ELS Reports Second Quarter Results
ELS Reports Second Quarter Results
Strong Core Performance
CHICAGO--(BUSINESS WIRE)-- Equity LifeStyle Properties, Inc. (NYS: ELS) (referred to herein as "we," "us," and "our") today announced results for the quarter and six months ended June 30, 2013. All per share results reflect the two-for-one stock split we completed on July 15, 2013 and are reported on a fully-diluted basis unless otherwise noted.
Financial Results for the Quarter Ended June 30, 2013
Normalized Funds from Operations ("Normalized FFO") increased $4.5 million, or $0.04 per common share, to $52.3 million, or $0.57 per common share, compared to $47.8 million, or $0.53 per common share, for the same period in 2012. Funds from Operations ("FFO") increased $3.0 million, or $0.03 per common share, to $50.8 million, or $0.56 per common share, compared to $47.8 million, or $0.53 per common share, for the same period in 2012. Net income available for common stockholders increased $15.8 million, or $0.19 per common share, to $17.9 million, or $0.21 per common share, compared to $2.1 million, or $0.02 per common share, for the same period in 2012.
Portfolio Performance
For the quarter ended June 30, 2013, property operating revenues, excluding deferrals, increased $5.7 million to $169.5 million compared to $163.8 million for the same period in 2012. For the six months ended June 30, 2013, property operating revenues, excluding deferrals, increased $13.4 million to $345.4 million compared to $332.0 million for the same period in 2012. For the quarter ended June 30, 2013, income from property operations, excluding deferrals, increased $3.0 million to $94.5 million compared to $91.5 million for the same period in 2012. For the six months ended June 30, 2013, income from property operations, excluding deferrals, increased $6.9 million to $198.7 million compared to $191.8 million for the same period in 2012.
For the quarter ended June 30, 2013, Core property operating revenues increased approximately 2.7 percent and income from Core property operations increased approximately 2.8 percent compared to the same period in 2012. For the six months ended June 30, 2013, Core property operating revenues increased approximately 2.9 percent and income from Core property operations increased approximately 2.7 percent compared to the same period in 2012.
The Core portfolio excludes amounts related to 11 manufactured home communities in Michigan held for disposition which are presented separately as discontinued operations. We are under contract to sell these communities for a purchase price of approximately $165.0 million.
Balance Sheet
During the quarter we closed on a $110.0 million loan as part of our previously announced long-term refinancing plan. This loan is secured by a portfolio of RV assets, matures in 2023 and bears a stated interest rate of 4.87 percent per annum. During the quarter we paid off three mortgages totaling $21.5 million with a weighted average interest rate of 5.9 percent per annum. We paid a $1.4 million premium for the early retirement of two of these mortgages.
On July 1, 2013, the proceeds from the new loan, along with available cash, were used to pay off six mortgages with maturity dates in 2015. The retired loans had an outstanding principal balance of approximately $120.0 million, with a weighted average interest rate of 5.7 percent per annum. We paid a $16.4 million premium for the early retirement of these six mortgages. On July 18, 2013, we paid off the mortgage on one manufactured home community, which was set to mature on July 1, 2020, for approximately $7.8 million with a stated interest rate of 7.2 percent per annum.
Interest coverage was approximately 2.9 times in the quarter. Our cash balance as of June 30, 2013, before the previously mentioned July 1st debt repayment, was approximately $177.9 million. Expanded disclosure on our balance sheet and debt statistics are included in the tables below.
As of July 22, 2013, we own or have an interest in 383 quality properties in 32 states and British Columbia consisting of 142,682 sites. We are a self-administered, self-managed real estate investment trust ("REIT") with headquarters in Chicago.
A live webcast of our conference call discussing these results will be available via our website in the Investor Information section at www.equitylifestyle.com at 10:00 a.m. Central Time on July 23, 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 our expectations, goals or intentions regarding the future, and the expected effect of our recent acquisitions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:
our ability to control costs, real estate market conditions, the actual rate of decline in customers, the actual use of sites by customers and our success in acquiring new customers at our properties (including those that we may acquire);
our ability to maintain historical rental rates and occupancy with respect to properties currently owned or that we may acquire;
our ability to retain and attract customers renewing, upgrading and entering right-to-use contracts;
our assumptions about rental and home sales markets;
our assumptions and guidance concerning 2013 estimated net income, FFO and Normalized FFO;
our 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 recent acquisitions and our estimates regarding the future performance of recent acquisitions;
unanticipated costs or unforeseen liabilities associated with 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 our 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. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.
Tables follow:
Second Quarter 2013 - Selected Financial Data | |||||
(In millions, except per share data (adjusted for stock split), unaudited) | |||||
Quarter Ended | |||||
June 30, 2013 | |||||
Income from property operations - 2013 Core (1) | $ | 94.1 | |||
Income from property operations - 2012 Acquisitions (2) | 0.3 | ||||
Income from discontinued operations | 3.9 | ||||
Property management and general and administrative | (17.0 | ) | |||
Other income and expenses | 3.6 | ||||
Financing costs and other | (32.6 | ) | |||
Normalized FFO(3) | 52.3 | ||||
Change in fair value of contingent consideration asset (4) | 0.1 | ||||
Transaction costs | (0.2 | ) | |||
Early debt retirement | (1.4 | ) | |||
FFO(3) (5) | $ | 50.8 | |||
Normalized FFO per share - fully diluted | $ | 0.57 | |||
FFO per share - fully diluted | $ | 0.56 | |||
Normalized FFO(3) | $ | 52.3 | |||
Non-revenue producing improvements to real estate | (7.2 | ) | |||
Funds available for distribution (FAD)(3) | $ | 45.1 | |||
FAD per share - fully diluted | $ | 0.50 | |||
Weighted average shares outstanding - fully diluted | 91.1 | ||||
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1. | See page 8 for details of the 2013 Core Income from Property Operations. | ||
2. | See page 9 for details of the Income from Property Operations for the properties acquired during 2012 (the "2012 Acquisitions"). | ||
3. | See page 6 for a reconciliation of Net income available for Common Shares to FFO, Normalized FFO and FAD. See definitions of FFO, Normalized FFO and FAD on page 21. | ||
4. | Represents the increase in fair value of the net asset described in the following sentences. We own both a fee interest and a ground leasehold interest in a 2,200 site property. The ground lease provides a purchase option to the lessee and a put option to the lessor. Either option may be exercised upon the death of the fee holder. We are the beneficiary of an escrow funded by the seller consisting of approximately 99,041 shares of our common stock as of June 30, 2013. The escrow was established to protect us from future scheduled ground lease payment increases as well as scheduled increases in the option purchase price over time. The current fair value estimate of the escrow is approximately $6.7 million. We revalue the asset based on the market value of our common stock as of each reporting date and recognize in earnings any increase or decrease in fair value of the escrow. | ||
5. | Second quarter 2013 FFO adjusted to include a deduction for depreciation expense on rental homes would have been $49.2 million, or $0.54 per fully diluted share. | ||
Consolidated Income Statement | |||||||||||||||||
(In thousands, unaudited) | |||||||||||||||||
Quarters Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Revenues: | |||||||||||||||||
Community base rental income | $ | 101,468 | $ | 98,336 | $ | 202,244 | $ | 196,433 | |||||||||
Rental home income | 3,598 | 2,786 | 6,992 | 5,367 | |||||||||||||
Resort base rental income | 33,197 | 30,408 | 73,936 | 67,987 | |||||||||||||
Right-to-use annual payments | 12,043 | 12,221 | 23,566 | 23,972 | |||||||||||||
Right-to-use contracts current period, gross | 3,361 | 2,942 | 6,192 | 5,186 | |||||||||||||
Right-to-use contracts, deferred, net of prior period amortization | (1,550 | ) | (1,285 | ) | (2,590 | ) | (1,891 | ) | |||||||||
Utility and other income | 15,787 | 17,097 | 32,470 | 33,053 | |||||||||||||
Gross revenues from home sales | 4,217 | 1,921 | 6,913 | 3,925 | |||||||||||||
Brokered resale revenue and ancillary services revenues, net | 932 | 482 | 2,727 | 2,225 | |||||||||||||
Interest income | 2,076 | 1,908 | 3,974 | 4,012 | |||||||||||||
Income from other investments, net (1) | 1,624 | 1,567 | 4,104 | 3,055 | |||||||||||||
Total revenues | 176,753 | 168,383 | 360,528 | 343,324 | |||||||||||||
Expenses: | |||||||||||||||||
Property operating and maintenance | 58,345 | 56,882 | 113,401 | 109,850 | |||||||||||||
Rental home operating and maintenance | 1,487 | 1,281 | 3,357 | 2,694 | |||||||||||||
Real estate taxes | 11,888 | 11,510 | 24,290 | 23,367 | |||||||||||||
Sales and marketing, gross | 3,333 | 2,632 | 5,694 | 4,275 | |||||||||||||
Sales and marketing, deferred commissions, net | (655 | ) | (655 | ) | (1,118 | ) | (897 | ) | |||||||||
Property management | 10,170 | 9,312 | 20,303 | 18,947 | |||||||||||||
Depreciation on real estate assets and rental homes | 29,313 | 25,523 | 55,333 | 50,947 | |||||||||||||
Amortization of in-place leases | 159 | 15,650 | 318 | 31,265 | |||||||||||||
Cost of home sales | 3,919 | 2,514 | 6,700 | 4,681 | |||||||||||||
Home selling expenses | 454 | 399 | 981 | 728 | |||||||||||||
General and administrative | 6,946 | 6,810 | 13,655 | 12,909 | |||||||||||||
Early debt retirement | 1,381 | — | 1,381 | — | |||||||||||||
Rent control initiatives and other | 1,624 | 367 | 1,856 | 846 | |||||||||||||
Interest and related amortization | 30,377 | 30,705 | 60,500 | 61,528 | |||||||||||||
Total expenses | 158,741 | 162,930 | 306,651 | 321,140 | |||||||||||||
Income before equity in income of unconsolidated joint ventures and gain on sale of property | 18,012 | 5,453 | 53,877 | 22,184 | |||||||||||||
Equity in income of unconsolidated joint ventures | 609 | 492 | 1,185 | 1,255 | |||||||||||||
Consolidated income from continuing operations | 18,621 | 5,945 | 55,062 | 23,439 | |||||||||||||
Discontinued Operations: | |||||||||||||||||
Net income from discontinued operations | 3,165 | 353 | 6,233 | 513 | |||||||||||||
Gain on sale of property, net of tax (2) | — | — | 958 | — | |||||||||||||
Income from discontinued operations | 3,165 | 353 | 7,191 | 513 | |||||||||||||
Consolidated net income | 21,786 | 6,298 | 62,253 | 23,952 | |||||||||||||
Income allocated to non-controlling interest-Common OP Units | (1,597 | ) | (197 | ) | (4,730 | ) | (1,388 | ) | |||||||||
Series A Redeemable Perpetual Preferred Stock Dividends | — | (4,038 | ) | — | (8,069 | ) | |||||||||||
Series C Redeemable Perpetual Preferred Stock Dividends | (2,329 | ) | — | (4,640 | ) | — | |||||||||||
Net income available for Common Shares | $ | 17,860 | $ | 2,063 | $ | 52,883 | $ | 14,495 | |||||||||
___________________________________________
1. | For the quarter and six months ended June 30, 2013, includes approximately $0.1 million and $1.1 million, respectively, resulting from the increase in the fair value of a contingent asset. See footnote 4 on page 4 for a detailed explanation. | ||
2. | For the six months ended June 30, 2013, a $1.0 million gain was recognized as a result of new tax legislation that was passed that eliminated a previously accrued built-in-gain tax liability related to the disposition of our Cascade property in 2012. | ||
Reconciliation of Net Income to FFO, Normalized FFO and FAD | |||||||||||||||||
(In thousands, except per share data (adjusted for stock split), unaudited) | |||||||||||||||||
Quarters Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Net income available for Common Shares | $ | 17,860 | $ | 2,063 | $ | 52,883 | $ | 14,495 | |||||||||
Income allocated to common OP Units | 1,597 | 197 | 4,730 | 1,388 | |||||||||||||
Right-to-use contract upfront payments, deferred, net (1) | 1,550 | 1,285 | 2,590 | 1,891 | |||||||||||||
Right-to-use contract commissions, deferred, net (2) | (655 | ) | (655 | ) | (1,118 | ) | (897 | ) | |||||||||
Depreciation on real estate assets | 27,681 | 24,173 | 52,139 | 48,301 | |||||||||||||
Depreciation on real estate assets, discontinued operations | 772 | 704 | 1,536 | 1,379 | |||||||||||||
Depreciation on rental homes | 1,632 | 1,351 | 3,194 | 2,646 | |||||||||||||
Amortization of in-place leases | 159 | 15,650 | 318 | 31,265 | |||||||||||||
Amortization of in-place leases, discontinued operations | — | 2,751 | — | 5,502 | |||||||||||||
Depreciation on unconsolidated joint ventures | |||||||||||||||||
