Overview

The Company is a self-administered, self-managed real estate investment trust (REIT) that primarily owns and operates manufactured home communities. As of September 30, 2024, the Company owns and operates 139 manufactured home communities containing approximately 26,200 developed homesites, of which around 10,300 are rental homes owned by the Company.

The Company’s business includes leasing manufactured home spaces, renting manufactured homes to residents, and selling and financing the sale of manufactured homes. The Company also has a joint venture with Nuveen Real Estate to acquire and develop manufactured housing communities, and has formed a qualified opportunity zone fund to invest in communities located in economically distressed areas.

The Company’s capital structure, which uses a balanced combination of equity and debt, is intended to enhance shareholder returns as the properties appreciate over time. The Company’s business plan focuses on acquiring communities that are expected to yield more than the cost of funds, and then investing in physical improvements, including adding rental homes, to increase occupancy and improve operating results.

Significant Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP. Management regularly evaluates its assumptions, judgments, and estimates, and believes there have been no material changes to the significant accounting policies and estimates disclosed in the Company’s Annual Report.

Supplemental Measures

The Company uses certain non-GAAP financial measures, including Community Net Operating Income (Community NOI), Funds from Operations Attributable to Common Shareholders (FFO), and Normalized Funds from Operations Attributable to Common Shareholders (Normalized FFO), to provide investors with additional insight into the Company’s operating performance.

Community NOI is a measure of the actual operating results of the Company’s manufactured home communities, excluding corporate-level expenses. FFO and Normalized FFO are industry performance measures that exclude certain non-cash items, such as depreciation and amortization, from net income to facilitate comparisons between REITs.

The following tables show the Company’s calculations of these non-GAAP measures for the three and nine months ended September 30, 2024 and 2023:

Community NOI (in thousands):

FFO and Normalized FFO Attributable to Common Shareholders (in thousands):

| | Three Months Ended | Nine Months Ended |

(1) Consists of one-time legal fees, costs associated with the liquidation/sale of inventory in a particular sales center, and other non-recurring expenses.

The following table shows the Company’s cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

| | Nine Months Ended |

Changes in Results of Operations

Rental and related income increased 8% and 9% for the three and nine months ended September 30, 2024, respectively, due to increases in rental rates, occupancy, and the number of rental homes. Community operating expenses increased 9% and 7% for the three and nine months ended September 30, 2024, respectively, due to higher payroll, taxes, and other costs.

Community NOI increased 7% and 11% for the three and nine months ended September 30, 2024, respectively, driven by the increases in rental income. Sales of manufactured homes increased 10% and 6% for the three and nine months ended September 30, 2024, respectively, with gross profit margins improving.

General and administrative expenses remained relatively stable, decreasing as a percentage of gross revenue. Depreciation expense increased due to the addition of rental homes. Interest income increased due to higher balances and rates on notes receivable, while dividend income decreased due to a smaller securities portfolio and lower yields.

The Company recognized losses on sales of marketable securities and decreases in the fair value of the securities portfolio during the periods.

Changes in Financial Condition

Total investment property increased 4% or $58.0 million during the nine months ended September 30, 2024, primarily due to the addition of 284 rental homes, net of sales. Marketable securities decreased 1% or $328,000 during the period.

Mortgages payable decreased 2% or $8.2 million, while loans payable decreased 72% or $67.5 million, primarily due to a reduction in the unsecured line of credit balance.

Liquidity and Capital Resources

The Company’s principal liquidity demands include distributions to shareholders, acquisitions, capital improvements, debt service, and financing of manufactured home inventory and rental homes. The Company funds these needs through cash flow from operations, sales of marketable securities, borrowings, and capital raises.

During the nine months ended September 30, 2024, the Company issued and sold 9.4 million shares of common stock and 664,000 shares of preferred stock, generating net proceeds of $163.2 million and $15.3 million, respectively. The Company also raised $7.6 million from the DRIP program.

As of September 30, 2024, the Company had $66.7 million in cash and cash equivalents, $34.2 million in marketable securities, and $260 million available on its unsecured credit facility. The Company’s net debt to total market capitalization was approximately 22%.

The Company believes it has the ability to meet its obligations and generate funds for new investments through its operations, access to capital markets, and available credit facilities.

Cautionary Statement Regarding Forward-Looking Statements

The discussion includes forward-looking statements that are subject to risks and uncertainties, including changes in real estate and economic conditions, increased competition, the Company’s ability to identify and acquire new properties, maintain occupancy and rental rates, access capital markets, and other factors. The Company expressly disclaims any obligation to publicly update or revise any forward-looking statements.