ELS Reports Third Quarter Results

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, 2013. All per share results are reported on a fully diluted basis unless otherwise noted.

Financial Results for the Quarter Ended September 30, 2013

Normalized Funds from Operations (“Normalized FFO”) increased $6.8 million, or $0.07 per common share, to $59.4 million, or $0.65 per common share, compared to $52.6 million, or $0.58 per common share, for the same period in 2012. Funds from Operations (“FFO”) decreased $32.8 million, or $0.36 per common share, to $20.4 million, or $0.22 per common share, compared to $53.2 million, or $0.58 per common share, for the same period in 2012. Net income available for common stockholders increased $13.9 million, or $0.17 per common share, to $29.9 million, or $0.36 per common share, compared to $16.0 million, or $0.19 per common share, for the same period in 2012. Net income available for stockholders was impacted by the $40.6 million gain on sale of the Michigan properties, offset by the early debt retirement expenses of $36.5 million.

Portfolio Performance

For the quarter ended September 30, 2013, property operating revenues, excluding deferrals, increased $8.5 million to $178.9 million compared to $170.4 million for the same period in 2012. For the nine months ended September 30, 2013, property operating revenues, excluding deferrals, increased $21.9 million to $524.3 million compared to $502.4 million for the same period in 2012. For the quarter ended September 30, 2013, income from property operations, excluding deferrals, increased $4.6 million to $99.8 million compared to $95.2 million for the same period in 2012. For the nine months ended September 30, 2013, income from property operations, excluding deferrals, increased $11.4 million to $298.4 million compared to $287.0 million for the same period in 2012.

For the quarter ended September 30, 2013, Core property operating revenues increased approximately 3.5 percent and income from Core property operations increased approximately 3.3 percent compared to the same period in 2012. For the nine months ended September 30, 2013, Core property operating revenues increased approximately 3.1 percent and income from Core property operations increased approximately 2.9 percent compared to the same period in 2012.

Balance Sheet

We closed on $237.1 million of financing proceeds during the quarter as part of our $430 million long-term refinancing plan. These loans have a weighted average maturity of 20 years and bear a weighted average interest rate of 4.28 percent per annum. In connection with the refinancing, we defeased 27 mortgages during the quarter totaling $295.3 million with a weighted average interest rate of 5.66 percent per annum which were set to mature in 2014 and 2015. In addition, we paid off $60.7 million in mortgages with a weighted average interest rate of 6.02 percent per annum which were set to mature in 2013. We paid a $36.5 million premium for the early retirement of the mortgages.

Interest coverage, was approximately 3.2 times in the quarter. Our cash balance as of September 30, 2013 was approximately $51.5 million. Expanded disclosure on our balance sheet and debt statistics are included in the tables below.

As of October 21, 2013, we own or have an interest in 376 quality properties in 32 states and British Columbia consisting of 138,869 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 22, 2013.

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 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 2013 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;
• 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;” 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:

2013 Guidance - Selected Financial Data ⁽¹⁾

Our guidance acknowledges the existence of volatile economic conditions, which may impact our current guidance assumptions. Factors impacting 2013 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 purchased by us 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.

Fourth Quarter 2013 Guidance - Selected Financial Data ⁽¹⁾

Our guidance acknowledges the existence of volatile economic conditions, which may impact our current guidance assumptions. Factors impacting 2013 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 purchased by us 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.

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.

2011 Acquired Chattel Loan Assumptions

The following chattel loan assumptions exclude the 11 Michigan properties sold in 2013. For the year ending December 31, 2013, other income and expenses guidance includes estimated interest income of approximately $3.5 million from notes receivable acquired from the seller and secured by manufactured homes in connection with the acquisition of properties in 2011. As of September 30, 2013, our carrying value of the notes receivable was approximately $14.7 million. Our initial carrying value was based on a third party valuation utilizing 2011 market transactions and is adjusted based on actual performance in the loan pool. Factors used in determining the initial carrying value included delinquency status, market interest rates and recovery assumptions. The following tables provide a summary of the notes receivable and certain assumptions about future performance on the remaining notes receivable portfolio, including interest income guidance for 2013. An increase in the estimate of expected cash flows would generally result in additional interest income to be recognized over the remaining life of the underlying pool of loans. A decrease in the estimate of expected cash flows could result in an impairment loss to the carrying value of the loans. There can be no assurance that the notes receivable will perform in accordance with these assumptions.

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 nonrefundable 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.