Continued Strong Performance
Equity LifeStyle Properties, Inc. (NYSE:ELS) (referred to herein
as “we,” “us,” and “our”) today announced results for the third
quarter and nine months ended September 30, 2016. All per
share results are reported on a fully diluted basis unless
otherwise noted.
Financial Results for the Quarter and Nine Months Ended
September 30, 2016
For the quarter ended September 30, 2016, total revenues
increased $16.1 million, or 7.7 percent, to $226.2 million compared
to $210.1 million for the same period in 2015. Net income available
for Common Stockholders increased $4.3 million, or $0.05 per Common
Share, to $41.0 million, or $0.48 per Common Share, compared to
$36.7 million, or $0.43 per Common Share, for the same period in
2015.
For the nine months ended September 30, 2016, total revenues
increased $36.4 million, or 5.9 percent, to $656.4 million compared
to $620.0 million for the same period in 2015. Net income available
for Common Stockholders for the nine months ended September 30,
2016 increased $31.5 million, or $0.36 per Common Share, to $127.1
million, or $1.49 per Common Share, compared to $95.6 million, or
$1.13 per Common Share, for the same period in 2015.
Non-GAAP Financial Measures and Portfolio Performance
For the quarter ended September 30, 2016, Funds from
Operations (“FFO”) available for Common Stock and OP Unit holders
increased $6.6 million, or $0.06 per Common Share, to $76.9 million
or $0.83 per Common Share, compared to $70.3 million, or $0.77 per
Common Share, for the same period in 2015. For the nine months
ended September 30, 2016, FFO available for Common Stock and
OP Unit holders increased $36.5 million, or $0.38 per Common Share,
to $230.4 million or $2.49 per Common Share, compared to $193.9
million, or $2.11 per Common Share, for the same period in
2015.
For the quarter ended September 30, 2016 Normalized Funds from
Operations (“Normalized FFO”) available for Common Stock and OP
Unit holders increased $6.7 million, or $0.06 per Common Share, to
$77.2 million, or $0.83 per Common Share, compared to $70.5
million, or $0.77 per Common Share, for the same period in 2015.
For the nine months ended September 30, 2016, Normalized FFO
available for Common Stock and OP Unit holders increased $19.9
million, or $0.20 per Common Share, to $231.3 million, or $2.50 per
Common Share, compared to $211.4 million, or $2.30 per Common
Share, for the same period in 2015.
For the quarter ended September 30, 2016, property
operating revenues, excluding deferrals, increased $12.0 million to
$211.3 million compared to $199.3 million for the same period in
2015. For the nine months ended September 30, 2016, property
operating revenues, excluding deferrals, increased $31.0 million to
$616.2 million compared to $585.2 million for the same period in
2015. For the quarter ended September 30, 2016, income from
property operations, excluding deferrals and property management,
increased $7.4 million to $119.6 million compared to $112.2 million
for the same period in 2015. For the nine months ended September
30, 2016, income from property operations, excluding deferrals and
property management, increased $22.2 million to $360.3 million
compared to $338.1 million for the same period in 2015.
For the quarter ended September 30, 2016, Core property
operating revenues, excluding deferrals, increased approximately
4.7 percent and Core income from property operations, excluding
deferrals and property management, increased approximately 5.3
percent compared to the same period in 2015. For the nine months
ended September 30, 2016, Core property operating revenues,
excluding deferrals, increased approximately 4.5 percent and Core
income from property operations, excluding deferrals and property
management, increased approximately 5.8 percent compared to the
same period in 2015.
Investment Activity
In October 2016, we completed the acquisition of Riverside RV, a
499-site property located in Arcadia, Florida. The purchase price
of approximately $20.3 million was funded with available cash.
In August 2016, we closed on the purchase of approximately 25
acres of vacant land adjacent to Colony Cove and Ridgewood Estates
manufactured home communities in Ellenton, Florida, for $2.0
million.
Balance Sheet Activity
In July 2016, we paid off two maturing mortgage loans of
approximately $24.0 million in the aggregate, with a weighted
average interest rate of 5.99 percent per annum, secured by one RV
resort and one manufactured home community.
During September 2016, we completed refinancing activity and
closed on loans with total gross proceeds of approximately $54.5
million in the aggregate. The loans have a weighted average
interest rate of 4.05 percent per annum and are secured by three
manufactured home communities and one RV resort.
In October 2016, we closed on a loan of approximately $15.0
million, secured by one manufactured home community, with a stated
interest rate of 3.55 percent per annum.
About Equity LifeStyle Properties
We are a self-administered, self-managed real estate investment
trust (“REIT”) with headquarters in Chicago.
As of October 17, 2016, we own or have an interest in 391
quality properties in 32 states and British Columbia consisting of
146,298 sites.
For additional information, please contact our Investor
Relations Department at (800) 247-5279 or at
investor_relations@equitylifestyle.com.
Conference Call
A live webcast of our conference call discussing these results
will take place tomorrow, Tuesday, October 18, 2016, at 10:00 a.m.
Central Time. Please visit the Investor Information section at
www.equitylifestyle.com for the link. A replay of the webcast will
be available for two weeks at this site.
Reporting Calendar
Quarterly financial results and related earnings conference
calls for the next three quarters are expected to occur as
follows:
Release Date Earnings
Call Fourth Quarter 2016 Monday, January 23, 2017 Tuesday,
January 24, 2017 10:00 a.m. CT First Quarter 2017 Monday, April 17,
2017 Tuesday, April 18, 2017 10:00 a.m. CT Second Quarter 2017
Monday, July 17, 2017 Tuesday, July 18, 2017 10:00 a.m. CT
Forward-Looking Statements
In addition to historical information, 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
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 or
increase future 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
2016 and 2017 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 home
buyers 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;
- the completion of future transactions
in their entirety, if any, and timing and effective integration
with respect thereto;
- 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";
- the outcome of pending or future
lawsuits filed against us, including those disclosed in our filings
with the Securities and Exchange Commission, by tenant groups
seeking to limit rent increases and/or seeking large damage awards
for our alleged failure to properly maintain certain Properties or
other tenant related matters, such as the case currently pending in
the California Court of Appeal, Sixth Appellate District, Case No.
H041913, involving our California Hawaiian manufactured home
property, including any further proceedings on appeal or in the
trial court; 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.
Investor Information
Equity Research Coverage (1) Robert W.
Baird & Company BMO Capital Markets
Green Street Advisors Drew T. Babin Paul
Adornato David Bragg/ Ryan Burke 215-553-7816 212-885-4170
949-640-8780
dbabin@rwbaird.com
paul.adornato@bmo.com
dbragg@greenstreetadvisors.com
rburke@greenstreetadvisors.com
Cantor Fitzgerald Citi Research Gaurav Mehta Michael
Bilerman/ Nick Joseph
Wells Fargo Securities 212-915-1221
212-816-1383 Todd Stender
gmehta@cantor.com
michael.bilerman@citi.com
562-637-1371
nicholas.joseph@citi.com
todd.stender@wellsfargo.com
Bank of America Merrill Lynch Global Research
Evercore ISI Juan Sanabria Steve Sakwa/ Gwen Clark
646-855-1589 212-446-5600
juan.sanabria@baml.com
steve.sakwa@evercoreisi.com
gwen.clark@evercoreisi.com
______________________
1. Any opinions, estimates or forecasts regarding our
performance made by these analysts or agencies do not represent our
opinions, forecasts or predictions. We do not by reference to these
firms imply our endorsement of or concurrence with such
information, conclusions or recommendations.
Financial Highlights
(In millions, except Stock and OP Units
outstanding and per share data, unaudited)
As of and for the Three Months Ended
September 30,
June 30, March 31,
December 31,
September 30,
2016
2016 2016
2015
2015 Operating Information Total
revenues $ 226.2 $ 210.1 $ 220.1 $ 201.6 $ 210.1 Net income $ 46.8
$ 40.8 $ 57.2 $ 39.8 $ 42.1 Net income available for Common
Stockholders $ 41.0 $ 35.5 $ 50.6 $ 34.5 $ 36.7 Adjusted EBITDA (1)
$ 103.4 $ 95.9 $ 111.3 $ 94.6 $ 97.5 FFO available for Common Stock
and OP Unit holders(1)(2) $ 76.9 $ 68.9 $ 84.6 $ 67.1 $ 70.3
Normalized FFO available for Common Stock and OP Unit holders(1)(2)
$ 77.2 $ 69.3 $ 84.8 $ 67.6 $ 70.5 Funds available for distribution
(FAD) available for Common Stock and OP Unit holders(1)(2) $ 67.2 $
58.4 $ 77.4 $ 57.0 $ 62.5
Stock Outstanding (In
thousands)
and Per Share Data
Common Stock and OP Units, end of the period 92,507 92,499 91,802
91,461 91,505 Weighted average Common Stock and OP Unit outstanding
- fully diluted 92,910 92,264 92,041 91,875 91,940 Net income per
Common Share - fully diluted $ 0.48 $ 0.42 $ 0.60 $ 0.41 $ 0.43 FFO
per Common Share - fully diluted $ 0.83 $ 0.75 $ 0.92 $ 0.73 $ 0.77
Normalized FFO per Common Share - fully diluted $ 0.83 $ 0.75 $
0.92 $ 0.74 $ 0.77 Dividends per Common Share $ 0.425 $ 0.425 $
0.425 $ 0.375 $ 0.375
Balance Sheet Total assets (3)
$ 3,470 $ 3,486 $ 3,415 $ 3,400 $ 3,423 Total liabilities (3) $
2,396 $ 2,420 $ 2,400 $ 2,408 $ 2,434
Market
Capitalization Total debt $ 2,111 $ 2,134 $ 2,125 $ 2,146 $
2,156 Total market capitalization (4) $ 9,387 $ 9,675 $ 8,938 $
8,380 $ 7,651
Ratios Total debt / total market
capitalization 22.5 % 22.1 % 23.8 % 25.6 % 28.2 % Total debt +
preferred stock / total market capitalization 23.9 % 23.5 % 25.3 %
27.2 % 30.0 % Total debt / Adjusted EBITDA (5) 5.2 5.3 5.4 5.5 5.6
Interest coverage (6) 4.1 4.0 4.0 3.8 3.7 Fixed charges + preferred
distributions coverage (7) 3.6 3.5 3.5 3.4 3.3
______________________
1. See Non-GAAP Financial Measure Definitions and
Other Terms at the end of the supplemental information for
definition of Adjusted EBITDA, FFO, Normalized FFO and FAD; and
reconciliation of Adjusted EBITDA. 2. See page 7 for a
reconciliation of Net income available for Common Stockholders to
non-GAAP financial measures FFO available for Common Stock and OP
Unit holders, Normalized FFO available for Common Stock and OP Unit
holders and FAD available for Common Stock and OP Unit holders. 3.
As of December 31, 2015 and September 30, 2015, deferred financing
costs of approximately $19.7 million and $20.3 million,
respectively, were reclassified from deferred financing costs, net
to mortgages notes payable and term loan due to the adoption of ASU
2015-03: Simplifying the Presentation of Debt Issuance Costs. 4.
See page 18 for market capitalization calculation as of September
30, 2016. 5. Represents trailing twelve months Adjusted EBITDA. We
believe trailing twelve months Adjusted EBITDA provides additional
information for determining our ability to meet future debt service
requirements. 6. Interest coverage is calculated by dividing
trailing twelve months Adjusted EBITDA by the interest expense
incurred during the same period. 7. See Non-GAAP Financial Measure
Definitions and Other Terms at the end of the supplemental
information for a definition of fixed charges. This ratio is
calculated by dividing trailing twelve months Adjusted EBITDA by
the sum of fixed charges and preferred stock dividends during the
same period.
Balance Sheet
(In thousands, except share and per
share data)
September 30, 2016
December 31, 2015
(unaudited) Assets Investment in real estate: Land $
1,155,587 $ 1,101,676 Land improvements 2,863,758 2,787,882
Buildings and other depreciable property 622,045 588,041
4,641,390 4,477,599 Accumulated depreciation (1,368,942 )
(1,282,423 ) Net investment in real estate 3,272,448 3,195,176 Cash
68,812 80,258 Notes receivable, net 34,277 35,463 Investment in
unconsolidated joint ventures 19,198 17,741 Deferred commission
expense 31,435 30,865 Escrow deposits, goodwill, and other assets,
net (1) 44,213 40,897
Total Assets $
3,470,383 $ 3,400,400
Liabilities and Equity Liabilities: Mortgage notes payable
(1) $ 1,892,692 $ 1,926,880 Term loan (1) 199,327 199,172 Unsecured
lines of credit — — Accrued expenses and accounts payable 94,103
76,044 Deferred revenue – upfront payments from right-to-use
contracts 80,832 78,405 Deferred revenue – right-to-use annual
payments 10,578 9,878 Accrued interest payable 8,128 8,715 Rents
and other customer payments received in advance and security
deposits 70,794 74,300 Distributions payable 39,315 34,315
Total Liabilities 2,395,769 2,407,709
Equity: Stockholders’ Equity: Preferred stock, $0.01 par value,
9,945,539 shares authorized as of September 30, 2016 and December
31, 2015; none issued and outstanding. — — 6.75% Series C
Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value,
54,461 shares authorized and 54,458 issued and outstanding as of
September 30, 2016 and December 31, 2015 at liquidation value
136,144 136,144 Common stock, $0.01 par value, 200,000,000 shares
authorized as of September 30, 2016 and December 31, 2015;
85,303,937 and 84,253,065 shares issued and outstanding as of
September 30, 2016 and December 31, 2015, respectively 852 843
Paid-in capital 1,096,916 1,039,140 Distributions in excess of
accumulated earnings (231,879 ) (250,506 ) Accumulated other
comprehensive loss (646 ) (553 ) Total Stockholders’ Equity
1,001,387 925,068 Non-controlling interests – Common OP Units
73,227 67,623
Total Equity 1,074,614
992,691
Total Liabilities and Equity $
3,470,383 $ 3,400,400
_______________
1.
As of December 31, 2015, deferred
financing costs of approximately $3.7 million, $18.9 million and
$0.8 million were reclassified from Deferred financing costs, net
to Escrow deposits, goodwill, and other assets, net, to Mortgages
notes payable, and to Term loan line items, respectively, due to
the adoption of ASU 2015-03: Simplifying the Presentation of Debt
Issuance Costs.
Consolidated Income Statement
(In thousands, unaudited)
Quarters Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Revenues: Community base rental income $ 117,164
$ 110,908 $ 346,625 $ 330,251 Rental home income 3,484 3,413 10,572
10,526 Resort base rental income 54,486 49,765 154,652 142,837
Right-to-use annual payments 11,349 11,334 33,590 33,260
Right-to-use contracts current period, gross 3,672 3,889 9,290
10,264 Right-to-use contract upfront payments, deferred, net (1,327
) (1,701 ) (2,427 ) (3,929 ) Utility and other income 21,174 20,027
61,490 58,010 Gross revenues from home sales 10,895 7,878 28,239
24,341 Brokered resale revenue and ancillary services revenues, net
920 1,051 2,736 4,045 Interest income 1,767 1,758 5,052 5,314
Income from other investments, net 2,581 1,822 6,574
5,119 Total revenues 226,165 210,144 656,393 620,038
Expenses: Property operating and maintenance 73,410
69,227 203,011 194,522 Rental home operating and maintenance 1,768
1,874 4,874 5,232 Real estate taxes 13,467 12,923 39,534 38,169
Sales and marketing, gross 3,100 3,105 8,524 9,139 Right-to-use
contract commissions, deferred, net (200 ) (464 ) (212 ) (1,471 )
Property management 11,863 11,361 35,670 33,750 Depreciation on
real estate assets and rental homes 29,518 28,410 87,203 84,861
Amortization of in-place leases 1,376 616 2,139 1,950 Cost of home
sales 10,745 7,868 28,507 23,685 Home selling expenses 909 861
2,548 2,386 General and administrative 7,653 7,225 23,315 22,172
Property rights initiatives and other 855 687 2,036 1,934 Early
debt retirement — — — 16,922 Interest and related amortization
25,440 26,227 76,635 79,648 Total
expenses 179,904 169,920 513,784 512,899
Income before equity in income of unconsolidated joint
ventures 46,261 40,224 142,609 107,139 Equity in income of
unconsolidated joint ventures 496 1,882 2,142
3,606 Consolidated net income 46,757 42,106
144,751 110,745 Income allocated to
non-controlling interest-Common OP Units (3,462 ) (3,136 ) (10,770
) (8,191 ) Series C Redeemable Perpetual Preferred Stock Dividends
(2,297 ) (2,297 ) (6,910 ) (6,910 )
Net income available
for Common Stockholders $ 40,998 $
36,673 $ 127,071 $
95,644
Non-GAAP Financial Measures
Third Quarter 2016 - Selected Non-GAAP
Financial Measures
(In millions, except per share data,
unaudited)
Quarter Ended September 30,
2016 Income from property operations, excluding deferrals
and property management - 2016 Core (1) $ 117.9 Income from
property operations, excluding deferrals and property management -
Acquisitions (2) 1.7 Property management and general and
administrative (excluding transaction costs) (19.2 ) Other income
and expenses 4.5 Financing costs and other (27.7 )
Normalized
FFO available for Common Stock and OP Unit holders (3)
77.2 Transaction costs (0.3 )
FFO available for Common
Stock and OP Unit holders (3) $ 76.9
Normalized FFO per Common Share - fully diluted $
0.83 FFO per Common Share - fully diluted $ 0.83
Normalized FFO available for Common Stock and OP Unit
holders (3) $ 77.2 Non-revenue producing
improvements to real estate (10.0 )
FAD available for Common
Stock and OP Unit holders (3) $ 67.2
Weighted average Common Stock and OP Units - fully
diluted 92.9
___________________
1.
See Non-GAAP Financial Measure Definitions
and Other Terms at the end of the supplemental information for
definitions of non-GAAP financial measures Income from property
operations, excluding deferrals and property management, and Core,
and reconciliation of income from property operations, excluding
deferrals and property management to income before equity in income
of unconsolidated joint ventures. See page 9 for details of the
2016 Core Income from Property Operations, excluding deferrals and
property management.
2. See Non-GAAP Financial Measure Definitions and Other Terms at
the end of the supplemental information for definition of
Acquisition properties. See page 10 for details of the Income from
Property Operations, excluding deferrals and property management
for the Acquisitions. 3. See page 7 for a reconciliation of Net
income available for Common Stockholders to non-GAAP financial
measures FFO available for Common Stock and OP Unit holders,
Normalized FFO available for Common Stock and OP Unit holders and
FAD available for Common Stock and OP Unit holders. See definitions
of non-GAAP financial measures of FFO, Normalized FFO and FAD and
Non-revenue producing improvements in Non-GAAP Financial Measure
Definitions and Other Terms at the end of the supplemental
information.
Reconciliation of Net Income to
Non-GAAP Financial Measures
(In thousands, except per share data,
unaudited)
Quarters Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Net income available for Common Stockholders
$ 40,998 $ 36,673 $
127,071 $ 95,644 Income allocated to Common OP
Units 3,462 3,136 10,770 8,191 Right-to-use contract upfront
payments, deferred, net (1) 1,327 1,701 2,427 3,929 Right-to-use
contract commissions, deferred, net (2) (200 ) (464 ) (212 ) (1,471
) Depreciation on real estate assets 26,847 25,747 79,218 76,811
Depreciation on rental homes 2,671 2,663 7,985 8,050 Amortization
of in-place leases 1,376 616 2,139 1,950 Depreciation on
unconsolidated joint ventures 373 274 968 799
FFO available for Common Stock and OP Unit holders
(3) 76,854 70,346 230,366
193,903 Transaction costs (4) 327 121 925 603 Early debt
retirement — — — 16,922
Normalized
FFO available for Common Stock and OP Unit holders(3)
77,181 70,467 231,291 211,428
Non-revenue producing improvements to real estate (10,004 ) (7,931
) (28,322 ) (26,196 )
FAD available for Common Stock and OP Unit
holders (3) $ 67,177 $
62,536 $ 202,969 $
185,232 Net income available per Common
Share - Basic $ 0.48 $ 0.44
$ 1.50 $ 1.14 Net income available
per Common Share - Fully Diluted $ 0.48 $
0.43 $ 1.49 $ 1.13 FFO
per Common Share & OP Units-Basic $ 0.83
$ 0.77 $ 2.51 $ 2.13
FFO per Common Share & OP Units-Fully Diluted $
0.83 $ 0.77 $ 2.49 $
2.11 Normalized FFO per Common Share & OP
Units-Basic $ 0.84 $ 0.77 $
2.52 $ 2.32 Normalized FFO per Common Share
& OP Units-Fully Diluted $ 0.83 $
0.77 $ 2.50 $ 2.30
Average Common Stock - Basic 85,105 84,057 84,649 84,016 Average
Common Stock and OP Units - Basic 92,307 91,269 91,854 91,236
Average Common Stock and OP Units - Fully Diluted 92,910 91,940
92,405 91,877
_____________________________
1. We are required by GAAP to defer, over the
estimated customer life, recognition of non-refundable upfront
payments from sales of new and upgrade right-to-use contracts. For
2016, the customer life is estimated to be 40 years and is based
upon our experience operating the membership platform since 2008.
The amount shown represents the deferral of a substantial portion
of current period upgrade sales, offset by amortization of prior
period sales. 2. We are required by GAAP to defer recognition of
commissions paid related to the entry of right-to-use contracts.
The deferred commissions will be amortized using the same method as
used for the related non-refundable upfront payments from the entry
of right-to-use contracts and upgrade sales. The amount shown
represents the deferral of a substantial portion of current period
commissions on those contracts, offset by the amortization of prior
period commissions. 3. See Non-GAAP Financial Measure Definitions
and Other Terms at the end of the supplemental information for
non-GAAP financial measure definitions of FFO, Normalized FFO and
FAD and for the definition of Non-revenue producing improvements.
4. Included in general and administrative on the Consolidated
Income Statement on page 4.
Consolidated Income from Property
Operations (1)
(In millions, except home site and
occupancy figures, unaudited)
Quarters Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Community base rental income (2) $ 117.2 $ 110.9 $
346.6 $ 330.3 Rental home income 3.5 3.4 10.6 10.5 Resort base
rental income (3) 54.5 49.8 154.6 142.8 Right-to-use annual
payments 11.3 11.3 33.6 33.3 Right-to-use contracts current period,
gross 3.7 3.9 9.3 10.3 Utility and other income 21.1 20.0
61.5 58.0 Property operating revenues 211.3
199.3 616.2 585.2 Property operating, maintenance and real
estate taxes 86.8 82.1 242.5 232.8 Rental home operating and
maintenance 1.8 1.9 4.9 5.2 Sales and marketing, gross 3.1
3.1 8.5 9.1 Property operating expenses 91.7
87.1 255.9 247.1
Income from
property operations, excluding deferrals and property
management (1) $ 119.6 $
112.2 $ 360.3 $
338.1 Manufactured home site figures and
occupancy averages: Total sites 70,999 70,126 70,507 70,112
Occupied sites 66,330 64,918 65,697 64,767 Occupancy % 93.4 % 92.6
% 93.2 % 92.4 % Monthly base rent per site $ 589 $ 569 $ 586 $ 567
Resort base rental income: Annual $ 31.3 $ 29.1 $
91.6 85.5 Seasonal 4.2 3.9 24.6 22.6 Transient 19.0 16.8
38.4 34.7 Total resort base rental income $
54.5 $ 49.8 $ 154.6 $ 142.8
_________________________
1. See page 4 for the Consolidated Income Statement
and see Non-GAAP Financial Measure Definitions and Other Terms at
the end of the supplemental information for non-GAAP measure
definitions and reconciliation of Income from property operations,
excluding deferrals and property management. 2. See the
manufactured home site figures and occupancy averages below within
this table. 3. See resort base rental income detail included below
within this table.
2016 Core Income from Property
Operations (1)
(In millions, except home site and
occupancy figures, unaudited)
Quarters Ended
Nine Months Ended September 30,
% September 30, % 2016
2015 Change (2) 2016
2015 Change (2) Community base rental income
(3) $ 116.0 $ 110.8 4.7% $ 345.0 $ 330.0 4.6% Rental home income
3.5 3.4 2.2% 10.6 10.5 0.5% Resort base rental income (4) 52.8 49.3
7.0% 150.7 142.0 6.1% Right-to-use annual payments 11.3 11.3 0.1%
33.6 33.3 1.0% Right-to-use contracts current period, gross 3.7 3.9
(5.6)% 9.3 10.3 (9.5)% Utility and other income 20.9 20.0
4.7% 61.0 57.9 5.3% Property operating
revenues 208.2 198.7 4.7% 610.2 584.0 4.5% Property
operating, maintenance and real estate taxes 85.4 81.7 4.5% 239.7
232.1 3.3% Rental home operating and maintenance 1.8 1.9 (5.8)% 4.9
5.2 (6.9)% Sales and marketing, gross 3.1 3.1 (0.2)%
8.5 9.1 (6.7)% Property operating expenses 90.3
86.7 4.1% 253.1 246.4 2.7%
Income
from property operations, excluding deferrals and property
management (1) $ 117.9 $
112.0 5.3% $ 357.1
$ 337.6 5.8% Occupied sites
(5) 65,464 64,880 Core manufactured
home site figures and occupancy averages: Total sites 69,830
69,848 69,833 69,851 Occupied sites 65,327 64,785 65,183 64,644
Occupancy % 93.6 % 92.8 % 93.3 % 92.5 % Monthly base rent per site
$ 592 $ 570 $ 588 $ 567
Resort base rental income:
Annual $ 30.6 $ 28.9 5.8% $ 89.9 $ 85.1 5.7% Seasonal 3.7 3.8
(1.9)% 23.4 22.4 4.4% Transient 18.5 16.6 11.3% 37.4
34.5 8.2% Total resort base rental income $ 52.8
$ 49.3 7.0% $ 150.7 $ 142.0 6.1%
___________________________
1. See Non-GAAP Financial Measure Definitions and
Other Terms at the end of the supplemental information for
definitions of non-GAAP measures Income from property operations,
excluding deferrals and property management, and Core. 2.
Calculations prepared using actual results without rounding. 3. See
the Core manufactured home site figures and occupancy averages
included below within this table. 4. See resort base rental income
detail included below within this table. 5. Occupied sites as of
the end of the period shown. Occupied sites have increased by 450
from 65,014 at December 31, 2015.
Acquisitions - Income from Property
Operations (1)
(In millions, unaudited)
Quarter Nine
Months Ended Ended
September 30,
September 30,
2016 2016 Community base rental income $ 1.2 $ 1.6
Resort base rental income 1.7 3.9 Utility income and other property
income 0.2 0.5 Property operating revenues 3.1 6.0
Property operating expenses 1.4 2.8
Income from property
operations, excluding deferrals and property management
$ 1.7 $ 3.2
______________________
1. See Non-GAAP Financial Measure Definitions and
Other Terms at the end of the supplemental information for
definition of Acquisitions.
Income from Rental Home
Operations
(In millions, except occupied rentals,
unaudited)
Quarters Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Manufactured homes: New home $ 6.3 $ 5.8 $ 18.8
$ 17.2 Used home 6.0 6.8 18.7 21.0 Rental
operations revenues (1) 12.3 12.6 37.5 38.2 Rental operations
expense 1.8 1.9 4.9 5.2 Income from rental
operations, before depreciation 10.5 10.7 32.6 33.0 Depreciation on
rental homes 2.7 2.7 8.0 8.1
Income from
rental operations, after depreciation $ 7.8
$ 8.0 $ 24.6
$ 25.0 Occupied rentals: (2) New
2,316 2,076 Used 2,473 2,876
Total occupied rental sites
4,789 4,952
As of September
30, 2016 September 30, 2015 Net of Net of
Cost basis in rental homes:
(3)
Gross Depreciation Gross Depreciation
New $ 123.9 $ 98.0 $ 110.2 $ 89.2 Used 52.6 27.0 58.8
39.0 Total rental homes $ 176.5 $ 125.0 $
169.0 $ 128.2
__________________________
1. For the quarters ended September 30, 2016 and
2015, approximately $8.9 million and $9.0 million, respectively, of
the rental operations revenue are included in the Community base
rental income in the Consolidated Income from Property Operations
table on page 8. For the nine months ended September 30, 2016 and
2015, approximately $27.0 million and $27.6 million, respectively,
of the rental operations revenue are included in the Community base
rental income in the Consolidated Income from Property Operations
table on page 8. The remainder of the rental operations revenue is
included in the Rental home income in the Consolidated Income from
Property Operations table on page 8. 2. Occupied rentals as of the
end of the period shown in our Core portfolio. Included in the
quarters ended September 30, 2016 and 2015 are 158 and 72 homes
rented through our ECHO joint venture, respectively. For the nine
months ended September 30, 2016 and 2015, the rental home
investment associated with our ECHO joint venture totals
approximately $5.7 million and $2.5 million, respectively. 3.
Includes both occupied and unoccupied rental homes. New home cost
basis does not include the costs associated with our ECHO joint
venture. At September 30, 2016 and 2015, our investment in the ECHO
joint venture was approximately $15.3 million and $10.0 million,
respectively.
Total Sites and Home Sales
(In thousands, except sites and home
sale volumes, unaudited)
Summary of Total Sites as of September 30, 2016
Sites Community sites 71,000 Resort sites:
Annuals 26,300 Seasonal 10,800 Transient 10,500 Membership (1)
24,100 Joint Ventures (2) 3,100
Total 145,800 Home
Sales - Select Data
Quarters Ended Nine Months Ended
September 30, September 30, 2016 2015
2016 2015 Total New Home Sales Volume (3) 207 123 508
352 New Home Sales Volume - ECHO joint venture 65 52 162 140 New
Home Sales Gross Revenues(3) $ 8,057 $ 3,901 $ 19,500 $ 12,186
Total Used Home Sales Volume (3) 335 357 988 1,174 New Used
Sales Gross Revenues(3) $ 2,838 $ 3,977 $ 8,739 $ 12,155
Brokered Home Resales Volume 182 202 585 668 Brokered Home Resale
Revenues, net $ 276 $ 290 $ 884 $ 941
__________________________
1. Sites primarily utilized by approximately 106,700
members. Includes approximately 5,700 sites rented on an annual
basis. 2. Joint venture income is included in the Equity in income
from unconsolidated joint ventures in the Consolidated Income
Statement on page 4. 3. Total new home sales volume includes home
sales from our ECHO joint venture. New home sales gross revenues
does not include the revenues associated with our ECHO joint
venture. There was one used home sale from our ECHO joint venture
for the quarter ended September 30, 2016.
2016 Guidance - Selected Financial
Data (1)
Our guidance acknowledges the existence of
volatile economic conditions, which may impact our current guidance
assumptions. Factors impacting 2016 guidance include, but are not
limited to the following: (i) the mix of site usage within the
portfolio; (ii) yield management on our short-term resort sites;
(iii) scheduled or implemented rate increases on community and
resort sites; (iv) scheduled or implemented rate increases in
annual payments under right-to-use contracts; (v) occupancy
changes; (vi) our ability to retain and attract customers renewing
or entering right-to-use contracts; (vii) our ability to integrate
and operate recent acquisitions in accordance with our estimates;
(viii) completion of pending transactions in their entirety and on
assumed schedule; (ix) ongoing legal matters and related fees; and
(x) costs to restore property operations following storms or other
unplanned events.
(In millions, except per share data,
unaudited)
Quarter Ended Year
Ended December 31, 2016 December 31,
2016 Income from property operations, excluding deferrals and
property management - 2016 Core (2) $ 116.3 $ 473.3 Income from
property operations - Acquisitions (3) 1.6 4.8 Property management
and general and administrative (19.1) (77.1) Other income and
expenses 1.6 14.2 Financing costs and other (27.6)
(111.2)
Normalized FFO available for Common Stock and OP Unit
holders (4) 72.8 304.0 Transaction costs —
(0.9)
FFO available for Common Stock and OP Unit
holders (4) 72.8 303.1 Depreciation on
real estate and other (28.0) (110.3) Depreciation on rental homes
(2.7) (10.7) Deferral of right-to-use contract sales revenue and
commission, net (0.6) (2.8) Income allocated to non-controlling
interest-Common OP Units (3.2) (14.0)
Net income
available for Common Stockholders $ 38.3
$ 165.3 Net income per Common
Share - fully diluted (5) $0.42 - $0.48 $1.91 - $1.97 FFO per
Common Share - fully diluted $0.75 - $0.81 $3.25 - $3.31 Normalized
FFO per Common Share - fully diluted $0.75 - $0.81 $3.26 - $3.32
Weighted average Common Stock outstanding - fully diluted
92.8 92.5
_____________________________________
1. Each line item represents the mid-point of a range
of possible outcomes and reflects management’s estimate of the most
likely outcome. Actual Normalized FFO available for Common Stock
and OP Unit holders, Normalized FFO per Common Share, FFO available
for Common Stock and OP Unit holders, FFO per Common Share, Net
income available for Common Stockholders and Net income per Common
Share could vary materially from amounts presented above if any of
our assumptions is incorrect. 2. See page 14 for 2016 Core Guidance
Assumptions. Amount represents 2015 income from property
operations, excluding deferrals and property management, from the
2016 Core properties of $111.3 million multiplied by an estimated
growth rate of 4.6% and $448.8 million multiplied by an estimated
growth rate of 5.5% for the quarter ended September 30, 2016 and
the year ended December 31, 2016, respectively. 3. See page 14 for
the 2016 Assumptions regarding the Acquisition properties. 4. See
Non-GAAP Financial Measure Definitions and Other Terms at the end
of the supplemental information for definitions of Normalized FFO
and FFO. 5. Net income per fully diluted Common Share is calculated
before Income allocated to non-controlling interest-Common OP
Units.
2016 Core Guidance Assumptions
(1)
(In millions, unaudited)
Quarter
Fourth
Ended
Quarter 2016
Year Ended
2016
December 31,
Growth
December 31,
Growth
2015
Factors (2)
2015
Factors (2)
Community base rental income $ 111.7 4.7% $ 441.6 4.6% Rental home
income 3.5 (0.4)% 14.0 0.2% Resort base rental income (3) 41.3 4.9%
183.4 5.8% Right-to-use annual payments 11.2 0.3% 44.4 0.8%
Right-to-use contracts current period, gross 2.5 12.9% 12.8 (5.1)%
Utility and other income 18.1 (1.3)% 76.0 3.7%
Property operating revenues 188.3 3.9% 772.2 4.3% Property
operating, maintenance, and real estate taxes 72.5 2.9% 304.5 3.2%
Rental home operating and maintenance 1.9 (2.1)% 7.2 (5.6)% Sales
and marketing, gross 2.6 9.4% 11.7 (3.2)% Property
operating expenses 77.0 3.0% 323.4 2.8%
Income
from property operations, excluding deferrals and property
management $ 111.3 4.6% $
448.8 5.5% Resort base rental
income: Annual $ 29.4 5.6% $ 114.6 5.7% Seasonal 6.3 (1.0)%
28.7 3.2% Transient 5.6 8.0% 40.1 8.2% Total resort
base rental income
$ 41.3 4.9% $
183.4 5.8%
2016 Assumptions Regarding Acquisition
Properties (1)
(In millions, unaudited)
Quarter Ended
Year Ended
December
December 31,
31, 2016 (4)
2016 (4)
Community base rental income $ 1.2 $ 2.9 Resort base rental income
1.5 5.4 Utility income and other property income 0.3 0.8
Property operating revenues 3.0 9.1 Property operating,
maintenance, and real estate taxes 1.4 4.2 Property
operating expenses
Income from property
operations, excluding deferrals and property management
$ 1.6 $ 4.9 1.
See Non-GAAP Financial Measure Definitions and Other
Terms at the end of the supplemental information for definition of
Core and Acquisition properties. 2. Management’s estimate of the
growth of property operations in the 2016 Core Properties compared
to actual 2015 performance. Represents our estimate of the
mid-point of a range of possible outcomes. Calculations prepared
using actual results without rounding. Actual growth could vary
materially from amounts presented above if any of our assumptions
is incorrect. 3. See Resort base rental income table included below
within this table. 4. Each line item represents our estimate of the
mid-point of a possible range of outcomes and reflects management’s
best estimate of the most likely outcome for the Acquisition
properties. Actual income from property operations for the
Acquisition properties could vary materially from amounts presented
above if any of our assumptions is incorrect.
Preliminary 2017 Guidance - Selected
Financial Data (1)
Our guidance acknowledges the existence of
volatile economic conditions, which may impact our current guidance
assumptions. Factors impacting 2017 guidance include, but are not
limited to the following: (i) the mix of site usage within the
portfolio; (ii) yield management on our short-term resort sites;
(iii) scheduled or implemented rate increases on community and
resort sites; (iv) scheduled or implemented rate increases in
annual payments under right-to-use contracts; (v) occupancy
changes; (vi) our ability to retain and attract customers renewing
or entering right-to-use contracts; (vii) our ability to integrate
and operate recent acquisitions in accordance with our estimates;
(viii) completion of pending transactions in their entirety and on
assumed schedule; and (ix) ongoing legal matters and related fees;
and (x) costs to restore property operations following storms or
other unplanned events.
(In millions, except per share data,
unaudited)
Year Ended December 31, 2017
Income from property operations, excluding deferrals and property
management - 2017 Core (2) $ 495.8 Income from property operations
- Acquisitions 6.5 Property management and general and
administrative (80.4) Other income and expenses 13.2 Financing
costs and other (109.3)
Normalized FFO and FFO available for
Common Shares (3) 325.8 Depreciation on real
estate and other (109.2) Depreciation on rental homes (10.7)
Deferral of right-to-use contract sales revenue and commission, net
(2.6) Income allocated to OP units (15.8)
Net income available
for Common Shares $ 187.5 Net income per
Common Share - fully diluted (4) $2.14 - $2.24 FFO per Common Share
- fully diluted $3.45 - $3.55 Normalized FFO per Common Share -
fully diluted $3.45 - $3.55 Weighted average Common Shares
outstanding - fully diluted 93.0
____________________________________
1. Each line item represents the mid-point of a range
of possible outcomes and reflects management’s estimate of the most
likely outcome. Actual Normalized FFO available for Common Shares,
Normalized FFO per common share, FFO available for Common Shares,
FFO per common share, Net income available for Common Shares and
Net income per common share could vary materially from amounts
presented above if any of our assumptions are incorrect. 2. See
page 16 for 2016 Core Guidance Assumptions. Amount represents
estimated 2016 income from property operations, excluding deferrals
and property management, from the 2016 Core properties of $475.0
million multiplied by an estimated growth rate of 4.4% for the year
ended December 31, 2017. 3. See Non-GAAP Financial Measure
Definitions and Other Terms at the end of the supplemental
information for definitions of Normalized FFO and FFO. 4. Net
income per fully diluted Common Share is calculated before Income
allocated to Common OP Units.
Preliminary 2017 Core (1)
Guidance Assumptions -
Income from Property Operations
(In millions, unaudited)
Estimated 2017
Growth 2016 Factors (2) Community base
rental income $ 462.4 4.0% Rental home income 14.0 (4.2)% Resort
base rental income (3) 196.6 4.4% Right-to-use annual payments 44.8
0.7% Right-to-use contracts current period, gross 12.1 1.7% Utility
and other income 79.2 (1.3)% Property operating revenues
809.1 3.2% Property operating, maintenance,
and real estate taxes (315.9 ) 1.8% Rental home operating and
maintenance (6.8 ) (3.9)% Sales and marketing, gross (11.4 ) (1.8)%
Property operating expenses (334.1 ) 1.5%
Income from property
operations $ 475.0 4.4%
Resort base rental income: Annual $ 122.3 5.0% Seasonal 30.2
2.0% Transient 44.1 4.5% Total resort base rental income
$ 196.6 4.4%
_______________________________
1. See Non-GAAP Financial Measure Definitions and
Other Terms at the end of the supplemental information for
definition of Core and Acquisition properties. 2. Management’s
estimate of the growth of property operations in the 2017 Core
Properties compared to actual 2016 performance. Represents our
estimate of the mid-point of a range of possible outcomes.
Calculations prepared using actual results without rounding. Actual
growth could vary materially from amounts presented above if any of
our assumptions is incorrect. 3. See Resort base rental income
table included below within this table.
Right-To-Use Memberships - Select
Data
(In thousands, except member count,
number of Thousand Trail Camping Pass,
number of annuals and number of
upgrades, unaudited)
Year Ended December 31, 2013
2014 2015
2016 (1) 2017 (1) Member
Count (2) 98,277 96,130 102,413 106,900 108,800 Thousand
Trails Camping Pass (TTC) Origination (3) 15,607 18,187 25,544
29,100 29,800 TTC Sales 9,289 10,014 11,877 12,700 13,100 RV Dealer
TTC Activations 6,318 8,173 13,667 16,400 16,700 Number of annuals
(4) 4,830 5,142 5,470 5,800 6,000 Number of upgrade sales (5) 2,999
2,978 2,687 2,500 2,600 Right-to-use annual payments (6) $
47,967 $ 44,860 $ 44,441 $ 44,800 $ 45,100 Resort base rental
income from annuals $ 11,148 $ 12,491 $ 13,821 $ 15,400 $ 17,200
Resort base rental income from seasonals/transients $ 12,692 $
13,894 $ 15,795 $ 17,100 $ 18,100 Upgrade contract initiations (7)
$ 13,815 $ 13,892 $ 12,783 $ 12,100 $ 12,300 Utility and other
income $ 2,293 $ 2,455 $ 2,430 $ 2,440 $ 2,515
________________________________
1. Guidance estimate. Each line item represents our
estimate of the mid-point of a possible range of outcomes and
reflects management’s best estimate of the most likely outcome.
Actual figures could vary materially from amounts presented above
if any of our assumptions is incorrect. 2. Members have entered
into right-to-use contracts with us that entitle them to use
certain properties on a continuous basis for up to 21 days. 3. TTCs
allow access to any of five geographic areas in the United States.
4. Members who rent a specific site for an entire year in
connection with their right-to-use contract. 5. Existing customers
that have upgraded agreements are eligible for longer stays, can
make earlier reservations, may receive discounts on rental units,
and may have access to additional properties. Upgrades require a
non-refundable upfront payment. 6. The years ended December 31,
2013, includes $2.1 million of revenue recognized related to our
right-to-use annual memberships activated through our dealer
program. During the third quarter of 2013, we changed the
accounting treatment of revenues and expenses associated with the
RV dealer program to recognize as revenue only the cash received
from members generated by the program. 7. Revenues associated with
contract upgrades, included in Right-to-use contracts current
period, gross, on our Consolidated Income Statement on page 4.
Market Capitalization
(In millions, except share and OP Unit
data, unaudited)
Capital Structure as of September 30, 2016
Total
% of Total % of Total
Common
Common Market Stock/Units
Stock/Units Total % of
Total Capitalization Secured Debt $
1,911 90.5 % Unsecured Debt 200 9.5 %
Total
Debt (1) $ 2,111 100.0 %
22.5 % Common Stock 85,303,937 92.2 % OP Units
7,202,678 7.8 % Total Common Stock and OP
Units 92,506,615 100.0 % Common Stock price at September 30, 2016 $
77.18 Fair Value of Common Stock $ 7,140 98.1 % Perpetual Preferred
Stock 136 1.9 %
Total Equity $
7,276 100.0 % 77.5 %
Total Market Capitalization $ 9,387
100.0 % Perpetual Preferred Stock as of
September 30, 2016
Annual
Annual Callable Outstanding Liquidation
Dividend
Dividend Series Date
Stock Value
Per Share Value 6.75%
Series C 9/7/2017 54,458 $136 $168.75 $ 9.2
_________________
1. Excludes deferred financing costs of approximately
$18.8 million.
Debt Maturity Schedule
Debt Maturity Schedule as of
September 30, 2016
(In thousands, unaudited)
Weighted
Weighted
Weighted Average Average % of
Average Secured Interest Unsecured
Interest Total Interest Year
Debt Rate Debt
Rate Total Debt
Debt Rate 2016 $ — — % $
— — $ — — % — % 2017 57,429 5.80 % — — 57,429 2.73 % 5.80 % 2018
200,273 5.97 % — — 200,273 9.52 % 5.97 % 2019 202,113 6.27 % — —
202,113 9.60 % 6.27 % 2020 122,452 6.13 % 200,000 2.39 % 322,452
15.32 % 3.81 % 2021 191,174 5.01 % — — 191,174 9.08 % 5.01 % 2022
151,199 4.59 % — — 151,199 7.18 % 4.59 % 2023 111,963 5.12 % — —
111,963 5.32 % 5.12 % 2024 — — % — — — — % — % Thereafter 868,026
4.18 % — — 868,026 41.24 % 4.18 %
Total $ 1,904,629 4.93 %
$ 200,000 2.39 % $
2,104,629 100.0 % 4.69 %
Note Premiums 6,213 —
6,213
Total Debt 1,910,842 200,000
2,110,842 Deferred Financing Costs
(18,150 ) (673 ) (18,823
) Total Debt, net 1,892,692
4.92
%(1)
199,327 2.52 % $
2,092,019 4.69 %
(1)
Average Years to Maturity 10.9 3.3
10.1
______________________
1. Reflects effective interest rate including
amortization of note premiums and amortization of deferred loan
cost for secured and total debt and stated interest rate for
unsecured debt.
Non-GAAP Financial
Measures Definitions and Other Terms
This document contains certain non-GAAP measures used by
management that we believe are helpful in understanding our
business, as further discussed in the paragraphs below. We believe
investors should review Funds from Operations (“FFO”), Normalized
Funds from Operations (“Normalized FFO”), Funds Available for
Distribution (“FAD”) and Adjusted Earnings Before Interest, Tax,
Depreciation and Amortization (“Adjusted EBITDA”), along with GAAP
net income and cash flow from operating activities, investing
activities and financing activities, when evaluating an equity
REIT’s operating performance. Our definitions and calculations of
these non-GAAP financial and operating measures and other terms may
differ from the definitions and methodologies used by other REITs
and, accordingly, may not be comparable. These non-GAAP financial
and operating measures do not represent cash generated from
operating activities in accordance with GAAP, nor do they represent
cash available to pay distributions and should not be considered as
an alternative to net income, determined in accordance with GAAP,
as an indication of our financial performance, or to cash flow from
operating activities, determined in accordance with GAAP, as a
measure of our liquidity, nor is it indicative of funds available
to fund our cash needs, including our ability to make cash
distributions.
FUNDS FROM OPERATIONS (FFO). We define FFO as net income,
computed in accordance with GAAP, excluding gains and actual or
estimated losses from sales of properties, plus real estate related
depreciation and amortization, impairments, if any, and after
adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect FFO on the same basis. We compute FFO in
accordance with our interpretation of standards established by the
National Association of Real Estate Investment Trusts (“NAREIT”),
which may not be comparable to FFO reported by other REITs that do
not define the term in accordance with the current NAREIT
definition or that interpret the current NAREIT definition
differently than we do. We receive up-front non-refundable payments
from the entry of right-to-use contracts. In accordance with GAAP,
the upfront non-refundable payments and related commissions are
deferred and amortized over the estimated customer life. Although
the NAREIT definition of FFO does not address the treatment of
non-refundable right-to-use payments, we believe that it is
appropriate to adjust for the impact of the deferral activity in
our calculation of FFO.
We believe FFO, as defined by the Board of Governors of NAREIT,
is generally a measure of performance for an equity REIT. While FFO
is a relevant and widely used measure of operating performance for
equity REITs, it does not represent cash flow from operations or
net income as defined by GAAP, and it should not be considered as
an alternative to these indicators in evaluating liquidity or
operating performance.
NORMALIZED FUNDS FROM OPERATIONS (NORMALIZED FFO). We
define Normalized FFO as FFO excluding the following non-operating
income and expense items: a) the financial impact of contingent
consideration; b) gains and losses from early debt extinguishment,
including prepayment penalties and defeasance costs; c) property
acquisition and other transaction costs related to mergers and
acquisitions; and d) other miscellaneous non-comparable items.
Normalized FFO presented herein is not necessarily comparable to
Normalized FFO presented by other real estate companies due to the
fact that not all real estate companies use the same methodology
for computing this amount.
FUNDS AVAILABLE FOR DISTRIBUTION (FAD). We define FAD as
Normalized FFO less non-revenue producing capital expenditures.
We believe that FFO, Normalized FFO and FAD are helpful to
investors as supplemental measures of the performance of an equity
REIT. We believe that by excluding the effect of depreciation,
amortization, impairments, if any, and actual or estimated gains or
losses from sales of real estate, all of which are based on
historical costs and which may be of limited relevance in
evaluating current performance, FFO can facilitate comparisons of
operating performance between periods and among other equity REITs.
We further believe that Normalized FFO provides useful information
to investors, analysts and our management because it allows them to
compare our operating performance to the operating performance of
other real estate companies and between periods on a consistent
basis without having to account for differences not related to our
operations. For example, we believe that excluding the early
extinguishment of debt, property acquisition and other transaction
costs related to mergers and acquisitions from Normalized FFO
allows investors, analysts and our management to assess the
sustainability of operating performance in future periods because
these costs do not affect the future operations of the properties.
In some cases, we provide information about identified non-cash
components of FFO and Normalized FFO because it allows investors,
analysts and our management to assess the impact of those
items.
INCOME FROM PROPERTY OPERATIONS, EXCLUDING DEFERRALS AND
PROPERTY MANAGEMENT. We define Income from property operations,
excluding deferrals and property management as rental income,
utility income and right-to-use income less property operating and
maintenance expenses, real estate tax, sales and marketing
expenses, property management and the GAAP deferral of right-to-use
contract upfront payments and related commissions, net. We believe
that this non-GAAP financial measure is helpful to investors and
analysts as a measure of the operating results of our manufactured
home and RV communities.
The following table reconciles Income before equity in income of
unconsolidated joint ventures to Income from property operations
(amounts in thousands):
Quarters Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Income before equity in income of unconsolidated joint
ventures $ 46,261 $ 40,224 $ 142,609 $ 107,139 Right-to-use upfront
payments, deferred, net 1,327 1,701 2,427 3,929 Gross revenues from
home sales (10,895 ) (7,878 ) (28,239 ) (24,341 ) Brokered resale
revenues and ancillary services revenues, net (920 ) (1,051 )
(2,736 ) (4,045 ) Interest income (1,767 ) (1,758 ) (5,052 ) (5,314
) Income from other investments, net (2,581 ) (1,822 ) (6,574 )
(5,119 ) Right-to-use contract commissions, deferred, net (200 )
(464 ) (212 ) (1,471 ) Property management 11,863 11,361 35,670
33,750 Depreciation on real estate and rental homes 29,518 28,410
87,203 84,861 Amortization of in-place leases 1,376 616 2,139 1,950
Cost of homes sales 10,745 7,868 28,507 23,685 Home selling
expenses 909 861 2,548 2,386 General and administrative 7,653 7,225
23,315 22,172 Property rights initiatives and other 855 687 2,036
1,934 Early debt retirement — — — 16,922 Interest and related
amortization 25,440 26,227 76,635 79,648
Income from property operations, excluding deferrals and
property management 119,584 112,207 360,276 338,086 Right-to-use
contracts, deferred and sales and marketing, deferred, net (1,127 )
(1,237 ) (2,215 ) (2,458 ) Property management (11,863 ) (11,361 )
(35,670 ) (33,750 ) Income from property operations $ 106,594
$ 99,609 $ 322,391 $ 301,878
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION
(EBITDA) AND ADJUSTED EBITDA. EBITDA is defined as net income
or loss before interest income and expense, income taxes,
depreciation and amortization. We define Adjusted EBITDA as EBITDA
excluding the following non-operating income and expense items: a)
the financial impact of contingent consideration; b) gains and
losses from early debt extinguishment, including prepayment
penalties and defeasance costs; c) property acquisition and other
transaction costs related to mergers and acquisitions; d) GAAP
deferral of right-to-use contract upfront payments and related
commissions, net; e) impairments, if any; and f) other
miscellaneous non-comparable items. EBITDA and Adjusted EBITDA
provide us with an understanding of one aspect of earnings before
the impact of investing and financing charges. We believe that
EBITDA and Adjusted EBITDA may be useful to an investor in
evaluating our operating performance and liquidity because the
measures are widely used to measure a company’s operating
performance and they are used by rating agencies and other parties,
including lenders, to evaluate our creditworthiness.
The following table reconciles Consolidated net income to EBITDA
and Adjusted EBITDA (amounts in thousands):
Quarters Ended Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Consolidated net income $ 46,757 $ 42,106
$ 144,751 $ 110,745 Interest Income (1,767 ) (1,758 ) (5,052 )
(5,314 ) Depreciation on real estate assets and rental homes 29,518
28,410 87,203 84,861 Amortization of in-place leases 1,376 616
2,139 1,950 Depreciation on corporate assets 282 275 840 1,089
Depreciation on unconsolidated joint ventures 373 274 968 800
Interest and related amortization 25,440 26,227
76,635 79,648 EBITDA 101,979 96,150
307,484 273,779 Right-to-use contract upfront payments, deferred,
net 1,327 1,701 2,427 3,929 Right-to-use contract commissions,
deferred, net (200 ) (464 ) (212 ) (1,471 ) Transaction costs 327
121 925 603 Early debt retirement — — —
16,922 Adjusted EBITDA $ 103,433 $ 97,508
$ 310,624 $ 293,762
CORE. The Core properties include properties we owned and
operated during all of 2015 and 2016. We believe Core is a measure
that is useful to investors for annual comparison as it removes the
fluctuations associated with acquisitions, dispositions and
significant transactions or unique situations.
ACQUISITIONS. The Acquisition properties include three
properties acquired during 2016 and three properties acquired
during 2015.
NON-REVENUE PRODUCING IMPROVEMENTS. Represents capital
expenditures that will not directly result in increased revenue or
expense savings and are primarily comprised of common area
improvements, furniture, and mechanical improvements.
FIXED CHARGES. Fixed charges consist of interest expense,
amortization of note premiums and debt issuance costs.
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version on businesswire.com: http://www.businesswire.com/news/home/20161017006362/en/
Equity LifeStyle Properties, Inc.Paul Seavey, 800-247-5279
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