UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

EQUITY LIFESTYLE PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Maryland		1-11718		36-3857664
(State or other jurisdiction of		(Commission File No.)		(IRS Employer
incorporation or organization)				Identification Number)
Two North Riverside Plaza, Chicago, Illinois				60606
(Address of principal executive offices)				(Zip Code)

(312) 279-1400
(Registrant’s telephone number, including area code)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 8.01 Other Events

          Equity LifeStyle Properties, Inc. (the “Company”) is filing this Current Report on Form 8-K solely to reflect certain accounting adjustments with respect to the financial information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (“2008 Form 10-K”), which was filed with the United States Securities and Exchange Commission on March 2, 2009. This Current Report on Form 8-K shows the effects of the retrospective adoption on the 2008 Form 10-K of the following:

•

In accordance with Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS No.160”), effective January 1, 2009, the Company, for all periods presented, has reclassified the non-controlling interest for Common OP Units from the mezzanine section under Total Liabilities to the Equity section of the consolidated balance sheets. Based on the Company’s analysis, Perpetual Preferred OP Units will remain in the mezzanine section. The presentation of income allocated to Common OP Units and Perpetual Preferred OP Units on the consolidated statements of operations has been moved to the bottom of the statement prior to Net income available to Common Shares. This reclassification has no effect on the Company’s net income attributable to common stockholders or funds from operations (“FFO”).

          Management does not believe the adjustments in accordance with SFAS No.160 have a material effect on the Company’s consolidated financial statements. The Company is filing this Form 8-K to conform certain parts of Items 6 and 15 of the 2008 Form 10-K to the presentation of our consolidated financial statements in our 2009 Form 10-Q filings for ease of comparability. Except as described above, we have not modified or updated any disclosures in our 2008 Form 10-K. This Current Report on Form 8-K should be read in conjunction with our 2008 Form 10-K.

          This report 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. 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 recently acquired);
	•		our ability to maintain historical rental rates and occupancy with respect to Properties currently owned or that we may acquire;
	•		our assumptions about rental and home sales markets;
	•		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;
	•		in the all-age Properties, 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;
	•		the completion of future acquisitions, if any, and timing with respect thereto and the effective integration and successful realization of cost savings;
	•		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 common stock;
	•		the effect of accounting for the sale of agreements to customers representing a right-to-use the Properties previously leased by Privileged Access under Staff Accounting Bulletin No. 104, Revenue Recognition in Consolidated Financial Statements, Corrected; 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. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.

Item 9.01 Financial Statements and Exhibits

          (d) Exhibits

          The information contained in the attached exhibit is audited and should be read in conjunction with the Registrant’s annual and quarterly reports filed with the Securities and Exchange Commission.

          Exhibit 23.1      Consent of Ernst & Young LLP

          Exhibit 99.1      Item 6. Selected Financial Data

          Exhibit 99.2      Item 15. Exhibits and Financial Statement Schedules

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 10, 2009

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-68473, No. 333-28469, No. 333-25295, and No. 33-76486, and Form S-3 No. 333-66550, No. 333-90813, No. 333-65515, No. 333-25297, No. 333-1710, No. 33-82902, No. 33-97288 and No. 333-159014) of Equity Lifestyle Properties, Inc., and in the related Prospectuses, of our report dated February 27, 2009 (except for the second paragraph of Note 2(s) and the last table and paragraph of Note 5, as to which the date is August 10, 2009) with respect to the consolidated financial statements of Equity Lifestyle Properties, Inc. included in this Current Report (Form 8-K).

/s/ ERNST & YOUNG, LLP                                 
ERNST & YOUNG, LLP

Chicago, Illinois
August 10, 2009

Exhibit 99.1

Item 6. Selected Financial Data

     The following table sets forth selected financial and operating information on a historical basis. The historical operating data has been derived from the historical financial statements of the Company. The following information should be read in conjunction with all of the financial statements and notes thereto included elsewhere in this Form 10-K.

Equity LifeStyle Properties, Inc.
Consolidated Historical Financial Information
(Amounts in thousands, except for per share and property data)

		(1) Years ended December 31,
		2008				2007				2006				2005				2004
Property Operations:
Community base rental income		$	245,833			$	236,933			$	225,815			$	213,280			$	204,190
Resort base rental income			111,876				102,372				89,925				74,371				54,661
Right-to-use annual payments (2)			19,667				—				—				—				—
Right-to-use contracts current period, gross (2)			10,951				—				—				—				—
Right-to-use contracts, deferred, net of prior period amortization (2)			(10,611	)			—				—				—				—
Utility and other income			41,633				36,849				30,643				27,367				24,496
Property operating revenues			419,349				376,154				346,383				315,018				283,347
Property operating and maintenance			152,363				127,342				116,179				103,832				91,812
Real estate taxes			29,457				27,429				26,246				24,671				22,723
Sales and marketing, gross (2)			7,116				—				—				—				—
Sales and marketing, deferred commissions, net (2)			(3,644	)			—				—				—				—
Property management			25,451				18,385				17,079				15,919				12,852
Property operating expenses (exclusive of depreciation shown separately below)			210,743				173,156				159,504				144,422				127,387
Income from property operations			208,606				202,998				186,879				170,596				155,960
Home Sales Operations:
Gross revenues from inventory home sales			21,845				33,333				61,247				66,014				47,404
Cost of inventory home sales			(24,069	)			(30,713	)			(54,498	)			(57,471	)			(41,577	)
Gross (loss) profit from inventory home sales			(2,224	)			2,620				6,749				8,543				5,827
Brokered resale revenues, net			1,094				1,528				2,129				2,714				2,176
Home selling expenses			(5,776	)			(7,555	)			(9,836	)			(8,838	)			(8,630	)
Ancillary services revenues, net			1,197				2,436				3,027				2,227				2,280
(Loss) income from home sales operations and other			(5,709	)			(971	)			2,069				4,646				1,653
Other Income (Expenses):
Interest income			3,095				1,732				1,975				1,406				1,391
Income from other investments, net (3)			17,006				22,476				20,102				16,609				3,475
General and administrative			(20,617	)			(15,591	)			(12,760	)			(13,624	)			(9,243	)
Rent control initiatives			(1,555	)			(2,657	)			(1,157	)			(1,081	)			(2,412	)
Interest and related amortization			(99,406	)			(103,070	)			(103,161	)			(100,712	)			(91,154	)
Loss on early debt retirement (4)			(24	)			—				—				(20,630	)			—
Depreciation on corporate assets			(390	)			(437	)			(410	)			(804	)			(1,657	)
Depreciation on real estate assets and other costs			(66,193	)			(63,554	)			(60,276	)			(55,608	)			(47,467	)
Total other expenses, net			(168,084	)			(161,101	)			(155,687	)			(174,444	)			(147,067	)
Equity in income of unconsolidated joint ventures			3,753				2,696				3,583				6,508				3,739
Consolidated income from continuing operations			38,566				43,622				36,844				7,306				14,285
Discontinued Operations:
Discontinued operations			257				289				520				1,927				2,750
Depreciation on discontinued operations			—				—				(84	)			(410	)			(1,427	)
(Loss) gain on sale of discontinued properties and other			(79	)			12,036				(192	)			2,279				638
Income from discontinued operations			178				12,325				244				3,796				1,961
Consolidated net income			38,744				55,947				37,088				11,102				16,246
Income allocated to non-controlling interests:
Common OP Units			(4,297	)			(7,705	)			(4,318	)			539				(936	)
Perpetual Preferred OP Units (5)			(16,144	)			(16,140	)			(16,138	)			(13,974	)			(11,284	)
Net income (loss) available for Common Shares		$	18,303			$	32,102			$	16,632			$	(2,333	)		$	4,026

Equity LifeStyle Properties, Inc.
Consolidated Historical Financial Information
(continued)
(Amounts in thousands, except for per share and property data)

		(1) As of December 31,
		2008				2007				2006				2005				2004
Earnings per Common Share — Basic:
Income (loss) from continuing operations		$	0.74			$	0.92			$	0.70			$	(0.23	)		$	0.11
Income from discontinued operations		$	0.01			$	0.41			$	0.01			$	0.13			$	0.07
Net income (loss) available for Common Shares		$	0.75			$	1.33			$	0.71			$	(0.10	)		$	0.18
Earnings per Common Share — Fully Diluted:
Income (loss) from continuing operations		$	0.74			$	0.90			$	0.68			$	(0.23	)		$	0.10
Income from discontinued operations		$	0.01			$	0.41			$	0.01			$	0.13			$	0.07
Net income (loss) available for Common Shares		$	0.75			$	1.31			$	0.69			$	(0.10	)		$	0.17
Distributions declared per Common Share outstanding		$	0.80			$	0.60			$	0.30			$	0.10			$	0.05
Weighted average Common Shares outstanding — basic			24,466				24,089				23,444				23,081				22,849
Weighted average Common OP Units outstanding			5,674				5,870				6,165				6,285				6,067
Weighted average Common Shares outstanding — fully diluted			30,498				30,414				30,241				29,366				29,465
Balance Sheet Data:
Real estate, before accumulated depreciation (6)		$	2,491,021			$	2,396,115			$	2,337,460			$	2,152,567			$	2,035,790
Total assets			2,091,647				2,033,695				2,055,831				1,948,874				1,886,289
Total mortgages and loans			1,662,403				1,659,392				1,717,212				1,638,281				1,653,051
Non-controlling interests — Perpetual Preferred OP Units (5)			200,000				200,000				200,000				200,000				125,000
Total equity			96,234				88,717				59,912				41,895				41,615
Other Data:
Funds from operations (7)		$	97,615			$	92,752			$	82,367			$	52,827			$	54,448
Total Properties (at end of period)			309				311				311				285				275
Total sites (at end of period)			112,074				112,779				112,956				106,337				102,178

Exhibit 99.2

Item 15. Exhibits and Financial Statement Schedules

INDEX TO FINANCIAL STATEMENTS

EQUITY LIFESTYLE PROPERTIES, INC.

		Page
Report of Independent Registered Public Accounting Firm		F-3
Consolidated Balance Sheets as of December 31, 2008 and 2007		F-4
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006		F-5 and F-6
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2008, 2007 and 2006		F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006		F-8 and F-9
Notes to Consolidated Financial Statements		F-10

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Equity Lifestyle Properties, Inc.

We have audited the accompanying consolidated balance sheets of Equity Lifestyle Properties, Inc. (“Equity Lifestyle Properties” or the “Company”), as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equity Lifestyle Properties at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Equity Lifestyle Properties’ internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2009 (not included herein), expressed an unqualified opinion thereon.

Chicago, Illinois
February 27, 2009,
except for the second paragraph  of Note 2(s) and the last table and paragraph of Note 5,
as to which the date is August 10, 2009

Equity LifeStyle Properties, Inc.
Consolidated Balance Sheets
As of December 31, 2008 and 2007
(amounts in thousands, except for share data)

		December 31,				December 31,
		2008				2007
Assets
Investment in real estate:
Land		$	541,979			$	541,000
Land improvements			1,725,752				1,700,888
Buildings and other depreciable property			223,290				154,227
			2,491,021				2,396,115
Accumulated depreciation			(561,233	)			(494,211	)
Net investment in real estate			1,929,788				1,901,904
Cash and cash equivalents			45,312				5,785
Notes receivable, net			31,799				10,954
Investment in joint ventures			9,676				4,569
Rents and other customer receivables, net			1,040				1,156
Deferred financing costs, net			12,408				12,142
Inventory, net			12,934				63,526
Deferred commission expense			3,644				—
Escrow deposits and other assets			45,046				33,659
Total Assets		$	2,091,647			$	2,033,695
Liabilities and Equity
Liabilities:
Mortgage notes payable		$	1,569,403			$	1,556,392
Unsecured lines of credit			93,000				103,000
Accrued payroll and other operating expenses			66,656				34,617
Deferred revenue — sale of right-to-use contracts			10,611				—
Accrued interest payable			8,335				9,164
Rents and other customer payments received in advance and security deposits			41,302				37,274
Distributions payable			6,106				4,531
Total Liabilities			1,795,413				1,744,978
Commitments and contingencies
Non-controlling interests — Perpetual Preferred OP Units			200,000				200,000
Equity:
Stockholders’ Equity:
Preferred stock, $.01 par value 10,000,000 shares authorized; none issued			—				—
Common stock, $.01 par value 100,000,000 shares authorized for 2008 and 2007; 25,051,322 and 24,348,517 shares issued and outstanding for 2008 and 2007, respectively			238				236
Paid-in capital			320,084				310,803
Distributions in excess of accumulated earnings			(241,609	)			(240,098	)
Total Stockholders’ Equity			78,713				70,941
Non-controlling interests — Common OP Units			17,521				17,776
Total Equity			96,234				88,717
Total Liabilities and Equity		$	2,091,647			$	2,033,695

The accompanying notes are an integral part of the financial statements.

Equity LifeStyle Properties, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2008, 2007 and 2006
(amounts in thousands, except per share data)

		2008				2007				2006
Property Operations:
Community base rental income		$	245,833			$	236,933			$	225,815
Resort base rental income			111,876				102,372				89,925
Right-to-use annual payments			19,667				—				—
Right-to-use contracts current period, gross			10,951				—				—
Right-to-use contracts, deferred, net of prior period amortization			(10,611	)			—				—
Utility and other income			41,633				36,849				30,643
Property operating revenues			419,349				376,154				346,383
Property operating and maintenance			152,363				127,342				116,179
Real estate taxes			29,457				27,429				26,246
Sales and marketing, gross			7,116				—				—
Sales and marketing, deferred commissions, net			(3,644	)			—				—
Property management			25,451				18,385				17,079
Property operating expenses (exclusive of depreciation shown separately below)			210,743				173,156				159,504
Income from property operations			208,606				202,998				186,879
Home Sales Operations:
Gross revenues from inventory home sales			21,845				33,333				61,247
Cost of inventory home sales			(24,069	)			(30,713	)			(54,498	)
Gross (loss) profit from inventory home sales			(2,224	)			2,620				6,749
Brokered resale revenues, net			1,094				1,528				2,129
Home selling expenses			(5,776	)			(7,555	)			(9,836	)
Ancillary services revenues, net			1,197				2,436				3,027
(Loss) income from home sales operations & other			(5,709	)			(971	)			2,069
Other Income (Expenses):
Interest income			3,095				1,732				1,975
Income from other investments, net			17,006				22,476				20,102
General and administrative			(20,617	)			(15,591	)			(12,760	)
Rent control initiatives			(1,555	)			(2,657	)			(1,157	)
Interest and related amortization			(99,430	)			(103,070	)			(103,161	)
Depreciation on corporate assets			(390	)			(437	)			(410	)
Depreciation on real estate assets			(66,193	)			(63,554	)			(60,276	)
Total other expenses, net			(168,084	)			(161,101	)			(155,687	)
Equity in income of unconsolidated joint ventures			3,753				2,696				3,583
Consolidated income from continuing operations			38,566				43,622				36,844
Discontinued Operations:
Discontinued operations			257				289				520
Depreciation on discontinued operations			—				—				(84	)
(Loss) gain on sale of discontinued real estate			(79	)			12,036				(192	)
Income from discontinued operations			178				12,325				244
Consolidated net income			38,744				55,947				37,088
Income allocated to non-controlling interests:
Common OP Units			(4,297	)			(7,705	)			(4,318	)
Perpetual Preferred OP Units			(16,144	)			(16,140	)			(16,138	)
Net income available for Common Shares		$	18,303			$	32,102			$	16,632

The accompanying notes are an integral part of the financial statements.

Equity LifeStyle Properties, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2008, 2007 and 2006
(amounts in thousands, except per share data)

		2008				2007				2006
Earnings per Common Share — Basic:
Income from continuing operations		$	0.74			$	0.92			$	0.70
Income from discontinued operations		$	0.01			$	0.41			$	0.01
Net income available for Common Shares		$	0.75			$	1.33			$	0.71
Earnings per Common Share — Fully Diluted:
Income from continuing operations		$	0.74			$	0.90			$	0.68
Income from discontinued operations		$	0.01			$	0.41			$	0.01
Net income available for Common Shares		$	0.75			$	1.31			$	0.69
Distributions declared per Common Share outstanding		$	0.80			$	0.60			$	0.30
Tax status of Common Shares distributions deemed paid during the year:
Ordinary income		$	0.80			$	0.60			$	0.30
Long-term capital gain		$	—			$	—			$	—
Unrecaptured section 1250 gain		$	—			$	—			$	—
Weighted average Common Shares outstanding — basic			24,466				24,089				23,444
Weighted average Common Shares outstanding — fully diluted			30,498				30,414				30,241

The accompanying notes are an integral part of the financial statements.

Equity LifeStyle Properties, Inc.
Consolidated Statements of Changes In Stockholders’ Equity
For The Years Ended December 31, 2008, 2007 and 2006
(amounts in thousands)

										Distributions in
										Excess of				Non-controlling
										Accumulated				interests
		Common								Comprehensive				Common OP
		Stock				Paid-in Capital				Earnings				Units				Total Equity
Balance, December 31, 2005		$	226			$	299,444			$	(267,154	)		$	9,379			$	41,895
Conversion of OP Units to common stock							211								(211	)			—
Issuance of common stock through exercise of options			3				2,741												2,744
Issuance of common stock through employee stock purchase plan							1,074												1,074
Compensation expense related to stock options and restricted stock							3,122												3,122
Repurchase of common stock							(926	)											(926	)
Issuance costs							(15	)											(15	)
Adjustment for Common OP Unitholders in the Operating Partnership							(1,168	)							1,168				—
Net income											16,632				4,318				20,950
Distributions											(7,072	)			(1,860	)			(8,932	)
Balance, December 31, 2006		$	229			$	304,483			$	(257,594	)		$	12,794			$	59,912
Conversion of OP Units to common stock			4				655								(659	)			—
Issuance of common stock through exercise of options			3				2,577												2,580
Issuance of common stock through employee stock purchase plan							1,183												1,183
Compensation expense related to stock options and restricted stock							4,268												4,268
Repurchase of common stock							(883	)											(883	)
Adjustment for Common OP Unitholders in the Operating Partnership							(1,480	)							1,480				—
Net income											32,102				7,705				39,806
Distributions											(14,606	)			(3,544	)			(18,149	)
Balance, December 31, 2007		$	236			$	310,803			$	(240,098	)		$	17,776			$	88,717
Conversion of OP Units to common stock							1,463								(1,463	)			—
Issuance of common stock through exercise of options			2				3,205												3,207
Issuance of common stock through employee stock purchase plan							1,501												1,501
Compensation expense related to stock options and restricted stock							5,162												5,162
Repurchase of common stock							(600	)											(600	)
Adjustment for Common OP Unitholders in the Operating Partnership							(1,450	)							1,450				—
Net income											18,303				4,297				22,603
Distributions											(19,814	)			(4,539	)			(24,356	)
Balance, December 31, 2008		$	238			$	320,084			$	(241,609	)		$	17,521			$	96,234

The accompanying notes are an integral part of the financial statements.

Equity LifeStyle Properties, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2008, 2007 and 2006
(amounts in thousands)

		2008				2007				2006
Cash Flows From Operating Activities
Consolidated net income		$	38,744			$	55,947			$	37,088
Adjustments to reconcile net income to cash provided by operating activities:
Loss (Gain) on sale of properties and other			79				(12,036	)			192
Gain on sale of investment			—				—				(914	)
Depreciation expense			68,700				65,419				62,581
Amortization expense			2,956				2,894				2,795
Debt premium amortization			(632	)			(1,608	)			(1,477	)
Equity in income of unconsolidated joint ventures			(5,528	)			(4,123	)			(5,494	)
Distributions from unconsolidated joint ventures			3,717				5,052				3,449
Amortization of stock-related compensation			5,162				4,268				3,122
Revenue recognized from right-to-use contract sales			(340	)			—				—
Amortized commission expense related to right-to-use contract sales			112				—				—
Accrued long term incentive plan compensation			1,098				685				—
Increase (decrease) in provision for uncollectible rents receivable			353				269				(294	)
Increase in inventory reserve			63				250				—
Changes in assets and liabilities:
Rent and other customer receivables, net			(236	)			(152	)			(147	)
Inventory			(5,129	)			4,516				(8,059	)
Deferred commission expense			(3,756	)			—				—
Escrow deposits and other assets			(1,208	)			(1,244	)			229
Accrued payroll and other operating expenses			1,564				82				2,188
Deferred revenue — sales of right-to-use contracts			10,951				—				—
Rents received in advance and security deposits			(2,708	)			2,573				4,198
Net cash provided by operating activities			113,962				122,792				99,457
Cash Flows From Investing Activities
Acquisition of rental properties			(3,484	)			(24,774	)			(35,283	)
Acquisition of Privileged Access			1,267				—				—
Proceeds from disposition of rental properties			—				23,261				—
Proceeds from disposition of investment			—				—				9,000
Net tax-deferred exchange withdrawal (deposit)			2,124				(2,294	)			—
Joint Ventures:
Investments in			(5,545	)			(3,656	)			(2,734	)
Distributions from			524				152				1,647
Net (borrowings) repayments of notes receivable			(1,274	)			11,091				(7,511	)
Improvements:
Corporate			(198	)			(618	)			(252	)
Rental properties			(15,319	)			(15,970	)			(14,605	)
Site development costs			(11,199	)			(12,796	)			(17,348	)
Net cash used in investing activities			(33,104	)			(25,604	)			(67,086	)

The accompanying notes are an integral part of the financial statements.

Equity LifeStyle Properties, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2008, 2007 and 2006
(amounts in thousands)

		2008				2007				2006
Cash Flows From Financing Activities
Net proceeds from stock options and employee stock purchase plan			4,708				3,734				3,818
Distributions to Common Stockholders, Common OP Unitholders, and Perpetual Preferred OP Unitholders			(38,921	)			(32,014	)			(23,575	)
Stock repurchase and Unit redemption			(600	)			(883	)			(926	)
Lines of credit:
Proceeds			201,200				126,200				193,600
Repayments			(211,200	)			(154,400	)			(200,100	)
Principal repayments on disposition			—				(1,992	)			—
Principal payments and mortgage debt payoff			(224,442	)			(16,169	)			(16,751	)
New financing proceeds			231,047				—				14,247
Early debt retirement			—				(17,174	)			—
Debt issuance costs			(3,123	)			(310	)			(1,689	)
Net cash used in financing activities			(41,331	)			(93,008	)			(31,376	)
Net increase in cash and cash equivalents			39,527				4,180				995
Cash and cash equivalents, beginning of year			5,785				1,605				610
Cash and cash equivalents, end of year		$	45,312			$	5,785			$	1,605
Supplemental Information:
Cash paid during the period for interest		$	96,668			$	101,206			$	103,368
Non-cash investing and financing activities:
Real estate acquisition and disposition
Mortgage debt assumed and financed on acquisition of real estate			—				8,528				85,832
Mezzanine and joint venture investments applied to real estate acquisition			—				11,297				32,716
Other assets and liabilities, net, acquired on acquisition of real estate			36				932				2,295
Proceeds from loan to pay insurance premiums			—				4,344				3,638
Inventory reclassified to Buildings and other depreciable property			57,797				—				—
Acquisition of operations of Privileged Access
Assumption of assets and liabilities:
Inventory			2,139				—				—
Escrow deposits and other assets			12,344				—				—
Accrued payroll and other operating expenses			15,383				—				—
Rents and other customer payments received in advance and security deposits			19,799				—				—
Notes receivable			19,571				—				—
Investment in real estate			6,897				—				—
Debt assumed and financed on acquisition			7,037				—				—

The accompanying notes are an integral part of the financial statements.

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 1 — Organization of the Company and Basis of Presentation

     Equity LifeStyle Properties, Inc., a Maryland corporation, together with MHC Operating Limited Partnership (the “Operating Partnership”) and other consolidated subsidiaries (“Subsidiaries”), is referred to herein as the “Company,” “ELS,” “we,” “us,” and “our.” The Company is a fully integrated owner and operator of lifestyle-oriented properties (“Properties”). The Company leases individual developed areas (“sites”) with access to utilities for placement of factory built homes, cottages, cabins or recreational vehicles (“RVs”). At certain Properties, the Company provides access to its sites through right-to-use or membership contracts. We believe that we have qualified for taxation as a real estate investment trust (“REIT”) for U.S. federal income tax purposes since our taxable year ended December 31, 1993. We plan to continue to meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. We cannot, therefore, guarantee that we have qualified or will qualify in the future as a REIT. The determination that we are a REIT requires an analysis of various factual matters that may not be totally within our control and we cannot provide any assurance that the IRS will agree with our analysis. For example, to qualify as a REIT, at least 95% of our gross income must come from sources that are itemized in the REIT tax laws. We are also required to distribute to stockholders at least 90% of our REIT taxable income computed without regard to our deduction for dividends paid and our net capital gain. The fact that we hold our assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT qualification. Furthermore, Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for us to remain qualified as a REIT. We do not believe, however, that any pending or proposed tax law changes would jeopardize our REIT qualification.

     If we fail to qualify as a REIT, we would be subject to U.S. federal income tax at regular corporate rates. Also, unless the IRS granted us relief under certain statutory provisions, we would remain disqualified as a REIT for four years following the year we first failed to qualify. Even if the Company qualifies for taxation as a REIT, the Company is subject to certain foreign, state and local taxes on its income and property and U.S. federal income and excise taxes on its undistributed income.

     The operations of the Company are conducted primarily through the Operating Partnership. The Company contributed the proceeds from its initial public offering and subsequent offerings to the Operating Partnership for a general partnership interest. In 2004, the general partnership interest was contributed to MHC Trust, a private REIT subsidiary owned by the Company. The financial results of the Operating Partnership and the Subsidiaries are consolidated in the Company’s consolidated financial statements. In addition, since certain activities, if performed by the Company, may cause us to earn income which is not qualifying for the REIT gross income tests, the Company has formed taxable REIT subsidiaries, as defined in the Code, to engage in such activities.

     Several Properties acquired are wholly-owned by taxable REIT subsidiaries of the Company. In addition, Realty Systems, Inc. (“RSI”) is a wholly-owned taxable REIT subsidiary of the Company that is engaged in the business of purchasing, selling and leasing homes that are located in Properties owned and managed by the Company. RSI also provides brokerage services to customers at such Properties. Typically, customers move from a Property but do not relocate their homes. RSI may provide brokerage services, in competition with other local brokers, by seeking buyers for the homes. Subsidiaries of RSI also lease from the Operating Partnership certain real property within or adjacent to certain Properties consisting of golf courses, pro shops, stores and restaurants.

     On August 14, 2008, the Company acquired substantially all of the assets and certain liabilities of Privileged Access, LP (“Privileged Access”) for an unsecured note payable of $2.0 million (the “PA Transaction”). Prior to the purchase, Privileged Access was the tenant under a 12-year lease with the Company for 82 Properties that terminated upon the closing of our acquisition. The $2.0 million unsecured note payable matures on August 14, 2010 and accrues interest at 10 percent per annum. See Note 12 in the Notes to Consolidated Financial Statements contained in this Form 10-K.

     The limited partners of the Operating Partnership (the “Common OP Unitholders”) receive an allocation of net income that is based on their respective ownership percentage of the Operating Partnership that is shown on the Consolidated Financial Statements as Non-controlling Interests — Common OP Units. As of December 31, 2008, the Non-controlling Interests — Common OP Units represented 5,366,741 units of limited partnership interest (“OP Units”) which are convertible into an equivalent number of shares of the Company’s common stock. The issuance of additional shares of common stock or common OP Units changes the respective ownership of the Operating Partnership for both the Non-controlling Interests and the Company.

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements

Note 2 — Summary of Significant Accounting Policies

(a) Basis of Consolidation

     The Company consolidates its majority-owned subsidiaries in which it has the ability to control the operations of the subsidiaries and all variable interest entities with respect to which the Company is the primary beneficiary. The Company also consolidates entities in which it has a controlling direct or indirect voting interest. All inter-company transactions have been eliminated in consolidation. The Company’s acquisitions on or prior to December 31, 2008 were all accounted for as purchases in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”). For business combinations for which the acquisition date is on or after January 1, 2009, the purchase price of Properties will be in accordance with Statement of Financial Accounting Standard No. 141R, “Business Combinations,” (“SFAS No. 141R”).

     The Company has applied the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”) — an interpretation of ARB 51. The objective of FIN 46R is to provide guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, non-controlling interests, and results of operations of a VIE need to be included in a company’s consolidated financial statements. A company that holds variable interests in an entity will need to consolidate such entity if the company absorbs a majority of the entity’s expected losses or receives a majority of the entity’s expected residual returns if they occur, or both (i.e., the primary beneficiary). The Company has also applied Emerging Issues Task Force 04-5 — Accounting for investments in limited partnerships when the investor is the sole general partner and the limited partners have certain rights (“EITF 04-5”) which determines whether a general partner or the general partners as a group controls a limited partnership or similar entity and therefore should consolidate the entity. The Company will apply FIN 46R and EITF 04-5 to all types of entity ownership (general and limited partnerships and corporate interests).

     The Company applies the equity method of accounting to entities in which the Company does not have a controlling direct or indirect voting interest or is not considered the primary beneficiary, but can exercise influence over the entity with respect to its operations and major decisions. The cost method is applied when (i) the investment is minimal (typically less than 5%) and (ii) the Company’s investment is passive.

     As of December 31, 2007, the Bar Harbor joint venture was consolidated with the operations of the Company as the Company has determined that as of December 31, 2007 we were the primary beneficiary by applying the standards of FIN 46R.

(b) Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(c) Markets

     We manage all our operations on a property-by-property basis. Since each Property has similar economic and operational characteristics, the Company has one reportable segment, which is the operation of land lease Properties. The distribution of the Properties throughout the United States reflects our belief that geographic diversification helps insulate the portfolio from regional economic influences. We intend to target new acquisitions in or near markets where the Properties are located and will also consider acquisitions of Properties outside such markets.

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 2 — Summary of Significant Accounting Policies (continued)

(d) Inventory

     Inventory primarily consists of new and used Site Set homes and is stated at the lower of cost or market after consideration of the N.A.D.A. Manufactured Housing Appraisal Guide and the current market value of each home included in the home inventory. Inventory sales revenues and resale revenues are recognized when the home sale is closed. Inventory is recorded net of an inventory reserve as of December 31, 2008 and December 31, 2007 of $0.5 million and $0.8 million, respectively. The expense for the inventory reserve is included in the cost of home sales in our Consolidated Statements of Operations. Resale revenues are stated net of commissions paid to employees of $0.7 million and $0.8 million for the years ended December 31, 2008 and 2007, respectively. (See Note 7 in the Notes to Consolidated Financial Statements contained in this Form 10-K).

(e) Real Estate

     In accordance with SFAS No. 141, we allocate the purchase price of Properties we acquire to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be available in connection with the acquisition or financing of the respective Property and other market data. We also consider information obtained about each Property as a result of our due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

     Real estate is recorded at cost less accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. We use a 30-year estimated life for buildings acquired and structural and land improvements, a ten-to-fifteen-year estimated life for building upgrades and a three-to-seven-year estimated life for furniture, fixtures and equipment. Used rental homes are depreciated based on its model year with a minimum of 15 years and new rental homes are depreciated using a 20-year estimated life from its model year down to a salvage value of 40% of the original costs. Depreciation on rental homes is included in ancillary services, net. In connection with the PA Transaction, we acquired approximately $2.0 million in used resort cottages. The used resort cottages are depreciated using a 20-year estimate life and are included in corporate and other depreciation.

     The values of above-and below-market leases are amortized and recorded as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income over the remaining term of the associated lease. The value associated with in-place leases is amortized over the expected term, which includes an estimated probability of lease renewal. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve the asset and extend the useful life of the asset are capitalized over their estimated useful life.

     We periodically evaluate our long-lived assets, including our investments in real estate, for impairment indicators. Our judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal factors. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted.

     For Properties to be disposed of, an impairment loss is recognized when the fair value of the Property, less the estimated cost to sell, is less than the carrying amount of the Property measured at the time the Company has a commitment to sell the Property and/or is actively marketing the Property for sale. A Property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less costs to sell. Subsequent to the date that a Property is held for disposition, depreciation expense is not recorded. The Company accounts for its Properties held for disposition in accordance with Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). Accordingly, the results of operations for all assets sold or held for sale have been classified as discontinued operations in all periods presented.

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 2 — Summary of Significant Accounting Policies (continued)

(f) Identified Intangibles and Goodwill

     We record acquired intangible assets and acquired intangible liabilities at their estimated fair value separate and apart from goodwill. We amortize identified intangible assets and liabilities that are determined to have finite lives over the period the assets and liabilities are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.

     The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. An impairment loss for an asset group is allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets, unless the fair value of specific components of the reporting group are determinable without undue cost and effort.

     As of December 31, 2008 and 2007, the carrying amounts of identified intangible assets, a component of “Escrow deposits and other assets” on our consolidated balance sheets, were approximately $4.2 million and $0, respectively. Amortization of identified intangibles assets was approximately $129,000 and $0 as of December 31, 2008 and 2007, respectively.

(g) Cash and Cash Equivalents

     We consider all demand and money market accounts and certificates of deposit with a maturity date, when purchased, of three months or less to be cash equivalents. The cash and cash equivalents as of December 31, 2008 and December 31, 2007 include approximately $0.4 million and $0 of restricted cash, respectively.

(h) Notes Receivable

     Notes receivable generally are stated at their outstanding unpaid principal balances net of any deferred fees or costs on originated loans, or unamortized discounts or premiums net of a valuation allowance. Interest income is accrued on the unpaid principal balance. Discounts or premiums are amortized to income using the interest method. In certain cases we finance the sales of homes to our customers (referred to as “Chattel Loans”) which loans are secured by the homes. The valuation allowance for the Chattel Loans is calculated based on a comparison of the outstanding principal balance of each note compared to the N.A.D.A. value and the current market value of the underlying manufactured home collateral.

     Beginning August 14, 2008, as a result the PA Transaction, the Company also now provides financing for nonrefundable upfront payments on sales of right-to-use contracts (“Contracts Receivable”). Based upon historical collection rates and current economic trends, when a sale is financed a reserve is established for a portion of the Contracts Receivable balance estimated to be uncollectible. The allowance and the rate at which the Company provides for losses on its Contracts Receivable could be increased or decreased in the future based on the Company’s actual collection experience. (See Note 8 in the Notes to Consolidated Financial Statements contained in this Form 10-K).

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 2 — Summary of Significant Accounting Policies (continued)

(i) Investments in Joint Ventures

     Investments in joint ventures in which the Company does not have a controlling direct or indirect voting interest, but can exercise significant influence over the entity with respect to its operations and major decisions, are accounted for using the equity method of accounting whereby the cost of an investment is adjusted for the Company’s share of the equity in net income or loss from the date of acquisition and reduced by distributions received. The income or loss of each entity is allocated in accordance with the provisions of the applicable operating agreements. The allocation provisions in these agreements may differ from the ownership interests held by each investor. Differences between the carrying amount of the Company’s investment in the respective entities and the Company’s share of the underlying equity of such unconsolidated entities are amortized over the respective lives of the underlying assets, as applicable. (See Note 6 in the Notes to Consolidated Financial Statements contained in this Form 10-K)

(j) Income from Other Investments, net

     Income from other investments, net, primarily includes revenue relating to the Company’s former ground leases with Privileged Access of $15.8 million and $20.6 million for the years ended December 31, 2008 and 2007, respectively. The ground leases were terminated on August 14, 2008 due to the PA Transaction. The ground leases with Privileged Access were for approximately 24,300 sites at 82 of the Company’s Properties and were accounted for in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases. The income for the year ended December 31, 2008 includes an expense of $1.0 million of a lease restatement bonus paid to Privileged Access in January 2008. In 2007, income from other investments, net also includes a one-time gain of approximately $1.1 million earned in connection with a 2005 defeasance transaction.

(k) Insurance Claims

     The Properties are covered against fire, flood, property damage, earthquake, windstorm and business interruption by insurance policies containing various deductible requirements and coverage limits. Recoverable costs are classified in other assets as incurred. Insurance proceeds are applied against the asset when received. Recoverable costs relating to capital items are treated in accordance with the Company’s capitalization policy. The book value of the original capital item is written off once the value of the impaired asset has been determined. Insurance proceeds relating to the capital costs are recorded as income in the period they are received.

     Approximately 70 Florida Properties suffered damage from the four hurricanes that struck the state during 2004 and 2005. As of February 3, 2009, the Company estimates its total claim to exceed $21.0 million. The Company has made claims for full recovery of these amounts, subject to deductibles. Through December 31, 2008, the Company has made total expenditures of approximately $18.0 million and expects to incur additional expenditures to complete the work necessary to restore the Properties to their pre-hurricanes condition. The Company has reserved approximately $2.0 million related to these expenditures ($0.7 million in 2005 and $1.3 million in 2004 ). Approximately $6.9 million of these expenditures have been capitalized per the Company’s capitalization policy through December 31, 2008.

     The Company has received proceeds from insurance carriers of approximately $8.8 million through December 31, 2008. Approximately $0.6 million has been recognized as a gain on insurance recovery, which is net of approximately $0.3 million of contingent legal fees and included in income from other investments, net, as of December 31, 2008.

     On June 22, 2007, the Company filed a lawsuit related to some of the unpaid claims against certain insurance carriers and its insurance broker. See Note 17 in the Notes to Consolidated Financial Statements contained in this Form 10-K for further discussion of this lawsuit.

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 2 — Summary of Significant Accounting Policies (continued)

(l) Fair Value of Financial Instruments

     The Company’s financial instruments include short-term investments, notes receivable, accounts receivable, accounts payable, other accrued expenses, and mortgage notes payable. The fair values of all financial instruments, including notes receivable, were not materially different from their carrying values at December 31, 2008 and 2007.

(m) Deferred Financing Costs, net

     Deferred financing costs, net include fees and costs incurred to obtain long-term financing. The costs are being amortized over the terms of the respective loans on a level yield basis. Unamortized deferred financing fees are written-off when debt is retired before the maturity date. Upon amendment of the lines of credit, unamortized deferred financing fees are accounted for in accordance with, Emerging Issues Task Force No. 98-14, “Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements” (“EITF No. 98-14”). Accumulated amortization for such costs was $13.1 million and $10.3 million at December 31, 2008 and 2007, respectively.

(n) Revenue Recognition

     The Company accounts for leases with its customers as operating leases. Rental income is recognized over the term of the respective lease or the length of a customer’s stay, the majority of which are for a term of not greater than one year. We will reserve for receivables when we believe the ultimate collection is less than probable. Our provision for uncollectible rents receivable was approximately $1.5 million and $1.2 million as of December 31, 2008 and December 31, 2007, respectively.

     The sales of right-to-use contracts are recognized in accordance with Staff Accounting Bulletin 104, Revenue Recognition in Consolidated Financial Statements, Corrected (“SAB 104”). The Company will recognize the upfront non-refundable payments over the estimated customer life which, based on historical attrition rates, the Company has estimated to be between one to 31 years. The current period sales of upfront non-refundable payments are reported on the Income Statement in the line item titled “Right-to-use contracts current period, gross.” The cumulative deferral of the upfront non-refundable payments are reported on the Balance Sheet in the line item titled “Deferred revenue — sale of right-to use contracts.” The deferral of current period sales, net of amortization of prior period sales, is reported on the Income Statement in the line item titled “Right-to-use contracts, deferred, net of prior period amortization.” The decision to recognize this revenue in accordance with SAB 104 was made after corresponding with the Office of the Chief Accountant at the SEC during September and October of 2008. The commissions paid on the sale of right-to-use contracts will be deferred and amortized over the same period as the related sales revenue. The current period commissions paid are reported on the Income Statement in the line item titled “Sales and marketing, gross.” The cumulative deferrals of commissions paid are reported on the Balance Sheet in the line item titled “Deferred commissions expense.” The deferral of current period commissions, net of amortization of prior period commissions is reported on the Income Statement in the line item titled “Sales and marketing, deferred commissions, net.”

     Annual payments paid by customers under the terms of the right-to-use contracts are deferred and recognized ratably over the one-year period in which the services are provided.

     Income from home sales is recognized when the earnings process is complete. The earnings process is complete when the home has been delivered, the purchaser has accepted the home and title has transferred.

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 2 — Summary of Significant Accounting Policies (continued)

(o) Non-controlling Interests

     Net income is allocated to Common OP Unitholders based on their respective ownership percentage of the Operating Partnership. Such ownership percentage is calculated by dividing the number of Common OP Units held by the Common OP Unitholders (5,366,741 and 5,836,043 at December 31, 2008 and 2007, respectively) by the total OP Units held by the Common OP Unitholders and the Company. Issuance of additional shares of common stock or Common OP Units changes the percentage ownership of both the Non-controlling Interests and the Company.

     Due in part to the exchange rights (which provide for the conversion of common OP Units into shares of common stock on a one-for-one basis), such transactions and the proceeds there from are treated as capital transactions and result in an allocation between stockholders’ equity and Non-controlling Interests to account for the change in the respective percentage ownership of the underlying equity of the Operating Partnership.

(p) Income Taxes

Due to the structure of the Company as a REIT, the results of operations contain no provision for U.S. federal income taxes for the REIT. However, the Company may be subject to certain foreign, state and local income, excise or franchise taxes. The Company paid federal, foreign, state and local taxes of approximately $378,000 and $369,000 during the years ended December 31, 2008 and 2007, respectively, which includes taxes payable from activities managed through taxable REIT subsidiaries. As of December 31, 2008, net investment in real estate and notes receivable had a U.S. federal tax basis of approximately $1.5 billion and $32.3 million, respectively.

The Company adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”) an interpretation of FASB Statement No. 109 “Accounting for Income Taxes,” on January 1, 2007. The adoption of FIN 48 resulted in no impact to the Company’s consolidated financial statements. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and Canada. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2005.

(q) Derivative Instruments and Hedging Activities

     The Company recognizes all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The Company currently does not have any derivative instruments.

(r) Stock Compensation

     The Company adopted the fair-value-based method of accounting for share-based payments pursuant to Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS No.148”) and Statement of Financial Accounting Standards No. 123(R), “Share Based Payment” (“SFAS 123(R)”). The Company uses the Black-Scholes-Merton formula to estimate the value of stock options granted to employees (see Note 13 in the Notes to Consolidated Financial Statements contained in this Form 10-K).

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 2 — Summary of Significant Accounting Policies (continued)

(s) Recent Accounting Pronouncements

     In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). The Statement identifies the sources of accounting principles and framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with United States generally accepted accounting principles (“GAAP”). The purpose is to remove the focus of setting the GAAP hierarchy from the auditor and giving the entity the responsibility of setting the GAAP hierarchy. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company does not believe SFAS No. 162 will have an impact on the consolidated financial statements.

     In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS No. 160”), an amendment of Accounting Research Bulletin No. 51. SFAS No. 160 seeks to improve uniformity and transparency in reporting of the net income attributable to non-controlling interests in the consolidated financial statements of the reporting entity. The statement requires, among other provisions, the disclosure, clear labeling and presentation of non-controlling interests in the Consolidated Balance Sheet and Consolidated Income Statement. SFAS No. 160 is effective January 1, 2009 with early adoption prohibited. SFAS No. 160 will effect the presentation of minority interest within the consolidated financial statements. All current and prior year amounts have been reclassified to reflect our adoption of SFAS No. 160.

     In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141R, “Business Combinations,” (“SFAS No. 141R”). SFAS No. 141R replaces FASB Statement No. 141 but retains the fundamental requirements set forth in SFAS No. 141 that the acquisition method of accounting (also known as the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R replaces, with limited exceptions as specified in the statement, the cost allocation process in SFAS No. 141 with a fair value based allocation process. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early application is not permitted. The Company believes that the impact SFAS No. 141R will have on our consolidated financial statements will depend on the size and nature of any business combination that is entered into after the implementation date.

     In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 is optional and the Company has elected not to adopt SFAS No. 159 for any of its financial assets and financial liabilities.

(t) Reclassifications

     Certain 2006 and 2007 amounts have been reclassified to conform to the 2008 presentation. This reclassification had no material effect on the consolidated balance sheets or statement of operations of the Company.

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 3 — Earnings Per Common Share

     Earnings per common share are based on the weighted average number of common shares outstanding during each year. Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS No. 128”) defines the calculation of basic and fully diluted earnings per share. Basic and fully diluted earnings per share are based on the weighted average shares outstanding during each year and basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. The conversion of OP Units has been excluded from the basic earnings per share calculation. The conversion of an OP Unit to a share of common stock has no material effect on earnings per common share.

     The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2008, 2007 and 2006 (amounts in thousands):

		Years Ended December 31,
		2008				2007				2006
Numerators:
Income from Continuing Operations:
Income from continuing operations — basic		$	18,157			$	22,160			$	16,439
Amounts allocated to dilutive securities			4,265				5,322				4,267
Income from continuing operations — fully diluted		$	22,422			$	27,482			$	20,706
Income from Discontinued Operations:
Income from discontinued operations — basic		$	146			$	9,942			$	193
Amounts allocated to dilutive securities			32				2,383				51
Income from discontinued operations — fully diluted		$	178			$	12,325			$	244
Net Income Available for Common Shares:
Net income available for Common Shares — basic		$	18,303			$	32,102			$	16,632
Amounts allocated to dilutive securities			4,297				7,705				4,318
Net income available for Common Shares — fully diluted		$	22,600			$	39,807			$	20,950
Denominator:
Weighted average Common Shares outstanding — basic			24,466				24,089				23,444
Effect of dilutive securities:
Redemption of Common OP Units for Common Shares Shares			5,674				5,870				6,165
Employee stock options and restricted shares			358				455				632
Weighted average Common Shares outstanding — fully diluted			30,498				30,414				30,241

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 4 — Common Stock and Other Equity Related Transactions

     On May 18, 2007 the stockholders approved the increase of authorized common stock from 50,000,000 to 100,000,000.

     The following table presents the changes in the Company’s outstanding common stock for the years ended December 31, 2008, 2007 and 2006 (excluding OP Units of 5,366,741, 5,836,043 and 6,090,068 outstanding at December 31, 2008, 2007, and 2006, respectively):

		2008				2007				2006
Shares outstanding at January 1,			24,348,517				23,928,652				23,479,753
Common stock issued through conversion of OP Units			469,302				254,025				117,403
Common stock issued through exercise of options			169,367				143,841				155,031
Common stock issued through stock grants			50,000				18,000				170,500
Common stock issued through ESPP and DRIP			32,184				22,820				23,605
Common stock repurchased and retired			(18,048	)			(18,821	)			(17,640	)
Shares outstanding at December 31,			25,051,322				24,348,517				23,928,652

     As of December 31, 2008 and 2007, the Company’s percentage ownership of the Operating Partnership was approximately 82.4% and 80.6%, respectively. The remaining approximately 17.6% and 19.4%, respectively, was owned by the Common OP Unitholders.

     The following regular quarterly distributions have been declared and paid to common stockholders and Non-controlling Interests since January 1, 2006:

Distribution Amount		For the Quarter		Stockholder
Per Share		Ending		Record Date		Payment Date
$0.0750		March 31, 2006		March 31, 2006		April 14, 2006
$0.0750		June 30, 2006		June 30, 2006		July 14, 2006
$0.0750		September 30, 2006		September 29, 2006		October 13, 2006
$0.0750		December 31, 2006		December 29, 2006		January 12, 2007
$0.1500		March 31, 2007		March 30, 2007		April 13, 2007
$0.1500		June 30, 2007		June 29, 2007		July 13, 2007
$0.1500		September 30, 2007		September 28, 2007		October 12, 2007
$0.1500		December 31, 2007		December 28, 2007		January 11, 2008
$0.2000		March 31, 2008		March 28, 2008		April 11, 2008
$0.2000		June 30, 2008		June 27, 2008		July 11, 2008
$0.2000		September 30, 2008		September 26, 2008		October 10, 2008
$0.2000		December 31, 2008		December 26, 2008		January 9, 2009

     The Company adopted the 1997 Non-Qualified Employee Stock Purchase Plan (“ESPP”) in July 1997. Pursuant to the ESPP as amended on May 3, 2006, certain employees and directors of the Company may each annually acquire up to $250,000 of common stock of the Company. The aggregate number of shares of common stock available under the ESPP shall not exceed 1,000,000, subject to adjustment by the Company’s Board of Directors. The common stock may be purchased monthly at a price equal to 85% of the lesser of: (a) the closing price for a share of common stock on the last day of the offering period; and (b) the closing price for a share of common stock on the first day of the offering period. Shares of common stock issued through the ESPP for the years ended December 31, 2008 and 2007 were 31,770 and 21,677, respectively.

Equity LifeStyle Properties, Inc.
Notes To Consolidated Financial Statements

Note 5 — Investment in Real Estate

     Investment in Real Estate is comprised of (amounts in thousands):

Properties Held for Long Term

		December 31, 2008				December 31, 2007
Investment in real estate:
Land		$	539,702			$	538,723
Land improvements			1,715,627				1,690,784
Buildings and other depreciable property			222,699				153,671
			2,478,028				2,383,178
Accumulated depreciation			(557,130	)			(490,108	)
Net investment in real estate		$	1,920,898			$	1,893,070

Properties Held for Sale

		December 31, 2008				December 31, 2007
Investment in real estate:
Land		$	2,277			$	2,277
Land improvements			10,125				10,104
Buildings and other depreciable property			591				556
			12,993				12,937
Accumulated depreciation			(4,103	)			(4,103	)
Net investment in real estate		$	8,890			$	8,834

     Land improvements consist primarily of improvements such as grading, landscaping and infrastructure items such as streets, sidewalks or water mains. Buildings and other depreciable property consist of permanent buildings in the Properties such as clubhouses, laundry facilities, maintenance storage facilities, rental units and furniture, fixtures and equipment. See Note 7 in the Notes to the Consolidated Financial Statements contained in this Form 10-K for disclosure regarding the reclassification of manufactured home inventory to Buildings and other depreciable property during the year ended December 31, 2008.

     All acquisitions have been accounted for utilizing the purchase method of accounting and, accordingly, the results of operations of acquired assets are included in the statements of operations from the dates of acquisition. Certain purchase price adjustments may be made within one year following the acquisitions. We acquired all of these Properties from unaffiliated third parties. During the years ended December 31, 2008, 2007 and 2006, the Company acquired the following Properties (dollars in millions):

     1) During the year ended December 31, 2008, we acquired the following Properties:

Closing Date		Property		Location		Total Sites				Real Estate				Debt				Net Equity
January 14, 2008		Grandy Creek		Concrete, WA			179			$	1.8				—			$	1.8
January 23, 2008		Lake George Schroon Valley		Warrensburg, NY			151				2.1				—				2.1