ELS Reports Fourth Quarter Results

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ELS Reports Fourth Quarter Results

Continued Stable Core Performance

CHICAGO--(BUSINESS WIRE)-- Equity LifeStyle Properties, Inc. (NYS: ELS) (the "Company") today announced results for the three months and year ended December 31, 2012. All per share results are reported on a fully-diluted basis unless otherwise noted.


a) Financial Results

For the three months ended December 31, 2012, Funds From Operations ("FFO") were $50.3 million, or $1.11 per share, compared to $44.8 million, or $0.99 per share, for the same period in 2011. For the year ended December 31, 2012, FFO was $210.0 million, or $4.62 per share, compared to $147.5 million, or $3.66 per share, for the same period in 2011.

Net income available to common stockholders totaled $24.3 million, or $0.58 per share, for the three months ended December 31, 2012 compared to a net loss of $(0.2) million, or $0.00 per share, for the same period in 2011. Net income available to common stockholders totaled $54.8 million, or $1.32 per share, for the year ended December 31, 2012, compared to $22.8 million, or $0.64 per share, for the same period in 2011. See the tables included in 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

During the year ended December 31, 2012, Core property operations were impacted by previously disclosed non-recurring items related to utility income and membership sales and marketing expenses. For the year ended December 31, 2012, compared to the same period in 2011, the increases in Core property operating revenues, expenses and income were approximately 2.3 percent, 1.3 percent and 3.0 percent, respectively, excluding cable service prepayments, right-to-use contract sales and sales and marketing expenses.

For the three months ended December 31, 2012, property operating revenues, excluding deferrals, were $167.9 million, compared to $161.1 million in the same period of 2011. Property operating revenues, excluding deferrals, for the year ended December 31, 2012 were $688.1 million, compared to $578.2 million for the year ended December 31, 2011.

For the three months ended December 31, 2012, Core property operating revenues increased approximately 1.5 percent and income from Core property operations increased approximately 1.4 percent compared to the same period in 2011. For the year ended December 31, 2012, Core property operating revenues increased approximately 1.8 percent and income from Core property operations increased approximately 2.3 percent compared to the same period in 2011.

c) Balance Sheet

Our cash balance as of December 31, 2012 was approximately $37.1 million. Our average long-term secured debt balance was approximately $2.1 billion during the three months ended December 31, 2012, with a weighted average interest rate, including loan cost amortization, of approximately 5.5 percent per annum and weighted average maturity of 5.0 years. Interest coverage was approximately 2.9 times in the three months ended December 31, 2012.

During the three months ended December 31, 2012, the Company paid off the mortgage on one resort property, which was set to mature on February 11, 2013 totaling approximately $5.2 million, with a stated interest rate of 6.5 percent per annum.

d) Asset-related Transactions

During the three months ended December 31, 2012, the Company closed on a $25.0 million acquisition of the Victoria Palms Resort, a 1,122-site property, and the Alamo Palms Resort, a 643-site property. Both properties are located in Rio Grande Valley, Texas.

The Company also closed on the sale of Cascade, a 163-site property in Snoqualmie, Washington formerly operated as a Thousand Trails resort. The sale was the result of a settlement related to a previously threatened condemnation of the property. Cash proceeds from the disposition, net of closing costs, were approximately $7.6 million and a gain on disposition of approximately $4.6 million, net of tax, was recorded. The property was not operating at the time of the sale.

e) Preferred Stock Redemption

During the three months ended December 31, 2012, the Company redeemed the remaining 2,554,235 shares of 8.034% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, 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 January 28, 2013, Equity LifeStyle Properties, Inc. owns or has an interest in 383 quality properties in 32 states and British Columbia consisting of 142,682 sites. The Company is a self-administered, self-managed, real estate investment trust (REIT) with headquarters in Chicago.

A live webcast of the Equity LifeStyle Properties, Inc. 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 on January 29, 2013.

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 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:

Fourth Quarter 2012 - Selected Financial Data

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

Three Months Ended
December 31, 2012
Income from property operations - 2012 Core (1)$70.6
Income from property operations - 2011 Acquisitions (2)27.0
Property management and general and administrative(17.0)
Other income and expenses (3)3.4
Financing costs and other(33.7)
Funds from operations (FFO)(4) (5)50.3
Depreciation on real estate(24.6)
Depreciation on rental homes (5)(1.7)
Amortization of in-place leases(0.8)
Depreciation on unconsolidated joint ventures(0.3)
Deferral of right-to-use contract sales revenue and commission, net(1.0)
Income allocated to OP Units(2.2)
Gain on sale of property4.6 
Net income available to common shares$24.3 
 
Net income per common share - fully diluted (6)$0.58
FFO per share - fully diluted$1.11
 
Weighted average shares outstanding - fully diluted45.5

____________________________

1. See page 9 for the 2012 Core Income from Property Operations detail.

2. See page 10 for the Income from Property Operations detail for the 2011 Acquisition Properties.

3. Includes approximately $50,000 resulting from the decrease 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 21.

5. Fourth quarter 2012 FFO adjusted to include a deduction for depreciation expense on rental homes would have been $48.6 million, or $1.07 per fully diluted share.

6. Net income per fully diluted common share is calculated before Income allocated to OP Units.

Consolidated Income Statement

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

Three Months Ended Year Ended
December 31,December 31,
2012 2011(1)2012 2011(1)
Revenues:
Community base rental income$104,351$99,111$414,170$318,851
Rental home income3,9532,70814,0657,970
Resort base rental income29,82428,631134,327130,489
Right-to-use annual payments11,57512,10347,66249,122
Right-to-use contracts current period, gross3,7534,76013,43317,856
Right-to-use contracts, deferred, net of prior period amortization(2,014)(3,169)(6,694)(11,936)
Utility and other income14,41113,79964,43253,843
Gross revenues from home sales2,6851,8078,5666,088
Brokered resale revenue and ancillary services revenues, net(117)(260)3,1143,464
Interest income2,4232,62110,0097,000
Income from other investments, net (2)1,087 210 6,793 6,452 
Total revenues171,931162,321709,877589,199
 
Expenses:
Property operating and maintenance53,80552,206226,952200,623
Rental home operating and maintenance2,2041,7667,3594,850
Real estate taxes11,32311,09747,62337,619
Sales and marketing, gross2,9972,93010,84611,219
Sales and marketing, deferred commissions, net(981)(1,294)(3,155)(4,789)
Property management9,8099,21938,46035,076
Depreciation on real estate assets and rental homes26,29725,023104,91784,257
Amortization of in-place leases80817,72045,12228,479
Cost of home sales2,6061,6639,4755,683
Home selling expenses3413501,4111,589
General and administrative7,0435,76326,74423,833
Acquisition costs1571,16018018,493
Rent control initiatives and other3894851,4562,043
Interest and related amortization31,090 30,737 124,524 99,668 
Total expenses147,888158,825641,914548,643
Income before equity in income of unconsolidated joint ventures and gain on sale of property24,0433,49667,96340,556
Equity in income of unconsolidated joint ventures3753661,8991,948
Gain on sale of property, net of tax4,596  4,596  
Consolidated net income29,0143,86274,45842,504
 
(Income) loss allocated to non-controlling interest-Common OP Units(2,176)16(5,067)(3,105)
Income allocated to non-controlling interest-Perpetual Preferred OP Units(2,801)
Series A Redeemable Perpetual Preferred Stock Dividends(242)(4,038)(11,704)(13,357)
Series B Redeemable Preferred Stock Dividends(466)
Series C Redeemable Perpetual Preferred Stock Dividends(2,322) (2,909) 
Net income (loss) available for Common Shares$24,274 $(160)$54,778 $22,775 
 
Net income (loss) per Common Share - Basic$0.59$$1.33$0.64
Net income (loss) per Common Share - Fully Diluted$0.58$$1.32$0.64
 
Average Common Shares - Basic41,28540,26341,17435,591
Average Common Shares and OP Units - Basic45,16044,97845,11240,004
Average Common Shares and OP Units - Fully Diluted45,47245,29645,43140,330

___________________________________________

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

2. For the three months and year ended December 31, 2012, includes approximately $50,000 decrease and $0.5 million increase, respectively, in a net asset associated with the Acquisition Properties. See footnote 3 on page 5 for detailed explanation.

Reconciliation of Net Income to FFO and FAD

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

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Three Months Ended Year Ended
December 31,December 31,
2012 20112012 2011
Computation of funds from operations:
Net income (loss) available for Common Shares$24,274$(160)$54,778$22,775
Income (loss) allocated to common OP Units2,176(16)5,0673,105
Series B Redeemable Preferred Stock Dividends466
Right-to-use contract upfront payments, deferred, net (1)2,0143,1696,69411,936
Right-to-use contract commissions, deferred, net (2)(981)(1,294)(3,155)(4,789)
Depreciation on real estate assets24,64323,78098,82679,981
Depreciation on rental homes (3)1,6541,2436,0914,276
Amortization of in-place leases80817,72045,12228,479
Depreciation on unconsolidated joint ventures2933081,1661,228
Gain on sale of property, net of tax(4,596) (4,596) 
Funds from operations (FFO)(4) (5)$50,285$44,750$209,993$147,457
Non-revenue producing improvements to real estate(9,246)(8,320)(29,287)(23,315)
Funds available for distribution (FAD)(4)$41,039 $