 31, 2018
2019	$	2,770		$	4,921
2020	4,801			4,801
2021	4,179			4,179
2022	2,103			2,103
2023	953			953
Thereafter	5,054			5,054
Total undiscounted rental payments	19,860			22,011
Less imputed interest	(2,895		)	(3,289		)
Total lease liabilities	$	16,965		$	18,722

ROU assets and lease ~~assets. For~~liabilities from our operating leases ~~where we are~~included within Other assets, net and Accounts payable and other liabilities on the ~~lessor,~~Consolidated Balance Sheets were $15.7 million and $17.0 million, respectively, as of June 30, 2019. The weighted average remaining lease term for our operating leases was 7 years and the Company expects that accounting for lease components will be largely unchanged from existing GAAP and to elect the practical expedient to not separate non-lease components from lease components based upon the predominant component for these operating leases.weighted average incremental borrowing rate was 4.4% at June 30, 2019.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 34 – Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:



	Quarters Ended June 30,				Six Months Ended June 30,
(amounts in thousands, except per share data)	2019		2018		2019		2018
Numerator:
Net income available for Common Stockholders – Basic	$	46,401	$	46,137	$	159,710	$	106,359
Amounts allocated to dilutive securities	2,676		3,024		9,902		6,979
Net income available for Common Stockholders – Fully Diluted	$	49,077	$	49,161	$	169,612	$	113,338
Denominator:
Weighted average Common Shares outstanding – Basic	90,156		88,549		89,969		88,537
Effect of dilutive securities:
Exchange of Common OP Units for Common Shares	5,643		5,826		5,691		5,827
Restricted stock and stock options	131		248		113		236
Weighted average Common Shares outstanding – Fully Diluted	95,930		94,623		95,773		94,600

Earnings per Common Share – Basic	$	0.51	$	0.52	$	1.78	$	1.20

Earnings per Common Share – Fully Diluted	$	0.51	$	0.52	$	1.77	$	1.20

Quarters Ended September 30, Nine Months Ended September 30,
(amounts in thousands, except per share data) 2018 2017 2018 2017
Numerator:
Net Income Available for Common Stockholders:
Net income available for Common Stockholders – basic $ 56,070
$ 48,525
$ 162,429
$ 144,911
Amounts allocated to dilutive securities 3,590
3,286
10,569
9,825
Net income available for Common Stockholders – fully dilutive $ 59,660
$ 51,811
$ 172,998
$ 154,736
Denominator:
Weighted average Common Shares outstanding – basic 89,200
87,037
88,760
86,620
Effect of dilutive securities:
Exchange of Common OP Units for Common Shares 5,771
5,836
5,808
6,100
Stock options and restricted shares 292
451
259
415
Weighted average Common Shares outstanding – fully diluted 95,263
93,324
94,827
93,135

Earnings per Common Share – Basic:
Net income available for Common Stockholders $ 0.63
$ 0.56
$ 1.83
$ 1.67

Earnings per Common Share – Fully Diluted:
Net income available for Common Stockholders $ 0.63
$ 0.56
$ 1.82
$ 1.66

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

Note 45 – Common Stock and Other Equity Related Transactions

Common Stockholder Distribution Activity

The following quarterly distributions have been declared and paid to ~~common stockholders~~Common Stockholders and ~~non-controlling common operating partnership unit ("~~the limited partners of the Operating Partnership (the "Common OP ~~Unit"~~Unit holders") ~~holders~~ since January 1, ~~2017:~~2018.



Distribution Amount Per Share	For the Quarter Ended	Stockholder Record Date	Payment Date
~~$0.4875~~	~~March 31, 2017~~	~~March 31, 2017~~	~~April 14, 2017~~
~~$0.4875~~	~~June 30, 2017~~	~~June 30, 2017~~	~~July 14, 2017~~
~~$0.4875~~	~~September 30, 2017~~	~~September 29, 2017~~	~~October 13, 2017~~
~~$0.4875~~	~~December 31, 2017~~	~~December 29, 2017~~	~~January 12, 2018~~
$0.5500	March 31, 2018	March 30, 2018	April 13, 2018
$0.5500	June 30, 2018	June 29, 2018	July 13, 2018
$0.5500	September 30, 2018	September 28, 2018	October 12, 2018
$0.5500	December 31, 2018	December 28, 2018	January 11, 2019
$0.6125	March 31, 2019	March 29, 2019	April 12, 2019
$0.6125	June 30, 2019	June 28, 2019	July 12, 2019

Increase in Authorized Shares

On ~~November 2, 2017,~~April 30, 2019, our stockholders approved an amendment to our charter to increase the number of shares of our common stock that we ~~adopted a new~~are authorized to issue from 200,000,000 to 400,000,000 shares.

Equity Offering Program

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

Equity LifeStyle Properties, Inc.

Notes to ~~$125.0 million.~~Consolidated Financial Statements

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

The following table presents the shares that were issued under the current ATM equity offering ~~programs~~program during the ~~nine~~six months ended ~~September~~June 30, ~~2018 and nine months ended September 30, 2017.~~

(amounts in thousands, except stock data): Nine Months Ended
September 30, 2018 September 30, 2017
Shares of Common Stock sold 861,141
484,913
Weighted average price $ 91.45
$ 86.69
Total gross proceeds
$ 78,755
$ 42,037
Commissions paid to sales agents $ 1,028
$ 526

~~As of September 30, 2018, approximately $71.2 million of Common Stock remained available for issuance~~2019. There was no activity under the ATM equity offering ~~program.~~program during the six months ended June 30, 2018.



	Six Months Ended June 30,
(amounts in thousands, except stock data)	2019
Shares of Common Stock sold	505,236
Weighted average price	$	117.41
Total gross proceeds	$	59,319
Commissions paid to sales agents	$	771

Exchanges

Subject to certain limitations, ~~holders of~~Common OP ~~Units~~Unit holders can request an exchange of any or all of their OP Units for shares of Common Stock at any time. Upon receipt of such a request, we may, in lieu of issuing shares of Common Stock, cause the Operating Partnership to pay cash. During the ~~nine~~six months ended ~~September~~June 30, ~~2018, 87,718~~2019, 495,325 OP Units were exchanged for an equal number of shares of Common Stock. During the ~~same period in 2017, 1,335,247~~six months ended June 30, 2018, 13,838 OP Units were exchanged for an equal number of shares of Common Stock.

~~Series C Preferred Stock Redemption and Distribution Activity~~

During the nine months ended September 30, 2017, we redeemed our 6.75% Series C Preferred Stock for $138.4 million, including accrued dividends. The shares of Series C Preferred Stock that were redeemed now have the status of authorized but unissued preferred stock, without designation as to class or series. There were no shares of 6.75% Series C Preferred Stock issued or outstanding as of September 30, 2017 or 2018.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

~~Note 4 –Common Stock and Other Equity Related Transactions (continued)~~

~~The following quarterly distributions have been declared and paid to our preferred stockholders since January 1, 2017 and prior to the stock's redemption, which occurred in September 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~~
~~$0.421875~~	~~September 30, 2017~~	~~September 15, 2017~~	~~September 25, 2017~~

Note 56 – Investment in Real Estate

Acquisitions

On ~~September 21, 2018,~~May 29, 2019, we completed the acquisition of ~~Sunseekers,~~White Oak Shores Camping and RV Resort, a ~~241-site~~455-site RV ~~resort~~community located in Stella, North ~~Fort Myers, Florida. The~~Carolina, for a purchase price ~~was $6.5 million and~~of $20.5 million. The acquisition was funded with ~~net proceeds from sales of Common Stock under our ATM equity offering program.~~available cash.

On ~~July 20, 2018,~~April 10, 2019, we completed the acquisition of ~~Everglades Lakes,~~Round Top RV Campground, a ~~612-site manufactured home~~391-site RV community located in ~~Fort Lauderdale, Florida. The~~Gettysburg, Pennsylvania, for a purchase price ~~was $72.2 million, including $0.2 million~~ of ~~transaction costs, and was funded with net proceeds from sales of Common Stock under our ATM equity offering program.~~

~~On April 20, 2018, we completed the~~$12.4 million. This acquisition ~~of Holiday Travel Park, a 613-site RV Resort in Holiday, Florida. The purchase price was $22.5 million, including $0.3 million of transaction costs, and~~ was funded with available cash and ~~proceeds from our line~~a loan assumption of ~~credit.~~approximately $7.8 million, excluding mortgage premium of $0.2 million.

On March ~~15, 2018,~~25, 2019, we completed the ~~acquisition~~acquisitions of ~~Serendipity,~~Drummer Boy Camping Resort, a ~~425-site manufactured home~~465-site RV community located in ~~Clearwater, Florida. The~~Gettysburg, Pennsylvania, and Lake of the Woods Campground, a 303-site RV community located in Wautoma, Wisconsin, for a total purchase price ~~was $30.7 million, including $0.6 million~~ of ~~transaction costs, and was~~$25.4 million. These acquisitions were funded with available cash and a loan assumption of ~~$9.2~~approximately $10.8 million, ~~and new loan proceeds~~excluding mortgage premium of ~~$8.8~~$0.4 million.

Dispositions

On ~~March 8, 2018,~~January 23, 2019, we ~~completed~~closed on the ~~acquisition~~sale of ~~Kingswood, a 229-site manufactured home community~~five all-age MH communities located in ~~Riverview, Florida.~~Indiana and Michigan, collectively containing 1,463 sites, for $89.7 million. The ~~purchase price was $17.5~~assets and liabilities associated with the transaction were classifieds as held for sale on the Consolidated Balance Sheets as of December 31, 2018. We recognized a gain on sale of these Properties of $52.5 million ~~including $0.4 million~~during the first quarter of ~~transaction costs, and was funded with available cash.~~2019.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 67 – Investment in Unconsolidated Joint Ventures

The following table summarizes our ~~Investment~~investment in unconsolidated joint ventures ~~(amounts~~ (investment amounts in thousands ~~except~~with the number of Properties shown parenthetically as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017)~~2018, respectively):


						Investment as of				Joint Venture Income/(Loss) Nine Months Ended										Investment as of				Income/(Loss) for Six Months Ended
Investment	Location	Number of Sites ^(a)	Economic Interest ^(b)			September 30, 2018		December 31, 2017		September 30, 2018			September 30, 2017		Location	Number of Sites ^(a)	Economic Interest ^(b)			June 30, 2019		December 31, 2018		June 30, 2019		June 30, 2018
Meadows	Various (2,2)	1,077	50	%		$	558	$	307	$	1,252		$	1,610	Various (2,2)	1,077	50	%		$	346	$	346	$	800	$	819
Lakeshore	Florida (3,3)	720	(c)			2,278		2,530		(62		)	10		Florida (3,3)	720	(c)			2,154		2,263		122		123
Voyager	Arizona (1,1)	1,801	50	%	^(d)	3,249		3,205		866			795		Arizona (1,1)	1,801	50	%	^(d)	414		3,135		2,925		883
Loggerhead	Florida	2,343	49	%		35,205		31,414		1,089			230		Florida	2,343	49	%		35,789		35,789		642		689
ECHO JV	Various	—	50	%		16,076		15,624		451			231		Various	—	50	%		16,492		16,222		270		294
		5,941				$	57,366	$	53,080	$	3,596		$	2,876		5,941				$	55,195	$	57,755	$	4,759	$	2,808

_____________________


(a)	Loggerhead sites represent marina slip count.


(b)	The percentages shown approximate our economic interest as of ~~September~~June 30, ~~2018.~~2019. Our legal ownership interest may differ.


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


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

On March 29, 2018, the Crosswinds joint venture repaid 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.

We received approximately ~~$3.0~~$7.2 million and ~~$2.7~~$1.8 million in distributions from ~~these~~our unconsolidated joint ventures for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Approximately ~~$0.1~~$2.7 million of the distributions made to us exceeded our basis in unconsolidated joint ventures for the six months ended June 30, 2019 and, ~~$0.6 million~~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 ~~nine~~six months ended ~~September~~June 30, ~~2018 and September 30, 2017, respectively, and as such were recorded as income from unconsolidated joint ventures.~~2018.

Note 78 – Borrowing Arrangements

Mortgage Notes Payable

2019 Activity

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

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

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

2018 Activity

During the three months ended March 31, 2018, we closed on one loan, secured by two RV ~~resorts,~~communities, for gross proceeds of approximately $64.0 million. The loan carries an interest rate of ~~4.83%~~4.8% per annum and matures in 2038.

In connection with the Serendipity acquisition that closed during the ~~first quarter of~~three months ended March 31, 2018, we assumed a loan of approximately $9.2 million and obtained additional financing of $8.8 million for a total mortgage debt, secured by the ~~manufactured home~~MH community, of $18.0 ~~million. The loans carry~~million with an ~~average~~ interest rate of ~~4.75% and mature~~4.8% that matures in 2039.

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 8 – Borrowing Arrangements (continued)

Our mortgage notes payable is classified as Level 2 in the fair value hierarchy. The following table presents the fair value of ~~September 30, 2018 and December 31, 2017, we had outstanding~~our mortgage ~~indebtedness of approximately $2,016.3 million and $1,971.7 million, respectively, net of deferred financing costs.~~notes payable:



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

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 nine months ended September~~as of June 30, ~~2018~~2019, was approximately ~~4.7%~~4.5% per annum. The debt bears interest at stated rates ranging from ~~3.1%~~3.5% to 8.9% per annum and matures on various dates ranging from ~~2018~~2020 to 2041. The debt encumbered a total of ~~124~~116 and ~~120~~118 of our Properties as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, and the carrying value of such Properties was approximately ~~$2,508.5~~$2,475.4 million and ~~$2,323.1~~$2,489.8 million, as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Unsecured Line of Credit

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we ~~borrowed and paid~~did not borrow or pay off amounts on our unsecured Line of Credit ("LOC"). During the six months ended June 30, 2018, we paid off our unsecured line of credit ~~leaving a~~ balance, ~~of $80.0~~including approximately $30.0 million outstanding as of ~~September~~December 31, 2017. As of June 30, ~~2018.~~2019, the full capacity on our LOC remained available.

As of ~~September~~June 30, ~~2018,~~2019, we ~~are~~were in compliance in all material respects with the covenants in all our borrowing arrangements.

Note 9 – Derivative Instruments and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

Our objective in utilizing interest rate derivatives is to add stability to our interest expense and to manage our exposure to interest rate movements. We do not enter into derivatives for speculative purposes. In connection with our $200.0 million senior unsecured term loan (the “Term Loan”), which has an interest rate of LIBOR plus 1.20% to 1.90% per annum, we entered into a three-year LIBOR Swap Agreement (the "Swap") allowing us to trade the variable interest rate on the Term Loan for a fixed interest rate. The Swap has a notional amount of $200.0 million of outstanding principal with an underlying LIBOR of 1.85% per annum and matures on November 1, 2020. Based on the leverage as of June 30, 2019, our spread over LIBOR was 1.20% resulting in an estimated all-in interest rate of 3.05% per annum.

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



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

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



Derivatives in Cash Flow Hedging Relationship	Amount of (gain)/loss recognized in OCI on derivative for the six months ended June 30,					Location of (gain)/ loss reclassified from accumulated OCI into income	Amount of (gain)/loss reclassified from accumulated OCI into income for the six months ended June 30,
(amounts in thousands)	2019		2018			(amounts in thousands)	2019			2018
Interest Rate Swap	$	1,901	$	(2,544	)	Interest Expense	$	(640	)	$	93

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 9 – Derivative Instruments and Hedging Activities (continued)

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

Note 810 – Equity Incentive Awards

Compensation expense related to restricted stock and stock options, reported in General and administrative on the Consolidated Statements of Income and Comprehensive Income, for the quarters ended September 30, 2018 and 2017 was approximately $2.7 million and $2.6 million, respectively, and for the nine months ended September 30, 2018 and 2017 was approximately $7.3 million and $6.8 million, respectively.

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. ~~Grants under~~During 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. The Compensation Committee determines the vesting schedule, if any, of each restricted stock grant or stock option grant and the term of each 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 September 30, 2018, 2,927,923 shares remained available for grant.

~~On February 1, 2018, we awarded 70,250~~quarter ended March 31, 2019, 61,200 shares of restricted stock ~~(the “2018 Awards”) at a fair market value of approximately $5.9 million~~were awarded to certain members of our ~~senior~~ management ~~for their service~~team. Of these shares, 50% are time-based awards, vesting in ~~2018. These restricted stock grants vest~~equal installments over a three-year ~~vesting~~ period ~~with one-third vesting~~ on ~~December 28, 2018~~January 31, 2020, January 29, 2021, and ~~the remaining two-thirds vesting on each~~January 31, 2022, respectively, and have a grant date fair value 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.$3.2 million. The remaining ~~one-half~~50% are performance-based awards, and are valued using the closing price at the grant date when all the key terms and conditions are known to all parties. The 10,201 shares of ~~the Extended Vesting Portion of the 2018 Awards provide for performance-based vesting and will vest,~~restricted stock awarded in 2019 subject to ~~the satisfaction~~2019 performance goals have a grant date fair value of ~~the performance conditions to be established by the Compensation Committee in the year~~$1.1 million. Additionally, 11,711 shares of ~~the vesting period, in equal installments on December 28, 2019 and December 28, 2020.~~

~~Additionally, on February 1, 2018, we awarded a one-time transition award of time-based~~ restricted stock ~~(the "Transition Awards") as~~awarded in 2018 subject to 2019 performance goals have a ~~transition from our prior practice of granting annual restricted stock awards which vest in full on December 31 of the relevant~~ grant ~~year. On February 1, 2018, we awarded Transition Awards for 70,250 shares of common stock at a~~date fair ~~market~~ value of ~~approximately $5.9 million to certain members of our senior management. These Transition Awards are intended to mitigate~~$1.3 million.

During the ~~impact of a reduction in the realized pay for certain members of our senior management in 2018 and~~quarter ended June 30, 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 intend to replicate these Transition Awards in future years.

~~On May 1, 2018,~~ we awarded to certain members of our Board of Directors, ~~51,388~~35,431 shares of ~~Restricted Stock~~restricted stock at a fair ~~market~~ value of approximately ~~$4.6~~$4.1 million. These shares are time-based awards subject to various vesting dates between October 30, 2019 and April 30, 2022.

Compensation expense related to restricted stock and stock options, reported in General and administrative on the Consolidated Statements of Income and Comprehensive Income, for the quarters ended June 30, 2019 and 2018, was $2.6 million and Options to purchase 6,270 shares of common stock with an exercise price of $89.65 per share. The shares of common stock covered by these awards are subject to multiple tranches that vest between November 1, 2018$2.7 million, respectively, and ~~May 1, 2021.~~

On July 31, 2018, we awarded to certain members of our Board of Directors 617 shares of Restricted Stock at a fair market value of approximately $0.1 million. The shares of common stock covered by these awards are subject to multiple tranches that vest between January 31,for the six months ended June 30, 2019 and ~~July 31, 2021.~~2018, was approximately $5.0 million and $4.5 million, respectively.

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. 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.

~~Equity LifeStyle Properties, Inc.~~

~~Notes to Consolidated Financial Statements~~

Note 911 – Commitments and Contingencies

~~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. ~~Other~~The Proceedings include, but are not limited to, legal claims made by employees, vendors and customers, and notices, consent decrees, information requests, and additional permit requirements and other similar enforcement actions by governmental agencies relating to our utility infrastructure, including water and wastewater treatment plants and other waste treatment facilities and electrical systems. Additionally, in the ordinary course of business, our operations are subject to audit by various taxing authorities. Management believes these ~~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 1012 – 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.

All revenues ~~are~~were from external customers and there iswas no customer who contributed 10% or more of our total revenues during the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 or ~~2017.~~2018.

The following tables summarize our segment financial information for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~:2018:

Quarter Ended~~September~~ June 30, ~~2018~~2019


(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated			Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	236,204		$	13,204		$	249,408		$	233,848		$	11,836		$	245,684
Operations expenses	(114,384		)	(12,747		)	(127,131		)	(116,893		)	(10,558		)	(127,451		)
Income from segment operations	121,820			457			122,277			116,955			1,278			118,233
Interest income	863			978			1,841			950			846			1,796
Depreciation on real estate assets and rental homes	(30,425		)	(2,431		)	(32,856		)
Amortization of in-place leases	(2,124		)	—			(2,124		)
Depreciation and amortization										(35,197		)	(2,579		)	(37,776		)
Income (loss) from operations	$	90,134		$	(996	)	$	89,138		$	82,708		$	(455	)	$	82,253
Reconciliation to consolidated net income:
Corporate interest income							5									$	7
Income from other investments, net							5,421									879
General and administrative							(8,816		)							(9,225		)
Other expenses							(386		)							(540		)
Interest and related amortization							(26,490		)							(26,024		)
Equity in income of unconsolidated joint ventures							788									3,226
Early debt retirement																(1,491		)
Consolidated net income							$	59,660								$	49,085

Total assets	$	3,630,136		$	224,901		$	3,855,037		$	3,766,573		$	247,905		$	4,014,478
Capital improvements	$	21,722		$	25,339		$	47,061		$	28,501		$	40,502		$	69,003

Quarter EndedJune 30, 2018



(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	222,167		$	13,060		$	235,227
Operations expenses	(110,046		)	(12,234		)	(122,280		)
Income from segment operations	112,121			826			112,947
Interest income	823			1,033			1,856
Depreciation and amortization	(31,954		)	(2,391		)	(34,345		)
Income (loss) from operations	$	80,990		$	(532	)	$	80,458
Reconciliation to consolidated net income:
Corporate interest income							$	6
Income from other investments, net							3,413
General and administrative							(9,669		)
Other expenses							(367		)
Interest and related amortization							(26,285		)
Equity in income of unconsolidated joint ventures							1,613
Consolidated net income							$	49,169

Total assets	$	3,477,455		$	222,734		$	3,700,189
Capital improvements	$	26,602		$	23,459		$	50,061

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 1012 – Reportable Segments (continued)

~~Quarter~~

Six Months Ended~~September~~ June 30, ~~2017~~2019


(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated			Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	223,184		$	14,415		$	237,599		$	479,864		$	22,173		$	502,037
Operations expenses	(110,431		)	(13,528		)	(123,959		)	(225,863		)	(19,477		)	(245,340		)
Income from segment operations	112,753			887			113,640			254,001			2,696			256,697
Interest income	773			1,042			1,815			1,844			1,696			3,540
Depreciation on real estate assets and rental homes	(27,879		)	(2,614		)	(30,493		)
Amortization of in-place leases	(138		)	—			(138		)
Depreciation and amortization										(70,740		)	(5,013		)	(75,753		)
Gain on sale of real estate, net										52,507			—			52,507
Income (loss) from operations	$	85,509		$	(685	)	$	84,824		$	237,612		$	(621	)	$	236,991
Reconciliation to consolidated net income:
Corporate interest income							159									$	14
Income from other investments, net							2,052									1,865
General and administrative							(7,505		)							(19,134		)
Other expenses							(324		)							(967		)
Interest and related amortization							(25,027		)							(52,417		)
Equity in income of unconsolidated joint ventures							686									4,759
Early debt retirement																(1,491		)
Consolidated net income							$	54,865								$	169,620

Total assets	$	3,298,122		$	227,725		$	3,525,847		$	3,766,573		$	247,905		$	4,014,478
Capital improvements	$	20,308		$	14,104		$	34,412		$	52,906		$	68,538		$	121,444

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

(amounts in thousands)
Property
Operations

Home Sales
and Rentals
Operations
Consolidated
Operations revenues $ 689,387
$ 38,383
$ 727,770
Operations expenses (329,942 ) (36,054 ) (365,996 )
Income from segment operations 359,445
2,329
361,774
Interest income 2,494
2,918
5,412
Depreciation on real estate assets and rental homes (89,308 ) (7,322 ) (96,630 )
Amortization of in-place leases (5,069 ) —
(5,069 )
Income (loss) from operations $ 267,562
$ (2,075 ) $ 265,487
Reconciliation to consolidated net income:
Corporate interest income 246
Income from other investments, net 9,774
General and administrative (26,523 )
Other expenses (1,096 )
Interest and related amortization (78,478 )
Equity in income of unconsolidated joint ventures 3,596
Consolidated net income $ 173,006

Total assets $ 3,630,136
$ 224,901
$ 3,855,037
Capital improvements $ 69,591
$ 58,845
$ 128,436



(amounts in thousands)	Property Operations			Home Sales and Rentals Operations			Consolidated
Operations revenues	$	453,183		$	25,179		$	478,362
Operations expenses	(215,558		)	(23,307		)	(238,865		)
Income from segment operations	237,625			1,872			239,497
Interest income	1,631			1,940			3,571
Depreciation and amortization	(56,029		)	(10,690		)	(66,719		)
Income (loss) from operations	$	183,227		$	(6,878	)	$	176,349
Reconciliation to consolidated net income:
Corporate interest income							$	241
Income from other investments, net							4,353
General and administrative							(17,707		)
Other expenses							(710		)
Interest and related amortization							(51,988		)
Equity in income of unconsolidated joint venture							2,808
Consolidated net income							$	113,346

Total assets	$	3,477,455		$	222,734		$	3,700,189
Capital Improvements	$	47,870		$	33,507		$	81,377

Equity LifeStyle Properties, Inc.

Notes to Consolidated Financial Statements

Note 1012 – Reportable Segments (continued)

~~Nine Months EndedSeptember 30, 2017~~

(amounts in thousands)
Property
Operations

Home Sales
and Rentals
Operations
Consolidated
Operations revenues $ 648,766
$ 37,100
$ 685,866
Operations expenses (310,337 ) (33,604 ) (343,941 )
Income from segment operations 338,429
3,496
341,925
Interest income 2,256
3,122
5,378
Depreciation on real estate assets and rental homes (82,939 ) (7,910 ) (90,849 )
Amortization of in-place leases (2,128 ) —
(2,128 )
Income (loss) from operations $ 255,618
$ (1,292 ) $ 254,326
Reconciliation to consolidated net income:
Corporate interest income 164
Income from other investments, net 3,918
General and administrative (23,339 )
Other expenses (814 )
Interest and related amortization (74,728 )
Equity in income of unconsolidated joint ventures 2,876
Consolidated net income $ 162,403

Total assets $ 3,298,122
$ 227,725
$ 3,525,847
Capital improvements $ 52,040
$ 35,837
$ 87,877

The following table summarizes our financial information for the Property Operations segment for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~: 2018:


	Quarters Ended September 30,						Nine Months Ended September 30,						Quarters Ended June 30,						Six Months Ended June 30,
(amounts in thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Revenues:
Community base rental income	$	130,746		$	123,177		$	386,064		$	365,833
Resort base rental income	64,351			58,471			183,836			169,594
Right-to-use annual payments	12,206			11,531			35,616			34,133
Right-to-use contracts current period, gross	4,863			4,208			11,969			11,212
Rental income													$	208,375		$	195,594		$	428,357		$	399,072
Right-to-use annual payments (membership subscriptions)													12,586			11,891			24,902			23,410
Right-to-use contracts current period, gross (membership upgrade sales)													5,041			3,944			8,879			7,106
Right-to-use contract upfront payments, deferred, net	(2,883		)	(1,670		)	(6,189		)	(3,766		)	(2,912		)	(2,021		)	(4,683		)	(3,306		)
Utility and other income	25,917			26,295			75,758			69,071
Other income													10,265			12,536			20,635			25,572
Ancillary services revenues, net	1,004			1,172			2,333			2,689			493			223			1,774			1,329
Total property operations revenues	236,204			223,184			689,387			648,766			233,848			222,167			479,864			453,183
Expenses:
Property operating and maintenance	84,445			80,164			239,444			221,119			83,576			80,091			160,320			154,999
Real estate taxes	13,240			14,006			40,815			41,986			15,107			13,440			30,430			27,575
Sales and marketing, gross	3,568			3,277			9,685			8,861			4,214			3,305			7,623			6,117
Right-to-use contract commissions, deferred, net	(458		)	(176		)	(744		)	(372		)	(389		)	(262		)	(580		)	(286		)
Property management	13,589			13,160			40,742			38,743			14,385			13,472			28,070			27,153
Total property operations expenses	114,384			110,431			329,942			310,337			116,893			110,046			225,863			215,558
Income from property operations segment	$	121,820		$	112,753		$	359,445		$	338,429		$	116,955		$	112,121		$	254,001		$	237,625

~~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 and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:


	Quarters Ended September 30,				Nine Months Ended September 30,				Quarters Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Revenues:
Rental income ^(a)									$	3,632	$	3,561	$	7,216	$	7,076
Gross revenue from home sales	$	9,339	$	10,012	$	26,753	$	24,872	7,825		9,105		14,300		17,414
Brokered resale revenues, net	358		337		1,009		925		379		369		657		651
Rental home income ^(a)	3,507		3,592		10,583		10,829
Ancillary services revenues, net	—		474		38		474		—		25		—		38
Total revenues	13,204		14,415		38,383		37,100		11,836		13,060		22,173		25,179
Expenses:
Property operating and maintenance									1,292		1,629		2,496		3,053
Cost of home sales	9,742		10,377		27,948		25,391		8,164		9,632		14,796		18,206
Home selling expenses	1,101		1,447		3,149		3,301		1,102		973		2,185		2,048
Rental home operating and maintenance	1,904		1,704		4,957		4,912
Total expenses	12,747		13,528		36,054		33,604		10,558		12,234		19,477		23,307
Income from home sales and rentals operations segment	$	457	$	887	$	2,329	$	3,496	$	1,278	$	826	$	2,696	$	1,872

______________________


(a)	Segment information ~~does not include~~includes income related to rental homes. Income related to Site rent on rental ~~income~~homes is included ~~in Community base rental income.~~within property operations.

~~Note 11 - Subsequent Events~~

On October 1, 2018, we paid off six mortgage loans of $66.3 million, including $0.1 million of prepayment penalties, using our line of credit. The loans, which would have matured in 2019, had a weighted average interest rate of 6.07% per annum and were secured by six MH properties.

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~~consolidated financial statements and related ~~Notes~~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, ~~2017, and with~~2018 ("2018 Form 10-K"), as well as information in the ~~information under the heading~~ "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our ~~Annual Report on~~2018 Form ~~10-K for the year ended December 31, 2017.~~10-K.

Overview and Outlook

We are a self-administered and self-managed real estate investment trust (“REIT”) with headquarters in Chicago, Illinois. We are a fully integrated owner and operator of lifestyle-oriented properties (“Properties”) consisting primarily of manufactured home ("MH") ~~communities~~ and recreational vehicle ("RV") ~~resorts and campgrounds.~~communities. As of ~~September~~June 30, ~~2018,~~2019, we owned or had an ownership interest in a portfolio of ~~411~~413 Properties located throughout the United States and Canada containing ~~153,847~~155,973 Sites. These Properties are located

Management's Discussion and Analysis (continued)

in 3233 states and British Columbia, with more than 90 Properties with lake, river or ocean frontage and more than ~~100~~120 Properties within 10 miles of the coastal United States.

We invest in Properties in sought-after locations near retirement and vacation destinations and urban areas across the United States with a focus on ~~increasing operating cash flows.~~delivering value for both customers and stockholders. We seek growth in earnings, funds from operations ("FFO") and cash flows by enhancing the profitability and operation of our Properties and investments. We seek to accomplish this by attracting ~~high- quality customers to our Properties~~ and retaining ~~these~~high quality customers, who take pride in ~~the Property~~our Properties 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~~communities will continue to outpace supply for several years. We believe these individuals, seeking an active lifestyle, will continue to drive the market for ~~second home~~second-home sales as vacation properties, investment opportunities, or retirement retreats. The entitlement process to develop new MH and RV communities is extremely restrictive. As a result, there have been few new communities developed in our target geographic markets. We believe it is likely that over the next decade, we will continue to see high levels of ~~second home~~second-home sales and that ~~resort~~manufactured homes and cottages in our Properties will continue to provide a viable second-home alternative to site-built homes.

We also believe that our Properties and our business model provide an opportunity for increased cash flows and appreciation in value. These may be achieved through ~~increases in rental~~increasing occupancy and ~~occupancy rates,~~maintaining market rents, as well as expense controls, expansion of existing Properties and opportunistic acquisitions. We actively seek to acquire and are currently engaged in various stages of negotiations relating to the possible acquisition of additional properties, which may include contracts outstanding to acquire such properties that are subject to the satisfactory completion of our due diligence review.

We generate the majority of our revenues from customers renting our individual developed areas ("Sites"), or entering into right-to-use contracts (also referred to as membership ~~products)~~subscriptions), which provide our customers access to specific Properties for limited stays. Our MH community Sites and annual RV ~~resort~~community Sites are leased on an annual basis. Seasonal Sites are leased to customers generally for one to six months. Transient Sites are leased to customers on a short-term basis. The revenue from seasonal and transient Sites is generally higher during the first and third quarters. We consider the transient revenue stream to be our most volatile as it is subject to weather conditions and other factors affecting the marginal RV customer's vacation and travel preferences. We also have interests in joint venture Properties for which revenue is classified as Equity in income from unconsolidated joint ventures inon the Consolidated Statements of Income and Comprehensive Income.

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



		Total Sites as of ~~September~~June 30, ~~2018~~2019
MH Community Sites	~~72,400~~	72,000
~~Resort~~RV Community Sites:
Annual	~~28,500~~	30,400
Seasonal		11,300
Transient	~~11,400~~	12,100
~~Membership~~Thousand Trails portfolio ⁽¹⁾		24,300
Joint Ventures ⁽²⁾		5,900
	~~153,800~~	156,000

_________________________


⁽¹⁾	Primarily utilized to service the approximately ~~112,500~~115,400 membership customers who have entered into a right-to-use ~~contract.~~contracts (membership subscriptions). Includes approximately 5,800 Sites rented on an annual basis.


⁽²⁾	~~Joint ventures have~~Includes approximately 2,700 annual Sites, 400 seasonal Sites, and 500 transient Sites and ~~includes~~ approximately 2,300 marina slips.

~~Management's Discussion and Analysis (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~~factory-built 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 represents an attractive source of occupancy and ~~the~~an opportunity to convert the renter to a homebuyer in the future. We also sell and rent homes through our joint venture, ECHO Financing, LLC (the "ECHO JV"). We ~~provide~~offer home sale brokerage services to residents of our Properties who move from a Property but do not relocate their home. In addition, we operate ancillary activities at certain Properties, such as golf courses, pro shops, stores and restaurants.

In the manufactured housing industry, options for home financing, also known as chattel financing, are limited. Chattel financing options available today include community owner-funded programs or ~~third-party~~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

Management's Discussion and Analysis (continued)

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

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

Results Overview

For the quarter ended ~~September~~June 30, ~~2018,~~2019, Net income available for Common Stockholders increased ~~$7.6~~$0.3 million to $46.4 million, or ~~$0.07 per Common Share, to $56.1 million, or $0.63~~$0.51 per fully diluted Common Share, compared to ~~$48.5~~$46.1 million, or ~~$0.56~~$0.52 per fully diluted Common Share, for the same period in ~~2017.~~2018. For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, Net income available for Common Stockholders increased ~~$17.5~~$53.3 million, or ~~$0.16~~$0.57 per fully diluted Common Share, to ~~$162.4~~$159.7 million, or ~~$1.82~~$1.77 per fully diluted Common Share, compared to ~~$144.9~~$106.4 million, or ~~$1.66~~$1.20 per fully diluted Common Share, for the same period in ~~2017.~~2018.

For the quarter ended ~~September~~June 30, ~~2018,~~2019, FFO available for Common Stock and OP Unit holders increased ~~$13.4~~$4.2 million, or ~~$0.13~~$0.04 per fully diluted Common Share, to ~~$97.7~~$89.8 million, or ~~$1.03~~$0.94 per fully diluted Common Share, compared to ~~$84.3~~$85.6 million, or $0.90 per fully diluted Common Share, for the same period in ~~2017.~~2018. For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, FFO available for Common Stock and OP Unit holders increased ~~$29.2~~$14.0 million, or ~~$0.26~~$0.13 per fully diluted Common Share, to ~~$281.5~~$197.8 million or ~~$2.97~~$2.07 per fully diluted Common Share, compared to ~~$252.3~~$183.8 million or ~~$2.71~~$1.94 per fully diluted Common Share, for the same period in ~~2017.~~2018.

For the quarter ended ~~September~~June 30, ~~2018,~~2019, Normalized FFO available for Common Stock and OP Unit holders increased ~~$8.8~~$8.1 million, or ~~$0.08~~$0.07 per fully diluted Common Share, to ~~$93.9~~$91.9 million, or ~~$0.99~~$0.96 per fully diluted Common Share, compared to ~~$85.1~~$83.8 million, or ~~$0.91~~$0.89 per fully diluted Common Share, for the same period in ~~2017.~~2018. For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, Normalized FFO available for Common Stock and OP Unit holders increased ~~$22.2~~$17.9 million or ~~$0.19~~$0.16 per fully diluted Common Share, to ~~$275.6~~$199.6 million, or ~~$2.91~~$2.08 per fully diluted Common Share, compared to ~~$253.4~~$181.7 million or ~~$2.72~~$1.92 per fully diluted Common Share, for the same period in ~~2017.~~2018.

For the quarter ended ~~September~~June 30, ~~2018,~~2019, our Core Portfolio property operating revenues, ~~in our Core Portfolio,~~ excluding deferrals, increased ~~$8.0 million, or 3.5%~~4.9% and property operating expenses, ~~in our Core Portfolio,~~ excluding deferrals and property management, increased ~~$1.9 million, or 1.9%~~4.5%, from the ~~quarter ended September 30, 2017,~~same period in 2018, resulting in an increase ~~of $6.1 million, or 4.8%,~~ in ~~our~~ income from property operations, excluding deferrals and property management, ~~from~~of 5.2% compared to the ~~quarter ended September 30, 2017.~~same period in 2018. For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, our Core Portfolio property operating revenues, ~~in our Core Portfolio,~~ excluding deferrals, increased ~~$31.9 million, or 4.9%,~~4.4% and property operating expenses, ~~in our Core Portfolio,~~ excluding deferrals and property management, increased ~~$13.8 million, or 5.1%,~~3.5% from the ~~nine months ended September 30, 2017,~~same period in 2018, resulting in an increase ~~of $18.1 million, or 4.8%,~~ in ~~our~~ income from property operations, excluding deferrals and property management, ~~from~~of 5.1% compared to the ~~nine months ended September 30, 2017.~~

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

same period in 2018.

We ~~continue to~~ focus on the quality of occupancy growth by increasing the number of manufactured homeowners in our Core ~~Portfolio.~~Portfolio over the long term. There may be fluctuations in the sources of occupancy gains depending on local market conditions, availability of vacant sites and success with converting renters to home owners. Our Core Portfolio average occupancy ~~consists of occupied home Sites~~includes both homeowners and renters in our MH communities ~~(both homeowners and renters)~~ and was ~~94.7%~~95.4% for ~~the quarter ended September 30, 2018, consistent with~~ the quarter ended June 30, ~~2018 and increased by 0.3% from 94.4%~~2019, compared to 95.3% for the ~~same period in 2017.~~quarter ended March 31, 2019 and 94.9% for the quarter ended June 30, 2018. As of ~~September~~June 30, ~~2018,~~2019, our Core Portfolio occupancy increased 81126 Sites with an increase in homeowner occupancy of ~~144~~79 Sites compared to occupancy as of ~~June 30, 2018.~~March 31, 2019. By comparison, ~~as of September 30, 2017,~~ our Core Portfolio occupancy increased 9561 Sites with an increase in homeowner occupancy of ~~267 Sites.~~145 Sites from the same period in 2018. Additionally, for both the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we have experienced rental rate increases, ~~which contributed~~contributing to a ~~4.0%~~4.5% growth ~~to Community~~in community base rent compared to the same ~~periods~~period in ~~2017.~~2018.

We ~~have experienced growth in revenues~~continue to grow RV rental income in our Core RV Portfolio as a result of our ability to increase ~~both rental~~ rates and occupancy. RV rental income in our Core Portfolio for the quarter ended ~~September~~June 30, ~~2018~~2019 was ~~5.9%~~4.1% higher than the same period in ~~2017.~~2018. Annual ~~seasonal~~ and ~~transient~~seasonal rental income for the quarter ended ~~September~~June 30, ~~2018~~2019 increased ~~6.4%~~6.0% and 4.0%, ~~4.0% and 5.4%, respectively, from~~respectively. Transient rental income declined 1.1% for the quarter ended ~~September~~June 30, ~~2017.~~2019 compared to the same period in 2018. RV rental income in our Core Portfolio for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~7.0%~~4.2% higher than the same period in ~~2017.~~2018. Annual and seasonal rental income for the six months ended June 30, 2019 increased 6.1% and 3.1%, respectively. Transient rental income declined 0.8% for the six months ended June 30, 2019 compared to the same period in 2018. The decrease in transient rental income for both the ~~nine~~quarter and six months ended ~~September~~June 30, 2019 was mainly due to weather related events at a limited number of Properties.

Management's Discussion and Analysis (continued)

We experienced growth in our membership base within our Thousand Trails portfolio during the quarter ended June 30, 2019. We sold approximately 6,600 Thousand Trails camping passes in the quarter and 10,200 for the six months ended June 30, 2019, an increase of 13.2% and 14.2% over the quarter and six months ended June 30, 2018, ~~increased 6.7%, 8.6% and 6.6%, respectively, from~~respectively. In addition, we sold 749 membership upgrades during the ~~nine months~~quarter ended ~~September~~June 30, ~~2017.~~

~~We continue~~2019, 19.8% more than the same period in 2018. Our customers are increasingly choosing self-service options to ~~build on our successful multi-channel marketing campaigns, incorporating social media and advanced marketing analytics.~~complete their transactions with us. During the quarter ended ~~September~~June 30, ~~2018,~~2019, our total Core RV rental income through digital channels increased ~~24%~~21.0% and our sales of online camping passes increased ~~43%~~27.6% compared to the same period in ~~2017. We have increased the awareness of our product offerings and year over year we have seen an increase in social media fans and followers to a current base of over 500,000.~~2018.

~~We continue to see high demand~~Demand for our homes and ~~communities.~~communities remains strong as evidenced by factors including our high occupancy levels. We closed 141 new home sales in the quarter ended September 30, 2018 compared to 173 during the quarter ended September 30, 2017 and 417 new home sales in the nine months ended September 30, 2018 compared to 413 during the nine months ended September 30, 2017. The117 new home sales during the quarter ended June 30, 2019 compared to 146 during the quarter ended June 30, 2018 and ~~nine~~208 new home sales during the six months ended ~~September~~June 30, ~~2018 were primarily~~2019 compared to 276 during the six months ended in June 30, 2018. The decrease in new home sales from the same period in the prior year was mainly due to certain areas of our ~~Arizona, Florida, Colorado~~portfolio reaching historically high occupancy levels. We continue to believe renting our vacant homes represents an attractive source of occupancy and ~~California communities.~~an opportunity to convert the renter to a homebuyer in the future.

As of ~~September~~June 30, ~~2018,~~2019, we had ~~4,219~~4,013 occupied rental homes in our Core MH communities, including ~~265~~298 homes rented through our ECHO JV. ~~Home~~Our Core Portfolio income from rental ~~program net operating income was approximately $7.2 million,~~operations, net of ~~rental asset~~ depreciation, ~~expense of approximately $2.4~~was $7.6 million for the quarter ended ~~September~~June 30, ~~2018,~~2019 and ~~approximately $7.9 million, net of rental asset depreciation expense of approximately $2.6~~$7.3 million for the quarter ended ~~September~~June 30, ~~2017.~~2018. Approximately ~~$8.0~~$7.8 million of rental operations revenue related to Site rental was included within community base rental income in our Core Portfolio for both the quarters ended June 30, 2019 and 2018. Our Core Portfolio income from rental operations, net of depreciation, was $15.2 million for the six months ended June 30, 2019 and $14.7 million for the six months ended June 30, 2018. Approximately $15.5 million and ~~$8.7~~$15.6 million of ~~home~~ rental operations revenue related to Site rental was included in community base rental income in our Core Portfolio for the ~~quarters ended September 30, 2018 and 2017, respectively. For the nine~~six months ended ~~September~~June 30, ~~2018~~2019 and 2017, home rental program net operating income was approximately $22.8 million and $24.3 million, respectively, net of rental asset depreciation expense of approximately $7.3 million for the nine months ended September 30, 2018, and $7.9 million for the nine months ended September 30, 2017. Approximately $24.5 million and $26.3 million of home rental operations revenue was included in community base rental income for the nine months ended September 30, 2018 and nine months ended September 30, 2017, respectively.

Our gross investment in real estate increased approximately ~~$250.5~~$163.4 million to ~~$5,166.3~~$5,436.9 million as of ~~September~~June 30, ~~2018~~2019 from ~~$4,915.8~~$5,273.5 million as of December 31, ~~2017,~~2018, primarily due to new acquisitions ~~as well as~~and capital ~~expenditures during the nine months ended September 30, 2018.~~

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

expenditures.

The following chart lists ~~both~~ the Properties acquired or ~~invested in~~sold from January 1, ~~2017~~2018 through ~~September~~June 30, ~~2018, which represents Non-Core Properties,~~2019 and Sites added through expansion opportunities at our existing Properties.



Property	Location	Type of Property	Transaction Date	Sites

Total Sites as of January 1, ~~2017~~2018				~~146,610~~151,323
Acquisitions:
~~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
Holiday Travel Park	Holiday, Florida	RV	April 20, 2018	613
Everglades Lakes	Fort Lauderdale, Florida	MH	July 20, 2018	612
Sunseekers RV Resort	North Fort Myers, Florida	RV	September 21, 2018	241
~~Joint Venture:~~Timber Creek RV Resort	Westerly, Rhode Island	RV	November 20, 2018	364
~~Crosswinds~~Palm Lake	~~St. Petersburg,~~Riviera Beach, Florida	MH	~~June 15, 2017~~	~~376~~
~~Loggerhead~~ ^(a)	~~Multiple, Florida~~	~~Marina~~	~~August 8, 2017~~	~~2,343~~
~~Expansion Site Development and other:~~
~~Net Sites added (reconfigured) in 2017~~				~~124~~
~~Net Sites added (reconfigured) in~~December 13, 2018	915
King Nummy Trail Campground	Cape May Court House, New Jersey	RV	~~404~~
~~Total Sites as of September 30,~~December 20, 2018	313
Drummer Boy Camping Resort	Gettysburg, Pennsylvania	RV	~~153,847~~March 25, 2019	465
Lake of the Woods Campground	Wautoma, Wisconsin	RV	March 25, 2019	303
Round Top RV Campground	Gettysburg, Pennsylvania	RV	April 10, 2019	391
White Oak Shores Camping and RV Resort	Stella, North Carolina	RV	May 29, 2019	455

Expansion Site Development:
~~(a)~~Sites added in 2018	~~Loggerhead sites represent marina slip count.~~				419
Sites added in 2019					373

Site Reconfigured, net					(5)

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

Management's Discussion and Analysis (continued)

Non-GAAP Financial Measures

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

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

Income from Property Operations and Core Portfolio

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

Our Core Portfolio consists of our Properties owned and operated since ~~December 31, 2016.~~January 1, 2018. Core Portfolio income from property operations, excluding deferrals and property management, is useful to investors for annual comparison as it removes the fluctuations associated with acquisitions, dispositions and significant transactions or unique situations. Our Non-Core Portfolio ~~(or Acquisitions)~~ includes all Properties that were not owned and operated during all of ~~2017~~2018 and ~~2018. This includes, but is not limited to, five properties acquired during 2018, three properties acquired during 2017 and~~2019, including Fiesta Key and Sunshine Key RV ~~Resorts.~~communities.

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

We define FFO as net income, computed in accordance with GAAP, excluding gains ~~and actual~~ or ~~estimated~~ losses from sales of properties, ~~plus real estate related~~ depreciation and amortization ~~impairments, if any,~~related to real estate, impairment charges, and ~~after~~ adjustments ~~for~~to reflect our share of FFO of 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

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

do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. We receive upfront non-refundable payments from the entry of right-to-use contracts. In accordance with GAAP, the upfront non-refundable payments and related commissions are deferred and amortized over the estimated customer life. Although the NAREIT definition of FFO does not address the treatment of non-refundable right-to-use payments, we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO.

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

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

Management's Discussion and Analysis (continued)

Income from Rental Operations, Net of Depreciation

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

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

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


	Quarters Ended September 30,						Nine Months Ended September 30,						Quarters Ended June 30,						Six Months Ended June 30,
(amounts in thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Computation of Income from Property Operations:
Net income available for Common Stockholders	$	56,070		$	48,525		$	162,429		$	144,911		$	46,401		$	46,137		$	159,710		$	106,359
Redeemable perpetual preferred stock dividends and original issuance costs	—			3,054			8			7,667
Income allocated to non-controlling interests - Common OP Units	3,590			3,286			10,569			9,825
Redeemable preferred stock dividends													8			8			8			8
Income allocated to non-controlling interests – Common OP Units													2,676			3,024			9,902			6,979
Equity in income of unconsolidated joint ventures	(788		)	(686		)	(3,596		)	(2,876		)	(3,226		)	(1,613		)	(4,759		)	(2,808		)
Income before equity in income of unconsolidated joint ventures	58,872			54,179			169,410			159,527			45,859			47,556			164,861			110,538
Total (other income) /expenses, net	63,405			59,461			192,364			182,398
(Income)/Loss from home sales operations and other	142			(171		)	964			(268		)
Gain on sale of real estate, net													—			—			(52,507		)	—
Total other expenses, net													72,374			65,391			144,343			128,959
Loss/(Income) from home sales operations and other													569			883			250			822
Income from property operations	$	122,419		$	113,469		$	362,738		$	341,657		$	118,802		$	113,830		$	256,947		$	240,319

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

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:


	Quarters Ended September 30,						Nine Months Ended September 30,						Quarters Ended June 30,						Six Months Ended June 30,
(amounts in thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Computation of FFO and Normalized FFO:
Net income available for Common Stockholders	$	56,070		$	48,525		$	162,429		$	144,911		$	46,401		$	46,137		$	159,710		$	106,359
Income allocated to non-controlling interests - Common OP units	3,590			3,286			10,569			9,825
Income allocated to non-controlling interests – Common OP Units													2,676			3,024			9,902			6,979
Right-to-use contract upfront payments, deferred, net ⁽¹⁾	2,883			1,670			6,189			3,766			2,912			2,021			4,683			3,306
Right-to-use contract commissions, deferred, net	(458		)	(176		)	(744		)	(372		)	(389		)	(262		)	(580		)	(286		)
Depreciation on real estate assets	30,424			27,879			89,307			82,939
Depreciation on rental homes	2,432			2,614			7,323			7,910
Amortization of in-place leases	2,124			138			5,069			2,128
Depreciation and amortization													37,776			34,345			75,753			66,719
Depreciation on unconsolidated joint ventures	651			360			1,390			1,171			441			367			873			739
Gain on sale of real estate, net													—			—			(52,507		)	—
FFO available for Common Stock and OP Unit holders	97,716			84,296			281,532			252,278			89,817			85,632			197,834			183,816
Transaction costs ⁽²⁾	—			—			—			324
Preferred stock original issuance costs	—			757			—			757
Insurance proceeds due to catastrophic weather event ⁽³⁾	(3,833		)	—			(5,925		)	—
Early debt retirement ⁽¹⁾													2,085			—			2,085			—
Insurance proceeds due to catastrophic weather event ⁽²⁾													—			(1,806		)	(349		)	(2,092		)
Normalized FFO available for Common Stock and OP Unit holders	$	93,883		$	85,053		$	275,607		$	253,359		$	91,902		$	83,826		$	199,570		$	181,724
Weighted average Common Shares outstanding – fully diluted	95,263			93,324			94,827			93,135
Weighted average Common Shares outstanding – Fully Diluted													95,930			94,623			95,773			94,600

______________________

⁽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 are recognized on a straight-line basis over 20 years to reflect~~ Includes our ~~current estimated customer life for the majority~~portion 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.early debt retirement costs incurred by unconsolidated joint ventures.

⁽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.

⁽³⁾Represents insurance recovery revenue from reimbursement for capital expenditures related to Hurricane Irma.

Management's Discussion and Analysis (continued)

Results of Operations

Comparison of the Quarter Ended ~~September~~June 30, ~~2018~~2019 to the Quarter Ended ~~September~~June 30, ~~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 endedSeptember 30,~~ 2018 ~~and~~ ~~2017~~. The Core Portfolio in this discussion includes all Properties acquired on or before December 31, 2016 and which we have owned and operated continuously since January 1, 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
(amounts in thousands) 2018 2017 Variance
%
Change
2018 2017 Variance
%
Change
Community base rental income $ 128,420
$ 122,975
$ 5,445
4.4 % $ 130,746
$ 123,177
$ 7,569
6.1 %
Rental home income 3,507
3,592
(85 ) (2.4 )% 3,507
3,592
(85 ) (2.4 )%
Resort base rental income 59,941
56,628
3,313
5.9 % 64,351
58,471
5,880
10.1 %
Right-to-use annual payments 12,205
11,507
698
6.1 % 12,206
11,531
675
5.9 %
Right-to-use contracts current period, gross 4,863
4,208
655
15.6 % 4,863
4,208
655
15.6 %
Utility and other income 24,045
26,109
(2,064 ) (7.9 )% 25,917
26,295
(378 ) (1.4 )%
Property operating revenues, excluding deferrals 232,981
225,019
7,962
3.5 % 241,590
227,274
14,316
6.3 %

Property operating and maintenance 80,891
78,875
2,016
2.6 % 84,445
80,164
4,281
5.3 %
Rental home operating and maintenance 1,904
1,705
199
11.7 % 1,904
1,704
200
11.7 %
Real estate taxes 13,308
13,921
(613 ) (4.4 )% 13,240
14,006
(766 ) (5.5 )%
Sales and marketing, gross 3,567
3,277
290
8.8 % 3,568
3,277
291
8.9 %
Property operating expenses, excluding deferrals and Property management 99,670
97,778
1,892
1.9 % 103,157
99,151
4,006
4.0 %
Income from property operations, excluding deferrals and Property management ⁽¹⁾
133,311
127,241
6,070
4.8 % 138,433
128,123
10,310
8.0 %
Property management 13,587
13,160
427
3.2 % 13,589
13,160
429
3.3 %
Income from property operations, excluding deferrals⁽¹⁾
119,724
114,081
5,643
4.9 % 124,844
114,963
9,881
8.6 %
Right-to-use contracts, deferred and sales and marketing, deferred, net 2,425
1,494
931
62.3 % 2,425
1,494
931
62.3 %
Income from property operations ⁽¹⁾
$ 117,299
$ 112,587
$ 4,712
4.2 % $ 122,419
$ 113,469

$ 8,950
7.9 %

~~__________________________~~

⁽¹⁾ Non-GAAP 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 Core and Non-Core Portfolios, for the quarter ended September 30, 2018 increased $9.0 million, or 7.9%, from the quarter ended September 30, 2017, primarily driven by an increase of $4.7 million, or 4.2%, in our Core Portfolio income from property operations and an increase of $4.2 million, in our Non-Core Portfolio income from property operations. The increase in Core Portfolio income from property operations for the quarter ended September 30, 2018 is primarily due to an increase in Community base rental income and Resort base rental income, partially offset by a decrease in Utility and other income and an increase in Property operating expenses, excluding deferrals and property management. The increase in Non-Core Portfolio income from property operations is primarily due to contribution from our Everglades acquisition that closed during the quarter ended September 30, 2018 and $1.2 million of insurance proceeds received during the quarter ended September 30, 2018, which we have identified as business interruption recovery at our RV properties in the Florida Keys.

~~Property Operating Revenues~~

Community base rental income in our Core Portfolio for the quarter ended September 30, 2018 increased $5.4 million, or 4.4%, from the quarter ended September 30, 2017, which reflects 4.0% growth from rate increases and 0.4% growth from occupancy gains. The average monthly base rental income per Site increased to approximately $637 for the quarter ended September 30, 2018 from approximately $613 for the same period in 2017. The average occupancy for the Core Portfolio increased to 94.7% for the quarter ended September 30, 2018 from 94.4% for the same period in 2017.

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

Resort base rental income in our Core Portfolio for the quarter ended September 30, 2018 increased $3.3 million, or 5.9%, from the quarter ended September 30, 2017 driven by increases in annual, seasonal and transient revenues as a result of higher rental rates and occupancy. Resort base rental income for the ~~quarters ended~~ ~~September 30, 2018 and 2017 is comprised of the following:~~

Core Portfolio Total Portfolio
(amounts in thousands) 2018 2017 Variance
%
Change
2018 2017 Variance
%
Change
Annual $ 35,407
$ 33,291
$ 2,116
6.4 % $ 37,424
$ 33,647
$ 3,777
11.2 %
Seasonal 4,477
4,304
173
4.0 % 4,838
4,952
(114 ) (2.3 )%
Transient 20,057
19,033
1,024
5.4 % 22,089
19,872
2,217
11.2 %
Resort base rental income $ 59,941
$ 56,628
$ 3,313
5.9 % $ 64,351
$ 58,471
$ 5,880
10.1 %

Utility and other income in our Core Portfolio for the quarter ended September 30, 2018 decreased by $2.1 million, or 7.9%, from the quarter ended September 30, 2017 due to insurance recovery revenue related to Hurricane Irma of $3.1 million recorded in the Core portfolio during the third quarter of 2017 to offset expenses incurred. This decrease was partially offset by an insurance recovery revenue accrual of $0.4 million related to Hurricane Florence recorded during the third quarter of 2018 to offset expenses incurred and an increase in utility income of $0.5 million, primarily due to higher electric and water usage and rates.

~~Property Operating Expenses~~

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for the quarter ended September 30, 2018 increased $1.9 million, or 1.9%, from the quarter ended September 30, 2017, mainly due to an increase in property payroll as a result of 2018 salary increases, higher utility expense from increased electric, trash and sewer expenses and higher insurance expense as a result of increased insurance premiums from our 2018 policy renewal. These increases were partially offset by a $2.0 million decrease in repair and maintenance expenses. We recorded clean up costs of $0.5 million related to Hurricane Florence during the third quarter of 2018 and $3.1 million related to Hurricane Irma during the third quarter of 2017.

~~Home Sales and Rental Operations~~

~~Home Sales and Other~~

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

Quarters Ended September 30,
(amounts in thousands, except home sales volumes) 2018 2017 Variance
%
Change
Gross revenues from new home sales ⁽¹⁾
$ 7,048
$ 7,233
$ (185 ) (2.6 )%
Cost of new home sales ⁽¹⁾
(6,946 ) (7,276 ) 330
4.5 %
Gross profit (loss) from new home sales 102
(43 ) 145
337.2 %

Gross revenues from used home sales 2,291
2,779
(488 ) (17.6 )%
Cost of used home sales (2,796 ) (3,101 ) 305
9.8 %
Loss from used home sales (505 ) (322 ) (183 ) (56.8 )%

Brokered resale and ancillary services revenues, net 1,362
1,983
(621 ) (31.3 )%
Home selling expenses (1,101 ) (1,447 ) 346
23.9 %
Income (loss) from home sales and other $ (142 ) $ 171
$ (313 ) (183.0 )%

Home sales volumes
Total new home sales ⁽²⁾
141
173
(32 ) (18.5 )%
New Home Sales Volume - ECHO JV 31
48
(17 ) (35.4 )%
Used home sales 304
331
(27 ) (8.2 )%
Brokered home resales 231
239
(8 ) (3.3 )%

~~_________________________~~

⁽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.~~

Loss from home sales and other was $0.1 million for the quarter ended September 30, 2018 compared to income of $0.2 million for the quarter ended September 30, 2017. The loss from home sales and other was primarily due to lower ancillary services revenues partially offset by lower home selling expenses.

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

~~Rental Operations~~

~~The following table summarizes certain financial and statistical data for manufact~~u~~red home Rental Operations.~~

Quarters Ended September 30,
(amounts in thousands, except rental unit volumes) 2018 2017 Variance
%
Change
Manufactured homes:
Rental operations revenue ⁽¹⁾
$ 11,539
$ 12,257
$ (718 ) (5.9 )%
Rental home operating and maintenance (1,904 ) (1,704 ) (200 ) (11.7 )%
Income from rental operations 9,635
10,553
(918 ) (8.7 )%
Depreciation on rental homes ⁽²⁾
(2,432 ) (2,614 ) 182
7.0 %
Income from rental operations, net of depreciation $ 7,203
$ 7,939
$ (736 ) (9.3 )%

Gross investment in new manufactured home rental units ⁽³⁾
$ 151,917
$ 131,389
$ 20,528
15.6 %
Gross investment in used manufactured home rental units $ 36,588
$ 44,624
$ (8,036 ) (18.0 )%

Net investment in new manufactured home rental units $ 122,947
$ 105,424
$ 17,523
16.6 %
Net investment in used manufactured home rental units $ 17,810
$ 24,833
$ (7,023 ) (28.3 )%

Number of occupied rentals – new, end of period ⁽⁴⁾
2,704
2,492
212
8.5 %
Number of occupied rentals – used, end of period 1,515
2,010
(495 ) (24.6 )%

~~______________________~~

⁽¹⁾

Rental operations revenue consists of Site rental income and home rental income. Approximately $8.0 million and $8.7 million for the quarters ended September 30, 2018 and 2017, 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 rental homes in the Consolidated Statements of Income and Comprehensive Income.~~


⁽³⁾	Includes both occupied and unoccupied rental homes. New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was $16.1 million and $15.5 million as of September 30, 2018 and 2017, respectively.


⁽⁴⁾	~~Occupied rentals as of the end of the period in our Core Portfolio and includes 265 and 254 homes rented through our ECHO JV during the quarters ended September 30, 2018 and 2017, 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. This was partially offset by an increase in the number of new occupied rentals.

~~Other Income and Expenses~~

~~The following table summarizes other income and expenses, net.~~

Quarters Ended September 30,
(amounts in thousands, expenses shown as negative) 2018 2017 Variance
%
Change
Depreciation on real estate and rental homes $ (32,856 ) $ (30,493 ) $ (2,363 ) (7.7 )%
Amortization of in-place leases (2,124 ) (138 ) (1,986 ) (1,439.1 )%
Interest income 1,846
1,974
(128 ) (6.5 )%
Income from other investments, net 5,421
2,052
3,369
164.2 %
General and administrative (8,816 ) (7,505 ) (1,311 ) (17.5 )%
Other expenses (386 ) (324 ) (62 ) (19.1 )%
Interest and related amortization (26,490 ) (25,027 ) (1,463 ) (5.8 )%
Total other income and expenses, net $ (63,405 ) $ (59,461 ) $ (3,944 ) (6.6 )%

Other expenses, net increased $3.9 million for the quarter ended September 30, 2018, compared to the quarter ended September 30, 2017. The increase was primarily due to increases in depreciation on real estate and rental homes, amortization of in-place leases, interest and related amortization and general and administrative costs. These increases were partially offset by $3.8 million insurance~~recovery revenue from reimbursement for capital expenditures related to Hurricane Irma during the quarter ended September 30, 2018.~~

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

~~Comparison of the Nine Months Ended September 30, 2018 to the Nine Months Ended September 30, 2017~~

Income from Property Operations

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the ~~nine months~~quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017. The Core Portfolio in this discussion includes all Properties acquired on or before December 31, 2016 and which we have owned and operated continuously since January 1, 2017.~~2018. 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									Quarters Ended June 30,									Quarters Ended June 30,
(amounts in thousands)	2018		2017		Variance			% Change		2018		2017		Variance			% Change		2019		2018		Variance			% Change		2019		2018		Variance			% Change
Community base rental income	$	382,152	$	365,515	$	16,637		4.6	%	$	386,064	$	365,833	$	20,231		5.5	%	$	132,406	$	125,879	$	6,527		5.2	%	$	136,213	$	128,579	$	7,634		5.9	%
Rental home income	10,583		10,829		(246		)	(2.3	)%	10,583		10,829		(246		)	(2.3	)%	3,631		3,274		357			10.9	%	3,632		3,561		71			2.0	%
Resort base rental income	173,811		162,475		11,336			7.0	%	183,836		169,594		14,242			8.4	%	56,181		53,952		2,229			4.1	%	60,997		55,231		5,766			10.4	%
Right-to-use annual payments	35,612		34,109		1,503			4.4	%	35,616		34,133		1,483			4.3	%
Right-to-use contracts current period, gross	11,969		11,212		757			6.8	%	11,969		11,212		757			6.8	%
Right-to-use annual payments (membership subscriptions)																			12,579		11,891		688			5.8	%	12,586		11,891		695			5.8	%
Right-to-use contracts current period, gross (membership upgrade sales)																			5,041		3,944		1,097			27.8	%	5,041		3,944		1,097			27.8	%
Utility and other income	70,429		68,549		1,880			2.7	%	75,758		69,071		6,687			9.7	%	21,817		21,909		(92		)	(0.4	)%	22,250		24,320		(2,070		)	(8.5	)%
Property operating revenues, excluding deferrals	684,556		652,689		31,867			4.9	%	703,826		660,672		43,154			6.5	%	231,655		220,849		10,806			4.9	%	240,719		227,526		13,193			5.8	%

Property operating and maintenance	231,506		217,221		14,285			6.6	%	239,444		221,119		18,325			8.3	%	80,277		78,105		2,172			2.8	%	84,396		80,091		4,305			5.4	%
Real estate taxes																			14,357		12,920		1,437			11.1	%	15,107		13,440		1,667			12.4	%
Rental home operating and maintenance	4,958		4,913		45			0.9	%	4,957		4,912		45			0.9	%	1,282		1,515		(233		)	(15.4	)%	1,292		1,629		(337		)	(20.7	)%
Real estate taxes	40,374		41,751		(1,377		)	(3.3	)%	40,815		41,986		(1,171		)	(2.8	)%
Sales and marketing, gross	9,684		8,861		823			9.3	%	9,685		8,861		824			9.3	%	4,214		3,305		909			27.5	%	4,214		3,305		909			27.5	%
Property operating expenses, excluding deferrals and Property management	286,522		272,746		13,776			5.1	%	294,901		276,878		18,023			6.5	%
Income from property operations, excluding deferrals and Property management ⁽¹⁾	398,034		379,943		18,091			4.8	%	408,925		383,794		25,131			6.5	%
Property operating expenses, excluding deferrals and property management																			100,130		95,845		4,285			4.5	%	105,009		98,465		6,544			6.6	%
Income from property operations, excluding deferrals and property management																			131,525		125,004		6,521			5.2	%	135,710		129,061		6,649			5.2	%
Property management	40,740		38,743		1,997			5.2	%	40,742		38,743		1,999			5.2	%	14,383		13,472		911			6.8	%	14,385		13,472		913			6.8	%
Income from property operations, excluding deferrals⁽¹⁾	357,294		341,200		16,094			4.7	%	368,183		345,051		23,132			6.7	%
Income from property operations, excluding deferrals																			117,142		111,532		5,610			5.0	%	121,325		115,589		5,736			5.0	%
Right-to-use contracts, deferred and sales and marketing, deferred, net	5,445		3,394		2,051			60.4	%	5,445		3,394		2,051			60.4	%	2,523		1,759		764			43.4	%	2,523		1,759		764			43.4	%
Income from property operations ⁽¹⁾	$	351,849	$	337,806	$	14,043		4.2	%	$	362,738	$	341,657	$	21,081		6.2	%	$	114,619	$	109,773	$	4,846		4.4	%	$	118,802	$	113,830	$	4,972		4.4	%

__________________________

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

Total ~~Portfolio~~portfolio income from property operations ~~which includes Core and Non-Core portfolios,~~ for ~~the nine months ended September 30, 2018~~2019 increased ~~$21.1~~$5.0 million, or ~~6.2%~~4.4%, from ~~the nine months ended September 30, 2017, primarily as a result~~2018, comprised of an increase of ~~$14.0~~$4.8 million, or ~~4.2%~~4.4%, infrom our Core Portfolio ~~income from property operations~~ and an increase of ~~$7.0~~$0.2 million infrom our Non-Core ~~Portfolio~~Portfolio. The increase in income from property operations from ~~the nine months ended September 30, 2017. The increase in~~our Core Portfolio ~~income from property operations is~~was primarily due to ~~an increase in Community~~higher community base rental income and ~~Resort~~resort base rental income, partially offset by ~~an increase in Property~~higher property operating ~~expenses, excluding deferrals and property management.~~expenses. The increase in ~~Non-Core Portfolio~~ income from property operations from our Non-Core Portfolio was partially offset by a decrease in income due to the ~~nine months ended September 30, 2017 is primarily driven by the performance~~sale of ~~newly acquired properties~~five all-age MH communities located in Indiana and ~~$3.7 million of insurance proceeds received~~Michigan during the ~~nine months ended September 30, 2018, which we have identified as business interruption recovery at our RV properties in the Florida Keys.~~first quarter of 2019.

Property Operating Revenues

Community base rental income in our Core Portfolio for ~~the nine months ended September 30, 2018~~2019 increased ~~$16.6~~$6.5 million, or ~~4.6%~~5.2%, from ~~the quarter ended September 30, 2017,~~2018, which reflects ~~4.0%~~4.5% growth from rate increases and ~~approximately 0.6%~~0.7% growth from occupancy gains. The average monthly base rental income per Site in our Core Portfolio increased to approximately ~~$633 for the nine months ended September 30, 2018~~$665 in 2019 from approximately ~~$608 for~~$636 in the ~~nine months ended September 30, 2017.~~same period in 2018. The average occupancy for ~~the~~our Core Portfolio increased to ~~94.7% for~~95.4% in 2019 from 94.9% in the ~~nine months ended September 30, 2018 from 94.2% for the nine months ended September 30, 2017.~~same period in 2018.

Management's Discussion and Analysis (continued)

Resort base rental income in our Core Portfolio for ~~the nine months ended September 30, 2018~~2019 increased ~~$11.3~~$2.2 million, or ~~7.0%~~4.1%, from ~~the nine months ended September 30, 2017~~2018, primarily driven by ~~increases~~higher rental rates. The decrease in ~~annual, seasonal and~~ transient ~~revenues.~~ rental income from 2018 was mainly due to weather related events at a limited number of Properties, which was offset by an increase in number of membership subscriptions sold in 2019.

Resort base rental income ~~for the nine months ended September 30, 2018 and 2017~~ is comprised of the following:

Core Portfolio Total Portfolio
(amounts in thousands) 2018 2017 Variance
%
Change
2018 2017 Variance
%
Change
Annual $ 104,120
$ 97,588
$ 6,532
6.7 % $ 109,175
$ 98,612
$ 10,563
10.7 %
Seasonal 28,075
25,844
2,231
8.6 % 29,067
28,353
714
2.5 %
Transient 41,616
39,043
2,573
6.6 % 45,594
42,629
2,965
7.0 %
Resort base rental income $ 173,811
$ 162,475
$ 11,336
7.0 % $ 183,836
$ 169,594
$ 14,242
8.4 %

Utility and other income in our Core Portfolio increased by $1.9 million primarily driven by an increase in utility income as a result of higher electric and water income. This increase is offset by increased utility expense discussed below.



	Core Portfolio									Total Portfolio
	Quarters Ended June 30,									Quarters Ended June 30,
(amounts in thousands)	2019		2018		Variance			% Change		2019		2018		Variance		% Change
Annual	$	38,257	$	36,077	$	2,180		6.0	%	$	40,790	$	36,595	$	4,195	11.5	%
Seasonal	5,135		4,939		196			4.0	%	5,713		5,206		507		9.7	%
Transient	12,789		12,936		(147		)	(1.1	)%	14,494		13,430		1,064		7.9	%
Resort base rental income	$	56,181	$	53,952	$	2,229		4.1	%	$	60,997	$	55,231	$	5,766	10.4	%

Property Operating Expenses

Property operating expenses, excluding deferrals and property management, in our Core Portfolio for ~~the nine months ended September 30, 2018~~2019 increased ~~$13.8~~$4.3 million, or ~~5.1%~~4.5%, from ~~the nine months ended September 30, 2017, primarily driven by~~2018, mainly due to an increase in property operating and maintenance expenses of ~~$14.3~~$2.2 million and an increase in property taxes of $1.4 million. The increase in property operating and maintenance expenses was primarily driven by an increase of $1.0 million in ~~utility expense from increased electric, trash and sewer expenses, higher~~ property payroll asdue to wage increases and an increase of $0.9 million in insurance expense. The increase in property taxes was primarily a result of ~~2018 salary increases, higher insurance expense as~~ a ~~result~~resolution of ~~increased insurance premiums from our 2018 policy renewal and an increase~~appeals in ~~landscaping, tree trimming and contract repairs expenses. These increases were partially offset by higher clean up costs~~certain states in ~~2017 related to storm events, most notably Hurricane Irma.~~2018.

Home Sales and Rental Operations

Home Sales and Other

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


	Nine Months Ended September 30,											Quarters Ended June 30,
(amounts in thousands, except home sales volumes)	2018			2017			Variance			% Change		2019			2018			Variance			% Change
Gross revenues from new home sales ⁽¹⁾	$	20,643		$	16,724		$	3,919		23.4	%	$	6,064		$	6,859		$	(795	)	(11.6	)%
Cost of new home sales ⁽¹⁾	(20,256		)	(16,467		)	(3,789		)	(23.0	)%	(5,984		)	(6,800		)	816			12.0	%
Gross profit from new home sales	387			257			130			50.6	%	80			59			21			35.6	%

Gross revenues from used home sales	6,110			8,148			(2,038		)	(25.0	)%	1,761			2,246			(485		)	(21.6	)%
Cost of used home sales	(7,692		)	(8,924		)	1,232			13.8	%	(2,180		)	(2,832		)	652			23.0	%
Loss from used home sales	(1,582		)	(776		)	(806		)	(103.9	)%	(419		)	(586		)	167			28.5	%

Brokered resale and ancillary services revenues, net	3,380			4,088			(708		)	(17.3	)%	872			617			255			41.3	%
Home selling expenses	(3,149		)	(3,301		)	152			4.6	%	(1,102		)	(973		)	(129		)	(13.3	)%
Income (loss) from home sales and other	$	(964	)	$	268		$	(1,232	)	(459.7	)%	$	(569	)	$	(883	)	$	314		35.6	%

Home sales volumes
Total new home sales ⁽²⁾	417			413			4			1.0	%	117			146			(29		)	(19.9	)%
New Home Sales Volume - ECHO JV	74			126			(52		)	(41.3	)%	18			25			(7		)	(28.0	)%
Used home sales	842			954			(112		)	(11.7	)%	210			297			(87		)	(29.3	)%
Brokered home resales	677			659			18			2.7	%	237			253			(16		)	(6.3	)%

_________________________

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

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

Loss from home sales and other was ~~$1.0~~$0.6 million for ~~the nine months ended September 30, 2018~~2019 compared ~~with income from homes sales and other of $0.3~~to $0.9 million for ~~the nine months ended September 30, 2017.~~2018. The decrease in loss from home sales and other was ~~primarily~~ due to ~~an increase~~a decrease in ~~the~~ loss from used home sales and ~~a decrease~~an increase in ancillary services ~~revenues.~~revenues, net.

Management's Discussion and Analysis (continued)

Rental Operations

The following table summarizes certain financial and statistical data for ~~manufact~~u~~red home~~MH Rental Operations.


	Nine Months Ended September 30,											Quarters Ended June 30,
(amounts in thousands, except rental unit volumes)	2018			2017			Variance			% Change		2019			2018			Variance			% Change
Manufactured homes:
Rental operations revenue ⁽¹⁾	$	35,107		$	37,143		$	(2,036	)	(5.5	)%	$	11,422		$	11,064		$	358		3.2	%
Rental home operating and maintenance	(4,957		)	(4,912		)	(45		)	(0.9	)%	(1,282		)	(1,515		)	233			15.4	%
Income from rental operations	30,150			32,231			(2,081		)	(6.5	)%	10,140			9,549			591			6.2	%
Depreciation on rental homes ⁽²⁾	(7,323		)	(7,910		)	587			7.4	%	(2,544		)	(2,251		)	(293		)	(13.0	)%
Income from rental operations, net of depreciation	$	22,827		$	24,321		$	(1,494	)	(6.1	)%	$	7,596		$	7,298		$	298		4.1	%

Gross investment in new manufactured home rental units ⁽³⁾	$	151,917		$	131,389		$	20,528		15.6	%	$	191,975		$	135,886		$	56,089		41.3	%
Gross investment in used manufactured home rental units	$	36,588		$	44,624		$	(8,036	)	(18.0	)%	$	25,103		$	34,476		$	(9,373	)	(27.2	)%

Net investment in new manufactured home rental units	$	122,947		$	105,424		$	17,523		16.6	%	$	159,950		$	110,298		$	49,652		45.0	%
Net investment in used manufactured home rental units	$	17,810		$	24,833		$	(7,023	)	(28.3	)%	$	11,563		$	24,538		$	(12,975	)	(52.9	)%

Number of occupied rentals – new, end of period ⁽⁴⁾	2,704			2,492			212			8.5	%	3,006			2,547			459			18.0	%
Number of occupied rentals – used, end of period	1,515			2,010			(495		)	(24.6	)%	1,007			1,467			(460		)	(31.4	)%

______________________

⁽¹⁾

Rental operations revenue consists of Site rental income and home rental ~~income.~~income in our Core Portfolio. Approximately ~~$24.5~~$7.8 million ~~and $26.3 million for the nine months ended September 30, 2018 and 2017, respectively,~~ of Site rental income ~~are~~for both the quarters ended June 30, 2019 and 2018 is included in ~~Community~~community base rental income inwithin the Core Portfolio Income from Property Operations table. The remainder of home rental income is included in ~~Rental~~rental home income inwithin the Core Portfolio Income from Property Operations table.


⁽²⁾	Included in Depreciation ~~on real estate~~ and ~~rental homes~~amortization in the Consolidated Statements of Income and Comprehensive Income.


⁽³⁾	Includes both occupied and unoccupied rental homes in our Core Portfolio. New home cost basis does not include the costs associated with our ECHO JV. Our investment in the ECHO JV was ~~$16.1~~$16.5 million and ~~$15.5~~$15.9 million as of ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.


⁽⁴⁾	Occupied rentals as of the end of the period in our Core Portfolio and includes ~~265~~298 and ~~254~~264 homes rented through our ECHO JV during the ~~nine months~~quarters ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

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

Other Income and Expenses

The following table summarizes other income and expenses, net.


	Nine Months Ended September 30,											Quarters Ended June 30,
(amounts in thousands, expenses shown as negative)	2018			2017			Variance			% Change		2019			2018			Variance			% Change
Depreciation on real estate and rental homes	$	(96,630	)	$	(90,849	)	$	(5,781	)	(6.4	)%
Amortization of in-place leases	(5,069		)	(2,128		)	(2,941		)	(138.2	)%
Depreciation and amortization												$	(37,776	)	$	(34,345	)	$	(3,431	)	(10.0	)%
Interest income	5,658			5,542			116			2.1	%	1,803			1,862			(59		)	(3.2	)%
Income from other investments, net	9,774			3,918			5,856			149.5	%	879			3,413			(2,534		)	(74.2	)%
General and administrative	(26,523		)	(23,015		)	(3,508		)	(15.2	)%	(9,225		)	(9,669		)	444			4.6	%
Transaction costs	—			(324		)	324			100.0	%
Other expenses	(1,096		)	(814		)	(282		)	(34.6	)%	(540		)	(367		)	(173		)	(47.1	)%
Early debt retirement												(1,491		)	—			(1,491		)	—	%
Interest and related amortization	(78,478		)	(74,728		)	(3,750		)	(5.0	)%	(26,024		)	(26,285		)	261			1.0	%
Total other income and expenses, net	$	(192,364	)	$	(182,398	)	$	(9,966	)	(5.5	)%
Total other income and (expenses), net												$	(72,374	)	$	(65,391	)	$	(6,983	)	(10.7	)%

~~Other expenses,~~Total other income and (expenses), net increased ~~$10.0~~$7.0 million ~~for the nine months ended September 30, 2018,~~during 2019 compared to ~~the nine months ended September 30, 2017. The increase was~~2018, primarily due to ~~increases~~an increase in depreciation ~~on real estate and rental homes, interest and related amortization, general and administrative expenses~~ and amortization and a decrease in income from other investments, net. The decrease in income from other investments, net was mainly due to $1.8 million of ~~in-place leases. These increases were partially offset by $5.9 million~~ insurancerecovery revenue from reimbursement for capital expenditures related to Hurricane Irma ~~during the nine months ended September 30,~~in 2018. Additionally, we incurred $1.5 million of early debt retirement costs in 2019.

Management's Discussion and Analysis (continued)

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

Income from Property Operations

The following table summarizes certain financial and statistical data for the Core Portfolio and the total portfolio for the six months ended June 30, 2019 and 2018. 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
	Six Months Ended June 30,									Six Months Ended June 30,
(amounts in thousands)	2019		2018		Variance			% Change		2019		2018		Variance			% Change
Community base rental income	$	263,444	$	250,669	$	12,775		5.1	%	$	271,495	$	255,318	$	16,177		6.3	%
Rental home income	7,121		6,506		615			9.5	%	7,216		7,076		140			2.0	%
Resort base rental income	122,115		117,235		4,880			4.2	%	133,165		119,485		13,680			11.4	%
Right-to-use annual payments (membership subscriptions)	24,889		23,409		1,480			6.3	%	24,902		23,410		1,492			6.4	%
Right-to-use contracts current period, gross (membership upgrade sales)	8,879		7,108		1,771			24.9	%	8,879		7,106		1,773			25.0	%
Utility and other income	44,434		45,970		(1,536		)	(3.3	)%	46,001		49,841		(3,840		)	(7.7	)%
Property operating revenues, excluding deferrals	470,882		450,897		19,985			4.4	%	491,658		462,236		29,422			6.4	%

Property operating and maintenance	154,575		151,241		3,334			2.2	%	161,989		154,999		6,990			4.5	%
Real estate taxes	28,931		26,743		2,188			8.2	%	30,430		27,575		2,855			10.4	%
Rental home operating and maintenance	2,464		2,873		(409		)	(14.2	)%	2,496		3,053		(557		)	(18.2	)%
Sales and marketing, gross	7,627		6,118		1,509			24.7	%	7,623		6,117		1,506			24.6	%
Property operating expenses, excluding deferrals and property management	193,597		186,975		6,622			3.5	%	202,538		191,744		10,794			5.6	%
Income from property operations, excluding deferrals and property management	277,285		263,922		13,363			5.1	%	289,120		270,492		18,628			6.9	%
Property management	28,067		27,151		916			3.4	%	28,070		27,153		917			3.4	%
Income from property operations, excluding deferrals	249,218		236,771		12,447			5.3	%	261,050		243,339		17,711			7.3	%
Right-to-use contracts, deferred and sales and marketing, deferred, net	4,103		3,020		1,083			35.9	%	4,103		3,020		1,083			35.9	%
Income from property operations ⁽¹⁾	$	245,115	$	233,751	$	11,364		4.9	%	$	256,947	$	240,319	$	16,628		6.9	%

__________________________

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

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

Property Operating Revenues

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

Management's Discussion and Analysis (continued)

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

Resort base rental income is comprised of the following:



	Core Portfolio									Total Portfolio
	Six Months Ended June 30,									Six Months Ended June 30,
(amounts in thousands)	2019		2018		Variance			% Change		2019		2018		Variance		% Change
Annual	$	75,606	$	71,274	$	4,332		6.1	%	$	79,874	$	71,751	$	8,123	11.3	%
Seasonal	24,319		23,597		722			3.1	%	26,798		24,229		2,569		10.6	%
Transient	22,190		22,364		(174		)	(0.8	)%	26,493		23,505		2,988		12.7	%
Resort base rental income	$	122,115	$	117,235	$	4,880		4.2	%	$	133,165	$	119,485	$	13,680	11.4	%

Property Operating Expenses

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

Home Sales and Rental Operations

Home Sales and Other

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



	Six Months Ended June 30,
(amounts in thousands, except home sales volumes)	2019			2018			Variance			% Change
Gross revenues from new home sales ⁽¹⁾	$	10,628		$	13,595		$	(2,967	)	(21.8	)%
Cost of new home sales ⁽¹⁾	(10,378		)	(13,310		)	2,932			22.0	%
Gross profit from new home sales	250			285			(35		)	(12.3	)%

Gross revenues from used home sales	3,672			3,819			(147		)	(3.8	)%
Cost of used home sales	(4,418		)	(4,896		)	478			9.8	%
Loss from used home sales	(746		)	(1,077		)	331			30.7	%

Brokered resale and ancillary services revenues, net	2,431			2,018			413			20.5	%
Home selling expenses	(2,185		)	(2,048		)	(137		)	(6.7	)%
Income (loss) from home sales and other	$	(250	)	$	(822	)	$	572		69.6	%

Home sales volumes
Total new home sales ⁽²⁾	208			276			(68		)	(24.6	)%
New Home Sales Volume - ECHO JV	31			43			(12		)	(27.9	)%
Used home sales	429			538			(109		)	(20.3	)%
Brokered home resales	405			446			(41		)	(9.2	)%

_________________________

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

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

Loss from home sales and other was $0.3 million for 2019 compared to $0.8 million for 2018. The decrease in loss from home sales and other was primarily due to a decrease in the loss from used home sales and an increase in ancillary services revenues, net.

Management's Discussion and Analysis (continued)

Rental Operations

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



	Six Months Ended June 30,
(amounts in thousands, except rental unit volumes)	2019			2018			Variance			% Change
Manufactured homes:
Rental operations revenue ⁽¹⁾	$	22,633		$	22,152		$	481		2.2	%
Rental home operating and maintenance	(2,464		)	(2,873		)	409			14.2	%
Income from rental operations	20,169			19,279			890			4.6	%
Depreciation on rental homes ⁽²⁾	(4,957		)	(4,605		)	(352		)	(7.6	)%
Income from rental operations, net of depreciation	$	15,212		$	14,674		$	538		3.7	%

Gross investment in new manufactured home rental units ⁽³⁾	$	191,975		$	135,886		$	56,089		41.3	%
Gross investment in used manufactured home rental units	$	25,103		$	34,476		$	(9,373	)	(27.2	)%

Net investment in new manufactured home rental units	$	159,950		$	110,298		$	49,652		45.0	%
Net investment in used manufactured home rental units	$	11,563		$	24,538		$	(12,975	)	(52.9	)%

Number of occupied rentals – new, end of period ⁽⁴⁾	3,006			2,547			459			18.0	%
Number of occupied rentals – used, end of period	1,007			1,467			(460		)	(31.4	)%

______________________

⁽¹⁾

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


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


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


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

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

Other Income and Expenses

The following table summarizes other income and expenses, net.



	Six Months Ended June 30,
(amounts in thousands, expenses shown as negative)	2019			2018			Variance			% Change
Depreciation and amortization	$	(75,753	)	$	(66,719	)	$	(9,034	)	(13.5	)%
Interest income	3,554			3,812			(258		)	(6.8	)%
Income from other investments, net	1,865			4,353			(2,488		)	(57.2	)%
General and administrative	(19,134		)	(17,707		)	(1,427		)	(8.1	)%
Other expenses	(967		)	(710		)	(257		)	(36.2	)%
Early debt retirement	(1,491		)	—			(1,491		)	—	%
Interest and related amortization	(52,417		)	(51,988		)	(429		)	(0.8	)%
Total other income and (expenses), net	$	(144,343	)	$	(128,959	)	$	(15,384	)	(11.9	)%

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

Gain on Sale of Real Estate, Net

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

Management's Discussion and Analysis (continued)

Liquidity and Capital Resources

Liquidity

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

~~We have entered into an~~Our at-the-market (“ATM”) equity offering program ~~pursuant~~allows us to ~~which we may~~ sell, from time-to-time, shares of our ~~Common Stock,~~common stock, par value $0.01 per share, having an aggregate offering price of up to $200.0 million. During the quarter ended September 30, 2018, we sold 861,141 shares of common stock as part of our ATM equity offering program at a weighted average price per share of $91.45, resulting in gross cash proceeds of approximately $78.8 million. As of ~~September~~June 30, ~~2018, $71.2~~2019, we have $140.7 million of common stock ~~remained~~ available for ~~issuance under~~issuance.

On April 30, 2019, our stockholders approved an amendment to our charter to increase the ~~ATM equity offering program.~~

~~In addition,~~number of shares of our common stock that we are authorized to issue from 200,000,000 to 400,000,000 shares. As of June 30, 2019, we have available liquidity in the form of approximately ~~110.3~~309.0 million shares of authorized ~~but~~and unissued common stock and ~~approximately~~ 10.0 million shares of authorized and unissued preferred stock 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.amended.

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

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

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

~~During~~As part of our Unsecured Credit Facility, our LOC arrangement will mature prior to the ~~nine months ended September 30, 2018, we closed on one~~expected discontinuation of LIBOR subsequent to 2021 and our $200.0 million term loan secured by two RV resorts, for gross proceeds of approximately $64.0 million. The loan carries an interest rate of 4.83% per annum and matures in 2038. In connection with the Serendipity acquisition during the nine months ended September 30, 2018, we assumed a loan of approximately $9.2 million and obtained additional financing of $8.8 million for total mortgage debt, secured by the manufactured home community, of $18.0 million. The loans carry an interest rate of 4.75% andis scheduled to mature in ~~2039.~~

~~During~~April 2023. We continue to monitor the ~~nine months ended September 30, 2018,~~development and adoption of an alternative index to LIBOR to manage the transition and as it pertains to new arrangements to be entered in the future. Given over 90% of our current debt is secured and not subject to LIBOR, we ~~borrowed and paid off amounts~~do not believe the discontinuation of LIBOR will have a significant impact on our unsecured LOC, leaving a balance of $80.0 million at September 30, 2018. We believe that as of September 30, 2018, we have sufficient liquidity, in the form of $107.2 million in unrestricted cash and $320.0 million available on our LOC, to satisfy our near term obligations. On October 1, 2018, we paid off six mortgage loans of $66.3 million, including $0.1 million of prepayment penalties, using our LOC. The loans, which would have matured in 2019, had a weighted average interest rate of 6.07% per annum and were secured by six MH properties.consolidated financial statements.

We expect to meet certain long-term liquidity requirements, ~~such as~~including scheduled debt maturities, property acquisitions and capital improvements by use of our long-term collateralized and uncollateralized borrowings including the existing LOC and the issuance of debt securities or additional equity securities. ~~As of September 30, 2018, we~~We have no debt maturing in 2019 and approximately ~~$3.0~~$48.9 million of scheduled debt ~~maturities~~matures in ~~2018~~2020 (excluding scheduled principal payments on debt maturing in ~~2018~~2020 and beyond). ~~We expect to satisfy~~

For information regarding our ~~2018 maturities with existing cash~~debt activities and ~~anticipated operating cash flow.~~related borrowing arrangements, see Item 1. Financial Statements—Note 8. Borrowing Arrangements.

The table below summarizes our cash flow ~~activities:~~activity:


	Nine Months Ended September 30,						Six Months Ended June 30,
(amounts in thousands)	2018			2017			2019			2018
Net cash provided by operating activities	$	321,142		$	303,322		$	244,685		$	229,965
Net cash used in investing activities	(244,469		)	(135,986		)	(75,881		)	(122,189		)
Net cash provided by (used in) financing activities	4,652			(146,281		)
Net cash used in financing activities							(147,321		)	(89,192		)
Net increase in cash and restricted cash	$	81,325		$	21,055		$	21,483		$	18,584

Management's Discussion and Analysis (continued)

Operating Activities

Net cash provided by operating activities increased ~~$17.8~~$14.7 million to ~~$321.1~~$244.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, from ~~$303.3~~$230.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The increase in net cash provided by operating activities was primarily due to higher income from property operations of ~~$21.1~~$16.6 million and an increase in rents and other customer payments received in advance and security deposits of approximately $5.3 million, partially offset by long term incentive compensation of approximately $4.2 million paid during the first quarter of 2019 and a net decrease in ~~insurance proceeds.~~other assets and accounts payable and other liabilities of approximately of $2.5 million.

Investing Activities

Net cash used in investing activities was ~~$244.5~~$75.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~$136.0~~$122.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease in net cash used in investing activities was primarily due to proceeds received of $77.7 million as a result of the sale of five MH properties during the first quarter of 2019 and distributions of capital from unconsolidated joint ventures of $5.2 million. This was partially offset by an increase ~~in real estate acquisitions and an increase~~of $40.1 million in capital improvements. ~~These increases were partially offset by a decrease in investment in joint ventures compared to the nine months ended September 30, 2017.~~

Capital Improvements

The table below summarizes capital improvement activities:


	Nine Months Ended September 30,				Six Months Ended June 30,
(amounts in thousands)	2018		2017		2019		2018
Recurring capital expenditures ⁽¹⁾	$	32,965	$	29,823	$	22,913	$	21,175
Property upgrades and site development⁽²⁾	35,200		20,931
Property upgrades and development⁽²⁾					28,915		25,580
New home investments⁽³⁾⁽⁴⁾	56,182		32,724		67,086		31,701
Used home investments ⁽⁴⁾	2,663		3,113		1,452		1,807
Total property	127,010		86,591		120,366		80,263
Corporate	1,426		1,286		1,078		1,114
Total capital improvements	$	128,436	$	87,877	$	121,444	$	81,377

______________________

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

⁽²⁾~~Includes $12.3 million of restoration and improvement capital expenditures related to Hurricane Irma for the nine months ended September 30, 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.~~


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


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


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


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

Financing Activities

Net cash ~~provided by financing activities was $4.7 million for the nine months ended September 30, 2018 compared to net cash~~ used in financing activities ~~of $146.3~~increased $58.1 million to $147.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019 from $89.2 million for the six months ended June 30, 2018. The ~~change~~increase in cash used in financing activities was primarily due to ~~redemption~~an increase in debt repayments and distributions paid of ~~our Series C Preferred Stock, increased proceeds~~$70.0 million and $13.2 million, respectively, during the six months ended June 30, 2019 as compared to the same period in the prior year. Proceeds of $59.3 million received from the sale of ~~Common~~our common stock ~~increased proceeds from~~under our ATM equity offering program for the ~~line of credit compared to the nine~~six months ended ~~September~~June 30, ~~2017,~~2019 was offset by debt proceeds received during the six months ended June 30, 2018. These increases in cash used in financing activities during the six months ended June 30, 2019 were partially offset by a ~~decrease in new mortgage debt proceeds,~~$30.0 million net ~~and increased distributions~~payment related to the LOC during the ~~nine~~six months ended ~~September~~June 30, 2018.

Contractual Obligations

Significant ongoing contractual obligations consist primarily of ~~long term~~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 ~~Management's~~the "Management's Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations" in our ~~Annual Report on~~2018 Form ~~10-K for the year ended December 31, 2017 filed with the SEC on February 28, 2018.~~

~~Inflation~~

Substantially all of the leases at the Properties allow for monthly or annual rent increases. In addition, we have the opportunity to achieve rate increases, where justified by the market, as each lease matures. Such types of leases generally minimize our risks of inflation. In addition, our RV 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 old.10-K.

Off-Balance Sheet Arrangements

As of ~~September~~June 30, ~~2018,~~2019, we have no off-balance sheet arrangements.

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

Critical Accounting Policies and Estimates

Refer to ~~Item 7,~~ ~~Management’s~~the "Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~ ~~included~~Operations" in our ~~Annual Report on~~2018 Form 10-K ~~for the year ended December 31, 2017~~ for a discussion of our critical accounting ~~policies, which include impairment, lease accounting, revenue recognition and business combinations.~~policies. There have been no significant changes to our critical accounting policies and estimates during the ~~quarter~~six months ended ~~September~~June 30, ~~2018, 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).~~2019.

Management's Discussion and Analysis (continued)

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2018~~2019 includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as “anticipate,” “expect,” “believe,” “project,” “intend,” “may be” and “will be” and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements and may include without limitation, information regarding our expectations, goals or intentions regarding the future, and the expected effect of our acquisitions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:

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

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

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

our assumptions about rental and home sales markets;

our ability to manage counterparty risk;

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

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

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

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

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

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

unanticipated costs or unforeseen liabilities associated with recent acquisitions;

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

the effect of interest rates;

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

the dilutive effects of issuing additional securities;

~~the effect of changes in accounting for Leases set forth under the Codification Topic~~ ~~"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 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 onin our 2018 Form ~~10-K for the year ended December 31, 2017.~~10-K. There have been no material changes in the assumptions used or results obtained regarding market risk since December 31, ~~2017.~~2018.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial ~~and accounting~~ officer), has evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2018.~~2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to us that would potentially be subject to disclosure under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder as of ~~September~~June 30, ~~2018.~~2019. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Control Over Financial Reporting

During the quarter ended ~~September~~June 30, ~~2018,~~2019, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information


Item 1.	Legal Proceedings

See Item 1. Financial Statements—Note ~~9 of~~11. Commitments and Contingencies accompanying the Consolidated Financial Statements ~~contained herein.~~in this Quarterly Report on Form 10-Q.


Item 1A.	Risk Factors

There have been no material changes to the risk factors discussed in “Item 1A. Risk Factors” in our ~~Annual Report on~~2018 Form ~~10-K for the year ended December 31, 2017 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.~~10-K.


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

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

None.


Item 5.	Other Information

None.


Item 6.	Exhibits



3.1	Articles of Amendment of Equity LifeStyle Properties, Inc. effective May 2, 2019 (Included as an exhibit to our Report on Form 8-K dated May 2, 2019 and incorporated herein by reference).
31.1	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
~~101~~101.INS	~~The following materials from Equity LifeStyle Properties, Inc.’s Quarterly Report on Form 10-Q for~~XBRL Instance Document - the ~~quarter ended September 30, 2018 formatted~~instance document does not appear in the Interactive Data File because its 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.tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

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



	EQUITY LIFESTYLE PROPERTIES, INC.

Date: ~~October 25, 2018~~July 30, 2019	By:	/s/ Marguerite Nader
		Marguerite Nader
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~October 25, 2018~~July 30, 2019	By:	/s/ Paul Seavey
		Paul Seavey
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial ~~and~~Officer)

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

4237



(amounts in thousands)	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	)



(amounts in thousands, except per share data)	As Reported			Balances Without Adoption of ASU 2014-09 (a)			Effect of Change Higher/(Lower)
Revenues
Right-to-use contract upfront payments, deferred, net	$	(2,883	)	$	(2,131	)	$	752
Total revenues	$	256,675		$	257,427		$	(752	)

Expenses
Right-to-use contract commissions, deferred, net	$	(458	)	$	(245	)	$	213
Total expenses	$	197,803		$	198,016		$	(213	)

Consolidated net income	$	59,660		$	60,189		$	(529	)
Net income available for Common Stockholders	$	56,070		$	56,567		$	(497	)
Earnings per Common Share - Basic	$	0.63		$	0.63		$	—
Earnings per Common Share - Fully Diluted	$	0.63		$	0.63		$	—



(amounts in thousands, except stock data):	Nine Months Ended
	September 30, 2018		September 30, 2017
Shares of Common Stock sold	861,141		484,913
Weighted average price	$	91.45	$	86.69
Total gross proceeds	$	78,755	$	42,037
Commissions paid to sales agents	$	1,028	$	526