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ELS Reports Third Quarter Results

·25 min read

Strong Operating Performance

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, 2020.

All Common Stock and OP Units as well as per share results reflect the two for one stock split that was completed on October 15, 2019. Additionally, 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, 2020

For the quarter ended September 30, 2020, total revenues increased $13.8 million, or 5.1 percent, to $285.0 million compared to $271.2 million for the same period in 2019. For the quarter ended September 30, 2020, net income available for Common Stockholders decreased $13.9 million, or $0.07 per Common Share, to $50.6 million, or $0.28 per Common Share, compared to $64.5 million, or $0.35 per Common Share, for the same period in 2019.

For the nine months ended September 30, 2020, total revenues increased $41.0 million, or 5.3 percent, to $819.6 million compared to $778.6 million for the same period in 2019. For the nine months ended September 30, 2020, net income available for Common Stockholders decreased $60.6 million, or $0.34 per Common Share, to $163.6 million, or $0.90 per Common Share, compared to $224.2 million, or $1.24 per Common Share, for the same period in 2019. The financial results for 2019 included a gain of $52.5 million on the sale of five all-age MH communities.

Non-GAAP Financial Measures and Portfolio Performance

For the quarter ended September 30, 2020, Funds from Operations ("FFO") available for Common Stock and OP Unit holders decreased $12.8 million, or $0.06 per Common Share, to $95.8 million, or $0.50 per Common Share, compared to $108.6 million, or $0.56 per Common Share, for the same period in 2019. For the nine months ended September 30, 2020, FFO available for Common Stock and OP Unit holders decreased $8.8 million, or $0.05 per Common Share, to $297.6 million, or $1.55 per Common Share, compared to $306.4 million, or $1.60 per Common Share, for the same period in 2019.

For the quarter ended September 30, 2020, Normalized Funds from Operations ("Normalized FFO") available for Common Stock and OP Unit holders increased $2.8 million, or $0.02 per Common Share, to $105.5 million, or $0.55 per Common Share, compared to $102.7 million, or $0.53 per Common Share, for the same period in 2019. For the nine months ended September 30, 2020, Normalized FFO available for Common Stock and OP Unit holders increased $7.5 million, or $0.03 per Common Share, to $309.8 million, or $1.61 per Common Share, compared to $302.3 million, or $1.58 per Common Share, for the same period in 2019.

For the quarter ended September 30, 2020, property operating revenues, excluding deferrals, increased $16.7 million to $272.9 million compared to $256.2 million for the same period in 2019. For the nine months ended September 30, 2020, property operating revenues, excluding deferrals, increased $41.7 million to $789.5 million compared to $747.8 million for the same period in 2019. For the quarter ended September 30, 2020, income from property operations, excluding deferrals and property management, increased $5.3 million to $150.6 million compared to $145.3 million for the same period in 2019. For the nine months ended September 30, 2020, income from property operations, excluding deferrals and property management, increased $19.5 million to $453.9 million compared to $434.4 million for the same period in 2019.

For the quarter ended September 30, 2020, Core property operating revenues, excluding deferrals, increased approximately 4.9 percent and Core income from property operations, excluding deferrals and property management, increased approximately 1.8 percent compared to the same period in 2019. For the nine months ended September 30, 2020, Core property operating revenues, excluding deferrals, increased approximately 3.7 percent and Core income from property operations, excluding deferrals and property management, increased approximately 2.7 percent compared to the same period in 2019.

Business Updates

Page 1 of this Earnings Release and Supplemental Financial Information provides an operations update.

Balance Sheet Activity

During the quarter ended September 30, 2020, we closed on a financing transaction with Fannie Mae generating gross proceeds of $386.9 million. The loan is secured by ten manufactured home ("MH") communities and consists of two tranches with a weighted average interest rate of 2.55% per annum and a weighted average maturity of 13.4 years. The net proceeds from the transaction were primarily used to repay our $200.0 million unsecured term loan scheduled to mature in 2023 and secured loans scheduled to mature in 2021. We incurred early debt retirement costs of $9.7 million related to these financing transactions.

Investment Activity

In October 2020, we completed the acquisition of Marina Dunes RV Park, an 89-site RV community located in Marina, California, and we completed the acquisition of Acorn Campground, a 323-site RV community in Green Creek, New Jersey. The total aggregate purchase price for these properties was $36.0 million, which was funded with available cash.

In October 2020, we also completed the acquisitions of two development properties, The Resort at Tranquility Lake, a planned 500-site RV community located in Cape Coral, Florida and Bayport, a planned 900-site RV community located in Jamaica, Virginia, for a total aggregate purchase price of $16.3 million. These acquisitions were funded with available cash.

As part of our strategy to expand owned communities with additional developed sites, in September and October 2020, we completed the acquisitions of five parcels of land adjacent to four of our properties for a total aggregate purchase price of $6.4 million, which was funded with available cash.

About Equity LifeStyle Properties

We are a self-administered, self-managed real estate investment trust ("REIT") with headquarters in Chicago. As of October 19, 2020, we own or have an interest in 415 quality properties in 33 states and British Columbia consisting of 157,690 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 20, 2020, 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 2021Core MH and Core RV annual rate growth;

  • our ability to manage counterparty risk;

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

  • 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;

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

  • the effect of 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 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.

In addition, these forward-looking statements and our preliminary guidance on Core MH and Core RV annual rate growth 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

  • All properties continue to be open subject to state and local guidelines.

    • Some of the amenities at certain properties remain closed at this time due to state and local guidelines.

    • All RV properties continue to be open to transient customers.

  • Hurricanes Hanna and Isaias made landfall during the third quarter of 2020 and impacted some of our communities in Texas, North Carolina, Delaware, New Jersey and Pennsylvania. The affected properties resumed operations shortly after the storms passed. Our current aggregate property damage estimate is approximately $9.0 million. During the quarter ended September 30, 2020, we recorded expenses of $2.8 million with offsetting insurance recovery revenue of $2.3 million.

Preliminary 2021 rent rate growth assumptions

  • By October month-end we will have sent 2021 rent increase notices to 48% of our MH residents. The average rent increase of these notices support our preliminary expectations for 2021 Core MH rate growth of 4.0%.(1)

  • We have set RV annual rates for the 2021 season for 90% of our annual sites. These rates support our preliminary expectations for 2021 Core RV annual rate growth of 4.0%. (1)
    ______________________

1. Actual results may differ. See Forward Looking Statements for risks that may impact our actual results.

Investor Information

Equity Research Coverage (1)

Bank of America Securities

BMO Capital Markets

Citi Research

Jeffrey Spector/ Joshua Dennerlein

John Kim

Michael Bilerman/ Nick Joseph

Evercore ISI

Green Street Advisors

Robert W. Baird & Company

Steve Sakwa/ Samir Khanal

John Pawlowski

Peter Hermann

Wells Fargo Securities

Todd Stender

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 Stock and OP Units outstanding and per share data (adjusted for stock split), unaudited)

As of and for the Three Months Ended

Sept 30,
2020

Jun 30,
2020

Mar 31,
2020

Dec 31,
2019

Sept 30,
2019

Operating Information

Total revenues

$

285.0

$

254.1

$

280.5

$

258.6

$

271.2

Net income

$

53.5

$

48.9

$

70.7

$

58.1

$

68.2

Net income available for Common Stockholders

$

50.6

$

46.2

$

66.9

$

55.0

$

64.5

Adjusted EBITDAre (1)

$

129.7

$

116.2

$

138.2

$

124.5

$

127.0

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

$

95.8

$

89.5

$

112.3

$

99.5

$

108.6

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

$

105.5

$

90.9

$

113.3

$

99.5

$

102.7

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

$

90.0

$

75.6

$

101.8

$

84.6

$

88.4

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

Common Stock and OP Units, end of the period

192,704

192,636

192,627

192,581

192,574

Weighted average Common Stock and OP Units outstanding - Fully Diluted

192,537

192,542

192,564

192,458

192,400

Net income per Common Share - Fully Diluted (3)

$

0.28

$

0.25

$

0.37

$

0.30

$

0.35

FFO per Common Share and OP Unit - Fully Diluted.

$

0.50

$

0.47

$

0.58

$

0.52

$

0.56

Normalized FFO per Common Share and OP Unit - Fully Diluted

$

0.55

$

0.47

$

0.59

$

0.52

$

0.53

Dividends per Common Share

$

0.3425

$

0.3425

$

0.3425

$

0.3063

$

0.3063

Balance Sheet

Total assets

$

4,260

$

4,268

$

4,212

$

4,151

$

4,137

Total liabilities

$

2,961

$

2,961

$

2,892

$

2,829

$

2,818

Market Capitalization

Total debt (4)

$

2,529

$

2,522

$

2,486

$

2,432

$

2,406

Total market capitalization (5)

$

14,342

$

14,558

$

13,558

$

15,988

$

15,270

Ratios

Total debt / total market capitalization

17.6

%

17.3

%

18.3

%

15.2

%

15.8

%

Total debt / Adjusted EBITDAre (6)

5.0

5.0

4.9

4.8

4.9

Interest coverage (7)

4.9

4.9

4.9

4.9

4.8

Fixed charges(8)

4.9

4.9

4.9

4.8

4.7

______________________

1.

See Non-GAAP Financial Measures Definitions and Other Terms 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 8 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 $28.3 million as of September 30, 2020.

5.

See page 15 for the calculation of market capitalization as of September 30, 2020.

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 Other Terms 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, 2020

December 31, 2019

(unaudited)

Assets

Investment in real estate:

Land

$

1,531,313

$

1,525,407

Land improvements

3,434,393

3,336,070

Buildings and other depreciable property

905,679

881,572

5,871,385

5,743,049

Accumulated depreciation

(1,886,768

)

(1,776,224

)

Net investment in real estate

3,984,617

3,966,825

Cash and restricted cash

114,218

28,860

Notes receivable, net

36,230

37,558

Investment in unconsolidated joint ventures

19,933

20,074

Deferred commission expense

42,220

41,149

Other assets, net

63,195

56,809

Total Assets

$

4,260,413

$

4,151,275

Liabilities and Equity

Liabilities:

Mortgage notes payable, net

$

2,450,783

$

2,049,509

Term loan, net

198,949

Unsecured line of credit

50,000

160,000

Accounts payable and other liabilities

148,034

124,665

Deferred revenue – upfront payments from membership upgrade sales

136,194

126,814

Deferred revenue – annual membership subscriptions

12,035

10,599

Accrued interest payable

8,055

8,639

Rents and other customer payments received in advance and security deposits

90,219

91,234

Distributions payable

66,001

58,978

Total Liabilities

2,961,321

2,829,387

Equity:

Preferred stock, $0.01 par value, 10,000,000 shares authorized as of September 30, 2020 and December 31, 2019; none issued and outstanding

Common stock, $0.01 par value, 600,000,000 and 400,000,000 shares authorized as of September 30, 2020 and December 31, 2019, respectively; 182,222,007 and 182,089,595 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

1,812

1,812

Paid-in capital

1,408,253

1,402,696

Distributions in excess of accumulated earnings

(181,754

)

(154,318

)

Accumulated other comprehensive income (loss)

(380

)

Total Stockholders’ Equity

1,228,311

1,249,810

Non-controlling interests – Common OP Units

70,781

72,078

Total Equity

1,299,092

1,321,888

Total Liabilities and Equity

$

4,260,413

$

4,151,275

Consolidated Income Statements

(In thousands, unaudited)

Quarters Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenues:

Rental income

$

238,869

$

225,116

$

696,178

$

660,689

Annual membership subscriptions

13,442

13,150

39,476

38,052

Membership upgrade sales current period, gross

6,631

5,730

16,522

14,609

Membership upgrade sales upfront payments, deferred, net

(4,171

)

(3,530

)

(9,379

)

(8,213

)

Other income

12,268

11,263

33,007

31,898

Gross revenues from home sales

13,070

8,438

33,245

22,738

Brokered resale and ancillary services revenues, net

1,648

2,133

2,011

4,564

Interest income

1,801

1,831

5,399

5,385

Income from other investments, net

1,428

7,029

3,093

8,894

Total revenues

284,986

271,160

819,552

778,616

Expenses:

Property operating and maintenance

99,566

90,765

268,465

253,581

Real estate taxes

15,981

15,166

49,490

45,596

Sales and marketing, gross

5,054

4,063

13,308

11,686

Membership sales commissions, deferred, net

(630

)

(313

)

(1,327

)

(893

)

Property management

14,527

14,605

44,344

42,675

Depreciation and amortization

38,581

37,032

115,937

112,785

Cost of home sales

12,866

8,434

33,627

23,230

Home selling expenses

1,241

1,033

3,535

3,218

General and administrative

9,692

8,710

31,156

27,844

Other expenses

658

1,460

1,885

2,427

Early debt retirement

9,732

10,786

1,491

Interest and related amortization

25,218

25,547

77,540

77,964

Total expenses

232,486

206,502

648,746

601,604

Gain on sale of real estate, net

52,507

Income before equity in income of unconsolidated joint ventures

52,500

64,658

170,806

229,519

Equity in income of unconsolidated joint ventures

968

3,518

2,239

8,277

Consolidated net income

53,468

68,176

173,045

237,796

Income allocated to non-controlling interests – Common OP Units

(2,908

)

(3,715

)

(9,415

)

(13,617

)

Redeemable perpetual preferred stock dividends

(8

)

(8

)

Net income available for Common Stockholders

$

50,560

$

64,461

$

163,622

$

224,171

Non-GAAP Financial Measures

This document contains certain non-GAAP measures used by management that we believe are helpful to understand our business. We believe investors should review these non-GAAP measures along with GAAP net income and cash flows from operating activities, investing activities and financing activities, when evaluating an equity REIT’s operating performance. Our definitions and calculations of these non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These non-GAAP financial and operating measures 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 flows from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make cash distributions. For definitions and reconciliations of non-GAAP measures to our financial statements as prepared under GAAP, refer to both Reconciliation of Net Income to Non-GAAP Financial Measures on page 8 and Non-GAAP Financial Measures Definitions and Reconciliations on pages 17 - 19.

Selected Non-GAAP Financial Measures

(In millions, except per share data, unaudited)

Quarter Ended

September 30, 2020

Income from property operations, excluding deferrals and property management - 2020 Core (1)

$

146.5

Income from property operations, excluding deferrals and property management - Non-Core (1)

4.1

Property management and general and administrative

(24.2

)

Other income and expenses

4.3

Interest and related amortization

(25.2

)

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

105.5

Early debt retirement

(9.7

)

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

$

95.8

FFO per Common Share and OP Unit - Fully Diluted

$0.50

Normalized FFO per Common Share and OP Unit - Fully Diluted

$0.55

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

$

105.5

Non-revenue producing improvements to real estate

(15.5

)

FAD for Common Stock and OP Unit holders (2)

$

90.0

Weighted average Common Stock and OP Units - Fully Diluted

192.5

______________________

1.

See page 10 for details of the Core Income from Property Operations, excluding deferrals and property management. See page 11 for details of the Non-Core Income from Property Operations, excluding deferrals and property management.

2.

See page 8 for a reconciliation of Net income available for Common Stockholders to 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.

Reconciliation of Net Income to Non-GAAP Financial Measures

(In thousands, except per share data, unaudited)

Quarters Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net income available for Common Stockholders

$

50,560

$

64,461

$

163,622

$

224,171

Income allocated to non-controlling interests – Common OP Units

2,908

3,715

9,415

13,617

Membership upgrade sales upfront payments, deferred, net

4,171

3,530

9,379

8,213

Membership sales commissions, deferred, net

(630

)

(313

)

(1,327

)

(893

)

Depreciation and amortization

38,581

37,032

115,937

112,785

Depreciation on unconsolidated joint ventures

183

174

544

1,047

Gain on sale of real estate, net

(52,507

)

FFO available for Common Stock and OP Unit holders

95,773

108,599

297,570

306,433

Early debt retirement

9,732

10,786

2,085

Insurance proceeds due to catastrophic weather event (1)

(5,856

)

(6,205

)

COVID-19 expenses (2)

1,446

Normalized FFO available for Common Stock and OP Unit holders

105,505

102,743

309,802

302,313

Non-revenue producing improvements to real estate

(15,481

)

(14,357

)

(42,277

)

(37,270

)

FAD for Common Stock and OP Unit holders

$

90,024

$

88,386

$

267,525

$

265,043

Net income available per Common Share - Basic

$

0.28

$

0.35

$

0.90

$

1.24

Net income available per Common Share - Fully Diluted (3)

$

0.28

$

0.35

$

0.90

$

1.24

FFO per Common Share and OP Unit - Basic

$

0.50

$

0.57

$

1.55

$

1.60

FFO per Common Share and OP Unit - Fully Diluted

$

0.50

$

0.56

$

1.55

$

1.60

Normalized FFO per Common Share and OP Unit - Basic

$

0.55

$

0.53

$

1.61

$

1.58

Normalized FFO per Common Share and OP Unit - Fully Diluted

$

0.55

$

0.53

$

1.61

$

1.58

Average Common Stock - Basic

181,869

181,649

181,811

180,515

Average Common Stock and OP Units - Basic

192,351

192,145

192,296

191,599

Average Common Stock and OP Units - Fully Diluted

192,537

192,400

192,548

191,840

______________________

1.

Represents insurance recovery revenue from reimbursement for capital expenditures related to Hurricane Irma.

2.

Includes expenses incurred related to the development and implementation of Center of Disease Control ("CDC") and public health guidelines for social distancing and enhanced cleaning, property employee appreciation bonuses and emergency time-off pay. These COVID-19 expenses are considered incremental to our normal operations and are nonrecurring. As such, they have been excluded from the calculation of Normalized FFO.

3.

Net income per fully diluted Common Share is calculated before Income allocated to non-controlling interest - Common OP Units.

Consolidated Income from Property Operations (1)

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

Quarters Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

MH base rental income (2) (3)

$

143.5

$

137.6

$

427.5

$

409.1

Rental home income (3)

4.2

3.8

12.2

11.0

RV and marina base rental income (3) (4)

79.0

71.7

220.1

204.8

Annual membership subscriptions

13.4

13.1

39.5

38.0

Membership upgrade sales current period, gross

6.6

5.7

16.5

14.6

Utility and other income (3) (5)

26.2

24.3

73.7

70.3

Property operating revenues

272.9

256.2

789.5

747.8

Property operating, maintenance and real estate taxes (3) (6)

115.5

105.3

318.0

297.7

Rental home operating and maintenance

1.7

1.6

4.3

4.1

Sales and marketing, gross

5.1

4.0

13.3

11.6

Property operating expenses

122.3

110.9

335.6

313.4

Income from property operations, excluding deferrals and property management (1) (6)

$

150.6

$

145.3

$

453.9

$

434.4

Manufactured home site figures and occupancy averages:

Total sites

72,372

72,008

72,328

72,121

Occupied sites

68,712

68,352

68,607

68,419

Occupancy %

94.9

%

94.9

%

94.9

%

94.9

%

Monthly base rent per site

$

696

$

671

$

692

$

664

RV and marina base rental income:

Annual

$

48.2

$

42.6

$

142.6

$

122.4

Seasonal

5.2

5.4

32.9

32.2

Transient

25.6

23.7

44.6

50.2

Total RV and marina base rental income

$

79.0

$

71.7

$

220.1

$

204.8

______________________

1.

Excludes property management and the GAAP deferral of membership upgrade sales upfront payments and membership sales commissions, net.

2.

See the manufactured home site figures and occupancy averages included below within this table.

3.

MH base rental income, Rental home income, RV and marina base rental income and Utility income, net of bad debt expense, are presented in Rental income in the Consolidated Income Statements on page 5. Bad debt expense is presented in Property operating, maintenance and real estate taxes in this table.

4.

See RV and marina base rental income detail included below within this table.

5.

Utility and other income includes $2.3 million of insurance recovery revenue for Hurricane Hanna and Hurricane Isaias for the quarter and nine months ended September 30, 2020.

6.

Includes debris removal and cleanup costs of approximately $2.8 million related to Hurricane Hanna and Hurricane Isaias for the quarter and nine months ended September 30, 2020. Results for the quarter include an increase compared to prior year in utility expense, including distribution system infrastructure repairs, of approximately $2.9 million. Results for the nine months ended September 30, 2020 include $1.0 million related to the development and implementation of CDC and public health guidelines for social distancing and enhanced cleaning, property employee appreciation bonuses and emergency time-off pay for the nine months ended September 30, 2020. These COVID-19 expenses are considered incremental to our normal operations and are nonrecurring.

Core Income from Property Operations (1)

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

Quarters Ended September 30,

Nine Months Ended September 30,

2020

2019

Change (2)

2020

2019

Change (2)

MH base rental income (3)

$

143.5

$

137.6

4.3 %

$

427.4

$

408.7

4.6 %

Rental home income

4.2

3.8

9.0 %

12.2

10.9

11.7 %

RV base rental income (4)

72.3

68.8

5.2 %

202.3

200.5

0.9 %

Annual membership subscriptions

13.4

13.2

2.0 %

39.4

38.1

3.7 %

Membership upgrade sales current period, gross

6.6

5.7

15.7 %

16.5

14.6

13.1 %

Utility and other income (5)

25.5

23.9

6.5 %

72.2

69.8

3.3 %

Property operating revenues

265.5

253.0

4.9 %

770.0

742.6

3.7 %

Property operating, maintenance and real estate taxes (6) (7)

112.2

103.4

8.5 %

308.5

294.7

4.7 %

Rental home operating and maintenance

1.7

1.6

6.7 %

4.3

4.1

5.3 %

Sales and marketing, gross

5.1

4.1

24.5 %

13.3

11.7

13.9 %

Property operating expenses

119.0

109.1

9.1 %

326.1

310.5

...

5.0 %

Income from property operations, excluding deferrals and property management (1) (7)

$

146.5

$

143.9

1.8 %

$

443.9

$

432.1

2.7 %

Occupied sites (8)

68,772

68,442

Core manufactured home site figures and occupancy averages:

Total sites

72,097

71,875

72,054

71,816

Occupied sites

68,690

68,352

68,592

68,266

Occupancy %

95.3

%

95.1

%

95.2

%

95.1

%

Monthly base rent per site

$

696

$

671

$

692

$

665

Core RV base rental income:

Annual

$

42.8

$

40.8

5.2 %

$

126.7

$

119.8

5.8 %

Seasonal

5.1

5.3

(4.5)%

32.8

32.1

2.3 %

Transient

24.4

22.7

7.3 %

42.8

48.6

(12.2)%

Total RV base rental income

$

72.3

$

68.8

5.2 %

$

202.3

$

200.5

0.9 %

______________________

1.

Excludes property management and the GAAP deferral of membership upgrades sales upfront payments and membership sales commissions, net.

2.

Calculations prepared using actual results without rounding.

3.

See Core manufactured home site figures and occupancy averages included below within this table.

4.

See Core RV base rental income detail included below within this table.

5.

Utility and other income includes $2.3 million of insurance recovery revenue for Hurricane Hanna and Hurricane Isaias for the quarter and nine months ended September 30, 2020.

6.

Includes bad debt expense for the periods presented.

7.

Includes debris removal and cleanup costs of $2.8 million related to Hurricane Hanna and Hurricane Isaias for the quarter and nine months ended September 30, 2020. Results for the quarter include an increase compared to prior year in utility expense, including distribution system infrastructure repairs, of approximately $2.9 million. Results for the nine months ended September 30, 2020 includes $1.0 million related to expenses incurred related to the development and implementation of CDC and public health guidelines for social distancing and enhanced cleaning, property employee appreciation bonuses and emergency time-off pay for the nine months ended September 30, 2020. These COVID-19 expenses are considered incremental to our normal operations and are nonrecurring.

8.

Occupied sites are presented as of the end of the period. Occupied sites have increased by 196 from 68,576 at December 31, 2019.

Non-Core Income from Property Operations (1)

(In millions, unaudited)

Quarter Ended

Nine Months Ended

September 30, 2020

September 30, 2020

MH base rental income

$

$

0.1

Rental home income

RV and marina base rental income

6.7

17.9

Utility and other income

0.7

1.6

Property operating revenues

7.4

19.6

Property operating expenses (2)

3.3

9.6

Income from property operations, excluding deferrals and property management (1)

$

4.1

$

10.0

______________________

1.

Excludes property management and the GAAP deferral of membership upgrade sales upfront payments and membership sales commissions, net.

2.

Includes bad debt expense for the periods presented.

Income from Rental Home Operations

(In millions, except occupied rentals, unaudited)

Quarters Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Manufactured homes:

Rental operations revenues (1)

$

12.0

$

11.7

$

35.7

$

34.3

Rental operations expense

1.7

1.6

4.3

4.1

Income from rental operations

10.3

10.1

31.4

30.2

Depreciation on rental homes (2)

2.7

2.8

8.2

7.8

Income from rental operations, net of depreciation

$

7.6

$

7.3

$

23.2

$

22.4

Occupied rentals: (3)

New

3,314

3,079

Used

588

914

Total occupied rental sites

3,902

3,993

As of September 30, 2020

As of September 30, 2019

Cost basis in rental homes: (4)

Gross

Net of
Depreciation

Gross

Net of
Depreciation

New

$

232.0

$

193.1

$

220.7

$

195.6

Used

16.7

7.2

23.5

10.4

Total rental homes

$

248.7

$

200.3

$

244.2

$

206.0

______________________

1.

For the quarters ended September 30, 2020 and 2019, approximately $7.8 million and $7.9 million, respectively, of the rental operations revenue is included in the MH base rental income in the Core Income from Property Operations on page 10. For the nine months ended September 30, 2020 and 2019, approximately $23.5 million and $23.4 million, respectively, of the rental operations revenue is included in the MH base rental income in the Core Income from Property Operations on page 10. The remainder of the rental operations revenue is included in Rental home income for the quarters and nine months ended September 30, 2020 and 2019 in the Core Income from Property Operations on page 10.

2.

Depreciation on rental homes in our Core portfolio is presented in Depreciation and amortization in the Consolidated Income Statements on page 5.

3.

Occupied rentals as of the end of the period in our Core portfolio. Included in the quarters ended September 30, 2020 and 2019 were 286 and 294 homes rented through our ECHO joint venture, respectively. As of September 30, 2020 and 2019, the rental home investment associated with our ECHO joint venture totaled approximately $11.3 million and $10.7 million, respectively.

4.

Includes both occupied and unoccupied rental homes in our Core portfolio. New home cost basis does not include the costs associated with our ECHO joint venture. As of September 30, 2020 and 2019, our investment in the ECHO joint venture was approximately $17.2 million and $16.7 million, respectively.

Total Sites and Home Sales

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

Summary of Total Sites as of September 30, 2020

Sites (1)

MH sites

72,500

RV sites:

Annual

29,900

Seasonal

10,200

Transient

14,100

Marina slips

2,300

Membership (2)

24,600

Joint Ventures (3)

3,600

Total (4)

157,300

Home Sales - Select Data

Quarters Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Total New Home Sales Volume (5)

183

128

471

336

New Home Sales Volume - ECHO joint venture

15

19

38

50

New Home Sales Gross Revenues (5)

$

11,929

$

6,864

$

28,863

$

17,492

Total Used Home Sales Volume

120

198

450

627

Used Home Sales Gross Revenues

$

1,141

$

1,574

$

4,382

$

5,246

Brokered Home Resales Volume

167

270

454

675

Brokered Home Resale Revenues, net

$

245

$

420

$

684

$

1,077

______________________

1.

MH sites are generally leased on an annual basis to residents who own or lease factory-built homes, including manufactured homes. Annual RV and marina sites are leased on an annual basis to customers who generally have an RV, factory-built cottage, boat or other unit placed on the site, including those Northern properties that are open for the summer season. Seasonal RV and marina sites are leased to customers generally for one to six months. Transient RV and marina sites are leased to customers on a short-term basis.

2.

Sites primarily utilized by approximately 117,900 members. Includes approximately 6,000 sites rented on an annual basis.

3.

Joint ventures have approximately 2,900 annual Sites, 500 seasonal Sites, and 200 transient Sites.

4.

Total does not foot due to rounding.

5.

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.

Memberships - Select Data

(Unaudited)

2016

2017

2018

2019

2020 Q3
YTD (1)

Member Count (2)

104,728

106,456

111,094

115,680

117,915

Thousand Trails Camping Pass (TTC) Origination

29,576

31,618

37,528

41,484

34,433

TTC Sales

12,856

14,128

17,194

19,267

16,390

RV Dealer TTC Activations

16,720

17,490

20,334

22,217

18,043

Number of annuals (3)

5,756

5,843

5,888

5,938

6,007

Number of upgrade sales (4)

2,477

2,514

2,500

2,919

2,595

(In thousands, unaudited)

Annual membership subscriptions

$

45,036

$

45,798

$

47,778

$

51,015

$

39,476

RV base rental income from annuals

$

15,413

$

16,841

$

18,363

$

19,634

$

15,334

RV base rental income from seasonals/transients

$

17,344

$

18,231

$

19,840

$

20,181

$

14,268

Membership upgrade sales current period, gross

$

12,312

$

14,130

$

15,191

$

19,111

$

16,522

Utility and other income

$

2,442

$

2,254

$

2,410

$

2,422

$

1,773

______________________

1.

Activity through September 30, 2020.

2.

Members have entered into annual subscriptions with us that entitle them to use certain properties on a continuous basis for up to 21 days.

3.

Members who rent a specific site for an entire year in connection with their membership subscriptions.

4.

Existing members who have upgraded memberships are eligible for enhanced benefits, including but not limited to longer stays, the ability to make earlier reservations, potential discounts on rental units, and potential access to additional properties. Upgrades require a non-refundable upfront payment.

Market Capitalization

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

Capital Structure as of September 30, 2020

Total
Common
Stock/Units

% of Total
Common
Stock/Units

Total

% of Total

% of Total
Market
Capitalization

Secured Debt

$

2,479

98.0

%

Unsecured Debt

50

2.0

%

Total Debt (1)

$

2,529

100.0

%

17.6

%

Common Stock

182,222,007

94.6

%

OP Units

10,481,994

5.4

%

Total Common Stock and OP Units

192,704,001

100.0

%

Common Stock price at September 30, 2020

$

61.30

Fair Value of Common Stock and OP Units

$

11,813

100.0

%

Total Equity

$

11,813

100.0

%

82.4

%

Total Market Capitalization

$

14,342

100.0

%

______________________

1. Excludes deferred financing costs of approximately $28.3 million

Debt Maturity Schedule

Debt Maturity Schedule as of September 30, 2020

(In thousands, unaudited)

Year

Secured
Debt

Weighted
Average
Interest
Rate

Unsecured
Debt

Weighted
Average
Interest
Rate

Total Debt

% of Total
Debt

Weighted
Average
Interest
Rate

2020

$

%

$

%

$

%

%

2021

%

%

%

%

2022

142,646

4.62

%

%

142,646

5.76

%

4.62

%

2023

100,400

5.01

%

%

100,400

4.05

%

5.01

%

2024

10,488

5.49

%

%

10,488

0.42

%

5.49

%

2025

99,045

3.45

%

%

99,045

4.00

%

3.45

%

2026

%

%

%

%

2027

%

%

%

%

2028

218,247

4.19

%

%

218,247

8.81

%

4.19

%

2029

%

%

%

%

Thereafter

1,907,485

3.54

%

%

1,907,485

76.97

%

3.54

%

Total

$

2,478,311

3.72

%

$

%

$

2,478,311

100.0

%

3.72

%

Unsecured Line of Credit (1)

50,000

50,000

Note Premiums

755

755

Total Debt

2,479,066

50,000

2,529,066

Deferred Financing Costs

(28,283)

(28,283)

Total Debt, net

$

2,450,783

$

50,000

$

2,500,783

3.97

%

(2)

Average Years to Maturity

13.2

1.1

13.0

______________________

1.

Reflects outstanding balance on our line of credit as of September 30, 2020. The Line of Credit matures in October 2021 and had an effective interest rate of 1.42% during the third quarter of 2020.

2.

Reflects effective interest rate for the quarter ended September 30, 2020, including amortization of note premiums and deferred financing costs.

Non-GAAP Financial Measures Definitions and Reconciliations

FUNDS FROM OPERATIONS (FFO). We define FFO as net income, computed in accordance with GAAP, excluding gains or losses from sales of properties, depreciation and amortization related to real estate, impairment charges and adjustments to reflect our share of FFO of unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with our interpretation of standards established by the National Association of Real Estate Investment Trusts ("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. We receive non-refundable upfront payments from membership upgrade contracts. In accordance with GAAP, the non-refundable upfront payments and related commissions are deferred and amortized over the estimated membership upgrade contract term. Although the NAREIT definition of FFO does not address the treatment of non-refundable upfront payments, we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO.

We believe FFO, as defined by the Board of Governors of NAREIT, is generally a 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.

NORMALIZED FUNDS FROM OPERATIONS (NORMALIZED FFO). We define Normalized FFO as FFO excluding non-operating income and expense items, such as gains and losses from early debt extinguishment, including prepayment penalties and defeasance costs, and other miscellaneous non-comparable items. 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.

FUNDS AVAILABLE FOR DISTRIBUTION (FAD). We define FAD as Normalized FFO less non-revenue producing capital expenditures.

We believe that FFO, Normalized FFO and FAD are helpful to investors as supplemental measures of the performance of an equity REIT. We believe that by excluding the effect of gains or losses from sales of properties, depreciation and amortization related to real estate and impairment charges, which are based on historical costs and 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 and other miscellaneous non-comparable items from 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.

INCOME FROM PROPERTY OPERATIONS, EXCLUDING DEFERRALS AND PROPERTY MANAGEMENT. We define Income from property operations, excluding deferrals and property management as rental income, membership subscriptions and upgrade sales, utility and other income less property and rental home operating and maintenance expenses, real estate taxes, sales and marketing expenses, excluding property management and the GAAP deferral of membership upgrade sales upfront payments and membership sales commissions, net. For comparative purposes, we present bad debt expense within Property operating, maintenance and real estate taxes in the current and prior periods. We believe that this Non-GAAP financial measure is helpful to investors and analysts as a measure of the operating results of our properties.

The following table reconciles Net income available for Common Stockholders to Income from property operations:

Quarters Ended September 30,

Nine Months Ended September 30,

(amounts in thousands)

2020

2019

2020

2019

Net income available for Common Stockholders

$

50,560

$

64,461

$

163,622

$

224,171

Redeemable perpetual preferred stock dividends

8

8

Income allocated to non-controlling interests – Common OP Units

2,908

3,715

9,415

13,617

Equity in income of unconsolidated joint ventures

(968

)

(3,518

)

(2,239

)

(8,277

)

Income before equity in income of unconsolidated joint ventures

52,500

64,658

170,806

229,519

Gain on sale of real estate, net

(52,507

)

Membership upgrade sales upfront payments, deferred, net

4,171

3,530

9,379

8,213

Gross revenues from home sales

(13,070

)

(8,438

)

(33,245

)

(22,738

)

Brokered resale and ancillary services revenues, net

(1,648

)

(2,133

)

(2,011

)

(4,564

)

Interest income

(1,801

)

(1,831

)

(5,399

)

(5,385

)

Income from other investments, net

(1,428

)

(7,029

)

(3,093

)

(8,894

)

Membership sales commissions, deferred, net

(630

)

(313

)

(1,327

)

(893

)

Property management

14,527

14,605

44,344

42,675

Depreciation and amortization

38,581

37,032

115,937

112,785

Cost of home sales

12,866

8,434

33,627

23,230

Home selling expenses

1,241

1,033

3,535

3,218

General and administrative

9,692

8,710

31,156

27,844

Other expenses

658

1,460

1,885

2,427

Early debt retirement

9,732

10,786

1,491

Interest and related amortization

25,218

25,547

77,540

77,964

Income from property operations, excluding deferrals and property management

150,609

145,265

453,920

434,385

Membership upgrade sales upfront payments, and membership sales commissions, deferred, net

(3,541

)

(3,217

)

(8,052

)

(7,320

)

Property management

(14,527

)

(14,605

)

(44,344

)

(42,675

)

Income from property operations

$

132,541

$

127,443

$

401,524

$

384,390

EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION FOR REAL ESTATE (EBITDAre) AND ADJUSTED EBITDAre. We define EBITDAre as net income or loss excluding interest income and expense, income taxes, depreciation and amortization, gains or losses from sales of properties, impairments charges, and adjustments to reflect our share of EBITDAre of unconsolidated joint ventures. We compute EBITDAre in accordance with our interpretation of the standards established by NAREIT, which may not be comparable to EBITDAre 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. We receive non-refundable upfront payments from membership upgrade contracts. In accordance with GAAP, the non-refundable upfront payments and related commissions are deferred and amortized over the estimated customer life. Although the NAREIT definition of EBITDAre does not address the treatment of non-refundable upfront payments, we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of EBITDAre.

We define Adjusted EBITDAre as EBITDAre excluding non-operating income and expense items, such as gains and losses from early debt extinguishment, including prepayment penalties and defeasance costs, and other miscellaneous non-comparable items.

We believe that EBITDAre and Adjusted EBITDAre may be useful to an investor in evaluating our operating performance and liquidity because the measures are widely used to measure the operating performance of an equity REIT.

The following table reconciles Consolidated net income to EBITDAre and Adjusted EBITDAre:

Quarters Ended September 30,

Nine Months Ended September 30,

(amounts in thousands)

2020

2019

2020

2019

Consolidated net income

$

53,468

$

68,176

$

173,045

$

237,796

Interest income

(1,801)

(1,831)

(5,399)

(5,385)

Membership upgrade sales upfront payments, deferred, net

4,171

3,530

9,379

8,213

Membership sales commissions, deferred, net

(630)

(313)

(1,327)

(893)

Real estate depreciation and amortization

38,581

37,032

115,937

112,785

Other depreciation and amortization

658

460

1,885

1,336

Interest and related amortization

25,218

25,547

77,540

77,964

Gain on sale of real estate, net

(52,507)

Adjustments to our share of EBITDAre of unconsolidated joint ventures

270

259

812

2,858

EBITDAre

119,935

132,860

371,872

382,167

Early debt retirement

9,732

10,786

2,085

Insurance proceeds due to catastrophic weather event

(5,856)

(6,205)

COVID-19 expenses

1,446

Adjusted EBITDAre

$

129,667

$

127,004

$

384,104

$

378,047

CORE. The Core properties include properties we owned and operated during all of 2019 and 2020. We believe Core is a measure that is useful to investors for annual comparison as it removes the fluctuations associated with acquisitions, dispositions and significant transactions or unique situations.

NON-CORE. The Non-Core properties include properties that were not owned and operated during all of 2019 and 2020. This includes, but is not limited to, four properties and the marinas acquired and five properties sold during 2019.

INCOME FROM RENTAL OPERATIONS, NET OF DEPRECIATION. We use Income from rental operations, net of depreciation as an alternative measure to evaluate the operating results of our home rental program. Income from rental operations, net of depreciation, represents income from rental operations less depreciation expense on rental homes. We believe this measure is meaningful for investors as it provides a complete picture of the home rental program operating results, including the impact of depreciation, which affects our home rental program investment decisions.

NON-REVENUE PRODUCING IMPROVEMENTS. Represents capital expenditures that do not directly result in increased revenue or expense savings and are primarily comprised of common area improvements, furniture and mechanical improvements.

FIXED CHARGES. Fixed charges consist of interest expense, amortization of note premiums and debt issuance costs.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201019005837/en/

Contacts

Paul Seavey
(800) 247-5279