Overview of the Company’s Financial Performance

The Company is a self-administered, self-managed real estate investment trust (REIT) that owns and operates 136 manufactured home communities across 11 states. The Company’s primary business is leasing manufactured home spaces and homes to residents, as well as selling and financing the sale of manufactured homes.

For the three and six months ended June 30, 2024, the Company reported strong financial results. Rental and related income increased 9% and 10% respectively compared to the prior year periods, driven by increases in rental rates, occupancy, and the addition of rental homes. Community Net Operating Income (NOI), a key performance metric, grew 11% and 13% for the three and six month periods.

The Company’s sales of manufactured homes also increased, up 7% and 4% for the three and six month periods respectively. Gross profit margins on these sales improved, rising from 30% to 38% in the three month period and from 31% to 32% in the six month period. This reflects the Company’s ability to effectively manage costs and capitalize on strong demand for affordable housing.

Overall, the Company’s financial performance demonstrates its ability to grow revenue and profitability through a combination of organic growth initiatives, such as increasing rents and occupancy, and strategic investments in rental homes and home sales operations.

Analysis of Strengths and Weaknesses

Strengths:

• Diversified portfolio of 136 manufactured home communities across multiple states, providing geographic diversification and economies of scale
• Strong demand for affordable housing, with the Company’s communities offering substantial comparative value versus other housing options
• Ability to consistently raise rents and maintain high occupancy rates, demonstrating the resilience of the business model
• Expanding rental home portfolio, which provides a stable, recurring revenue stream
• Profitable home sales operations, leveraging the Company’s position within its communities

Weaknesses:

• Exposure to macroeconomic factors such as interest rates and inflation, which can impact both the Company’s operations and the broader housing market
• Competition from other manufactured home community operators, as well as alternative housing options
• Reliance on debt financing to fund growth, which exposes the Company to interest rate risk
• Potential regulatory changes in certain jurisdictions that could limit the Company’s ability to raise rents

Overall, the Company appears to be well-positioned, with a diversified portfolio, strong operating performance, and a focus on affordable housing - a segment of the market that continues to see robust demand. However, the Company must remain vigilant in managing its exposure to macroeconomic risks and competitive pressures.

Outlook and Future Opportunities

The Company’s outlook for the future is cautiously optimistic. The continued strong demand for affordable housing, coupled with the Company’s ability to increase rents and occupancy, suggests that the business will continue to generate solid financial results.

The Company is also pursuing several strategic initiatives that could drive future growth:

1. Joint venture with a national homebuilder to develop and sell single-family homes adjacent to one of the Company’s existing communities. This could provide an additional revenue stream and further strengthen the Company’s position in the local market.

2. Expansion of the Company’s joint venture with Nuveen Real Estate to acquire and develop new manufactured home communities. This allows the Company to leverage Nuveen’s expertise and capital to grow its portfolio.

3. Continued investment in the Company’s opportunity zone fund to acquire and redevelop communities in economically distressed areas. This aligns with the Company’s focus on affordable housing and could provide attractive returns.

However, the Company also faces several risks and challenges that could impact its future performance:

• Potential changes in interest rates and the broader macroeconomic environment, which could affect both the Company’s operations and its ability to finance growth
• Increasing competition from other manufactured home community operators, as well as alternative housing options
• Regulatory changes in certain jurisdictions that could limit the Company’s ability to raise rents or make other operational changes

Overall, the Company appears to be well-positioned for future growth, with a diversified portfolio, strong operating performance, and a focus on strategic initiatives. However, the Company must remain vigilant in managing its exposure to risks and adapting to changes in the market.

Conclusion

The Company’s financial report for the three and six months ended June 30, 2024 demonstrates its ability to consistently grow revenue and profitability through a combination of organic initiatives and strategic investments. The Company’s focus on affordable housing, coupled with its diversified portfolio and expanding rental home operations, positions it well for continued success.

While the Company faces some risks and challenges, such as macroeconomic factors and increasing competition, its management team has shown the ability to navigate these obstacles and identify new opportunities for growth. The Company’s strategic initiatives, including the joint venture with a national homebuilder and the expansion of its opportunity zone fund, suggest that the Company is proactively positioning itself for the future.

Overall, the Company’s financial performance and outlook indicate that it is a well-managed REIT with a strong foundation for continued growth and success in the manufactured home community sector.