ELS Reports Third Quarter Results

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ELS Reports Third Quarter Results

Issues Preliminary 2013 Guidance

CHICAGO--(BUSINESS WIRE)-- Equity LifeStyle Properties, Inc. (NYS: ELS) (the "Company") today announced results for the three and nine months ended September 30, 2012.


a) Financial Results

For the three months ended September 30, 2012, Funds From Operations ("FFO") were $53.2 million, or $1.17 per share on a fully-diluted basis, compared to $33.0 million, or $0.76 per share on a fully-diluted basis, for the same period in 2011. For the nine months ended September 30, 2012, FFO was $159.7 million, or $3.52 per share on a fully-diluted basis, compared to $102.7 million, or $2.64 per share on a fully-diluted basis, for the same period in 2011.

Net income available to common stockholders totaled $16.0 million, or $0.39 per share on a fully-diluted basis, for the three months ended September 30, 2012 compared to a net loss of $(2.9) million, or $(0.07) per share on a fully-diluted basis, for the same period in 2011. Net income available to common stockholders totaled $30.5 million, or $0.74 per share on a fully-diluted basis for the nine months ended September 30, 2012, compared to $22.9 million, or $0.67 per share on a fully-diluted basis, for the same period in 2011. See the attachment to this press release for a reconciliation of FFO and FFO per share to net income available to common shares and net income per common share, respectively, the most directly comparable GAAP (General Accepted Accounting Principles) measure.

b) Portfolio Performance

The nine months ended September 30, 2012 compared to the same period in 2011 were impacted by the following: 1) the accelerated recognition of $2.1 million of revenue during the three months ended June 30, 2012, included in utility and other income, related to the early termination of a multi-year cable service agreement and 2) a decline in member right-to-use contract sales and related sales and marketing expenses as a result of the temporary cessation of membership upgrade sales in connection with sales force training and the roll out of new upgrade products during the first quarter of 2012. The overall performance of our right-to-use contracts net of related sales and marketing expense during the three months ended September 30, 2012 was in-line with our previously announced guidance. Excluding the impact of these items, for the nine months ended September 30, 2012, the increases in Core property operating revenues, expenses and income were approximately 2.2 percent, 1.2 percent and 3.0 percent, respectively.

For the three months ended September 30, 2012, property operating revenues, excluding deferrals, were $176.5 million, compared to $156.9 million in the same period of 2011. Our property operating revenues, excluding deferrals, for the nine months ended September 30, 2012 were $520.2 million, compared to $417.0 million for the nine months ended September 30, 2011.

For the three months ended September 30, 2012, Core property operating revenues increased approximately 1.8 percent and income from Core property operations increased approximately 2.6 percent as compared to the three months ended September 30, 2011. For the nine months ended September 30, 2012, Core property operating revenues increased approximately 1.8 percent and income from Core property operations increased approximately 2.6 percent as compared to the nine months ended September 30, 2011.

c) Balance Sheet

Our cash balance as of September 30, 2012 was approximately $147.9 million. Subsequent to the end of the quarter the Company used approximately $83.9 million for the redemption of our Series A Preferred Stock (see Preferred Stock Exchange discussion below) and quarterly common stock dividend payment. Our average long-term secured debt balance was approximately $2.1 billion, during the three months ended September 30, 2012, with a weighted average interest rate, including amortization, of approximately 5.5 percent per annum and weighted average maturity of 5.2 years. Interest coverage was approximately 3.0 times in the three months ended September 30, 2012.

During the quarter ended September 30, 2012, the Company received approximately $74.0 million of financing proceeds on one manufactured home community with a stated interest rate of 3.9 percent per annum, maturing in 2022. The proceeds were used to pay off the mortgage on the property, which was set to mature on May 1, 2013, totaling approximately $35.1 million, with a stated interest rate of 5.7 percent per annum. The Company also paid off two maturing mortgages totaling approximately $34.1 million, with a weighted average interest rate of 5.7 percent per annum.

During the quarter ended September 30, 2012, the Company amended its $380 million unsecured line of credit to (i) extend the maturity to September 15, 2016, (ii) lengthen the extension option to one-year, (iii) decrease the per annum interest rate to LIBOR plus a maximum of 1.40 percent to 2.00 percent, bearing a facility rate of 0.25 percent to 0.40 percent and (iv) effect certain other ministerial changes. The Company currently has no amounts outstanding on its line of credit.

d) Preferred Stock Exchange

During the quarter ended September 30, 2012, the Company exchanged 5,445,765 shares of 8.034% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock") for 5,445,765 depositary shares representing 1/100th of a share of the Company's 6.75% Series C Cumulative Redeemable Perpetual Preferred Stock (the "Series C Preferred Stock") with a liquidation value of $25.00 per depositary share, plus accrued and unpaid dividends of $0.3849625 per share of Series A Preferred Stock. The newly issued depositary shares trade on the New York Stock Exchange with the ticker symbol ELSPrC. On October 18, 2012, the Company redeemed the remaining 2,554,235 shares of Series A Preferred Stock at the $25.00 per share liquidation value and accrued and unpaid dividends of $0.094846 per share on such redeemed shares for approximately $64.1 million.

As of October 22, 2012, Equity LifeStyle Properties, Inc. owns or has an interest in 382 quality properties in 32 states and British Columbia consisting of 141,077 sites. The Company is a self-administered, self-managed, real estate investment trust (REIT) with headquarters in Chicago.

A live webcast of Equity LifeStyle Properties, Inc.'s conference call discussing these results will be available via the Company's website in the Investor Information section at www.equitylifestyle.com at 10:00 a.m. Central time on October 23, 2012.

This press release 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 the Company's expectations, goals or intentions regarding the future, and the expected effect of the recent acquisitions on the Company. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:

  • the Company's ability to control costs, real estate market conditions, the actual rate of decline in customers, the actual use of sites by customers and its success in acquiring new customers at its Properties (including those that it may acquire);
  • the Company's ability to maintain historical rental rates and occupancy with respect to Properties currently owned or that the Company may acquire;
  • the Company's ability to retain and attract customers renewing, upgrading and entering right-to-use contracts;
  • the Company's assumptions about rental and home sales markets;
  • the Company's assumptions and guidance concerning 2012 and 2013 estimated net income and funds from operations;
  • the Company's ability to manage counterparty risk;
  • in the age-qualified Properties, home sales results could be impacted by the ability of potential homebuyers 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 the recent acquisitions and the Company's estimates regarding the future performance of recent acquisitions;
  • unanticipated costs or unforeseen liabilities associated with the recent acquisitions;
  • ability to obtain financing or refinance existing debt on favorable terms or at all;
  • the effect of interest rates;
  • the dilutive effects of issuing additional securities;
  • the effect of accounting for the entry of contracts with customers representing a right-to-use the Properties under the Codification Topic "Revenue Recognition;" and
  • other risks indicated from time to time in the Company's 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. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.

Tables follow:

 

Third Quarter 2012 - Selected Financial Data

 

(In $US millions, except per share data, unaudited)

 
Three Months Ended
September 30, 2012
Income from property operations - 2012 Core (1)$73.0
Income from property operations - 2011 Acquisitions (2)25.8
Property management and general and administrative(16.0)
Other income and expenses (3)6.0
Financing costs and other(35.6)
Funds from operations (FFO)(4) (5)53.2
Depreciation on real estate(24.8)
Depreciation on rental homes (5)(1.6)
Amortization of in-place leases(7.5)
Depreciation on unconsolidated joint ventures(0.3)
Deferral of right-to-use contract sales revenue and commission, net(1.5)
Income allocated to OP Units(1.5)
Net income available to common shares$16.0 
 
Net income per common share - fully diluted (6)$0.39
FFO per share - fully diluted$1.17
 
Weighted average shares outstanding - fully diluted45.4

____________________________

1. See page 9 for 2012 Core income from property operations detail.
2.See page 10 for income from property operations detail for the 2011 Acquisition Properties.
3.

Includes approximately $0.5 million resulting from the increase in fair value of the net asset described in the following sentences. The company owns both a fee interest and a leasehold interest in a 2,200 site property. The ground lease contains a purchase option on behalf of the lessee and a put option on behalf of the lessor. The options may be exercised by either party upon the death of the fee holder. The Company is the beneficiary of an escrow funded by the seller and denominated in approximately 114,000 shares of common stock of the Company. The escrow was established to protect the Company from future scheduled ground lease payments as well as scheduled increases in the option purchase price over time. The current fair value estimate of the escrow is $6.8 million. The Company will revalue the asset as of each reporting date and will recognize in earnings any increase or decrease in fair value of the escrow.

4.See definition of FFO on page 23.
5.Third quarter 2012 FFO adjusted to include a deduction for depreciation expense on rental homes would have been $51.6 million, or $1.14 per fully diluted share.
6.Net income per fully diluted common share is calculated before Income allocated to OP Units.
 

Income Statement

 

(In $US thousands, except per share data, unaudited)

  
Three Months EndedNine Months Ended
September 30,September 30,
2012 2011(1)2012 2011(1)
Revenues:
Community base rental income$103,668$87,149$309,819$219,740
Rental home income3,7112,31110,1125,262
Resort base rental income36,51636,139104,503101,858
Right-to-use annual payments12,11512,44436,08737,019
Right-to-use contracts current period, gross4,4944,3869,68013,096
Right-to-use contracts, deferred, net of prior period amortization(2,788)(2,858)(4,680)(8,768)
Utility and other income16,03614,49850,02140,044
Gross revenues from home sales1,8611,6365,8814,281
Brokered resale revenue and ancillary services revenues, net9961,6173,2313,724
Interest income2,5682,3287,5864,379
Income from other investments, net (2)2,651 4,394 5,706 6,242 
Total revenues181,828164,044537,946426,877
 
Expenses:
Property operating and maintenance60,37856,451173,147148,417
Rental home operating and maintenance2,0091,4175,1553,084
Real estate taxes11,82610,30436,30026,522
Sales and marketing, gross3,5732,9507,8498,289
Sales and marketing, deferred commissions, net(1,277)(1,148)(2,174)(3,495)
Property management9,4739,20128,65125,857
Depreciation on real estate assets and rental homes26,29422,92578,62059,234
Amortization of in-place leases7,54810,75944,31410,759
Cost of home sales2,0511,5526,8694,020
Home selling expenses3343561,0701,239
General and administrative6,5356,41219,72418,070
Acquisition costs15,21617,333
Rent control initiatives and other2214671,0671,558
Interest and related amortization31,640 26,084 93,434 68,931 
Total expenses160,605162,946494,026389,818
Income before equity in income of unconsolidated joint ventures21,2231,09843,92037,059
Equity in income of unconsolidated joint ventures269 257 1,524 1,582 
Consolidated net income21,4921,35545,44438,641
 
(Income) loss allocated to non-controlling interest-Common OP Units(1,503)289(2,891)(3,121)
Income allocated to non-controlling interest-Perpetual Preferred OP Units(2,801)
Series A Redeemable Perpetual Preferred Stock Dividends(3,393)(4,031)(11,462)(9,319)
Series B Redeemable Preferred Stock Dividends(466)(466)
Series C Redeemable Perpetual Preferred Stock Dividends(587) (587) 
Net income (loss) available for Common Shares$16,009 $(2,853)$30,504 $22,934 
 
Net income (loss) per Common Share - Basic$0.39$(0.07)$0.74$0.67
Net income (loss) per Common Share - Fully Diluted(3)$0.39$(0.07)$0.74$0.67
 
Average Common Shares - Basic41,19038,34641,13734,017
Average Common Shares and OP Units - Basic45,13243,23045,09638,530
Average Common Shares and OP Units - Fully Diluted45,44743,60245,41838,858

___________________________________________

1. Certain 2011 amounts have been reclassified to conform to the 2012 presentation. This reclassification had no material effect on the statement of operations.
2.

Includes approximately $0.5 million from the increase in a net asset associated with the Acquisition Properties. See footnote 3 on page 5 for detailed explanation.

3.As a result of the Net loss available for Common Shares for the three months ended September 30, 2011, both the Company's Common OP Units and the Series B Preferred Stock were considered anti-dilutive, and excluded from the computation of the Net Loss Per Common Share - Fully Diluted for the three months ended September 30, 2011 only.
 

Reconciliation of Net Income to FFO and FAD

 

(In $US thousands, except per share data, unaudited)

  
Three Months EndedNine Months Ended
September 30,September 30,
2012 20112012 2011
Computation of funds from operations:
Net income (loss) available for Common Shares$16,009$(2,853)$30,504$22,934
Income (loss) allocated to common OP Units1,503(289)2,8913,121
Series B Redeemable Preferred Stock Dividends466466
Right-to-use contract upfront payments, deferred, net (1)2,7882,8584,6808,768
Right-to-use contract commissions, deferred, net (2)(1,277)(1,148)(2,174)(3,495)
Depreciation on real estate assets24,74121,68974,183
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