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ELS Reports Third Quarter Results

Continued Strong Performance;
Updated Guidance Due To Hurricane Ian

CHICAGO, October 17, 2022--(BUSINESS WIRE)--Equity LifeStyle Properties, Inc. (NYSE: ELS) (referred to herein as "we," "us," and "our") today announced results for the quarter and nine months ended September 30, 2022. All per share results are reported on a fully diluted basis unless otherwise noted.

Financial Results for the Quarter and Nine Months Ended September 30, 2022

For the quarter ended September 30, 2022, total revenues increased $33.7 million, or 9.7%, to $381.0 million, compared to $347.2 million for the same period in 2021. For the quarter ended September 30, 2022, net income available for Common Stockholders decreased $3.4 million, to $67.2 million, or $0.36 per Common Share, compared to $70.6 million, or $0.38 per Common Share, for the same period in 2021.

For the nine months ended September 30, 2022, total revenues increased $125.4 million, or 12.8%, to $1,106.5 million, compared to $981.1 million for the same period in 2021. For the nine months ended September 30, 2022, net income available for Common Stockholders increased $14.7 million, or $0.06 per Common Share, to $211.6 million, or $1.14 per Common Share, compared to $196.9 million, or $1.08 per Common Share, for the same period in 2021.

Non-GAAP Financial Measures and Portfolio Performance

For the quarter ended September 30, 2022, Funds from Operations ("FFO") available for Common Stock and OP Unit holders increased $9.9 million, or $0.04 per Common Share, to $134.4 million, or $0.69 per Common Share, compared to $124.5 million, or $0.65 per Common Share, for the same period in 2021. For the nine months ended September 30, 2022, Funds from Operations available for Common Stock and OP Unit holders increased $34.3 million, or $0.15 per Common Share, to $396.9 million, or $2.03 per Common Share, compared to $362.6 million, or $1.88 per Common Share, for the same period in 2021.

For the quarter ended September 30, 2022, Normalized Funds from Operations ("Normalized FFO") available for Common Stock and OP Unit holders increased $12.3 million, or $0.05 per Common Share, to $136.8 million, or $0.70 per Common Share, compared to $124.5 million, or $0.65 per Common Share, for the same period in 2021. For the nine months ended September 30, 2022, Normalized Funds from Operations available for Common Stock and OP Unit holders increased $38.1 million, or $0.17 per Common Share, to $403.5 million, or $2.07 per Common Share, compared to $365.4 million, or $1.90 per Common Share, for the same period in 2021.

For the quarter ended September 30, 2022, property operating revenues, excluding deferrals, increased $24.1 million to $332.8 million, compared to $308.7 million for the same period in 2021. For the nine months ended September 30, 2022, property operating revenues, excluding deferrals, increased $81.9 million to $971.0 million, compared to $889.1 million for the same period in 2021. For the quarter ended September 30, 2022, income from property operations, excluding deferrals and property management, increased $11.1 million to $183.9 million, compared to $172.8 million for the same period in 2021. For the nine months ended September 30, 2022, income from property operations, excluding deferrals and property management, increased $41.6 million to $551.2 million, compared to $509.6 million for the same period in 2021.

For the quarter ended September 30, 2022, Core property operating revenues, excluding deferrals, increased approximately 5.3% and Core income from property operations, excluding deferrals and property management, increased approximately 3.5%, compared to the same period in 2021. For the nine months ended September 30, 2022, Core property operating revenues, excluding deferrals, increased approximately 6.5% and Core income from property operations, excluding deferrals and property management, increased approximately 5.3%, compared to the same period in 2021.

Business Updates

Pages 1 and 2 of this Earnings Release and Supplemental Financial Information provide an update on operations, Hurricane Ian and 2022 guidance.

Investment Activity

In July 2022, we continued our partnership with RVC Outdoor Destinations and acquired an 80% equity interest in a joint venture for a total value of $1.1 million. The joint venture owns one property under development located in Gulf Shores, Alabama.

During the third quarter, we completed the acquisition of two parcels of land adjacent to two of our MH properties for an aggregate purchase price of $7.3 million.

About Equity LifeStyle Properties

We are a self-administered, self-managed real estate investment trust ("REIT") with headquarters in Chicago. As of October 17, 2022, we own or have an interest in 445 quality properties in 35 states and British Columbia consisting of 170,245 sites.

For additional information, please contact our Investor Relations Department at (800) 247-5279 or at investor_relations@equitylifestyle.com.

Conference Call

A live webcast of our conference call discussing these results will take place tomorrow, Tuesday, October 18, 2022, at 10:00 a.m. Central Time. Please visit the Investor Relations section at www.equitylifestyleproperties.com for the link. A replay of the webcast will be available for two weeks at this site.

Forward-Looking Statements

In addition to historical information, this press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as "anticipate," "expect," "believe," "project," "intend," "may be" and "will be" and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements and may include without limitation, information regarding our expectations, goals or intentions regarding the future, and the expected effect of our acquisitions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:

  • our ability to control costs and real estate market conditions, our ability to retain 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 attract and retain customers entering, renewing and upgrading membership subscriptions;

  • our assumptions about rental and home sales markets;

  • our assumptions and guidance concerning Net Income, FFO and Normalized FFO per share data;

  • our ability to manage counterparty risk;

  • our ability to renew our insurance policies at existing rates and on consistent terms;

  • home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility;

  • results from home sales and occupancy will continue to be impacted by local economic conditions, including an adequate supply of homes at reasonable costs, 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;

  • the effect of Hurricane Ian on our business including, but not limited to the following: (i) the timing and cost of recovery, (ii) the impact of the condition of properties and homes on occupancy demand and related rent revenue and (iii) the timing and amount of insurance proceeds;

  • our ability to obtain financing or refinance existing debt on favorable terms or at all;

  • the effect of inflation and interest rates;

  • the effect from any breach of our, or any of our vendors' data management systems;

  • the dilutive effects of issuing additional securities;

  • the outcome of pending or future lawsuits or actions brought by or 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.

Our guidance acknowledges the existence of volatile economic conditions, which may impact our current guidance assumptions. Factors impacting 2022 guidance include, but are not limited to the following: (i) the mix of site usage within the portfolio; (ii) yield management on our short-term resort and marina sites; (iii) scheduled or implemented rate increases on community, resort and marina sites; (iv) scheduled or implemented rate increases in annual payments under membership subscriptions; (v) occupancy changes; (vi) our ability to attract and retain membership customers; (vii) change in customer demand regarding travel and outdoor vacation destinations; (viii) our ability to manage expenses in an inflationary environment; (ix) our ability to integrate and operate recent acquisitions in accordance with our estimates; (x) our ability to execute expansion/development opportunities in the face of supply chain delays/shortages; (xi) completion of pending transactions in their entirety and on assumed schedule; (xii) our ability to attract and retain property employees, particularly seasonal employees; (xiii) ongoing legal matters and related fees; and (xiv) costs to restore property operations and potential revenue losses following storms or other unplanned events. In addition, these forward-looking statements, including our 2022 guidance are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration of the pandemic, the extent of the adverse health impact on the general population and on our residents, customers and employees in particular, its impact on the employment rate and the economy, the extent and impact of governmental responses and the impact of operational changes we have implemented and may implement in response to the pandemic.

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 the "Risk Factors" section 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.

Supplemental Financial Information

Operations Update

Normalized FFO per Common Share

  • Third Quarter ("Q3") 2022: $0.70 or 8.5% growth compared to the same period in 2021.

  • September Year to Date ("YTD") 2022: $2.07 or 9.0% growth compared to the same period in 2021.

Core Income from property operations, excluding deferrals and property management

  • Q3 2022: 3.5% growth compared to the same period in 2021.

  • September YTD 2022: 5.3% growth compared to the same period in 2021.

REVENUES

MH - 60% of Total Property Operating Revenues

  • Q3 2022 Core MH base rental income: 5.9% growth compared to the same period in 2021, which reflects 5.5% growth from rate increases and 0.4% from occupancy gains.

  • September YTD 2022 Core MH base rental income: 5.7% growth compared to the same period in 2021, which reflects 5.3% growth from rate increases and 0.4% from occupancy gains.

  • September YTD 2022 Core MH occupancy increased by 119 sites since December 31, 2021.

  • September YTD 2022 Core Manufactured homeowners increased by 633 since December 31, 2021.

  • Q3 2022 New home sales: 331 sales with an average sales price of $106,000.

  • By October month-end, we anticipate sending 2023 rent increase notices to approximately 51% of our MH residents. These rent increases will be effective by February 1, 2023 and have an average growth rate in the range of 6.2% to 6.6%.

RV and Marina - 32% of Total Property Operating Revenues

  • Q3 2022 Core RV and marina base rental income: 4.1% growth compared to the same period in 2021.

  • September YTD 2022 Core RV and marina base rental income: 10.3% growth compared to the same period in 2021.

  • Q3 2022 Core RV annual base rental income: 8.7% growth compared to the same period in 2021, which reflects 6.6% growth from rate increases and 2.1% from occupancy gains.

  • Q3 2022 combined Core Seasonal and Transient RV base rental income: exceeded our previously provided guidance with a decline of 2.0% from the same period in 2021 as a result of better than expected Seasonal rental income.

  • September YTD 2022 combined Core Seasonal and Transient RV base rental income: increased 13.0% or $12.5 million over the same period in 2021.

  • Core RV Site Composition

September 30, 2022

September 30, 2021

Annual

32,200

31,600

Seasonal

12,100

10,700

Transient

12,200

13,800

Member

25,400

24,800

  • Third quarter total nights camped increased 1.8% and 7.4% compared to the quarters ended September 30, 2021 and September 30, 2019, respectively.

  • We have set RV annual rates for the 2023 season for 95% of our annual sites. These rate increases will take effect between November 1, 2022 and April 1, 2023 and have an average growth rate in the range of 7.6% to 8.0%.

EXPENSES

Utility Expense - 27% of Total Property Operating Expenses

  • The increase in Utility expense was driven by average electric rate increases of 14% in Q3 2022 and 11% for September YTD 2022 compared to the same periods in 2021. The RV properties, which generate lower expense recovery due to the Transient component of the business, experienced the highest rate increases in the quarter with increases in the Northeast and South ranging from 16% to 29%.

Hurricane Ian Update and 2022 Guidance (1)

Hurricane Ian Update

Hurricane Ian made landfall on the west coast of Florida on September 28, 2022. Approximately 60% of our Florida portfolio was in the path of the storm as it moved across the state. During the storm, we prioritized the safety of our residents, guests and employees. For the majority of our properties the impact was limited to flooding, wind, wind-blown debris and falling trees and branches. These properties have resumed operations.

The most significant damage to our properties occurred in or near the Fort Myers area. Six of our properties in or near this market continue to experience utility disruptions and are temporarily closed. The properties include four RV parks and two marinas with a total of 2,100 sites/slips. During the storm, the four RV properties experienced strong winds as well as significant flooding, including from unprecedented storm surges that resulted in damage to certain common area buildings, utility infrastructure and residents’ homes. The two marinas suffered wind related building damage and the process of restoring the buildings has begun. We currently expect these properties will resume operations during the fourth quarter, although certain locations may operate at a limited capacity.

Over the last 20 days, we have worked towards quickly returning our properties to full operating condition with efforts focused on debris cleanup and removal and initiating the process to restore impacted buildings and infrastructure. Based on our prior experience with recovery following major storms, developing restoration plans and estimating costs to execute on those plans takes time, often several weeks. We did not record any expenses related to property damage and restoration work during the third quarter of 2022 given the short period of time between the storm’s passage and the end of the reporting period.

We have reviewed our assets impacted by the storm for potential impairment and determined that the estimated future cash flows are greater than the net book value of the assets. As such, it is appropriate not to impair any assets based on our recoverability tests. As part of our review and based on information currently available, we have determined that storm-related damage to certain assets supported a $3.7 million reduction to the carrying value of those assets, which is included in Loss on sale of real estate and impairment, net in the Consolidated Statements of Income on page 6. We believe the costs to restore these damaged assets will be included in our insurance claim.

2022 Guidance

Our updated per share guidance for 2022 Net Income, FFO and Normalized FFO is presented below. We have withdrawn our previously provided full year Core guidance for revenue, expense and NOI for the following reasons:

  • The recency of the Hurricane Ian storm event;

  • The status of our ongoing assessment of the storm’s impact on our properties; and

  • The uncertainty with respect to property operating revenues and expenses for the affected properties as we resume full operations following the storm.

The updated guidance does not include an assumption that we will receive insurance reimbursement for losses resulting from business interruption in 2022. In accordance with GAAP, insurance reimbursement for business interruption losses is to be recognized as revenue upon receipt. At this time, we do not have an estimate of the total potential clean up and restoration costs. We believe we have adequate insurance coverage, subject to deductibles, including business interruption, though we are unable to predict the timing or amount of insurance recovery.

($ in millions except per share)

Full Year

Net Income/share

$1.46 to $1.52

FFO/share

$2.60 to $2.66

Normalized FFO/share

$2.64 to $2.70

______________________

(1) Full year 2022 guidance ranges represent a range of possible outcomes and the midpoint reflects management's estimate of the most likely outcome. Actual growth rates and per share amounts could vary materially from growth rates and per share amounts presented above if any of our assumptions, including occupancy and rate changes, our ability to manage expenses in an inflationary environment, our ability to integrate and operate recent acquisitions and costs to restore property operations and potential revenue losses following storms or other unplanned events, is incorrect. See Forward-Looking Statements in this release for additional factors impacting our 2022 guidance assumptions.

Investor Information

Equity Research Coverage(1)

Bank of America Securities

Barclays

BMO Capital Markets

Jeffrey Spector/Joshua Dennerlein

Anthony Powell

John Kim

Citi Research

Colliers Securities

Evercore ISI

Nick Joseph

David Toti

Steve Sakwa/Samir Khanal

Green Street Advisors

RBC Capital Markets

Robert W. Baird & Company

John Pawlowski

Brad Heffern

Wes Golladay

Truist

UBS

Wolfe Research

Anthony Hau

Michael Goldsmith

Andrew Rosivach/Keegan Carl

______________________

  1. Any opinions, estimates or forecasts regarding our performance made by these analysts or agencies do not represent our opinions, forecasts or predictions. We do not, by reference to these firms, imply our endorsement of or concurrence with such information, conclusions or recommendations.

Financial Highlights

(In millions, except Common Shares and OP Units outstanding and per share data, unaudited)

As of and for the Quarter Ended

Sep 30, 2022

Jun 30, 2022

Mar 31, 2022

Dec 31, 2021

Sept 30, 2021

Operating Information

Total revenues

$

381.0

$

365.3

$

360.2

$

335.3

$

347.2

Net income

$

70.5

$

64.6

$

87.1

$

68.8

$

74.1

Net income available for Common Stockholders

$

67.2

$

61.5

$

82.9

$

65.5

$

70.6

Adjusted EBITDAre (1)

$

166.4

$

153.3

$

168.4

$

150.7

$

150.8

FFO available for Common Stock and OP Unit holders (1)(2)

$

134.4

$

121.6

$

140.9

$

123.0

$

124.5

Normalized FFO available for Common Stock and OP Unit holders (1)(2)

$

136.8

$

125.3

$

141.4

$

123.6

$

124.5

Funds Available for Distribution ("FAD") for Common Stock and OP Unit holders (1)(2)

$

115.4

$

103.6

$

125.1

$

102.3

$

106.1

Common Shares and OP Units Outstanding (In thousands) and Per Share Data

Common Shares and OP Units, end of the period

195,380

195,373

195,303

194,946

192,852

Weighted average Common Shares and OP Units outstanding - Fully Diluted

195,269

195,227

195,246

193,412

192,736

Net income per Common Share - Fully Diluted (3)

$

0.36

$

0.33

$

0.45

$

0.36

$

0.38

FFO per Common Share and OP Unit - Fully Diluted

$

0.69

$

0.62

$

0.72

$

0.64

$

0.65

Normalized FFO per Common Share and OP Unit - Fully Diluted

$

0.70

$

0.64

$

0.72

$

0.64

$

0.65

Dividends per Common Share

$

0.4100

$

0.4100

$

0.4100

$

0.3625

$

0.3625

Balance Sheet

Total assets

$

5,405

$

5,400

$

5,265

$

5,308

$

4,982

Total liabilities

$

3,886

$

3,878

$

3,734

$

3,822

$

3,673

Market Capitalization

Total debt (4)

$

3,329

$

3,298

$

3,193

$

3,303

$

3,154

Total market capitalization (5)

$

15,607

$

17,066

$

18,130

$

20,392

$

18,216

Ratios

Total debt / total market capitalization

21.3

%

19.3

%

17.6

%

16.2

%

17.3

%

Total debt / Adjusted EBITDAre (6)

5.2

5.3

5.2

5.6

5.5

Interest coverage (7)

5.7

5.7

5.7

5.5

5.5

Fixed charges(8)

5.6

5.6

5.6

5.5

5.4

________________

  1. See Non-GAAP Financial Measures Definitions and Reconciliations at the end of the supplemental financial information for definitions of Adjusted EBITDAre, FFO, Normalized FFO and FAD and a reconciliation of Consolidated net income to Adjusted EBITDAre.

  2. See page 9 for a reconciliation of Net income available for Common Stockholders to Non-GAAP financial measures FFO available for Common Stock and OP Unit holders, Normalized FFO available for Common Stock and OP Unit holders and FAD for Common Stock and OP Unit holders.

  3. Net income per Common Share - Fully Diluted is calculated before Income allocated to non-controlling interest - Common OP Units.

  4. Excludes deferred financing costs of approximately $29.0 million as of September 30, 2022.

  5. See page 17 for the calculation of market capitalization as of September 30, 2022.

  6. Calculated using trailing twelve months Adjusted EBITDAre.

  7. Calculated by dividing trailing twelve months Adjusted EBITDAre by the interest expense incurred during the same period.

  8. See Non-GAAP Financial Measures Definitions and Reconciliations at the end of the supplemental financial information for a definition of fixed charges. This ratio is calculated by dividing trailing twelve months Adjusted EBITDAre by the sum of fixed charges and preferred stock dividends, if any, during the same period.

Consolidated Balance Sheets

(In thousands, except share and per share data)

September 30, 2022

December 31, 2021

(unaudited)

Assets

Investment in real estate:

Land

$

2,080,234

$

2,019,787

Land improvements

4,083,036

3,912,062

Buildings and other depreciable property

1,139,755

1,057,215

7,303,025

6,989,064

Accumulated depreciation

(2,246,214

)

(2,103,774

)

Net investment in real estate

5,056,811

4,885,290

Cash and restricted cash

30,510

123,398

Notes receivable, net

44,653

39,955

Investment in unconsolidated joint ventures

88,352

70,312

Deferred commission expense

50,029

47,349

Other assets, net

135,091

141,567

Total Assets

$

5,405,446

$

5,307,871

Liabilities and Equity

Liabilities:

Mortgage notes payable, net

$

2,708,751

$

2,627,783

Term loan, net

496,595

297,436

Unsecured line of credit

94,984

349,000

Accounts payable and other liabilities

184,771

172,285

Deferred membership revenue

195,290

176,439

Accrued interest payable

10,317

9,293

Rents and other customer payments received in advance and security deposits

115,035

118,696

Distributions payable

80,314

70,768

Total Liabilities

3,886,057

3,821,700

Equity:

Preferred stock, $0.01 par value, 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; none issued and outstanding.

Common stock, $0.01 par value, 600,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 186,108,851 and 185,640,379 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

1,916

1,913

Paid-in capital

1,625,751

1,593,362

Distributions in excess of accumulated earnings

(200,969

)

(183,689

)

Accumulated other comprehensive income

20,476

3,524

Total Stockholders’ Equity

1,447,174

1,415,110

Non-controlling interests – Common OP Units

72,215

71,061

Total Equity

1,519,389

1,486,171

Total Liabilities and Equity

$

5,405,446

$

5,307,871

Consolidated Statements of Income

(In thousands, unaudited)

Quarters Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Revenues:

Rental income.

$

289,016

$

269,573

$

849,411

$

774,293

Annual membership subscriptions

16,254

15,127

47,003

43,048

Membership upgrade sales current period, gross

11,085

10,122

27,771

29,343

Membership upgrade sales upfront payments, deferred, net

(7,777

)

(7,253

)

(18,228

)

(21,134

)

Other income

15,580

12,053

43,316

36,759

Gross revenues from home sales, brokered resales and ancillary services (1)

52,547

44,570

144,937

110,048

Interest income.

1,865

1,805

5,346

5,314

Income from other investments, net

2,399

1,238

6,920

3,396

Total revenues

380,969

347,235

1,106,476

981,067

Expenses:

Property operating and maintenance

123,181

109,164

341,480

300,700

Real estate taxes

17,734

18,408

56,373

54,154

Sales and marketing, gross

7,143

6,513

18,466

18,987

Membership sales commissions, deferred, net

(1,206

)

(1,468

)

(2,746

)

(4,405

)

Property management

19,003

17,015

55,973

48,955

Depreciation and amortization

52,547

44,414

152,737

138,127

Cost of home sales, brokered resales and ancillary services (1)

40,224

34,830

111,894

85,541

Home selling expenses and ancillary operating expenses (1)

7,080

6,558

21,146

17,588

General and administrative

11,086

10,401

35,078

31,141

Other expenses

1,627

797

6,636

2,295

Early debt retirement

1,156

2,784

Interest and related amortization

29,759

27,361

85,276

80,767

Total expenses

308,178

273,993

883,469

776,634

Loss on sale of real estate and impairment, net (2)

(3,747

)