MRO Magazine

ELS Reports Fourth Quarter Results


January 25, 2016
By Business Wire News

CHICAGO

Equity LifeStyle Properties, Inc. (NYSE:ELS) (referred to herein as “we,” “us,” and “our”) today announced results for the quarter and year ended December 31, 2015. All per share results are reported on a fully diluted basis unless otherwise noted.

Financial Results for the Quarter Ended December 31, 2015

Normalized Funds from Operations (“Normalized FFO”) available for Common Stockholders increased $6.8 million, or $0.08 per Common Share, to $67.6 million, or $0.74 per Common Share, compared to $60.8 million, or $0.66 per Common Share, for the same period in 2014. Funds from Operations (“FFO”) available for Common Stockholders increased $6.8 million, or $0.07 per Common Share, to $67.1 million, or $0.73 per Common Share, compared to $60.3 million, or $0.66 per Common Share, for the same period in 2014. Net income available for Common Stockholders increased $5.1 million, or $0.06 per Common Share, to $34.5 million, or $0.41 per Common Share, compared to $29.4 million, or $0.35 per Common Share, for the same period in 2014.

Portfolio Performance

For the quarter ended December 31, 2015, property operating revenues, excluding deferrals, increased $8.7 million to $189.0 million compared to $180.3 million for the same period in 2014. For the year ended December 31, 2015, property operating revenues, excluding deferrals, increased $39.5 million to $774.2 million compared to $734.7 million for the same period in 2014. For the quarter ended December 31, 2015, income from property operations, excluding deferrals and property management, increased $6.8 million to $111.6 million compared to $104.8 million for the same period in 2014. For the year ended December 31, 2015, income from property operations, excluding deferrals and property management, increased $27.4 million to $449.6 million compared to $422.2 million for the same period in 2014.

For the quarter ended December 31, 2015, Core property operating revenues, excluding deferrals, increased approximately 3.9 percent and Core income from property operations, excluding deferrals and property management, increased approximately 5.8 percent compared to the same period in 2014. For the year ended December 31, 2015, Core property operating revenues, excluding deferrals, increased approximately 4.1 percent and Core income from property operations, excluding deferrals and property management, increased approximately 5.5 percent compared to the same period in 2014.

About Equity LifeStyle Properties

We are a self-administered, self-managed real estate investment trust (“REIT”) with headquarters in Chicago.

As of January 25, 2016, we own or have an interest in 387 quality properties in 32 states and British Columbia consisting of 143,887 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, January 26, 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
First Quarter 2016 Monday, April 18, 2016 Tuesday, April 19, 2016 10:00 a.m. CT
Second Quarter 2016 Monday, July 18, 2016 Tuesday, July 19, 2016 10:00 a.m. CT
Third Quarter 2016 Monday, October 17, 2016 Tuesday, October 18, 2016 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 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 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 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;
  • 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

BB&T Capital Markets Cantor Fitzgerald
David J. Toti Gaurav Mehta Wells Fargo Securities
212-419-4620 212-915-1221 Todd Stender

dtoti@bbandtcm.com

gmehta@cantor.com

562-637-1371

todd.stender@wellsfargo.com

Bank of America Merrill Lynch
Global Research

Citi Research
Jana Galan Michael Bilerman/ Nick Joseph
646-855-3081 212-816-1383

jana.galan@baml.com

michael.bilerman@citi.com

nicholas.joseph@citi.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 outstanding and per share data, unaudited)

 
As of and for the Three Months Ended

December 31,
2015

 

September 30,
2015

 

June 30,
2015

 

March 31,
2015

 

December 31,
2014

Operating Information        
Total revenues $ 201.6 $ 210.1 $ 201.5 $ 208.4 $ 190.3
Net income $ 39.8 $ 42.1 $ 36.8 $ 31.8 $ 34.3
Net income available for Common Stockholders $ 34.5 $ 36.7 $ 31.8 $ 27.2 $ 29.4
Normalized EBITDA (1) $ 96.0 $ 99.0 $ 92.9 $ 106.1 $ 91.2
FFO available for Common Stockholders (1)(2) $ 67.1 $ 70.3 $ 64.5 $ 59.1 $ 60.3
Normalized FFO available for Common Stockholders (1)(2) $ 67.6 $ 70.5 $ 64.5 $ 76.5 $ 60.8
Funds available for distribution (FAD) available for Common Stockholders (1)(2) $ 57.0 $ 62.5 $ 53.6 $ 69.1 $ 53.2
 
Stock Outstanding and Per Share Data
Common stock and OP units, end of the period 91,461 91,505 91,498 91,462 91,112
Weighted average Common Stock outstanding – fully diluted 91,875 91,940 91,851 91,777 91,644
Net income per Common Share – fully diluted $ 0.41 $ 0.43 $ 0.38 $ 0.32 $ 0.35
FFO per Common Share – fully diluted $ 0.73 $ 0.77 $ 0.70 $ 0.64 $ 0.66
Normalized FFO per Common Share – fully diluted $ 0.74 $ 0.77 $ 0.70 $ 0.83 $ 0.66
FAD per Common Share – fully diluted $ 0.62 $ 0.68 $ 0.58 $ 0.75 $ 0.58
Dividends per Common Share $ 0.375 $ 0.375 $ 0.375 $ 0.375 $ 0.325
 
Balance Sheet
Total assets $ 3,420 $ 3,440 $ 3,448 $ 3,469 $ 3,446
Total liabilities $ 2,427 $ 2,450 $ 2,466 $ 2,490 $ 2,467
 
Market Capitalization
Total debt $ 2,146 $ 2,156 $ 2,167 $ 2,212 $ 2,212
Total market capitalization (3) $ 8,380 $ 7,651 $ 7,114 $ 7,374 $ 7,045
 
Ratios
Total debt / total market capitalization 25.6 % 28.2 % 30.5 % 30.0 % 31.4 %
Total debt + preferred stock / total market capitalization 27.2 % 30.0 % 32.4 % 31.8 % 33.3 %
Total debt / Normalized EBITDA (4) 5.4 5.5 5.7 5.8 5.9
Interest coverage (5) 3.9 4.0 3.7 4.1 3.4
Fixed charges + preferred distributions coverage (6) 3.4 3.5 3.3 3.6 3.0

::::__

1. See page 17-18 for non-GAAP measure definitions of Normalized EBITDA, FFO, Normalized FFO and FAD.
2. See page 6 for a reconciliation of Net income available for Common Stockholders to FFO available for Common Stockholders, Normalized FFO available for Common Stockholders and FAD available for Common Stockholders.
3. See page 15 for market capitalization calculation as of December 31, 2015.
4. Represents trailing twelve months Normalized EBITDA. We believe trailing twelve months Normalized EBITDA provides additional information for determining our ability to meet future debt service requirements.
5. Interest coverage is calculated by dividing Normalized EBITDA for the period by the interest expense incurred.
6. See page 18 for a definition of fixed charges. This ratio is calculated by dividing Normalized EBITDA for the period by the sum of fixed charges and preferred stock dividends.
 

Fourth Quarter 2015 – Selected Financial Data

(In millions, except Stock outstanding and per share data, unaudited)

  Quarter Ended

December 31,
2015

Income from property operations, excluding deferrals and property management – 2015 Core (1) $ 109.9
Income from property operations, excluding deferrals and property management – Acquisitions (2) 1.7
Property management and general and administrative (excluding transaction costs) (18.7 )
Other income and expenses 3.1
Financing costs and other (28.4 )
Normalized FFO available for Common Stockholders (3) 67.6
Transaction costs (0.5 )
Early debt retirement  
FFO available for Common Stockholders(3) $ 67.1  
 
Normalized FFO per Common Share – fully diluted $ 0.74
FFO per Common Share – fully diluted $ 0.73
 
 
Normalized FFO available for Common Stockholders (3) $ 67.6
Non-revenue producing improvements to real estate (10.6 )
FAD available for Common Stockholders (3) $ 57.0  
 
FAD per Common Share – fully diluted $ 0.62
 
Weighted average Common Stock outstanding – fully diluted 91.9

::::__

1. See page 17-18 for definitions of Income from property operations, excluding deferrals and property management, and Core. See page 8 for details of the 2015 Core Income from Property Operations, excluding deferrals and property management.
2. See page 18 for definition of Acquisition properties. See page 9 for details of the Income from Property Operations, excluding deferrals and property management for the Acquisition properties.
3. See page 6 for a reconciliation of Net income available for Common Stockholders to FFO available for Common Stockholders, Normalized FFO available for Common Stockholders and FAD available for Common Stockholders. See definitions of FFO, Normalized FFO and FAD on page 17 and Non-revenue producing improvements on page 18.
 

Balance Sheet

(In thousands, except share and per share data)

  December 31,
2015
  December 31,
2014
(unaudited)
Assets
Investment in real estate:
Land $ 1,101,676 $ 1,091,550
Land improvements 2,787,882 2,734,304
Buildings and other depreciable property 588,041   562,059  
4,477,599 4,387,913
Accumulated depreciation (1,282,423 ) (1,169,492 )
Net investment in real estate 3,195,176 3,218,421
Cash 80,258 73,714
Notes receivable, net 35,463 37,137
Investment in unconsolidated joint ventures 17,741 13,512
Deferred financing costs, net 23,368 21,833
Deferred commission expense 30,865 28,589
Escrow deposits, goodwill, and other assets, net 37,190   53,133  
Total Assets $ 3,420,061   $ 3,446,339  
Liabilities and Equity
Liabilities:
Mortgage notes payable $ 1,945,713 $ 2,012,246
Term loan 200,000 200,000
Unsecured lines of credit
Accrued expenses and accounts payable 76,044 64,520
Deferred revenue – upfront payments from right-to-use contracts 78,405 74,174
Deferred revenue – right-to-use annual payments 9,878 9,790
Accrued interest payable 8,715 9,496
Rents and other customer payments received in advance and security deposits 74,300 67,463
Distributions payable 34,315   29,623  
Total Liabilities 2,427,370   2,467,312  
Equity:
Stockholders’ Equity:
Preferred stock, $0.01 par value 9,945,539 shares authorized as of December 31, 2015 and 9,765,900 shares authorized as of December 31, 2014; none issued and outstanding. As of December 31, 2014 includes 179,639 authorized shares 6% Series D Cumulative Preferred stock authorized, 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 December 31, 2015 and December 31, 2014 at liquidation value 136,144 136,144
Common stock, $0.01 par value 200,000,000 shares authorized as of December 31, 2015 and December 31, 2014; 84,253,065 and 83,879,779 shares issued and outstanding as of December 31, 2015 and December 31, 2014, respectively 843 838
Paid-in capital 1,039,139 1,029,601
Distributions in excess of accumulated earnings (250,506 ) (254,209 )
Accumulated other comprehensive loss (553 ) (381 )
Total Stockholders’ Equity 925,067 911,993
Non-controlling interests – Common OP Units 67,624   67,034  
Total Equity 992,691   979,027  
Total Liabilities and Equity $ 3,420,061   $ 3,446,339  
 

Consolidated Income Statement

(In thousands, unaudited)

  Quarters Ended   Years Ended
December 31, December 31,
2015   2014 2015   2014
Revenues:
Community base rental income $ 111,795 $ 107,372 $ 442,046 $ 426,886
Rental home income 3,486 3,640 14,012 14,827
Resort base rental income 41,923 37,780 184,760 163,968
Right-to-use annual payments 11,183 11,001 44,443 44,860
Right-to-use contracts current period, gross 2,519 3,380 12,783 13,892
Right-to-use contract upfront payments, deferred, net (302 ) (1,197 ) (4,231 ) (5,501 )
Utility and other income 18,143 17,138 76,153 70,209
Gross revenues from home sales 8,809 7,963 33,150 28,418
Brokered resale revenue and ancillary services revenues, net 104 359 4,149 3,850
Interest income 1,716 1,870 7,030 8,347
Income from other investments, net 2,240   955   7,359   7,053  
Total revenues 201,616 190,261 821,654 776,809
 
Expenses:
Property operating and maintenance 60,146 57,896 254,668 243,914
Rental home operating and maintenance 1,935 2,065 7,167 7,441
Real estate taxes 12,793 11,809 50,962 48,714
Sales and marketing, gross 2,612 3,744 11,751 12,418
Right-to-use contract commissions, deferred, net (85 ) (595 ) (1,556 ) (2,617 )
Property management 10,778 10,469 44,528 42,638
Depreciation on real estate assets and rental homes 28,748 27,830 113,609 111,065
Amortization of in-place leases 408 208 2,358 3,999
Cost of home sales 8,594 7,068 32,279 26,747
Home selling expenses 805 632 3,191 2,342
General and administrative (1) 8,472 7,232 30,644 27,410
Property rights initiatives and other 1,052 860 2,986 2,923
Early debt retirement (9 ) 16,913 5,087
Interest and related amortization 26,083   28,118   105,731   112,295  
Total expenses 162,332   157,336   675,231   644,376  
Income before equity in income of unconsolidated joint ventures and gain on sale of property 39,284 32,925 146,423 132,433
Equity in income of unconsolidated joint ventures 483 809 4,089 4,578
Gain on sale of property   528     1,457  
Consolidated net income 39,767   34,262   150,512   138,468  
 
Income allocated to non-controlling interest-Common OP Units (2,950 ) (2,534 ) (11,141 ) (10,463 )
Series C Redeemable Perpetual Preferred Stock Dividends (2,316 ) (2,325 ) (9,226 )   (9,274 )
Net income available for Common Stockholders $ 34,501   $ 29,403   $ 130,145   $ 118,731  

::::::::_

1. Includes transaction costs, see Reconciliation of Net income available for Common Stockholders to FFO available for Common Stockholders, Normalized FFO available for Common Stockholders and FAD available for Common Stockholders on page 6.
 

Reconciliation of Net Income to FFO, Normalized FFO and FAD

(In thousands, except Stock outstanding and per share data, unaudited)

 
  Quarters Ended   Years Ended
December 31, December 31,
2015   2014 2015   2014
Net income available for Common Stockholders $ 34,501 $ 29,403 $ 130,145 $ 118,731
Income allocated to common OP Units 2,950 2,534 11,141 10,463
Right-to-use contract upfront payments, deferred, net (1) 302 1,197 4,231 5,501
Right-to-use contract commissions, deferred, net (2) (85 ) (595 ) (1,556 ) (2,617 )
Depreciation on real estate assets 26,123 25,212 102,934 100,159
Depreciation on rental homes 2,625 2,618 10,675 10,906
Amortization of in-place leases 408 208 2,358 3,999
Depreciation on unconsolidated joint ventures 282 214 1,081 903
Gain on sale of property   (528 )   (1,457 )
FFO available for Common Stockholders (3)

 

 

67,106

 

60,263

 

261,009

 

246,588
Change in fair value of contingent consideration asset (4) (65 )
Transaction costs (5) 527 496 1,130 1,647
Early debt retirement (9 )   16,913   5,087  
Normalized FFO available for Common Stockholders (3) 67,624 60,759 279,052 253,257
Non-revenue producing improvements to real estate (10,584 ) (7,591 ) (36,780 ) (24,877 )
FAD available for Common Stockholders (3) $ 57,040   $ 53,168   $ 242,272   $ 228,380  
 
Net income available per Common Share – Basic $ 0.41 $ 0.35 $ 1.55 $ 1.42
Net income available per Common Share – Fully Diluted $ 0.41 $ 0.35 $ 1.54 $ 1.41
 
FFO per Common Share – Basic $ 0.74 $ 0.66 $ 2.86 $ 2.72
FFO per Common Share – Fully Diluted $ 0.73 $ 0.66 $ 2.84 $ 2.69
 
Normalized FFO per Common Share – Basic $ 0.74 $ 0.67 $ 3.06 $ 2.79
Normalized FFO per Common Share – Fully Diluted $ 0.74 $ 0.66 $ 3.04 $ 2.77
 
FAD per Common Share – Basic $ 0.62 $ 0.59 $ 2.66 $ 2.52
FAD per Common Share – Fully Diluted $ 0.62 $ 0.58 $ 2.64 $ 2.50
 
Average Common Stock – Basic 84,072 83,562 84,031 83,362
Average Common Stock and OP Units – Basic 91,280 90,794 91,247 90,773
Average Common Stock and OP Units – Fully Diluted 91,875 91,644 91,907 91,511

::::::

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 2015, the customer life was estimated to be 31 years and was 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 page 17 for non-GAAP measure definitions of FFO, Normalized FFO and FAD and page 18 for the definition of Non-revenue producing improvements.
4. Included in Income from other investments, net on the Consolidated Income Statement on page 5.
5. Included in general and administrative on the Consolidated Income Statement on page 5.
 

Consolidated Income from Property Operations (1)

(In millions, except home site and occupancy figures, unaudited)

 
  Quarters Ended   Years Ended
December 31, December 31,
2015   2014 2015   2014
Community base rental income (2) $ 111.8 $ 107.4 $ 442.0 $ 426.9
Rental home income 3.5 3.6 14.0 14.8
Resort base rental income (3) 41.9 37.8 184.8 164.0
Right-to-use annual payments 11.2 11.0 44.4 44.9
Right-to-use contracts current period, gross 2.5 3.4 12.8 13.9
Utility and other income 18.1   17.1   76.2   70.2  
Property operating revenues 189.0 180.3 774.2 734.7
 
Property operating, maintenance and real estate taxes 72.9 69.7 305.6 292.7
Rental home operating and maintenance 1.9 2.1 7.2 7.4
Sales and marketing, gross 2.6   3.7   11.8   12.4  
Property operating expenses 77.4   75.5   324.6   312.5  
Income from property operations, excluding deferrals and property management (1) $ 111.6   $ 104.8   $ 449.6   $ 422.2  
 
Manufactured home site figures and occupancy averages:
Total sites 70,115 69,959 70,113 69,951
Occupied sites 65,032 64,444 64,832 64,384
Occupancy % 92.8 % 92.1 % 92.5 % 92.0 %
Monthly base rent per site $ 573 $ 555 $ 568 $ 553
 
Resort base rental income:
Annual $ 29.8 $ 27.3 $ 115.4 $ 104.0
Seasonal 6.4 5.7 29.0 25.1
Transient 5.7   4.8   40.4   34.9  
Total resort base rental income $ 41.9   $ 37.8   $ 184.8   $ 164.0  

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1. See page 5 for the Consolidated Income Statement and page 17-18 for a definition 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.
 

2015 Core Income from Property Operations (1)

(In millions, except home site and occupancy figures, unaudited)

 
  Quarters Ended     Years Ended  
December 31, % December 31, %
2015   2014

Change(2)

2015   2014

Change(2)

Community base rental income (3) $ 111.7 $ 107.4 4.0 % $ 441.6 $ 426.9 3.5 %
Rental home income 3.5 3.6 (4.2 )% 14.0 14.8 (5.5 )%
Resort base rental income (4) 38.9 36.2 7.3 % 172.5 159.9 7.9 %
Right-to-use annual payments 11.2 11.0 1.6 % 44.4 44.9 (0.9 )%
Right-to-use contracts current period, gross 2.5 3.4 (25.5 )% 12.8 13.9 (8.0 )%
Utility and other income 17.8   17.1   4.7 %   75.1   70.0   7.3 %  
Property operating revenues 185.6 178.7 3.9 % 760.4 730.4 4.1 %
 
Property operating, maintenance and real estate taxes 71.2 69.0 3.1 % 298.7 290.6 2.8 %
Rental home operating and maintenance 1.9 2.1 (6.3 )% 7.2 7.4 (3.7 )%
Sales and marketing, gross 2.6   3.7   (30.3 )%   11.7   12.4   (5.4 )%  
Property operating expenses 75.7   74.8   1.2 %   317.6   310.4   2.3 %  
Income from property operations, excluding deferrals and property management (1) $ 109.9   $ 103.9   5.8 % $ 442.8   $ 420.0   5.5 %
Occupied sites (5) 65,014 64,541
 
Core manufactured home site figures and occupancy averages:
Total sites 69,837 69,831 69,847 69,823
Occupied sites 64,903 64,444 64,709 64,384
Occupancy % 92.9 % 92.3 % 92.6 % 92.2 %
Monthly base rent per site $ 574 $ 555 $ 569 $ 553
 
Resort base rental income:
Annual $ 27.5 $ 25.9 6.1 % $ 106.4 $ 100.5 5.9 %
Seasonal 6.0 5.6 6.6 % 27.4 24.9 9.9 %
Transient 5.4   4.7   14.8 %   38.7   34.5   12.2 %  
Total resort base rental income $ 38.9   $ 36.2   7.3 % $ 172.5   $ 159.9   7.9 %

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1. See page 17-18 for definitions of 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 473 from 64,541 at December 31, 2014.
 

Acquisitions – Income from Property Operations (1)

(In millions, unaudited)

  Quarter Ended   Year Ended

December 31,
2015

December 31,
2015
Community base rental income $ 0.1 $ 0.4
Resort base rental income 3.1 12.3
Utility income and other property income 0.3 1.1
Property operating revenues 3.5 13.8
 
Property operating expenses 1.8 7.0
Income from property operations, excluding deferrals and property management $ 1.7 $ 6.8

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1. See page 18 for definition of Acquisition properties.
   

Income from Rental Home Operations

(In millions, except occupied rentals, unaudited)

 
Quarters Ended Years Ended
December 31, December 31,
2015   2014 2015   2014
Manufactured homes:
New home $ 5.9 $ 5.5 $ 22.8 $ 22.7
Used home

 

6.6

 

 

7.7

 

 

27.8

 

 

31.4

Rental operations revenues (1)

 

12.5

 

13.2

 

50.6

 

54.1

Rental operations expense

 

1.9

 

 

2.1

 

 

7.2

 

 

7.4

Income from rental operations, before depreciation

 

10.6

 

11.1

 

43.4

 

46.7

Depreciation on rental homes

 

2.6

 

 

2.6

 

 

10.7

 

 

10.9

Income from rental operations, after depreciation $ 8.0   $ 8.5   $ 32.7   $ 35.8
 
Occupied rentals: (2)
New

 

2,170

 

2,020

Used

 

2,797

 

 

3,223

 

Total occupied rental sites

 

4,967

 

 

5,243

 
 

As of

December 31, 2015

December 31, 2014

Cost basis in rental homes: (3)

Gross

Net of
Depreciation

Gross

Net of
Depreciation

New

$

111.8

 

$

89.7

$

107.7

$

90.1

Used

 

57.4

   

36.1

   

63.3

   

48.0

Total rental homes

$

169.2

 

$

125.8

 

$

171.0

 

$

138.1

:::::___

1. For the quarters ended December 31, 2015 and 2014, approximately $9.0 million and $9.5 million, respectively, are included in the Community base rental income in the Consolidated Income from Property Operations table on page 7. For the years ended December 31, 2015 and 2014, approximately $36.6 million and $39.3 million, respectively, are included in the Community base rental income in the Consolidated Income from Property Operations table on page 7. The remainder of the rental operations revenue is included in the Rental home income in the Consolidated Income from Property Operations table on page 7.
2. Occupied rentals as of the end of the period shown in our Core portfolio. For the years ended December 31, 2015 and 2014, includes 100 and 33 homes rented through our ECHO joint venture, respectively. For the years ended December 31, 2015 and 2014, the rental home investment associated with our ECHO joint venture totals approximately $3.4 million and $1.1 million.
3. Includes both occupied and unoccupied rental homes. New home cost basis does not include the costs associated with our ECHO joint venture. At December 31, 2015 and 2014, our investment in the ECHO joint venture was approximately $10.4 million and $6.3 million, respectively.
       

Total Sites and Home Sales

(In thousands, except sites and home sale volumes, unaudited)

 

Summary of Total Sites as of December 31, 2015

Sites

Community sites

70,100

Resort sites:

Annuals

25,800

Seasonal

10,400

Transient

10,400

Membership (1)

24,100

Joint Ventures (2)

3,100

Total

143,900

 
 
Home Sales – Select Data
Quarters Ended Years Ended
December 31, December 31,
2015 2014 2015 2014
Total New Home Sales Volume (3) 127 99 479 336
New Home Sales Volume – ECHO joint venture 38 42 178 136
New Home Sales Gross Revenues(3) $ 5,488 $ 3,813 $ 17,674 $ 13,584
 
Used Home Sales Volume 315 382 1,489 1,526
Used Home Sales Gross Revenues $ 3,321 $ 4,150 $ 15,476 $ 14,834
 
Brokered Home Resales Volume 216 216 884 936
Brokered Home Resale Revenues, net $ 328 $ 306 $ 1,269 $ 1,222

:::::_

1. Sites primarily utilized by approximately 102,400 members. Includes approximately 5,500 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 5.
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.
   

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; and (ix) ongoing legal matters and related fees.

 

(In millions, except per share data, unaudited)

 
Quarter Ended Year Ended
March 31, 2016   December 31, 2016
Income from property operations, excluding deferrals and property management – 2016 Core (2) $ 124.2 $ 467.2
Income from property operations – Acquisitions (3) 0.7 1.6
Property management and general and administrative (19.2 ) (77.2 )
Other income and expenses 4.7 14.6
Financing costs and other (28.0 )   (111.6 )
Normalized FFO and FFO available for Common Stockholders (4) 82.4 294.6
Depreciation on real estate and other (26.6 ) (105.8 )
Depreciation on rental homes (2.6 ) (10.5 )
Deferral of right-to-use contract sales revenue and commission, net (0.5 ) (2.7 )
Income allocated to non-controlling interest-Common OP Units (4.2 )   (13.8 )
Net income available for Common Stockholders $ 48.5     $ 161.8  
 
Normalized FFO per Common Share – fully diluted $0.87 – $0.93 $3.15 – $3.25
FFO per Common Share – fully diluted $0.87 – $0.93 $3.15 – $3.25
Net income per Common Share – fully diluted (5) $0.54 – $0.60 $1.86 – $1.96
 
Weighted average Common Stock outstanding – fully diluted 92.0 92.1

:::::::__

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 Stockholders, Normalized FFO per Common Share, FFO available for Common Stockholders, 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 are incorrect.
2. See page 13 for 2016 Core Guidance Assumptions. Amount represents 2015 income from property operations, excluding deferrals and property management, from the 2016 Core properties of $119.3 million multiplied by an estimated growth rate of 4.1% and $448.8 million multiplied by an estimated growth rate of 4.1% for the quarter ended March 31, 2016 and the year ended December 31, 2016, respectively.
3. See page 13 for the 2016 Assumptions regarding the Acquisition properties.
4. See page 17 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)

 
First
Quarter Quarter
Ended 2016 Year Ended 2016

March 31,
2015

Growth
Factors (2)

December 31,
2015

Growth
Factors (2)

Community base rental income $ 109.2 3.8 % $ 441.6 3.5 %
Rental home income 3.6 (5.7 )% 14.0 (7.1 )%
Resort base rental income (3) 51.5 5.6 % 183.4 4.9 %
Right-to-use annual payments 11.0 0.4 % 44.4 0.1 %
Right-to-use contracts current period, gross 2.8 (7.2 )% 12.8 1.9 %
Utility and other income 19.0   2.2 % 76.0   0.1 %
Property operating revenues 197.1 3.6 % 772.2 3.1 %
 
Property operating, maintenance, and real estate taxes 73.6 3.1 % 304.5 1.6 %
Rental home operating and maintenance 1.7 (9.4 )% 7.2 (6.7 )%
Sales and marketing, gross 2.5   3.4 % 11.7   6.8 %
Property operating expenses 77.8   2.8 % 323.4   1.6 %
Income from property operations, excluding deferrals and property management $ 119.3   4.1 % $ 448.8   4.1 %
 
Resort base rental income:
Annual $ 27.8 5.7 % $ 114.6 5.7 %
Seasonal 15.0 5.0 % 28.7 4.0 %
Transient 8.7   6.4 % 40.1   3.5 %
Total resort base rental income $ 51.5   5.6 % $ 183.4   4.9 %
   

2016 Assumptions Regarding Acquisition Properties (1)

(In millions, unaudited)

 
Quarter Ended Year Ended

March 31, 2016 (4)

December 31, 2016 (4)
Community base rental income

$

0.1

$

0.5

Resort base rental income 1.0 2.4
Utility income and other property income   0.1     0.4
Property operating revenues 1.2 3.3
 
Property operating, maintenance, and real estate taxes   0.5     1.7
Property operating expenses   0.5     1.7
Income from property operations, excluding deferrals and property management

$

0.7

 

$

1.6

::::::_

1. Refer to page 18 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 are 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 are incorrect.
 

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,
2012   2013   2014   2015   2016 (1)
Member Count (2) 96,687 98,277 96,130 102,413 105,300
Thousand Trails Camping Pass (TTC) Origination (3) 10,198 15,607 18,187 25,544 27,700
TTC Sales 8,909 9,289 10,014 11,877 13,800
RV Dealer TTC Activations 1,289 6,318 8,173 13,667 13,900
Number of annuals (4) 4,280 4,830 5,142 5,470 5,750
Number of upgrade sales (5) 3,069 2,999 2,978 2,687 2,600
 
Right-to-use annual payments (6) $ 47,662 $ 47,967 $ 44,860 $ 44,441 $ 44,500
Resort base rental income from annuals $ 9,585 $ 11,148 $ 12,491 $ 13,821 $ 15,300
Resort base rental income from seasonals/transients $ 11,042 $ 12,692 $ 13,894 $ 15,795 $ 16,400
Upgrade contract initiations (7) $ 14,025 $ 13,815 $ 13,892 $ 12,783 $ 13,000
Utility and other income $ 2,407 $ 2,293 $ 2,455 $ 2,430 $ 2,700

::::::__

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 are 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, 2012 and December 31, 2013, include $0.1 million and $2.1 million, respectively, 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 5.
         

Market Capitalization

(In millions, except share and OP Unit data, unaudited)

 
Capital Structure as of December 31, 2015
 

Total
Common
Stock/Units

 

% of Total
Common
Stock/Units

  Total   % of Total  

% of Total
Market
Capitalization

 
Secured Debt $ 1,946 90.7 %
Unsecured Debt 200   9.3 %
Total Debt $ 2,146 100.0 % 25.6 %
 
Common Stock 84,253,065 92.1 %
OP Units 7,207,678   7.9 %
Total Common Stock and OP Units 91,460,743 100.0 %
Common Stock price at December 31, 2015 $ 66.67
Fair Value of Common Stock $ 6,098 97.8 %
Perpetual Preferred Equity 136   2.2 %
Total Equity $ 6,234 100.0 % 74.4 %
 
Total Market Capitalization $ 8,380 100.0 %
 
Perpetual Preferred Equity as of December 31, 2015
 
Series  

Callable
Date

     

Outstanding
Stock

 

Liquidation
Value

 

Annual
Dividend Per
Share

 

Annual
Dividend
Value

6.75% Series C 9/7/2017 54,458 $136 $168.75 $ 9.2
 

Debt Maturity Schedule

Debt Maturity Schedule as of December 31, 2015

(In thousands, unaudited)

 
           
Year

Secured
Debt

 

Weighted
Average
Interest
Rate

 

Unsecured
Debt

 

Weighted
Average
Interest
Rate

 

Total Debt

 

% of Total
Debt

 

Weighted
Average
Interest
Rate

 
2016 $ 80,264 5.79 % $ $ 80,264 3.76 % 5.79 %
2017 57,909 5.80 % 57,909 2.71 % 5.80 %
2018 203,128 5.97 % 203,128 9.51 % 5.97 %
2019 204,828 6.27 % 204,828 9.59 % 6.27 %
2020 124,104 6.13 % 200,000 2.39 % 324,104 15.17 % 3.82 %
2021 193,481 5.01 % 193,481 9.05 % 5.01 %
2022 153,915 4.59 % 153,915 7.20 % 4.59 %
2023 113,819 5.14 % 113,819 5.33 % 5.14 %
2024 % % %
Thereafter 805,419   4.18 %     805,419   37.69 % 4.18 %  
Total $ 1,936,867 5.00 % $ 200,000 2.39 % $ 2,136,867 100.0 % 4.75 %
 
Note Premiums 8,846     8,846  
 
Total Debt $ 1,945,713   4.75 % (1) $ 200,000   2.39 % $ 2,145,713   4.53 % (1)
 
Average Years to Maturity 10.9 4.1 10.3

::::__

1. Effective interest rate including amortization of note premiums.
 

Non-GAAP Financial Measures Definitions and Other Terms

This document contains certain non-GAAP measures we believe are helpful in understanding our business, as further discussed in the paragraphs below. Investors should review Funds from Operations (“FFO”), Normalized Funds from Operations (“Normalized FFO”) and Funds available for distribution (“FAD”), along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT’s operating performance. 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. 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. FFO, Normalized FFO and FAD 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.

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 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 NAREIT, is generally an appropriate 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 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.

We believe that FFO and Normalized FFO 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 and the change in fair value of our contingent consideration asset 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.

FAD.We define FAD as Normalized FFO less non-revenue producing capital expenditures.

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 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 direct measure of the actual operating results of our manufactured home and RV properties.

The following table reconciles Income before equity in income of unconsolidated joint ventures and gain on sale of property to Income from property operations (amounts in thousands):

  Quarters Ended   Years Ended
December 31, December 31,
2015   2014 2015   2014
Income before equity in income of unconsolidated joint ventures and gain on sale of property $ 39,284 $ 32,925 $ 146,423 $ 132,433
Right-to-use upfront payments, deferred, net 302 1,197 4,231 5,501
Gross revenues from home sales (8,809 ) (7,963 ) (33,150 ) (28,418 )
Brokered resale revenues and ancillary services revenues, net (104 ) (359 ) (4,149 ) (3,850 )
Interest income (1,716 ) (1,870 ) (7,030 ) (8,347 )
Income from other investments, net (2,240 ) (955 ) (7,359 ) (7,053 )
Right-to-use contract commissions, deferred, net (85 ) (595 ) (1,556 ) (2,617 )
Property management 10,778 10,469 44,528 42,638
Depreciation on real estate and rental homes 28,748 27,830 113,609 111,065
Amortization of in-place leases 408 208 2,358 3,999
Cost of homes sales 8,594 7,068 32,279 26,747
Home selling expenses 805 632 3,191 2,342
General and administrative 8,472 7,232 30,644 27,410
Property rights initiatives and other 1,052 860 2,986 2,923
Early debt retirement (9 ) 16,913 5,087
Interest and related amortization 26,083   28,118   105,731   112,295  
Income from property operations, excluding deferrals and property management

 

111,563

 

104,797

 

449,649

 

422,155
Right-to-use contracts, deferred and sales and marketing, deferred, net (217 ) (602 ) (2,675 ) (2,884 )
Property management (10,778 ) (10,469 ) (44,528 ) (42,638 )
Income from property operations $ 100,568   $ 93,726   $ 402,446   $ 376,633  
 

Earnings before interest, tax, depreciation and amortization (EBITDA) and Normalized EBITDA. We define EBITDA as net income or loss before interest income and expense, income taxes, depreciation and amortization. We define Normalized 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) impairments, if any; and e) other miscellaneous non-comparable items . The following table reconciles Income before equity in income of unconsolidated joint ventures to EBITDA and Normalized EBITDA (amounts in thousands):

  Quarters Ended   Years Ended
December 31, December 31,
2015   2014 2015   2014
Income before equity in income of unconsolidated joint ventures and gain on sale of property $ 39,284 $ 32,925 $ 146,423 $ 132,433
Right-to-use contract upfront payments, deferred, net 302 1,197 4,231 5,501
Right-to-use contract commissions, deferred, net (85 ) (595 ) (1,556 ) (2,617 )
Depreciation on real estate assets and rental homes 28,748 27,830 113,609 111,065
Amortization of in-place leases 408 208 2,358 3,999
Depreciation on corporate assets 276 241 1,089 890
Interest and related amortization 26,083 28,118 105,731 112,295
Equity in income from unconsolidated joint ventures 483   809   4,089   4,578  
EBITDA $ 95,499 $ 90,733 $ 375,974 $ 368,144
Change in fair value of contingent consideration asset (65 )
Transaction costs 527 496 1,130 1,647
Early debt retirement (9 )   16,913   5,087  
Normalized EBITDA $ 96,017   $ 91,229   $ 394,017   $ 374,813  
 

Core. The Core properties include properties we owned and operated during all of 2014 and 2015.

Acquisitions. The Acquisition properties include seven properties acquired during 2014 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.

Equity LifeStyle Properties, Inc.
Paul Seavey, 800-247-5279