The following discussion and analysis should be read in conjunction with the
consolidated financial statements and accompanying notes thereto included in
this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the
year ended December 31, 2020 ("2020 Form 10-K"), as well as information in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our 2020 Form 10-K.
Overview and Outlook
We are a self-administered and self-managed real estate investment trust
("REIT") with headquarters in Chicago, Illinois. We are a fully integrated owner
of lifestyle-oriented properties ("Properties") consisting of property
operations and home sales and rental operations primarily within manufactured
home ("MH") and recreational vehicle ("RV") communities. As of September 30,
2021, we owned or had an ownership interest in a portfolio of 436 Properties
located throughout the United States and Canada containing 167,123 individual
developed areas ("Sites"). These Properties are located in 33 states and British
Columbia, with more than 110 Properties with lake, river or ocean frontage and
more than 120 Properties within 10 miles of the coastal United States.
We invest in properties in sought-after locations near retirement and vacation
destinations and urban areas across the United States with a focus on delivering
value to our residents and guests as well as stockholders. Our business model is
intended to provide an opportunity for increased cash flows and appreciation in
value. We seek growth in earnings, Funds from Operations ("FFO"), Normalized
Funds from Operations ("Normalized FFO") and cash flows by enhancing the
profitability and operation of our Properties and investments. We accomplish
this by attracting and retaining high quality customers to our Properties, who
take pride in our Properties and in their homes, and efficiently managing our
Properties by increasing occupancy, maintaining competitive market rents and
controlling expenses. We also actively pursue opportunities that fit our
acquisition criteria and are currently engaged in various stages of negotiations
relating to the possible acquisition of additional properties.
We believe the demand from baby boomers for MH and RV communities will continue
to be strong over the long term. It is estimated that approximately 10,000 baby
boomers are turning 65 daily through 2030. In addition, the population aged 55
and older is expected to grow 17% from 2021 to 2036. These individuals, seeking
an active lifestyle, will continue to drive the market for second home sales as
vacation properties, investment opportunities or retirement retreats. We expect
it is likely that over the next decade, we will continue to see high levels of
second-home sales and that manufactured homes and cottages in our Properties
will continue to provide a viable second-home alternative to site-built homes.
We also believe the Millennial and Generation X demographics will contribute to
our future long-term customer pipeline. RV Industry Association ("RVIA")
tracking of the RV industry as of 2021 showed that those under 45 years of age
is the fastest growing segment of RV owners and has been for the past few years.
The RVIA also completed a survey showing that RV purchase intent is strongest
among Millennials, followed closely by Generation X. Millennials and Generation
X combined represent over half of RV buyers. RVIA statistics as of 2021 show
that over 11 million U.S. households own an RV, an increase of 62% over the past
20 years. The increase is driven by strong interest from younger individuals and
families who live an active, outdoor lifestyle and baby boomers who are entering
retirement. These groups exhibit interest in adopting a minimalist lifestyle due
to its affordability, preference over home quality relative to its size and the
overall unique experience that our communities can provide. We believe the
demand from baby boomers and these younger generations will continue to outpace
supply for MH and RV communities. The entitlement process to develop new MH and
RV communities is extremely restrictive. As a result, there have been limited
new communities developed in our target geographic markets.
We generate the majority of our revenues from customers renting our Sites or
entering into right-to-use contracts, also known as membership subscriptions,
which provide them access to specific Properties for limited stays. MH Sites are
generally leased on an annual basis to residents who own or lease factory-built
homes, including manufactured homes. RV and marina Sites are leased to those who
generally have an RV, factory-built cottage, boat or other unit placed on the
site, including those customers renting marina dry storage slips. Annual Sites
are leased on an annual basis, including those Northern Properties that are open
for the summer season. 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. Additionally, we
have interests in joint venture Properties for which revenue is classified as
Equity in income from unconsolidated joint ventures on the Consolidated
Statements of Income and Comprehensive Income.


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