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
Date of Report (Date of earliest event reported): November 9, 2017
EQUITY LIFESTYLE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 1-11718 | 36-3857664 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File No.) |
(IRS Employer 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):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition |
Equity LifeStyle Properties, Inc. (referred to herein as “we,” “us,” and “our”) hereby reaffirms previously issued guidance for our Net income per Common Share (fully diluted), for the year ending December 31, 2017 and 2018, to be between $2.13 and $2.19 and $2.43 and $2.53, respectively.
We also reaffirm previously issued guidance for our Funds from Operations (“FFO”) per Common Share (fully diluted), for the year ending December 31, 2017 and 2018, to be between $3.52 and $3.58 and $3.79 and $3.89, respectively.
We also reaffirm previously issued guidance for our Normalized Funds from Operations (“Normalized FFO”) per Common Share (fully diluted) for the year ending December 31, 2017 and 2018, to be between $3.56 and $3.62 and $3.79 and $3.89, respectively.
The projected 2017 and 2018 per Common Share amounts represent a range of possible outcomes and the mid-point of each range reflects management’s best estimate of the most likely outcome. Actual figures could vary materially from these amounts if any of our assumptions are incorrect.
| Item 7.01 | Regulation FD Disclosure |
At REITWorld 2017: NAREIT’s Annual Convention for All Things REIT to be held from November 14, 2017 through November 16, 2017, our officers will participate in one-on-one sessions with analysts and investors and will refer to a slide presentation. A copy of this presentation is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The presentation will be posted on our website, www.equitylifestyleproperties.com, on November 9, 2017. Included in this presentation is a discussion of our business and certain financial information regarding 2017 and 2018 guidance.
| Item 8.01 | Other Events |
As previously reported, our Florida mainland properties resumed normal operations shortly after Hurricane Irma made landfall on September 10, 2017. Fiesta Key RV Resort, one of our RV resorts in the Florida Keys, has reopened on a limited basis. We expect Sunshine Key RV Resort to reopen as utility services are restored. At this time, our restoration efforts continue. Our current estimate of costs, which includes capital expenditures and expenses, related to restoration of the Florida properties is approximately $25.0 to $30.0 million. We expect our restoration efforts to be substantially complete in early 2018.
We continue to believe that we have adequate insurance, subject to deductibles, including business interruption coverage. We are engaged in discussions with our insurance carriers’ adjusters and have submitted an initial request for partial reimbursement related to our claim. At this time, we continue to believe that Hurricane Irma will not significantly impact our results of operations or our financial condition on a consolidated basis.
In accordance with General Instruction B.2. of Form 8-K, the information included in items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall such information be deemed incorporated by reference in any registration statement filed by Equity Lifestyle Properties, Inc. under the Securities Act of 1933, as amended. We disclaim any intention or obligation to update or revise this information.
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 and may include without limitation, information regarding our expectations, goals or intentions regarding the future, and the expected effect of our acquisitions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:
| • | our ability to control costs, real estate market conditions, the actual rate of decline in customers, the actual use of Sites by customers and our success in acquiring new customers at our Properties (including those that we may acquire); |
| • | our ability to maintain historical or increase future rental rates and occupancy with respect to Properties currently owned or that we may acquire; |
| • | our ability to retain and attract customers renewing, upgrading and entering right-to-use contracts; |
| • | our assumptions and guidance concerning 2017 and 2018 estimated net income, FFO and Normalized FFO; |
| • | our assumptions about rental and home sales markets; |
| • | our ability to manage counter-party risk; |
| • | in the age-qualified Properties, home sales results could be impacted by the ability of potential home buyers to sell their existing residences as well as by financial, credit and capital markets volatility; |
| • | results from home sales and occupancy will continue to be impacted by local economic conditions, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing; |
| • | impact of government intervention to stabilize site-built single family housing and not manufactured housing; |
| • | effective integration of recent acquisitions and our estimates regarding the future performance of recent acquisitions; |
| • | the completion of future transactions in their entirety, if any, and timing and effective integration with respect thereto; |
| • | unanticipated costs or unforeseen liabilities associated with recent acquisitions; |
| • | ability to obtain financing or refinance existing debt on favorable terms or at all; |
| • | the effect of interest rates; |
| • | the dilutive effects of issuing additional securities; |
| • | the effect of accounting for the entry of contracts with customers representing a right-to-use the Properties under the Codification Topic “Revenue Recognition”; |
| • | the outcome of pending or future lawsuits or actions brought against us, including those disclosed in our filings with the Securities and Exchange Commission; and |
| • | other risks indicated from time to time in our filings with the Securities and Exchange Commission. |
For further information on these and other factors that could impact us and the statements contained herein, refer to our filings with the Securities and Exchange Commission, including “Risk Factors” in our most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q.
These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.
Equity LifeStyle Properties, Inc. is a fully integrated owner and operator of lifestyle-oriented properties and owns or has an interest in 404 quality properties in 32 states and British Columbia consisting of 149,448 sites. We are a self-administered, self-managed, real estate investment trust with headquarters in Chicago.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
| Exhibit 99.1 | Investor Presentation |
SIGNATURE
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.
| EQUITY LIFESTYLE PROPERTIES, INC. | ||
| By: | /s/ Paul Seavey | |
| Paul Seavey | ||
| Executive Vice President, | ||
| Chief Financial Officer and Treasurer | ||
Date: November 9, 2017
Exhibit 99.1
Equity LifeStyle Properties
Our Story • One of the nation’s largest real estate networks with 404 properties containing 149,448 sites in 32 states and British Columbia • Unique business model uOwn the land uLow maintenance costs/customer turnover costs uLease developed sites • High-quality real estate locations uMore than 90 properties with lake, river or ocean frontage uMore than 100 properties within 10 miles of coastal United States uProperty locations are strongly correlated with population migration uProperty locations in retirement and vacation destinations • Stable, predictable financial performance and fundamentals uBalance sheet flexibility • In business for more than 40 years 1
Property Locations 4 3 2 WA ME ND MN 4 MT 3 OR VT WI NY WY 4 MI NH ID 4 CA SD 2 2 3 MA NV 3 RI 7 NE IA 5 PA 6 6 6 IN OH UT CO IL 6 NJ 9 2 2 16 WV DE 4 7 KS AZ MO KY VA 11 NM NC 4 TN 6 26 OK AR 6 SC MS TX AL GA LA FL 9 6 18 12 39 16 9 14 10 12 2
Steady,Predictable Revenue Streams Property Operating Revenue Buckets(2) Property/Site Composition(1) Transient 5.7% • 205 manufactured/resort home communities Seasonal 4.1% u73,000 sites Right Annual to Use • 188 RV resorts 6.8% u74,000 sites uAnnuals 27,300 Annual RV uSeasonal 11,600 15.3% uTransient 11,000 uMembership sites 24,100 Annual MH 68.1% Note: (1) Property and site counts exclude Marina JV investment properties. (2) Property operating revenue buckets reflect estimated 2017 property operating revenues, derivable from our guidance included in Exhibit 99.1 to the Form 8-K filed with the SEC on October 17, 2017 All Annual Revenue = 90.1% (“ELS Reports Third Quarter Results”). 3
Our Lifestyle Options • Customers own the units they place on our sites uManufactured homes uResort cottages (park models) uRecreational vehicles • We offer a lifestyle and a variety of product options to meet our customers’ needs • We seek to create long-term relationships with our customers RV Site Manufactured Home RV Resort Cottage 4
Favorable Customer Demographics • The population of people age 55 and older is expected to grow 24% from 2017 to 2032 • Roughly 10,000 Baby Boomers will turn 65 every day through 2030 U.S. Population Over Age 55 (in millions) 120 100 80 New Residents 60 MH uAverage age: 59 years RV u Average age: 55 years 40 20 0 2017 2022 2027 2032 55-59 60-64 65-69 70-74 75+ Note: Sources: US Census 2014, Acxiom 2014, Pew Research Center 2010. 5
Track Record 10-Year Total Return Performance 400 350 300 250 200 IPO Year—1993 2017 150 Item 100 50 Properties 41 404 0 -50 Sites 12,312 149,448 -100 States 16 32 10/31/07 10/31/08 10/31/09 10/31/10 10/31/11 10/31/12 10/31/13 10/31/14 10/31/15 10/31/16 10/31/17 Net Income Per Share (1) $0.35 $2.16 ELS (+349%) S&P 500 (+106%) SNL US REIT Equity (+86%) FFO Per Share (1) $0.47 $3.55 Normalized FFO Per Share (1) $0.47 $3.59 Total Return Performance Since IPO Common Stock Price (2) $6.44 $88.48 4,500 (3) 4,000 Enterprise Value $296 million $10.5 billion 3,500 3,000 Dividend Paid Cumulative (4) – $22.43 2,500 Cumulative Total Return (5) – 3,853% 2,000 1,500 S&P 500 Total Return (5) – 850% 1,000 500 0 -500 Note: 2/25/93 2/25/95 2/25/97 2/25/99 2/25/01 2/25/03 2/25/05 2/25/07 2/25/09 2/25/11 2/25/13 2/25/15 2/25/17 (1) The 2017 amounts are the midpoint of an estimate range. See our guidance included in Exhibit 99.1 to the Form 8-K filed with the SEC on October 17, 2017. See pages 11 and 12 for the reconciliation and definition of FFO and ELS (+3,853%) S&P 500 (+850%) SNL US REIT Equity (+1,116%) Normalized FFO. The 1993 amount was determined from amounts presented in the 1996 Form 10-K. (2) The 1993 stock price is adjusted for stock splits; the 2017 price is the closing price as of October 31, 2017. (3) The 2017 enterprise value is as of October 31, 2017. See page 9. (4) Source: SNL Financial. Includes dividends paid from IPO date of February 25,1993 through Notes: October 31, 2017 and adjusted for stock splits. Source: SNL Financial (5) Source: SNL Financial from IPO through October 31, 2017 (calculation assumes common dividend reinvestment). (1) Total return calculation assumes dividend reinvestment. (2) SNL US REIT Equity; Includes all publicly traded (NYSE, NYSE Amex, NASDAQ, OTC BB, Pink Sheets) Equity REITs in SNL’s coverage universe. (3) Stock price date from IPO as of October 31, 2017. 6
Consistent Same Store NOI Growth and Outperformance ELS has maintained positive same store NOI growth in all quarters since at least Q3 1998. Note: (1) Source for Same Store NOI data: Citi Investment Research, August 2017. Earliest quarter collected by Citi is third quarter of 1998. “REIT Industry” includes an index of REITs across a variety of asset classes, including regional malls, shopping centers, multifamily, student housing, manufactured homes, self storage, office, industrial, mixed office and specialty. 3.2 3.9 3.0 3Q 98 1Q 99 3Q 99 1Q 00 3Q 00 1Q 01 3Q 01 1Q 02 3Q 02 1Q 03 3Q 03 1Q 04 3Q 04 1Q 05 3Q 05 1Q 06 3Q 06 1Q 07 3Q 07 1Q 08 3Q 08 1Q 09 3Q 09 1Q 10 3Q 10 1Q 11 3Q 11 1Q 12 3Q 12 1Q 13 3Q 13 1Q 14 3Q 14 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 2Q 17 7
Dividend Dividend Per Share $2.50 • 2018—$2.20/share(1) $1.00 g $2.20(1) $2.00 u13% increase u8% FFO growth $1.50 • Dividend growth $1.00 u5 year CAGR (2) uELS 17% $0.50 (3) uREIT Average 7% $0.00 (4) 2013 2014 2015 2016 2017 2018 • Tax treatment of dividend ELS REIT average u89% Ordinary Income u68% Ordinary Income u11% Return of Capital u11% Capital Gains u21% Return of Capital Note: (1) On October 31, 2017, our Board approved setting the annual dividend rate for 2018 at $2.20 per common share. (2) Compound average growth rate through 2018. (3) Source: SNL Financial; Includes all publicly traded U.S. Equity REITs in SNL’s coverage universe that declared regular dividends during the period January 1, 2011 through December 31, 2016. (4) Tax treatment of dividend in 2016. 8
Capital Structure As of October 31, 2017 (in millions) Loan Maturity as of October 31, 2017 $400,000 • Total enterprise value is $10.5 billion $350,000 • Debt to enterprise value is 21.0% Thousands) $300,000 • $400 million available line of credit(in $250,000 Debt $200,000 OPU’s $516.3, 4.9% Term Loan $200.1, 1.9% $150,000 Outstanding $100,000 $50,000 (1) $0 Common 2018 2019 2020 2021 2022 2023 2025 2028 2031 2034 2036 2037 2038 2039 2040 2041 $7,791.3 Year Mortgage Debt 74.1% Secured Fully Amortizing Unsecured $19.1% 2,005.8 13 4.5% Average Years Weighted Average to Maturity Interest Rate Note: (1) Stock price as of October 31, 2017. 9
Performance Update
•
200 Manufactured Home Communities(1) • 187 RV Resorts (1) uCore(2) occupancy of 94% as of 10/31/2017 uCore resort base rental income growth for the month ended 10/31/2017 is 4.5%(3) uCore occupancy has grown 32
consecutive quarters through 09/30/2017 uCore rental income growth from annuals for the month ended 10/31/2017 is 5.4%(3) uCore community base rental income growth for the month
ended 10/31/2017 is 4.8%(3) 2018 Guidance – Non GAAP Financial Measures(4) • Normalized FFO of $361.3 million • Core NOI growth of 4.4% u7.9% growth uCore MH rent growth of 4.0% u $3.79—$3.89 per fully diluted share uCore RV
rent growth of 4.9% Note: (1) Excludes joint venture properties. (2) Core Portfolio is defined as properties acquired prior to December 31, 2015. The Core Portfolio may change from time-to-time depending on acquisitions, dispositions and significant transactions or unique situations. (3) Compared to the month ended October 31, 2016. (4) See pages 11 and 12 for the
reconciliation and definition of FFO and Normalized FFO. The 2018 Normalized FFO and Core NOI growth are the mid-points of the respective estimated
2018 Normalized FFO and Core NOI growth disclosed in our guidance furnished with the SEC as Exhibit 99.1 to the Form
8-K filed on October 17, 2017. 10
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: “Risk The forward-looking Factors” in our statements 2016 Annual contained Report on in Form this presentation 10-K and our are Quarterly subject to Report certain on economic Form 10-Q risks for and the quarter uncertainties ended described March 31, under 2017. the See heading Form statements 8-K filed October that become 17, 2017 untrue for the because full text of of subsequent our forward-looking events. All statements. projections We are assume based on no 2017 obligation budgets, to update reforecasts or supplement and pro forma forward-looking expectations on recent investments. Non-GAAP Financial Measures Net Income to FFO and Normalized FFO Reconciliation (in millions) 2012 2013 2014 2015 2016 2017 (1) Net income available for common stockholders $54.8 $106.9 $118.7 $130.1 $164.0 $189.3 Income allocated to common OP units 5.1 9.7 10.5 11.1 13.9 12.6 Right-to-use contract revenue and commissions deferred, net 3.5 3.3 2.9 2.7 2.9 4.1 Depreciation on real estate assets and other 100.0 102.7 101.2 104.0 108.0 112.2 Depreciation on rental homes 6.1 6.5 10.9 10.7 10.7 10.5 Depreciation on discontinued operations – 1.5 – – – –Amortization of in-place leases 45.1 1.9 4.0 2.4 3.4 2.4 Gain on real estate (4.6) (41.5) (1.5) – – – FFO available for common stock and OP unit holders 210.0 191.0 246.7 261.0 302.9 331.1 Change in fair value of contingent consideration asset (0.5) 1.4 (0.1) – – –Transaction costs 0.2 2.0 1.6 1.1 1.2 0.3 Loss from early extinguishment of debt 0.5 37.9 5.1 16.9 – 2.7 Litigation settlement, net – – – – 2.4 –Preferred stock original issuance costs – – – – – 0.8 Normalized FFO available for common stock and OP unit holders $210.2 $232.3 $253.3 $279.0 $306.5 $334.9 Note: (1) The 2017 amounts are the midpoint of an estimate range. See our guidance included in Exhibit 99.1 to the Form 8-K filed with the SEC on October 17, 2017. 11
Non-GAAP Financial Measures This the paragraphs document contains below. We certain believe non-GAAP investors measures should review used these by management non-GAAP that measures, we believe along are with helpful GAAP in understanding net income and our cash business, flow from as further operating discussed activities, in and investing operating activities measures and financing and other activities, terms when may differ evaluating from an the equity definitions REIT’s and operating methodologies performance. used Our by other definitions REITs and and, calculations accordingly, of these may not non-GAAP be comparable. financial These cash available non-GAAP to pay financial distributions and operating and should measures not be do considered not represent as an cash alternative generated to net from income, operating determined activities in in accordance accordance with with GAAP, GAAP, as nor an do indication they represent of our available financial performance, to fund our cash or to needs, cash flow including from our operating ability to activities, make cash determined distributions. in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds FUNDS from sales FROM of properties, OPERATIONS plus real (FFO) estate . We related define depreciation FFO as net and income, amortization, computed impairments, in accordance if any, with and GAAP, after adjustments excluding gains for unconsolidated and actual or estimated partnerships losses and joint with ventures. our interpretation Adjustments of standards for unconsolidated established partnerships by the National and Association joint ventures of are Real calculated Estate Investment to reflect FFO Trusts on (“NAREIT”), the same basis. which We may compute not be comparable FFO in accordance to FFO reported we do. We by receive other REITs up-front that non-refundable do not define the payments term in accordance from the entry with of the right-to-use current NAREIT contracts. definition In accordance or that interpret with GAAP, the current the upfront NAREIT non-refundable definition differently payments than of and non-refundable related commissions right-to-use are deferred payments, and we amortized believe that over it the is appropriate estimated customer to adjust for life. the Although impact the of the NAREIT deferral definition activity of in FFO our calculation does not address of FFO. the treatment NORMALIZED expense items: a) FUNDS the financial FROM impact OPERATIONS of contingent (NORMALIZED consideration; FFO) b) .gains We define and losses Normalized from early FFO debt as FFO extinguishment, excluding the following including non-operating prepayment penalties income and and defeasance Normalized FFO costs; presented c) property herein acquisition is not necessarily and other transaction comparable costs to Normalized related to FFO mergers presented and acquisitions; by other real and estate d) other companies miscellaneous due to non-comparable the fact that not all items. real estate companies use the same methodology for computing this amount. the We effect believe of that depreciation, FFO and Normalized amortization, FFO impairments, are helpful to if any, investors and actual as supplemental or estimated measures gains or losses of the performance from sales of of real an estate, equity all REIT. of which We believe are based that by on excluding historical among costs and other which equity may REITs. be of We limited further relevance believe in that evaluating Normalized current FFO performance, provides useful FFO information can facilitate to comparisons investors, analysts of operating and our performance management between because periods it allows and having them to to compare account our for differences operating performance not related to to our the operations. operating performance For example, of we other believe real that estate excluding companies the early and extinguishment between periods of debt, on a consistent property acquisition basis without and other operating transaction performance costs in related future to periods mergers because and acquisitions these costs from do Normalized not affect the FFO future allows operations investors, of analysts the properties. and our In management some cases, to we assess provide the information sustainability about of identified non-cash components of FFO and Normalized FFO because it allows investors, analysts and our management to assess the impact of those items. 12
Equity LifeStyle Properties Two North Riverside Plaza, Chicago, Illinois 60606 800.247.5279 | EquityLifeStyleProperties.com 11/17