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ELS Reports Third Quarter Results

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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, 2014. All per share results are reported on a fully diluted basis unless otherwise noted.

Financial Results for the Quarter Ended September 30, 2014

Normalized Funds from Operations (“Normalized FFO”) increased $3.7 million, or $0.04 per common share, to $63.1 million, or $0.69 per common share, compared to $59.4 million, or $0.65 per common share, for the same period in 2013. Funds from Operations (“FFO”) increased $37.0 million, or $0.41 per common share, to $57.4 million, or $0.63 per common share, compared to $20.4 million, or $0.22 per common share, for the same period in 2013. Net income available for common stockholders decreased $4.2 million, or $0.05 per common share, to $25.7 million, or $0.31 per common share, compared to $29.9 million, or $0.36 per common share, for the same period in 2013.

Portfolio Performance

For the quarter ended September 30, 2014, property operating revenues, excluding deferrals, increased $10.0 million to $188.9 million compared to $178.9 million for the same period in 2013. For the nine months ended September 30, 2014, property operating revenues, excluding deferrals, increased $29.5 million to $553.8 million compared to $524.3 million for the same period in 2013. For the quarter ended September 30, 2014, income from property operations, excluding deferrals, increased $5.9 million to $105.7 million compared to $99.8 million for the same period in 2013. For the nine months ended September 30, 2014, income from property operations, excluding deferrals, increased $19.0 million to $317.4 million compared to $298.4 million for the same period in 2013.

For the quarter ended September 30, 2014, Core property operating revenues increased approximately 4.0 percent and income from Core property operations increased approximately 5.0 percent compared to the same period in 2013. For the nine months ended September 30, 2014, Core property operating revenues increased approximately 3.6 percent and income from Core property operations increased approximately 4.4 percent compared to the same period in 2013.

Balance Sheet

During the third quarter, we paid off five mortgages totaling $29.7 million with a weighted average interest rate of 5.45 percent per annum. We also refinanced the $53.8 million loan secured by our Colony Cove community with a stated interest rate of 4.65 percent per annum that was scheduled to mature in 2017. The new loan, with gross proceeds of $115.0 million, has a 25 year term and carries a stated interest rate of 4.64 percent per annum.

Interest coverage was approximately 3.3 times in the quarter. Expanded disclosure on our balance sheet and debt statistics are included in the tables below.

Acquisitions

In September 2014, we closed on the acquisition of three Northeast RV resorts comprised of 826 sites for a purchase price of $11.8 million. Two of the properties are located in the coastal vacation destination area of New Jersey and one property is in New Hampshire. The acquisition properties are within close proximity to numerous existing ELS assets and increased our presence in the Northeast markets to approximately 25,000 sites. In addition, in October 2014, we closed on the acquisition of a 270 site RV resort for a purchase price of $6.1 million. The property is located adjacent to an ELS MH community on the east coast of Florida.

General Information

As of October 20, 2014, we own or have an interest in 383 quality properties in 32 states and British Columbia consisting of 141,413 sites. We are a self-administered, self-managed real estate investment trust (“REIT”) with headquarters in Chicago.

A live webcast of our conference call discussing these results will be available via our website in the Investor Information section at www.equitylifestyle.com at 10:00 a.m. Central Time on October 21, 2014.

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

  • our ability to control costs, real estate market conditions, the actual rate of decline in customers, the actual use of sites by customers and our success in acquiring new customers at our properties (including those that we may acquire);
  • our ability to maintain historical or increase future rental rates and occupancy with respect to properties currently owned or that we may acquire;
  • our ability to retain and attract customers renewing, upgrading and entering right-to-use contracts;
  • our assumptions about rental and home sales markets;
  • our assumptions and guidance concerning 2014 and 2015 estimated net income, FFO and Normalized FFO;
  • our ability to manage counterparty risk;
  • in the age-qualified properties, home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility;
  • results from home sales and occupancy will continue to be impacted by local economic conditions, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing;
  • impact of government intervention to stabilize site-built single family housing and not manufactured housing;
  • effective integration of recent acquisitions and our estimates regarding the future performance of recent acquisitions;
  • the completion of future transactions in their entirety, if any, and timing and effective integration with respect thereto;
  • unanticipated costs or unforeseen liabilities associated with recent acquisitions;
  • ability to obtain financing or refinance existing debt on favorable terms or at all;
  • the effect of interest rates;
  • the dilutive effects of issuing additional securities;
  • the effect of accounting for the entry of contracts with customers representing a right-to-use the Properties under the Codification Topic “Revenue Recognition;
  • the outcome of the case currently pending in the California Superior Court for Santa Clara County, Case No. 109CV140751, involving our California Hawaiian manufactured home property including any post-trial proceedings in the trial court or on appeal; and
  • other risks indicated from time to time in our filings with the Securities and Exchange Commission.

These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.

Tables follow:

Third Quarter 2014 – Selected Financial Data

(In millions, except per share data, unaudited)

Quarter Ended
September 30, 2014
Income from property operations – 2014 Core (1) $ 103.7
Income from property operations – Acquisitions (2) 2.0
Property management and general and administrative (excluding transaction costs) (18.1 )
Other income and expenses 5.7
Financing costs and other (30.2 )
Normalized FFO (3) 63.1
Transaction costs (0.6 )
Early debt retirement (5.1 )
FFO (3) $ 57.4
Normalized FFO per share – fully diluted $ 0.69
FFO per share – fully diluted $ 0.63
Normalized FFO (3) $ 63.1
Non-revenue producing improvements to real estate (6.0 )
Funds available for distribution (FAD) (3) $ 57.1
FAD per share – fully diluted $ 0.62
Weighted average shares outstanding – fully diluted 91.5

______________________

1. See page 8 for details of the 2014 Core Income from Property Operations.
2. See page 9 for details of the Income from Property Operations for the properties acquired during 2013 and 2014 (the “Acquisitions”).
3. See page 6 for a reconciliation of Net income available for Common Shares to FFO, Normalized FFO and FAD. See definitions of FFO, Normalized FFO and FAD on page 22.
Consolidated Income Statement

(In thousands, unaudited)

Quarters Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Revenues:
Community base rental income $ 106,967 $ 103,157 $ 319,514 $ 305,401
Rental home income 3,684 3,584 11,187 10,576
Resort base rental income 44,351 39,932 126,188 113,868
Right-to-use annual payments 11,404 12,323 33,859 35,889
Right-to-use contracts current period, gross 3,944 3,707 9,956 9,899
Right-to-use contracts, deferred, net of prior period amortization (1,989 ) (1,856 ) (4,303 ) (4,446 )
Utility and other income 18,581 16,224 53,070 48,694
Gross revenues from home sales 8,717 5,415 20,455 12,328
Brokered resale revenue and ancillary services revenues, net 1,124 1,395 3,491 4,122
Interest income 1,902 2,200 6,477 6,173
Income from other investments, net (1) 1,869 1,885 6,098 5,989
Total revenues 200,554 187,966 585,992 548,493
Expenses:
Property operating and maintenance 66,105 61,782 186,018 175,183
Rental home operating and maintenance 1,829 1,950 5,376 5,307
Real estate taxes 12,263 11,584 36,905 35,873
Sales and marketing, gross 3,018 3,842 8,118 9,536
Sales and marketing, deferred commissions, net (757 ) (706 ) (2,022 ) (1,824 )
Property management 11,086 10,077 32,169 30,380
Depreciation on real estate assets and rental homes 27,831 26,460 83,234 81,793
Amortization of in-place leases 1,075 485 3,791 803
Cost of home sales 8,156 5,137 19,679 11,837
Home selling expenses 513 563 1,710 1,544
General and administrative (2) 7,623 7,606 20,178 21,261
Property rights initiatives 751 521 2,063 2,377
Early debt retirement 5,087 36,530 5,087 37,911
Interest and related amortization 27,864 29,206 84,177 89,706
Total expenses 172,444 195,037 486,483 501,687
Income (loss) from continuing operations before equity in income of unconsolidated joint ventures and gain on sale of property 28,110 (7,071 ) 99,509 46,806
Equity in income of unconsolidated joint ventures 1,237 439 3,768 1,624
Gain on sale of property (3) 929 929
Consolidated income (loss) from continuing operations 30,276 (6,632 ) 104,206 48,430
Discontinued Operations:(3)
Net income from discontinued operations 982 7,215
Gain on sale of property, net of tax 40,586 41,544
Income from discontinued operations 41,568 48,759
Consolidated net income 30,276 34,936 104,206 97,189
Income allocated to non-controlling interest-Common OP Units (2,219 ) (2,753 ) (7,929 ) (7,483 )
Series C Redeemable Perpetual Preferred Stock Dividends (2,311 ) (2,311 ) (6,949 ) (6,951 )
Net income available for Common Shares $ 25,746 $ 29,872 $ 89,328 $ 82,755

_________________________________________

1. For the quarter ended September 30, 2013, includes a $1.0 million reduction resulting from the change in the fair value of a contingent asset. For both the nine months ended September 30, 2014 and 2013, includes a $0.1 million increase resulting from the change in the fair value of a contingent asset.
2. Includes transaction costs, see Reconciliation of Net Income to FFO, Normalized FFO and FAD on page 6.
3. Effective January 1, 2014, we adopted on a prospective basis the new Accounting Standard Update 2014-08, Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity which changed the definition of discontinued operations. Under the new guidance the gain on sale of property recognized during the third quarter did not meet the criteria of discontinued operations and it is presented as part of our continuous operations.
Reconciliation of Net Income to FFO, Normalized FFO and FAD

(In thousands, except per share data, unaudited)

Quarters Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Net income available for Common Shares $ 25,746 $ 29,872 $ 89,328 $ 82,755
Income allocated to common OP Units 2,219 2,753 7,929 7,483
Right-to-use contract upfront payments, deferred, net (1) 1,989 1,856 4,303 4,446
Right-to-use contract commissions, deferred, net (2) (757 ) (706 ) (2,022 ) (1,824 )
Depreciation on real estate assets 25,058 24,807 74,947 76,946
Depreciation on real estate assets, discontinued operations 1,536
Depreciation on rental homes 2,773 1,653 8,287 4,847
Amortization of in-place leases 1,075 485 3,791 803
Depreciation on unconsolidated joint ventures 228 229 690 732
Gain on sale of property, net of tax (929 ) (40,586 ) (929 ) (41,544 )
FFO (3) $ 57,402 $ 20,363 $ 186,324 $ 136,180
Change in fair value of contingent consideration asset (4) 988 (65 ) (124 )
Transaction costs (5) 620 1,540 1,151 1,740
Early debt retirement 5,087 36,530 5,087 37,911
Normalized FFO (3) 63,109 59,421 192,497 175,707
Non-revenue producing improvements to real estate (5,983 ) (5,726 ) (17,286 ) (16,966 )
FAD (3) $ 57,126 $ 53,695 $ 175,211 $ 158,741
Income (loss) from continuing operations available per Common Share – Basic $ 0.31 $ (0.10 ) $ 1.07 $ 0.46
Income (loss) from continuing operations available per Common Share – Fully Diluted $ 0.31 $ (0.10 ) $ 1.06 $ 0.46
Net income available per Common Share – Basic $ 0.31 $ 0.36 $ 1.07 $ 1.00
Net income available per Common Share – Fully Diluted $ 0.31 $ 0.36 $ 1.06 $ 0.99
FFO per Common Share – Basic $ 0.63 $ 0.22 $ 2.05 $ 1.50
FFO per Common Share – Fully Diluted $ 0.63 $ 0.22 $ 2.04 $ 1.49
Normalized FFO per Common Share – Basic $ 0.70 $ 0.66 $ 2.12 $ 1.94
Normalized FFO per Common Share – Fully Diluted $ 0.69 $ 0.65 $ 2.10 $ 1.93
FAD per Common Share – Basic $ 0.63 $ 0.59 $ 1.93 $ 1.75
FAD per Common Share – Fully Diluted $ 0.62 $ 0.59 $ 1.92 $ 1.74
Average Common Shares – Basic 83,531 83,021 83,295 83,023
Average Common Shares and OP Units – Basic 90,784 90,625 90,766 90,529
Average Common Shares and OP Units – Fully Diluted 91,528 91,259 91,471 91,149

______________________________

1. We are required by GAAP to defer, over the estimated customer life, recognition of non-refundable upfront payments from the entry of right-to-use contracts and upgrade sales. The customer life is currently estimated to range from one to 31 years and is based upon our experience operating the membership platform since 2008. The amount shown represents the deferral of a substantial portion of current period upgrade sales, offset by amortization of prior period sales.
2. We are required by GAAP to defer recognition of commissions paid related to the entry of right-to-use contracts. The deferred commissions will be amortized using the same method as used for the related non-refundable upfront payments from the entry of right-to-use contracts and upgrade sales. The amount shown represents the deferral of a substantial portion of current period commissions on those contracts, offset by the amortization of prior period commissions.
3. See definitions of FFO, Normalized FFO and FAD on page 22.
4. Included in Income from other investments, net on the Consolidated Income Statement on page 5.
5. Included in general and administrative on the Consolidated Income Statement on page 5.

Consolidated Income from Property Operations (1)

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

Quarters Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Community base rental income (2) $ 107.0 $ 103.2 $ 319.5 $ 305.4
Rental home income 3.7 3.6 11.2 10.6
Resort base rental income (3) 44.4 39.9 126.2 113.9
Right-to-use annual payments 11.4 12.3 33.9 35.9
Right-to-use contracts current period, gross 3.9 3.7 10.0 9.9
Utility and other income 18.5 16.2 53.0 48.6
Property operating revenues 188.9 178.9 553.8 524.3
Property operating, maintenance, and real estate taxes 78.4 73.3 222.9 211.1
Rental home operating and maintenance 1.8 2.0 5.4 5.3
Sales and marketing, gross 3.0 3.8 8.1 9.5
Property operating expenses 83.2 79.1 236.4 225.9
Income from property operations (1) $ 105.7 $ 99.8 $ 317.4 $ 298.4
Manufactured home site figures and occupancy averages:
Total sites 69,933 69,566 69,949 69,032
Occupied sites 64,405 63,782 64,363 63,225
Occupancy % 92.1 % 91.7 % 92.0 % 91.6 %
Monthly base rent per site $ 554 $ 539 $ 552 $ 537
Core total sites 68,595 68,633 68,611 68,636
Core occupied sites 63,266 63,020 63,223 62,971
Core occupancy % 92.2 % 91.8 % 92.1 % 91.7 %
Core monthly base rent per site $ 553 $ 539 $ 551 $ 537
Resort base rental income:
Annual $ 26.1 $ 23.9 $ 76.8 $ 70.3
Seasonal 3.3 3.1 19.3 18.0
Transient 15.0 12.9 30.1 25.6
Total resort base rental income $ 44.4 $ 39.9 $ 126.2 $ 113.9

_________________________

1. See page 5 for a complete Income Statement. The line items that we include in property operating revenues and property operating expenses are also individually included in our Consolidated Income Statement. Income from property operations excludes property management expenses and the GAAP deferral of right-to-use contract upfront payments and related commissions, net.
2. See the manufactured home site figures and occupancy averages below within this table.
3. See resort base rental income detail included below within this table.

2014 Core Income from Property Operations (1)

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

Quarters Ended Nine Months Ended
September 30, % September 30, %
2014 2013 Change (2) 2014 2013 Change (2)
Community base rental income (3) $ 105.0 $ 101.9 3.0 % $ 313.5 $ 304.1 3.1 %
Rental home income 3.7 3.6 2.5 % 11.1 10.6 5.4 %
Resort base rental income (4) 42.4 39.9 6.2 % 121.2 113.9 6.5 %
Right-to-use annual payments 11.4 12.3 (7.5 )% 33.9 35.9 (5.7 )%
Right-to-use contracts current period, gross 3.9 3.7 6.4 % 10.0 9.9 0.6 %
Utility and other income 18.2 16.1 13.0 % 52.2 48.6 7.3 %
Property operating revenues 184.6 177.5 4.0 % 541.9 523.0 3.6 %
Property operating, maintenance, and real estate taxes 76.1 73.1 4.2 % 217.7 210.7 3.4 %
Rental home operating and maintenance 1.8 1.9 (6.5 )% 5.4 5.3 1.0 %
Sales and marketing, gross 3.0 3.8 (21.4 )% 8.1 9.5 (14.9 )%
Property operating expenses 80.9 78.8 2.7 % 231.2 225.5 2.5 %
Income from property operations (1) $ 103.7 $ 98.7 5.0 % $ 310.7 $ 297.5 4.4 %
Occupied sites (5) 63,356 63,100
Core manufactured home site figures and occupancy averages:
Total sites 68,595 68,633 68,611 68,636
Occupied sites 63,266 63,020 63,223 62,971
Occupancy % 92.2 % 91.8 % 92.1 % 91.7 %
Monthly base rent per site $ 553 $ 539 $ 551 $ 537
Resort base rental income:
Annual $ 25.1 $ 23.9 5.4 % $ 74.1 $ 70.4 5.4 %
Seasonal 3.2 3.1 1.3 % 18.9 18.0 5.0 %
Transient 14.1 12.9 8.9 % 28.2 25.5 10.3 %
Total resort base rental income $ 42.4 $ 39.9 6.2 % $ 121.2 $ 113.9 6.5 %

____________________________

1. 2014 Core properties include properties we owned and operated during all of 2013 and 2014. Income from property operations excludes property management expenses and the GAAP deferral of right-to-use contract upfront payments and related commissions, net.
2. Calculations prepared using actual results without rounding.
3. See the Core manufactured home site figures and occupancy averages included below within this table.
4. See resort base rental income detail included below within this table.
5. Occupied sites as of the end of the period shown. Occupied sites have increased by 168 from 63,188 at December 31, 2013.

Acquisitions – Income from Property Operations (1)

(In millions, unaudited)

Nine Months
Quarter Ended Ended
September 30, September 30,
2014 2014
Community base rental income $ 2.0 $ 6.0
Resort base rental income 1.9 5.0
Utility income and other property income 0.4 0.9
Property operating revenues 4.3 11.9
Property operating expenses 2.3 5.2
Income from property operations $ 2.0 $ 6.7

______________________

1. Represents actual performance of five properties we acquired during 2013 and five properties we acquired during 2014. Excludes property management expenses.
Income from Rental Home Operations

(In millions, except occupied rentals, unaudited)

Quarters Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Manufactured homes:
New home $ 5.6 $ 5.6 $ 17.2 $ 16.6
Used home 7.8 7.7 23.6 22.9
Rental operations revenues (1) 13.4 13.3 40.8 39.5
Rental operations expense 1.8 2.0 5.4 5.3
Income from rental operations, before depreciation 11.6 11.3 35.4 34.2
Depreciation on rental homes 2.8 1.7 8.3 4.8
Income from rental operations, after depreciation $ 8.8 $ 9.6 $ 27.1 $ 29.4
Occupied rentals: (2)
New 2,087 2,032
Used 3,253 3,380
Total occupied rental sites 5,340 5,412
As of
September 30, 2014 September 30, 2013
Net of Net of

Cost basis in rental homes: (3)

Gross Depreciation Gross Depreciation
New $ 110.7 $ 94.2 $ 112.6 $ 100.4
Used 64.2 50.5 63.7 55.6
Total rental homes $ 174.9 $ 144.7 $ 176.3 $ 156.0

____________________________

1. For the quarters ended September 30, 2014 and 2013, approximately $9.8 million and $9.7 million, respectively, are included in the Community base rental income in the Consolidated Income from Property Operations table on page 7. For the nine months ended September 30, 2014 and 2013, approximately $29.6 million and $28.9 million, respectively, are included in the Community base rental income in the Consolidated Income from Property Operations table on page 7. The remainder of the rental operations revenue is included in the Rental home income in the Consolidated Income from Property Operations table on page 7.
2. Occupied rentals as of the end of the period shown in our Core portfolio. Includes 15 homes rented through our Echo joint venture.
3.

Includes both occupied and unoccupied rental homes. New home cost basis does not include the costs associated with our Echo joint venture. At September 30, 2014, our investment in the Echo joint venture was $6.0 million.

Total Sites and Home Sales

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

Summary of Total Sites as of September 30, 2014
Sites
Community sites 69,900
Resort sites:
Annuals 24,800
Seasonal 9,100
Transient 10,100
Membership (1) 24,100
Joint Ventures (2) 3,100
Total 141,100
Home Sales – Select Data
Quarters Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Total New Home Sales Volume (3) 106 36 237 69
New Home Sales Volume – ECHO joint venture 52 12 94 14
New Home Sales Gross Revenues(3) $ 4,051 $ 1,530 $ 9,771 $ 3,269
Used Home Sales Volume 424 402 1,144 1,141
Used Home Sales Gross Revenues $ 4,666 $ 3,885 $ 10,684 $ 9,059
Brokered Home Resales Volume 251 176 720 623
Brokered Home Resale Revenues, net $ 336 $ 225 $ 916 $ 840

__________________________

1. Sites primarily utilized by approximately 97,000 members. Includes approximately 5,000 sites rented on an annual basis.
2. Joint venture income is included in the Equity in income from unconsolidated joint ventures in the Consolidated Income Statement on page 5.
3. Total new home sales volume includes home sales from our Echo joint venture. New home sales gross revenues does not include the revenues associated with our Echo joint venture. The quarter and nine months ended September 30, 2013 also include one third-party dealer sale.

2014 Guidance – Selected Financial Data (1)

Our guidance acknowledges the existence of volatile economic conditions, which may impact our current guidance assumptions. Factors impacting 2014 guidance include, but are not limited to the following: (i) the mix of site usage within the portfolio; (ii) yield management on our short-term resort sites; (iii) scheduled or implemented rate increases on community and resort sites; (iv) scheduled or implemented rate increases in annual payments under right-to-use contracts; (v) occupancy changes; (vi) our ability to retain and attract customers renewing or entering right-to-use contracts; (vii) performance of the chattel loans we purchased in connection with a prior acquisition; (viii) our ability to integrate and operate recent acquisitions in accordance with our estimates; (ix) completion of pending transactions in their entirety and on assumed schedule; and (x) ongoing legal matters and related fees.

(In millions, except per share data, unaudited)

Year Ended
December 31, 2014
Income from property operations – 2014 Core (2) $ 412.7
Income from property operations – Acquisitions (3) 9.1
Property management and general and administrative (68.9 )
Other income and expenses 19.6
Financing costs and other (121.6 )
Normalized FFO (4) 250.9
Change in fair value of contingent consideration asset 0.1
Transaction costs (1.2 )
Early debt retirement (5.1 )
FFO (4) 244.7
Depreciation on real estate and other (105.0 )
Depreciation on rental homes (11.0 )
Deferral of right-to-use contract sales revenue and commission, net (3.3 )
Income allocated to OP units (10.0 )
Gain on sale of land parcel 0.9
Net income available to common shares $ 116.3
Normalized FFO per share – fully diluted $2.71 – $2.77
FFO per share – fully diluted $2.65 – $2.71
Net income per common share – fully diluted (5) $1.35 – $1.41
Weighted average shares outstanding – fully diluted 91.5

_____________________________________

1. Each line item represents the mid-point of a range of possible outcomes and reflects management’s estimate of the most likely outcome. Actual Normalized FFO, Normalized FFO per share, FFO, FFO per share, Net Income and Net Income per share could vary materially from amounts presented if any of our assumptions are incorrect.
2. See page 14 for 2014 Core Guidance Assumptions. Amount represents 2013 income from property operations from the 2014 Core Properties of $395.4 million multiplied by an estimated growth rate of 4.4%.
3. See page 15 for the 2014 Assumptions regarding the Acquisition Properties.
4. See page 22 for definitions of Normalized FFO and FFO.
5. Net income per fully diluted common share is calculated before Income allocated to OP Units.

Fourth Quarter 2014 Guidance – Selected Financial Data (1)

Our guidance acknowledges the existence of volatile economic conditions, which may impact our current guidance assumptions. Factors impacting 2014 guidance include, but are not limited to the following: (i) the mix of site usage within the portfolio; (ii) yield management on our short-term resort sites; (iii) scheduled or implemented rate increases on community and resort sites; (iv) scheduled or implemented rate increases in annual payments under right-to-use contracts; (v) occupancy changes; (vi) our ability to retain and attract customers renewing or entering right-to-use contracts; (vii) performance of the chattel loans we purchased in connection with a prior acquisition; (viii) our ability to integrate and operate recent acquisitions in accordance with our estimates; (ix) completion of pending transactions in their entirety and on assumed schedule; and (x) ongoing legal matters and related fees.

(In millions, except per share data, unaudited)

Quarter Ended
December 31, 2014
Income from property operations – 2014 Core (2) $ 102.0
Income from property operations – Acquisitions (3) 2.4
Property management and general and administrative (17.7 )
Other income and expenses 2.1
Financing costs and other (30.4 )
Normalized FFO and FFO (4) 58.4
Depreciation on real estate and other (25.6 )
Depreciation on rental homes (2.7 )
Deferral of right-to-use contract sales revenue and commission, net (1.0 )
Income allocated to OP units (2.3 )
Net income available to common shares $ 26.8
Normalized FFO per share – fully diluted $0.61 – $0.67
FFO per share – fully diluted $0.61 – $0.67
Net income per common share – fully diluted (5) $0.29 – $0.35
Weighted average shares outstanding – fully diluted 91.5

_____________________________________

1. Each line item represents the mid-point of a range of possible outcomes and reflects management’s estimate of the most likely outcome. Actual Normalized FFO, Normalized FFO per share, FFO, FFO per share, Net Income and Net Income per share could vary materially from amounts presented above if any of our assumptions are incorrect.
2. See page 14 for 2014 Core Guidance Assumptions. Amount represents 2013 income from property operations from the 2014 Core Properties of $97.9 million multiplied by an estimated growth rate of 4.2%.
3. See page 15 for the 2014 Assumptions regarding the Acquisition Properties.
4. See page 22 for definitions of Normalized FFO and FFO.
5. Net income per fully diluted common share is calculated before Income allocated to OP Units.

2014 Core (1)

Guidance Assumptions – Income from Property Operations

(In millions, unaudited)

Fourth
Year Ended 2014 Quarter Ended Quarter 2014
December 31, Growth December 31, Growth
2013

Factors (2)

2013

Factors (2)

Community base rental income $ 406.6 3.0 % $ 102.4 2.9 %
Rental home income 14.2 3.6 % 3.7 (1.4 )%
Resort base rental income (3) 147.0 6.2 % 33.1 5.3 %
Right-to-use annual payments 48.0 (5.9 )% 12.1 (6.8 )%
Right-to-use contracts current period, gross 13.1 1.3 % 3.2 3.6 %
Utility and other income 63.6 7.3 % 15.0 7.2 %
Property operating revenues 692.5 3.5 % 169.5 3.0 %
Property operating, maintenance, and real estate taxes (276.9 ) 3.2 % (66.2 ) 2.7 %
Rental home operating and maintenance (7.4 ) (1.3 )% (2.1 ) (7.0 )%
Sales and marketing, gross (12.8 ) (16.0 )% (3.3 ) (19.4 )%
Property operating expenses (297.1 ) 2.2 % (71.6 ) 1.4 %
Income from property operations (1) $ 395.4 4.4 % $ 97.9 4.2 %
Resort base rental income:
Annual $ 94.6 5.5 % $ 24.3 5.6 %
Seasonal 22.9 5.0 % 4.9 5.0 %
Transient 29.5 9.4 % 3.9 3.8 %
Total resort base rental income $ 147.0 6.2 % $ 33.1 5.3 %

_______________________________

1. 2014 Core properties include properties we expect to own and operate during all of 2013 and 2014. Excludes property management expenses and the GAAP deferral of right to use contract upfront payments and related commissions, net.
2. Management’s estimate of the growth of property operations in the 2014 Core Properties compared to actual 2013 performance. Represents our estimate of the mid-point of a range of possible outcomes. Calculations prepared using actual results without rounding. Actual growth could vary materially from amounts presented above if any of our assumptions are incorrect.
3. See Resort base rental income table included below within this table.

2014 Assumptions Regarding Acquisition Properties (1)

(In millions, unaudited)

Year Ended Quarter Ended
December 31, 2014 (2) December 31, 2014 (2)
Community base rental income $ 8.0 $ 2.0
Rental home income 0.1
Resort base rental income 6.9 1.9
Utility income and other property income 1.1 0.3
Property operating revenues 16.1 4.2
Property operating, maintenance, and real estate taxes (7.0 ) (1.8 )
Property operating expenses (7.0 ) (1.8 )
Income from property operations $ 9.1 $ 2.4

___________________________________

1. The acquisition properties include five properties acquired during 2013 and five properties acquired during 2014.
2. Each line item represents our estimate of the mid-point of a possible range of outcomes and reflects management’s best estimate of the most likely outcome for the Acquisition Properties. Actual income from property operations for the Acquisition Properties could vary materially from amounts presented above if any of our assumptions are incorrect.

Preliminary 2015 Guidance – Selected Financial Data (1)

Our guidance acknowledges the existence of volatile economic conditions, which may impact our current guidance assumptions. Factors impacting 2015 guidance include, but are not limited to the following: (i) the mix of site usage within the portfolio; (ii) yield management on our short-term resort sites; (iii) scheduled or implemented rate increases on community and resort sites; (iv) scheduled or implemented rate increases in annual payments under right-to-use contracts; (v) occupancy changes; (vi) our ability to retain and attract customers renewing or entering right-to-use contracts; (vii) performance of the chattel loans we purchased in connection with a prior acquisition; (viii) our ability to integrate and operate recent acquisitions in accordance with our estimates; (ix) completion of pending transactions in their entirety and on assumed schedule; and (x) ongoing legal matters and related fees.

(In millions, except per share data unaudited)

Year Ended
December 31, 2015
Income from property operations – 2015 Core (2) $ 437.8
Income from property operations – Acquisitions 3.4
Property management and general and administrative (70.7 )
Other income and expenses 15.9
Financing costs and other (117.9 )
Normalized FFO and FFO (3) 268.5
Depreciation on real estate and other (104.8 )
Depreciation on rental homes (11.1 )
Deferral of right-to-use contract sales revenue and commission, net (4.2 )
Income allocated to OP units (11.8 )
Net income available to common shares $ 136.6
Normalized FFO per share – fully diluted $2.88 – $2.98
FFO per share – fully diluted $2.88 – $2.98
Net income per common share – fully diluted (4) $1.57 – $1.67
Weighted average shares outstanding – fully diluted 91.7

_____________________________________

1. Each line item represents the mid-point of a range of possible outcomes and reflects management’s estimate of the most likely outcome. Actual Normalized FFO, Normalized FFO per share, FFO, FFO per share, Net Income and Net Income per share could vary materially from amounts presented above if any of our assumptions is incorrect.
2. See page 17 for 2015 Core Guidance Assumptions. Amount represents 2014 income from property operations from the 2015 Core Properties of $419.6 million multiplied by an estimated growth rate of 4.3%.
3. See page 22 for definitions of Normalized FFO and FFO.
4. Net income per fully diluted common share is calculated before Income allocated to OP Units.

Preliminary 2015 Core (1)

Guidance Assumptions – Income from Property Operations

(In millions, unaudited)

2015 Growth
Estimated 2014

Factors (2)

Community base rental income $ 427.0 2.8 %
Rental home income 14.8 (4.7 )%
Resort base rental income (3) 159.1 4.3 %
Right-to-use annual payments 45.1 0.1 %
Right-to-use contracts current period, gross 13.3 1.5 %
Utility and other income 69.2 6.3 %
Property operating revenues 728.5 3.1 %
Property operating, maintenance, and real estate taxes (290.7 ) 1.8 %
Rental home operating and maintenance (7.4 ) (3.5 )%
Sales and marketing, gross (10.8 ) (2.6 )%
Property operating expenses (308.9 ) 1.5 %
Income from property operations $ 419.6 4.3 %
Resort base rental income:
Annual $ 100.5 5.0 %
Seasonal 24.5 3.0 %
Transient 34.1 3.0 %
Total resort base rental income $ 159.1 4.3 %

_______________________________

1. 2015 Core properties include properties we expect to own and operate during all of 2014 and 2015. Excludes property management expenses and the GAAP deferral of right to use contract upfront payments and related commissions, net.
2. Management’s estimate of the growth of property operations in the 2015 Core Properties compared to actual 2014 performance. Represents our estimate of the mid-point of a range of possible outcomes. Calculations prepared using actual results without rounding. Actual growth could vary materially from amounts presented above if any of our assumptions is incorrect.
3. See Resort base rental income table included below within this table.
Right-To-Use Memberships – Select Data

(In thousands, except member count, number of Zone Park Passes, number of annuals and number of upgrades, unaudited)

Year Ended December 31,
2011 2012 2013 2014 (1) 2015 (1)
Member Count (2) 99,567 96,687 98,277 96,650 96,500
Right-to-use annual payments (3) $ 49,122 $ 47,662 $ 47,967 $ 45,100 $ 45,200
Zone Park Pass (ZPP) Origination (4) 7,404 10,198 15,607 18,000 20,500
ZPP Sales 7,404 8,909 9,289 9,700 11,000
RV Dealer ZPP Activations -

1,289

6,318

8,300 9,500
Number of annuals (5) 3,555 4,280 4,830 5,085 5,325
Resort base rental income from annuals $ 8,069 $ 9,585 $ 11,148 $ 12,500 $ 13,550
Number of upgrades (6) 3,930 3,069 2,999 3,100 3,150
Upgrade contract initiations (7) $ 17,663 $ 13,431 $ 13,142 $ 13,300 $ 13,500
Resort base rental income from seasonals/transients $ 10,852 $ 11,042 $ 12,692 $ 13,600 $ 14,800
Utility and other income $ 2,444 $ 2,407 $ 2,293 $ 2,400 $ 2,500

________________________________

1. Guidance estimate. Each line item represents our estimate of the mid-point of a possible range of outcomes and reflects management’s best estimate of the most likely outcome. Actual figures could vary materially from amounts presented above if any of our assumptions are incorrect.
2. Members have entered into right-to-use contracts with us that entitle them to use certain properties on a continuous basis for up to 21 days.
3. The year ended December 31, 2012 and the year ending December 31, 2013, includes $0.1 million and $2.1 million, respectively, of revenue recognized related to our right-to-use annual memberships activated through our dealer program. During the third quarter of 2013, we changed the accounting treatment of revenues and expenses associated with the RV dealer program to recognize as revenue only the cash received from members generated by the program.
4. ZPPs allow access to any of five geographic areas in the United States.
5. Members who rent a specific site for an entire year in connection with their right to use contract.
6. Existing customers that have upgraded agreements are eligible for longer stays, can make earlier reservations, may receive discounts on rental units, and may have access to additional Properties. Upgrades require a non-refundable upfront payment.
7. Revenues associated with contract upgrades, included in Right-to-use contracts current period, gross, on our Consolidated Income Statement on page 5.
Balance Sheet

(In thousands, except share and per share data)

September 30,
2014
December 31,
2013
(unaudited)
Assets
Investment in real estate:
Land $ 1,068,236 $ 1,025,246
Land improvements 2,706,662 2,667,213
Buildings and other depreciable property 551,522 535,647
4,326,420 4,228,106
Accumulated depreciation (1,143,800 ) (1,058,540 )
Net investment in real estate 3,182,620 3,169,566
Cash 109,144 58,427
Notes receivable, net 38,051 42,990
Investment in joint ventures 15,414 11,583
Deferred financing costs, net 22,676 19,873
Deferred commission expense 27,885 25,251
Escrow deposits, goodwill, and other assets, net 55,358 64,619
Total Assets $ 3,451,148 $ 3,392,309
Liabilities and Equity
Liabilities:
Mortgage notes payable $ 2,005,942 $ 1,992,368
Term loan 200,000 200,000
Unsecured lines of credit
Accrued payroll and other operating expenses 85,879 65,157
Deferred revenue – upfront payments from right-to-use contracts 72,976 68,673
Deferred revenue – right-to-use annual payments 10,762 11,136
Accrued interest payable 8,865 9,416
Rents and other customer payments received in advance and security deposits 60,560 59,601
Distributions payable 29,620 22,753
Total Liabilities 2,474,604 2,429,104
Equity:
Stockholders’ Equity:
Preferred stock, $0.01 par value 9,945,539 shares authorized as of September 30, 2014 and December 31, 2013; none issued and outstanding as of September 30, 2014 and December 31, 2013. As of September 30, 2014 and December 31, 2013, includes 125 shares 6% Series D Cumulative Preferred stock and 250 shares 18.75% Series E Cumulative Preferred stock; both issued and outstanding
6.75% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value, 54,461 shares authorized and 54,458 issued and outstanding as of September 30, 2014 and December 31, 2013 at liquidation value 136,144 136,144
Common stock, $0.01 par value 200,000,000 shares authorized as of September 30, 2014 and December 31, 2013; 83,905,662 and 83,313,677 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively 838 834
Paid-in capital 1,028,912 1,021,365
Distributions in excess of accumulated earnings (256,340 ) (264,083 )
Accumulated other comprehensive gain (loss) 141 (927 )
Total Stockholders’ Equity 909,695 893,333
Non-controlling interests – Common OP Units 66,849 69,872
Total Equity 976,544 963,205
Total Liabilities and Equity $ 3,451,148 $ 3,392,309
Debt Maturity Schedule & Summary
Secured Debt Maturity Schedule as of September 30, 2014

(In thousands, unaudited)

Year Amount
2014
2015 284,194
2016 223,223
2017 39,576
2018 207,684
2019 209,138
2020 126,722
2021+ 900,758
Total (1) $ 1,991,295
Debt Summary as of September 30, 2014

(In millions, except weighted average interest and average years to maturity, unaudited)

Total Secured Unsecured
Weighted Average Weighted Average Weighted Average
Average Years to Average Years to Average Years to
Balance

Interest (2)

Maturity Balance

Interest (2)

Maturity Balance

Interest (2)

Maturity
Consolidated Debt $ 2,206 5.0 % 7.4 $ 2,006 5.2 % 7.8 $200 2.8 % 2.8

____________________________

1. Represents our mortgage notes payable excluding $14.6 million net note premiums and our $200 million term loan as of September 30, 2014.
2. Includes loan costs amortization.
Market Capitalization

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

Capital Structure as of September 30, 2014
Total % of Total Total % of Total % of Total
Secured debt $ 2,006 90.9 %
Unsecured debt 200 9.1 %
Total debt $ 2,206 100.0 % 35.6 %
Common Shares 83,905,662 92.1 %
OP Units 7,232,567 7.9 %
Total Common Shares and OP Units 91,138,229 100.0 %
Common Share price $ 42.36
Fair value of Common Shares $ 3,861 96.6 %
Perpetual Preferred Equity 136 3.4 %
Total Equity $ 3,997 100.0 % 64.4 %
Total market capitalization $ 6,203 100.0 %
Perpetual Preferred Equity as of September 30, 2014
Annual Dividend
Series Callable Date Outstanding Shares Liquidation Value Per Share Value
6.75% Series C 9/7/2017 54,458 $136 $168.75 $ 9.2

Non-GAAP Financial Measures

Funds from Operations (“FFO”) is a non-GAAP financial measure. We believe FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), is generally an appropriate measure of performance for an equity REIT. While FFO is a relevant and widely used measure of operating performance for equity REITs, it does not represent cash flow from operations or net income as defined by GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance.

We define FFO as net income, computed in accordance with GAAP, excluding gains and actual or estimated losses from sales of properties, plus real estate related depreciation and amortization, impairments, if any, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We receive up-front non-refundable payments from the entry of right-to-use contracts. In accordance with GAAP, the upfront non-refundable payments and related commissions are deferred and amortized over the estimated customer life. Although the NAREIT definition of FFO does not address the treatment of non-refundable right-to-use payments, we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO.

Normalized Funds from Operations (“Normalized FFO”) is a non-GAAP measure. We define Normalized FFO as FFO excluding the following non-operating income and expense items: a) the financial impact of contingent consideration; b) gains and losses from early debt extinguishment, including prepayment penalties and defeasance costs; c) property acquisition and other transaction costs related to mergers and acquisitions; and d) other miscellaneous non-comparable items.

We believe that FFO and Normalized FFO are helpful to investors as supplemental measures of the performance of an equity REIT. We believe that by excluding the effect of depreciation, amortization and actual or estimated gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. We further believe that Normalized FFO provides useful information to investors, analysts and our management because it allows them to compare our operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences not related to our operations. For example, we believe that excluding the early extinguishment of debt, property acquisition and other transaction costs related to mergers and acquisitions and the change in fair value of our contingent consideration asset from Normalized FFO allows investors, analysts and our management to assess the sustainability of operating performance in future periods because these costs do not affect the future operations of the properties. In some cases, we provide information about identified non-cash components of FFO and Normalized FFO because it allows investors, analysts and our management to assess the impact of those items.

Funds available for distribution (“FAD”) is a non-GAAP financial measure. We define FAD as Normalized FFO less non-revenue producing capital expenditures.

Investors should review FFO, Normalized FFO and FAD, along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT’s operating performance. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. Normalized FFO presented herein is not necessarily comparable to normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same methodology for computing this amount. FFO, Normalized FFO and FAD do not represent cash generated from operating activities in accordance with GAAP, nor do they represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

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