Strong Home Sales; ELS Updates 2006 Guidance
CHICAGO--(BUSINESS WIRE)--Oct. 17, 2005--Equity LifeStyle Properties, Inc. (NYSE:ELS) today announced results for the quarter and nine months ended September 30, 2005.
a) Financial Results
For the third quarter of 2005, Funds From Operations (FFO) were $15.9 million or $0.53 per share on a fully diluted basis, compared to $11.9 million or $0.40 per fully diluted share for the same period in 2004. For the nine months ended September 30, 2005, FFO were $58.5 million or $1.95 per share on a fully diluted basis, compared to $40.3 million or $1.38 per fully diluted share for the same period in 2004.
Net income available to common stockholders totaled $1.1 million or $0.04 per fully diluted share for the quarter ended September 30, 2005. This compares to net loss available to common stockholders of ($0.9 million) or ($0.04) per fully diluted share for the third quarter of 2004. Net income available to common stockholders totaled $12.3 million or $0.52 per fully diluted share for the nine months ended September 30, 2005. This compares to net income available to common stockholders of $4.1 million or $0.17 per fully diluted share for the nine months ended September 30, 2004. See the attachment to this press release for reconciliation of FFO and FFO per share to net income and net income per share, respectively, the most directly comparable GAAP measures.
b) Portfolio Performance
Third quarter 2005 property operating revenues were $76.8 million, compared to $72.2 million in the third quarter of 2004. Property operating revenues for the nine months ended September 30, 2005 were $236.4 million, compared to $210.4 million for the same period in 2004.
For the three months ended September 30, 2005, our Core(1) properties' operating revenues increased approximately 4.1 percent, while operating expenses increased approximately 3 percent over the same period in 2004. Net Core operating income increased approximately 5 percent over the same period last year (approximately 2.7 percent after removing the effect of an insurance reserve taken in the third quarter of 2004). For the nine months ended September 30, 2005, our Core properties' operating revenues increased approximately 3.8 percent, while operating expenses increased approximately 5 percent. Net Core operating income increased approximately 3 percent over the same period last year. On a year-to-date basis, our Core resort net operating income increased approximately 8.6 percent on a 4.4 percent increase in revenues.
For the quarter ended September 30, 2005, the Company had 199 new home sales, a 48 percent increase over the quarter ended September 30, 2004. Gross revenues from home sales were approximately $15.7 million for the quarter ended September 30, 2005, compared to approximately $12.6 million for the quarter ended September 30, 2004. For the nine months ended September 30, 2005, the Company had 512 new home sales, a 48 percent increase over the same period in 2004. Gross revenues from home sales were approximately $43.4 million for the nine months ended September 30, 2005, compared to approximately $30.7 million for the same period in 2004. Our ancillary income increased from $2.4 million to $3.5 million on a year-to-date basis due to our 2004 acquisitions.
The combination of general administrative costs and Rent Control Initiatives increased from $2.5 million for the quarter ended September 30, 2004 to approximately $3.7 million for the quarter ended September 30, 2005. On a year-to-date basis, these costs increased from $8.0 million to $11.0 million. We have added resources to manage our growth and continue to experience increased costs due to the changing regulatory environment.
c) Acquisitions
Our acquisitions contributed $0.15 per share of fully diluted FFO in the third quarter of 2005 compared to $0.07 per share of fully diluted FFO in the third quarter of 2004. For the nine months ended September 30, 2005, our 2004 acquisitions contributed $0.62 per share of fully diluted FFO compared to $0.13 per share for the same period in 2004. Income from the Thousand Trails portfolio continues to contribute FFO of approximately $2 million or $0.07 per fully diluted share per quarter.
During the quarter ended September 30, 2005, the Company purchased six resort properties containing approximately 3,500 sites located in the Northeast for approximately $81 million. The acquisitions contain over 100 acres of land available for future expansion.
d) Dispositions
We currently have seven all-age properties held for disposition and are in various stages of negotiations for sale of same. The Company plans to reinvest its sale proceeds or reduce outstanding line of credit debt with the sale proceeds.
e) Balance Sheet
During the quarter, we refinanced two mortgage loans totaling $34 million at a rate of 4.95 percent per annum. We used the net proceeds to pay down five other secured financings, which were maturing next year.
Our average long-term debt balance was $1.6 billion in the quarter, with a weighted average interest rate of approximately 6.1 percent per annum. Our unsecured debt balance consists of $112.8 million outstanding of a $120 million term loan with a fixed interest rate of approximately 4.7 percent per annum, and $68.2 million outstanding on our lines of credit, which have a current availability of approximately $92 million. Interest coverage was approximately 1.8 times in the quarter.
The Company has initiated the process to refinance approximately $293 million of secured debt maturing in 2007 with an effective interest rate of 6.8 percent per annum. The transaction is expected to generate approximately $340 million in proceeds from loans secured by individual mortgages on 20 properties, and is expected to close in the fourth quarter. Excess proceeds will be used to defease debt on two cross-collateralized loan pools consisting of 35 properties, and to repay amounts borrowed under the Company's lines of credit. The blended interest rate on the refinancing is approximately 5.30 percent per annum. The transaction costs will impact the fourth quarter by approximately $23 million or $0.74 in FFO per fully diluted share.
As a result of the changes in the law relating to deferred compensation plans, the Company, subject to the final approval of the Company's Management Committee, has determined that it will terminate its Supplemental Retirement Savings Plan by the end of 2005. Termination of the plan will result in taxable distribution to the applicable participants, who will receive the assets that are held in their plan account, net of withholding taxes. These assets include approximately 900,000 shares of ELS common stock in the aggregate, including approximately 825,000 shares of ELS common stock held in the plan accounts of ELS' executive officers and directors. All of the shares of ELS common stock held in plan accounts that are distributed will be freely tradeable without restriction or further registration under the federal securities laws, except for shares held in the plan accounts of executive officers and directors, which will be subject to the manner and volume of sale requirements of Rule 144 under the Securities Act. Termination of the Plan will have no effect on results of operations and no material impact on the Company's balance sheet.
f) Guidance
ELS management projects fully diluted FFO per share before early debt retirement charges, noted above, to be in the range of $0.53 to $0.55 for the fourth quarter of 2005. Guidance has been impacted by increases in utility costs and property taxes above the rate of inflation and marketing costs relating to customer loyalty programs initiated this quarter. In addition, other factors impacting this guidance include i) the mix of site usage within the Company's portfolio; ii) the Company's yield management on its short term resort sites; iii) scheduled or implemented rate increases; and iv) occupancy changes. Results for 2005 also may be impacted by, among other things i) continued competitive housing options and new home sales initiatives impacting occupancy levels at certain properties; ii) variability in income from home sales operations, including anticipated expansion projects; iii) potential effects of uncontrollable factors such as hurricanes; iv) potential acquisitions, investments and dispositions; and v) rent control initiatives and other legal defense costs. Quarter-to-quarter results during the year are impacted by the seasonality at certain of the properties.
Preliminary guidance for 2006 fully diluted FFO per share is projected to be in the range of $2.75 to $2.85.
We expect our Core portfolio to perform in line with historical norms. We anticipate revenue growth of approximately 4 percent and expense growth to reflect the Consumer Price Index. Utility costs and property taxes are expected to rise greater than the rate of inflation. We anticipate our sales performance to be in line with our current year's performance. We anticipate the interest expense savings from the upcoming $340 million refinancing will be partially offset by additional costs associated with marketing initiatives, continued investment in additional resources to manage our growth and increased interest expense associated with floating rate debt. We have not assumed a use of proceeds for our free cash flow.
Factors impacting this guidance include i) the mix of site usage within the Company's portfolio; ii) the Company's yield management on its short term resort sites; iii) scheduled or implemented rate increases; and iv) occupancy changes. Results for 2006 also may be impacted by, among other things i) continued competitive housing options and new home sales initiatives impacting occupancy levels at certain properties; ii) variability in income from home sales operations, including anticipated expansion projects; iii) potential effects of uncontrollable factors such as hurricanes; iv) potential acquisitions, investments and dispositions; and v) Rent Control Initiatives and other legal defense costs. Quarter-to-quarter results during the year are impacted by the seasonality at certain of the properties.
This news 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", "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. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to: in the age-qualified communities, home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial markets volatility; in the all-age communities, 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; our ability to maintain rental rates and occupancy with respect to properties currently owned or pending acquisitions; our assumptions about rental and home sales markets; the completion of pending acquisitions and timing with respect thereto; the effect of interest rates as well as 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. ELS is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.
Equity LifeStyle Properties, Inc. owns or has an interest in 285 quality properties in 28 states and British Columbia consisting of 106,492 sites. The Company is a self-administered, self-managed, real estate investment trust (REIT) with headquarters in Chicago.
A live webcast of the Company's conference call discussing these results will be available via the Company's website in the Investor Info section at www.mhchomes.com at 10:00 a.m. Central time on October 18, 2005. The conference call will not have any prerecorded remarks and will be limited to questions and answers from interested parties.
Tables follow
(1) Properties we owned for the same period in both years.
Equity LifeStyle Properties, Inc.
Selected Financial Data
(Unaudited)
(Amounts in thousands except for per share data)
Quarters Ended Nine Months Ended
Sept. 30, Sept 30, Sept. 30, Sept 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Property Operations:
Community base rental income $53,507 $52,219 $159,467 $152,529
Resort base rental income 16,855 14,167 55,964 39,460
Utility and other income 6,479 5,793 20,996 18,411
--------- --------- --------- ---------
Property operating revenues 76,841 72,179 236,427 210,400
Property operating and
maintenance 26,153 24,513 76,969 67,745
Real estate taxes 6,200 5,920 18,659 17,002
Property management 4,198 3,316 11,813 9,585
--------- --------- --------- ---------
Property operating expenses 36,551 33,749 107,441 94,332
--------- --------- --------- ---------
Income from property
operations 40,290 38,430 128,986 116,068
Home Sales Operations:
Gross revenues from inventory
home sales 15,706 12,568 43,393 30,691
Cost of inventory home sales (13,534) (10,817) (38,104) (26,945)
--------- --------- --------- ---------
Gross profit from inventory
home sales 2,172 1,751 5,289 3,746
Brokered resale revenues, net 678 536 2,095 1,621
Home selling expenses (2,290) (2,155) (6,527) (6,381)
Ancillary services revenues,
net 967 759 3,479 2,392
--------- --------- --------- ---------
Income from home sales and
other 1,527 891 4,336 1,378
Other Income and Expenses:
Interest income 311 309 994 1,076
Other corporate income 4,233 335 12,629 959
Equity in income of
unconsolidated joint ventures 2,891 906 7,435 3,710
General and administrative (3,512) (2,110) (10,197) (6,689)
Rent Control Initiatives (194) (375) (807) (1,295)
--------- --------- --------- ---------
Operating income (EBITDA) 45,546 38,386 143,376 115,207
Interest and related
amortization (25,302) (23,802) (75,304) (66,972)
Early debt retirement (482) --- (482) ---
Income from discontinued
operations 383 577 1,556 1,783
Depreciation on corporate
assets (243) (427) (682) (1,231)
Income allocated to Preferred
OP Units (4,017) (2,825) (9,929) (8,459)
--------- --------- --------- ---------
Funds from operations (FFO) $15,885 $11,909 $58,535 $40,328
Depreciation on real estate
and other costs (13,984) (12,440) (41,243) (34,195)
Depreciation on unconsolidated
joint ventures (517) (249) (1,341) (724)
Depreciation on discontinued
operations --- (318) (329) (1,004)
Gain on sale of properties --- --- --- 638
Income allocated to Common OP
Units (293) 234 (3,335) (937)
--------- --------- --------- ---------
Net Income (loss) $1,091 $(864) $12,287 $4,106
========= ========= ========= =========
Net income (loss) per Common
Share - Basic $0.04 $(0.04) $0.53 $0.18
Net income (loss) per Common
Share - Fully Diluted $0.04 $(0.04) $0.52 $0.17
--------- --------- --------- ---------
FFO per Common Share - Basic $0.54 $0.41 $1.99 $1.41
FFO per Common Share - Fully
Diluted $0.53 $0.40 $1.95 $1.38
--------- --------- --------- ---------
Average Common Shares - Basic 23,097 22,829 23,038 22,747
Average Common Shares and OP
Units - Basic 29,405 29,335 29,357 28,661
Average Common Shares and OP
Units - Fully Diluted 30,149 29,846 30,008 29,188
--------- --------- --------- ---------
Equity LifeStyle Properties, Inc.
(Unaudited)
As Of As Of
September 30, December 31,
Total Shares and OP Units Outstanding: 2005 2004
------------- --------------
Total Common Shares Outstanding 23,111,622 22,937,192
Total Common OP Units Outstanding 6,260,031 6,340,805
Selected Balance Sheet Data: September 30, December 31,
2005 2004
(amounts in (amounts in
000's) 000's)
------------- --------------
Total real estate, net $1,784,870 $1,712,923
Cash and cash equivalents $9,156 $5,305
Total assets (1) $1,978,939 $1,886,289
Mortgage notes payable $1,460,862 $1,417,251
Unsecured debt $181,000 $235,800
Total liabilities $1,719,854 $1,719,674
Minority interest $213,176 $134,771
Total stockholders' equity $45,909 $31,844
Manufactured Home Site and Quarters Ended Nine Months Ended
Occupancy Averages: Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Total Sites 42,781 42,638 42,757 42,220
Occupied Sites 38,581 38,903 38,634 38,621
Occupancy % 90.2% 91.2% 90.4% 91.5%
Monthly Base Rent Per Site $462.28 $447.42 $458.63 $438.82
Core(a) Monthly Base Rent Per
Site $465.05 $443.10 $461.39 $439.10
(a) Represents rent per site for properties owned in both periods of
comparison.
Quarters Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
Home Sales (2): 2005 2004 2005 2004
--------- --------- --------- ---------
New Home Sales Volume (3) 199 134 512 345
New Home Sales Gross Revenues $14,885 $11,732 $40,741 $27,594
Used Home Sales Volume 68 94 206 284
Used Home Sales Gross Revenues $821 $836 $2,652 $3,097
Brokered Home Resale Volume 376 331 1,184 1,065
Brokered Home Resale Revenues,
net $678 $536 $2,095 $1,621
(1) Includes hurricane related costs recoverable from insurance
providers of $5.7 million.
(2) Results of continuing sales operations.
(3) Quarter and nine months ended September 30, 2005 includes 37 and
50 third-party sales, respectively.
Equity LifeStyle Properties, Inc
(Unaudited)
Annual Revenue
Ranges:
Total Total Total Total
Sites Sites Sites Sites
(rounded (rounded (rounded (rounded Approximate
to to to to Annual
100's) 100's) 100's) 100's) Revenue Range (1)
--------- -------- -------- --------- -----------------
9/30/05 6/30/05 3/31/05 12/31/04
Community
sites (2) 45,300 45,200 45,200 45,200 $5,400-$5,500
(3)
Resort sites:
Annuals 15,500 13,100 13,100 13,100 $3,000-$3,200
Seasonal 8,200 7,600 7,600 7,200 $1,800-$1,900
Transient 6,400 5,600 5,600 6,000 $2,000-$2,200
Thousand
Trails 17,900 17,900 17,900 17,900 (4)
Joint Ventures 13,300 12,300 11,800 11,800 (5)
-------- -------- -------- ---------
106,600 101,700 101,200 101,200
======== ======== ======== =========
(1) All Ranges exclude utility and other income.
(2) Includes 2,466 sites from discontinued operations.
(3) Based on occupied sites. Average occupancy as of 12/31/04 was
approximately 90%.
(4) 17,911 sites are reserved for Thousand Trails members pursuant to
a sale-leaseback agreement with Thousand Trails Operations Holding
Company, L.P. with an annual rent of $16 million.
(5) Joint Venture income is included in equity in income from
unconsolidated joint ventures.
Funds available for
distribution (FAD): Quarters Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Funds from operations $15,885 $11,909 $58,535 $40,328
Non-revenue producing
improvements to real estate (3,683) (2,991) (9,016) (9,498)
--------- --------- --------- ---------
Funds available for
distribution $12,202 $8,918 $49,519 $30,830
========= ========= ========= =========
FAD per Common Share - Basic $0.41 $0.30 $1.69 $1.08
FAD per Common Share - Fully
Diluted $0.40 $0.30 $1.65 $1.06
--------- --------- --------- ---------
"Funds from Operations ("FFO") is a non-GAAP financial measure. The Company believes that FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), is 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.
FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from sales of properties, plus real estate related depreciation and amortization, 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. The Company believes that FFO is helpful to investors as one of several measures of the performance of an equity REIT. The Company further believes that by excluding the effect of depreciation, amortization and 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. The Company computes FFO in accordance with standards established by 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. Funds available for distribution ("FAD") is a non-GAAP financial measure. FAD is defined as FFO less non-revenue producing capital expenditures. Investors should review FFO and 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. 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."
CONTACT:
Equity LifeStyle Properties, Inc.
Michael Berman, 312-279-1496
SOURCE: Equity LifeStyle Properties, Inc.