Equity LifeStyle Properties, Inc. (NYSE: ELS) (referred to herein as
“we,” “us,” and “our”) today announced results for the quarter ended
March 31, 2014. All per share results are reported on a fully diluted
basis unless otherwise noted.
Financial Results for the Quarter Ended March 31, 2014
Normalized Funds from Operations (“Normalized FFO”) increased $7.8
million, or $0.09 per common share, to $71.8 million, or $0.79 per
common share, compared to $64.0 million, or $0.70 per common share, for
the same period in 2013. Funds from Operations (“FFO”) increased $6.4
million, or $0.07 per common share, to $71.4 million, or $0.78 per
common share, compared to $65.0 million, or $0.71 per common share, for
the same period in 2013. Net income available for common stockholders
increased $3.1 million, or $0.04 per common share, to $38.1 million, or
$0.46 per common share, compared to $35.0 million, or $0.42 per common
share, for the same period in 2013.
Portfolio Performance
For the quarter ended March 31, 2014, property operating revenues,
excluding deferrals, increased $10.5 million to $186.4 million compared
to $175.9 million for the same period in 2013. For the quarter ended
March 31, 2014, income from property operations, excluding deferrals,
increased $6.7 million to $111.0 million compared to $104.3 million for
the same period in 2013.
For the quarter ended March 31, 2014, Core property operating revenues
increased approximately 3.9 percent and income from Core property
operations increased approximately 4.2 percent compared to the same
period in 2013.
Balance Sheet
During the first quarter, we paid off $20.7 million in mortgages with a
weighted average interest rate of 5.63 percent per annum. On April 1,
2014, we completed our $430 million long-term refinancing plan initiated
in 2013. We closed on the final financing proceeds of $54.0 million,
with loans bearing a weighted average interest rate of 4.54 percent per
annum and maturing in 2034 and 2038.
Interest coverage was approximately 3.8 times in the quarter. Cash on
our balance sheet as of March 31, 2014 was approximately $56.4 million.
Expanded disclosure on our balance sheet and debt statistics are
included in the tables below.
Acquisitions
In January 2014, we closed on the acquisition of two resort properties,
Blackhawk Resort, a 490-site property, and Lakeland Resort, a 682-site
property, for a combined purchase price of approximately $25.0 million.
In addition, on March 10, 2014 we closed on the purchase option to
acquire the land related to our Colony Cove property which was part of
our 2011 Hometown acquisition. The total purchase price was
approximately $36.0 million.
General Information
As of April 21, 2014, we own or have an interest in 379 quality
properties in 32 states and British Columbia consisting of 140,333
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 April 22, 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 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:
|
|
|
First Quarter 2014 - Selected Financial Data
|
|
|
|
(In millions, except per share data, unaudited)
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31, 2014
|
|
Income from property operations - 2014 Core (1)
|
|
$
|
108.7
|
|
|
Income from property operations - Acquisitions (2)
|
|
2.3
|
|
|
Property management and general and administrative (excluding
transaction costs)
|
|
(15.9
|
)
|
|
Other income and expenses
|
|
7.1
|
|
|
Financing costs and other
|
|
(30.4
|
)
|
|
Normalized FFO (3)
|
|
71.8
|
|
|
Change in fair value of contingent consideration asset (4)
|
|
0.1
|
|
|
Transaction costs
|
|
(0.5
|
)
|
|
FFO (3)
|
|
$
|
71.4
|
|
|
|
|
|
|
Normalized FFO per share - fully diluted
|
|
$
|
0.79
|
|
|
FFO per share - fully diluted
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO (3)
|
|
$
|
71.8
|
|
|
Non-revenue producing improvements to real estate
|
|
(4.3
|
)
|
|
Funds available for distribution (FAD) (3)
|
|
$
|
67.5
|
|
|
|
|
|
|
FAD per share - fully diluted
|
|
$
|
0.74
|
|
|
|
|
|
|
Weighted average shares outstanding - fully diluted
|
|
91.4
|
|
______________________
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 20.
4. During the quarter we closed on the purchase option to acquire the
land related to our Colony Cove property and as a result terminated the
ground lease. We also received the final distributions of 51,290 of
shares of our common stock from the escrow funded by the seller and
recognized a $0.1 million change in fair value of contingent
consideration asset.
|
|
|
Consolidated Income Statement
|
|
|
|
(In thousands, unaudited)
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
Revenues:
|
|
|
|
|
|
Community base rental income
|
|
$
|
106,045
|
|
|
$
|
100,776
|
|
|
Rental home income
|
|
3,757
|
|
|
3,394
|
|
|
Resort base rental income
|
|
44,949
|
|
|
40,739
|
|
|
Right-to-use annual payments
|
|
11,214
|
|
|
11,523
|
|
|
Right-to-use contracts current period, gross
|
|
2,923
|
|
|
2,831
|
|
|
Right-to-use contracts, deferred, net of prior period amortization
|
|
(1,147
|
)
|
|
(1,040
|
)
|
|
Utility and other income
|
|
17,571
|
|
|
16,683
|
|
|
Gross revenues from home sales
|
|
5,178
|
|
|
2,696
|
|
|
Brokered resale revenue and ancillary services revenues, net
|
|
1,799
|
|
|
1,795
|
|
|
Interest income
|
|
2,697
|
|
|
1,898
|
|
|
Income from other investments, net (1)
|
|
1,601
|
|
|
2,480
|
|
|
Total revenues
|
|
196,587
|
|
|
183,775
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Property operating and maintenance
|
|
58,696
|
|
|
55,055
|
|
|
Rental home operating and maintenance
|
|
1,908
|
|
|
1,870
|
|
|
Real estate taxes
|
|
12,485
|
|
|
12,400
|
|
|
Sales and marketing, gross
|
|
2,405
|
|
|
2,361
|
|
|
Sales and marketing, deferred commissions, net
|
|
(555
|
)
|
|
(463
|
)
|
|
Property management
|
|
10,632
|
|
|
10,133
|
|
|
Depreciation on real estate assets and rental homes
|
|
27,642
|
|
|
26,020
|
|
|
Amortization of in-place leases
|
|
1,315
|
|
|
159
|
|
|
Cost of home sales
|
|
5,368
|
|
|
2,781
|
|
|
Home selling expenses
|
|
569
|
|
|
527
|
|
|
General and administrative (2)
|
|
5,760
|
|
|
6,711
|
|
|
Property rights initiatives
|
|
311
|
|
|
232
|
|
|
Interest and related amortization
|
|
28,048
|
|
|
30,123
|
|
|
Total expenses
|
|
154,584
|
|
|
147,909
|
|
|
Income from continuing operations before equity in income of
unconsolidated joint ventures
|
|
42,003
|
|
|
35,866
|
|
|
Equity in income of unconsolidated joint ventures
|
|
1,887
|
|
|
576
|
|
|
Consolidated income from continuing operations
|
|
43,890
|
|
|
36,442
|
|
|
|
|
|
|
|
|
Discontinued Operations:
|
|
|
|
|
|
Net income from discontinued operations
|
|
—
|
|
|
3,068
|
|
|
Gain on sale of property, net of tax
|
|
—
|
|
|
958
|
|
|
Income from discontinued operations
|
|
—
|
|
|
4,026
|
|
|
Consolidated net income
|
|
43,890
|
|
|
40,468
|
|
|
|
|
|
|
|
|
Income allocated to non-controlling interest-Common OP Units
|
|
(3,481
|
)
|
|
(3,133
|
)
|
|
Series C Redeemable Perpetual Preferred Stock Dividends
|
|
(2,310
|
)
|
|
(2,311
|
)
|
|
Net income available for Common Shares
|
|
$
|
38,099
|
|
|
$
|
35,024
|
|
_________________________________________
1. For the quarters ended March 31, 2014 and 2013, includes a $0.1
million increase and a $1.0 million increase, respectively, 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.
|
|
|
Reconciliation of Net Income to FFO, Normalized FFO and FAD
|
|
|
|
(In thousands, except per share data (prior period adjusted
for stock split), unaudited)
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
Net income available for Common Shares
|
|
$
|
38,099
|
|
|
$
|
35,024
|
|
|
Income allocated to common OP Units
|
|
3,481
|
|
|
3,133
|
|
|
Right-to-use contract upfront payments, deferred, net (1)
|
|
1,147
|
|
|
1,040
|
|
|
Right-to-use contract commissions, deferred, net (2)
|
|
(555
|
)
|
|
(463
|
)
|
|
Depreciation on real estate assets
|
|
24,892
|
|
|
24,458
|
|
|
Depreciation on real estate assets, discontinued operations
|
|
—
|
|
|
763
|
|
|
Depreciation on rental homes
|
|
2,750
|
|
|
1,562
|
|
|
Amortization of in-place leases
|
|
1,315
|
|
|
159
|
|
|
Depreciation on unconsolidated joint ventures
|
|
227
|
|
|
273
|
|
|
Gain on sale of property, net of tax
|
|
—
|
|
|
(958
|
)
|
|
FFO (3)
|
|
$
|
71,356
|
|
|
$
|
64,991
|
|
|
Change in fair value of contingent consideration asset (4)
|
|
(65
|
)
|
|
(1,018
|
)
|
|
Transaction costs (5)
|
|
490
|
|
|
—
|
|
|
Normalized FFO (3)
|
|
71,781
|
|
|
63,973
|
|
|
Non-revenue producing improvements to real estate
|
|
(4,312
|
)
|
|
(4,020
|
)
|
|
FAD (3)
|
|
$
|
67,469
|
|
|
$
|
59,953
|
|
|
|
|
|
|
|
|
Income from continuing operations available per Common Share -
Basic
|
|
$
|
0.46
|
|
|
$
|
0.38
|
|
|
Income from continuing operations available per Common Share -
Fully Diluted
|
|
$
|
0.46
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available per Common Share - Basic
|
|
$
|
0.46
|
|
|
$
|
0.42
|
|
|
Net income available per Common Share - Fully Diluted
|
|
$
|
0.46
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per Common Share - Basic
|
|
$
|
0.79
|
|
|
$
|
0.72
|
|
|
FFO per Common Share - Fully Diluted
|
|
$
|
0.78
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO per Common Share - Basic
|
|
$
|
0.79
|
|
|
$
|
0.71
|
|
|
Normalized FFO per Common Share - Fully Diluted
|
|
$
|
0.79
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAD per Common Share - Basic
|
|
$
|
0.74
|
|
|
$
|
0.66
|
|
|
FAD per Common Share - Fully Diluted
|
|
$
|
0.74
|
|
|
$
|
0.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Common Shares - Basic
|
|
83,116
|
|
|
83,026
|
|
|
Average Common Shares and OP Units - Basic
|
|
90,750
|
|
|
90,483
|
|
|
Average Common Shares and OP Units - Fully Diluted
|
|
91,353
|
|
|
91,060
|
|
______________________________
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 20.
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
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
Community base rental income (2)
|
|
$
|
106.0
|
|
|
$
|
100.8
|
|
|
Rental home income
|
|
3.8
|
|
|
3.4
|
|
|
Resort base rental income (3)
|
|
44.9
|
|
|
40.7
|
|
|
Right-to-use annual payments
|
|
11.2
|
|
|
11.5
|
|
|
Right-to-use contracts current period, gross
|
|
2.9
|
|
|
2.8
|
|
|
Utility and other income
|
|
17.6
|
|
|
16.7
|
|
|
Property operating revenues
|
|
186.4
|
|
|
175.9
|
|
|
|
|
|
|
|
|
Property operating, maintenance, and real estate taxes
|
|
71.1
|
|
|
67.3
|
|
|
Rental home operating and maintenance
|
|
1.9
|
|
|
1.9
|
|
|
Sales and marketing, gross
|
|
2.4
|
|
|
2.4
|
|
|
Property operating expenses
|
|
75.4
|
|
|
71.6
|
|
|
Income from property operations
|
|
$
|
111.0
|
|
|
$
|
104.3
|
|
|
|
|
|
|
|
|
Manufactured home site figures and occupancy averages:
|
|
|
|
|
|
Total sites
|
|
69,962
|
|
|
68,770
|
|
|
Occupied sites
|
|
64,309
|
|
|
62,901
|
|
|
Occupancy %
|
|
91.9
|
%
|
|
91.6
|
%
|
|
Monthly base rent per site
|
|
$
|
550
|
|
|
$
|
534
|
|
|
|
|
|
|
|
|
Core total sites
|
|
68,624
|
|
|
68,642
|
|
|
Core occupied sites
|
|
63,168
|
|
|
62,901
|
|
|
Core occupancy %
|
|
92.0
|
%
|
|
91.6
|
%
|
|
Core monthly base rent per site
|
|
$
|
549
|
|
|
$
|
534
|
|
|
|
|
|
|
|
|
Resort base rental income:
|
|
|
|
|
|
Annual
|
|
$
|
25.0
|
|
|
$
|
23.0
|
|
|
Seasonal
|
|
12.8
|
|
|
11.8
|
|
|
Transient
|
|
7.1
|
|
|
5.9
|
|
|
Total resort base rental income
|
|
$
|
44.9
|
|
|
$
|
40.7
|
|
_________________________
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
|
|
|
|
|
|
March 31,
|
|
%
|
|
|
|
2014
|
|
2013
|
|
Change (2)
|
|
Community base rental income (3)
|
|
$
|
104.1
|
|
|
$
|
100.8
|
|
|
3.3
|
%
|
|
Rental home income
|
|
3.7
|
|
|
3.4
|
|
|
10.2
|
%
|
|
Resort base rental income (4)
|
|
43.4
|
|
|
40.7
|
|
|
6.6
|
%
|
|
Right-to-use annual payments
|
|
11.2
|
|
|
11.5
|
|
|
(2.7
|
)%
|
|
Right-to-use contracts current period, gross
|
|
2.9
|
|
|
2.8
|
|
|
3.2
|
%
|
|
Utility and other income
|
|
17.5
|
|
|
16.7
|
|
|
4.2
|
%
|
|
Property operating revenues
|
|
182.8
|
|
|
175.9
|
|
|
3.9
|
%
|
|
|
|
|
|
|
|
|
|
Property operating, maintenance, and real estate taxes
|
|
69.8
|
|
|
67.3
|
|
|
3.5
|
%
|
|
Rental home operating and maintenance
|
|
1.9
|
|
|
1.9
|
|
|
1.7
|
%
|
|
Sales and marketing, gross
|
|
2.4
|
|
|
2.4
|
|
|
1.9
|
%
|
|
Property operating expenses
|
|
74.1
|
|
|
71.6
|
|
|
3.4
|
%
|
|
Income from property operations
|
|
$
|
108.7
|
|
|
$
|
104.3
|
|
|
4.2
|
%
|
|
Occupied sites (5)
|
|
63,263
|
|
|
63,015
|
|
|
|
|
|
|
|
|
|
|
|
|
Core manufactured home site figures and occupancy averages:
|
|
Total sites
|
|
68,624
|
|
|
68,642
|
|
|
|
|
Occupied sites
|
|
63,168
|
|
|
62,901
|
|
|
|
|
Occupancy %
|
|
92.0
|
%
|
|
91.6
|
%
|
|
|
|
Monthly base rent per site
|
|
$
|
549
|
|
|
$
|
534
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort base rental income:
|
|
|
|
|
|
|
|
Annual
|
|
$
|
24.2
|
|
|
$
|
23.0
|
|
|
5.2
|
%
|
|
Seasonal
|
|
12.6
|
|
|
11.8
|
|
|
6.4
|
%
|
|
Transient
|
|
6.6
|
|
|
5.9
|
|
|
12.5
|
%
|
|
Total resort base rental income
|
|
$
|
43.4
|
|
|
$
|
40.7
|
|
|
6.6
|
%
|
____________________________
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 75 from 63,188 at December 31, 2013.
|
|
|
Acquisitions - Income from Property Operations (1)
|
|
|
|
(In millions, unaudited)
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
2014
|
|
Community base rental income
|
|
$
|
2.0
|
|
Resort base rental income
|
|
1.5
|
|
Utility income and other property income
|
|
0.2
|
|
Property operating revenues
|
|
3.7
|
|
|
|
|
|
Property operating expenses
|
|
1.4
|
|
Income from property operations
|
|
$
|
2.3
|
______________________
1. Represents actual performance of five properties we acquired during
2013 and two properties we acquired during 2014. Excludes property
management expenses.
|
|
|
Income from Rental Home Operations
|
|
|
|
(In millions, except occupied rentals, unaudited)
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
Manufactured homes:
|
|
|
|
|
|
New home
|
|
$
|
5.8
|
|
|
$
|
5.4
|
|
|
Used home
|
|
7.9
|
|
|
7.5
|
|
|
Rental operations revenues (1)
|
|
13.7
|
|
|
12.9
|
|
|
Rental operations expense
|
|
(1.9
|
)
|
|
(1.9
|
)
|
|
Income from rental operations, before depreciation
|
|
11.8
|
|
|
11.0
|
|
|
Depreciation on rental homes
|
|
(2.8
|
)
|
|
(1.6
|
)
|
|
Income from rental operations, after depreciation
|
|
$
|
9.0
|
|
|
$
|
9.4
|
|
|
|
|
|
|
|
|
Occupied rentals: (2)
|
|
|
|
|
|
New
|
|
2,097
|
|
|
1,928
|
|
|
Used
|
|
3,406
|
|
|
3,391
|
|
|
Total occupied rental sites
|
|
5,503
|
|
|
5,319
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 31, 2014
|
|
March 31, 2013
|
|
Cost basis in rental homes: (3)
|
|
Gross
|
|
Net of
Depreciation
|
|
Gross
|
|
Net of
Depreciation
|
|
New
|
|
$
|
113.5
|
|
|
$
|
99.2
|
|
|
$
|
109.6
|
|
|
$
|
99.2
|
|
Used
|
|
64.3
|
|
|
53.9
|
|
|
60.5
|
|
|
53.9
|
|
Total rental homes
|
|
$
|
177.8
|
|
|
$
|
153.1
|
|
|
$
|
170.1
|
|
|
$
|
153.1
|
____________________________
1. For the quarters ended March 31, 2014 and 2013, approximately $10.0
million and $9.5 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.
3. Includes both occupied and unoccupied rental homes.
|
|
|
Total Sites and Home Sales
|
|
|
|
(In thousands, except sites and home sale volumes, unaudited)
|
|
|
|
|
|
Summary of Total Sites as of March 31, 2014
|
|
|
|
|
|
|
|
Sites
|
|
Community sites
|
|
|
|
69,900
|
|
Resort sites:
|
|
|
|
|
|
Annuals
|
|
|
|
24,300
|
|
Seasonal
|
|
|
|
9,100
|
|
Transient
|
|
|
|
9,800
|
|
Membership (1)
|
|
|
|
24,100
|
|
Joint Ventures (2)
|
|
|
|
3,100
|
|
Total
|
|
|
|
140,300
|
|
|
|
|
|
|
|
Home Sales - Select Data
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
New Home Sales Volume (3)
|
|
45
|
|
|
10
|
|
New Home Sales Gross Revenues
|
|
$
|
1,994
|
|
|
$
|
481
|
|
|
|
|
|
|
|
Used Home Sales Volume
|
|
380
|
|
|
341
|
|
Used Home Sales Gross Revenues
|
|
$
|
3,184
|
|
|
$
|
2,215
|
|
|
|
|
|
|
|
Brokered Home Resales Volume
|
|
226
|
|
|
220
|
|
Brokered Home Resale Revenues, net
|
|
$
|
295
|
|
|
$
|
318
|
__________________________
1. Sites primarily utilized by approximately 96,400 members. Includes
approximately 4,900 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. Includes 14 home sales through our Echo joint venture for the quarter
ended March 31, 2014.
|
|
|
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)
|
|
$
|
412.4
|
|
|
Income from property operations - Acquisitions (3)
|
|
9.5
|
|
|
Property management and general and administrative
|
|
(68.0
|
)
|
|
Other income and expenses
|
|
16.8
|
|
|
Financing costs and other
|
|
(122.3
|
)
|
|
Normalized FFO (4)
|
|
248.4
|
|
|
Change in fair value of contingent consideration asset
|
|
0.1
|
|
|
Transaction costs
|
|
(0.5
|
)
|
|
FFO (4)
|
|
248.0
|
|
|
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
|
|
(2.8
|
)
|
|
Income allocated to OP units
|
|
(10.8
|
)
|
|
Net income available to common shares
|
|
$
|
118.4
|
|
|
|
|
|
|
Normalized FFO per share - fully diluted
|
|
$2.67-$2.77
|
|
FFO per share - fully diluted
|
|
$2.66-$2.76
|
|
Net income per common share - fully diluted (5)
|
|
$1.36-$1.46
|
|
|
|
|
|
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 4.3%.
3. See page 15 for the 2014 Assumptions regarding the Acquisition
Properties.
4. See page 20 for definitions of Normalized FFO and FFO.
5. Net income per fully diluted common share is calculated before Income
allocated to OP Units.
|
|
|
Second 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
|
|
|
|
June 30, 2014
|
|
Income from property operations - 2014 Core (2)
|
|
$
|
98.3
|
|
|
Income from property operations - Acquisitions (3)
|
|
2.2
|
|
|
Property management and general and administrative
|
|
(17.1
|
)
|
|
Other income and expenses
|
|
3.0
|
|
|
Financing costs and other
|
|
(30.6
|
)
|
|
Normalized FFO and FFO (4)
|
|
55.8
|
|
|
Depreciation on real estate and other
|
|
(26.7
|
)
|
|
Depreciation on rental homes
|
|
(2.7
|
)
|
|
Deferral of right-to-use contract sales revenue and commission, net
|
|
(0.7
|
)
|
|
Income allocated to OP units
|
|
(2.2
|
)
|
|
Net income available to common shares
|
|
$
|
23.5
|
|
|
|
|
|
|
Normalized FFO per share - fully diluted
|
|
$0.58-$0.64
|
|
FFO per share - fully diluted
|
|
$0.58-$0.64
|
|
Net income per common share - fully diluted (5)
|
|
$0.25-$0.31
|
|
|
|
|
|
Weighted average shares outstanding - fully diluted
|
|
91.4
|
|
_____________________________________
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
$94.4 million multiplied by an estimated growth rate of 4.1%.
3. See page 15 for the 2014 Assumptions regarding the Acquisition
Properties.
4. See page 20 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
2014
|
|
Quarter Ended
|
|
Second
Quarter 2014
|
|
|
|
December 31,
2013
|
|
Growth
Factors (2)
|
|
June 30,
2013
|
|
Growth
Factors (2)
|
|
Community base rental income
|
|
$
|
406.6
|
|
|
3.0
|
%
|
|
$
|
101.5
|
|
|
3.0
|
%
|
|
Rental home income
|
|
14.2
|
|
|
6.0
|
%
|
|
3.6
|
|
|
4.2
|
%
|
|
Resort base rental income (3)
|
|
147.0
|
|
|
4.6
|
%
|
|
33.2
|
|
|
5.5
|
%
|
|
Right-to-use annual payments
|
|
48.0
|
|
|
(5.6
|
)%
|
|
12.0
|
|
|
(5.5
|
)%
|
|
Right-to-use contracts current period, gross
|
|
13.1
|
|
|
3.2
|
%
|
|
3.4
|
|
|
2.1
|
%
|
|
Utility and other income
|
|
63.6
|
|
|
5.1
|
%
|
|
15.8
|
|
|
5.2
|
%
|
|
Property operating revenues
|
|
692.5
|
|
|
3.0
|
%
|
|
169.5
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Property operating, maintenance, and real estate taxes
|
|
(276.9
|
)
|
|
2.1
|
%
|
|
(70.3
|
)
|
|
2.5
|
%
|
|
Rental home operating and maintenance
|
|
(7.4
|
)
|
|
0.3
|
%
|
|
(1.5
|
)
|
|
15.1
|
%
|
|
Sales and marketing, gross
|
|
(12.8
|
)
|
|
(14.9
|
)%
|
|
(3.3
|
)
|
|
(15.4
|
)%
|
|
Property operating expenses
|
|
(297.1
|
)
|
|
1.3
|
%
|
|
(75.1
|
)
|
|
1.9
|
%
|
|
Income from property operations
|
|
$
|
395.4
|
|
|
4.3
|
%
|
|
$
|
94.4
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Resort base rental income:
|
|
|
|
|
|
|
|
|
|
Annual
|
|
$
|
94.6
|
|
|
4.9
|
%
|
|
$
|
23.5
|
|
|
4.9
|
%
|
|
Seasonal
|
|
22.9
|
|
|
3.5
|
%
|
|
3.0
|
|
|
1.4
|
%
|
|
Transient
|
|
29.5
|
|
|
4.6
|
%
|
|
6.7
|
|
|
9.3
|
%
|
|
Total resort base rental income
|
|
$
|
147.0
|
|
|
4.6
|
%
|
|
$
|
33.2
|
|
|
5.5
|
%
|
_______________________________
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)
|
|
June 30, 2014 (2)
|
|
Community base rental income
|
|
$
|
8.0
|
|
|
$
|
2.0
|
|
|
Rental home income
|
|
0.1
|
|
|
—
|
|
|
Resort base rental income
|
|
6.4
|
|
|
1.5
|
|
|
Utility income and other property income
|
|
1.4
|
|
|
0.4
|
|
|
Property operating revenues
|
|
15.9
|
|
|
3.9
|
|
|
|
|
|
|
|
|
Property operating, maintenance, and real estate taxes
|
|
(6.4
|
)
|
|
(1.7
|
)
|
|
Property operating expenses
|
|
(6.4
|
)
|
|
(1.7
|
)
|
|
Income from property operations
|
|
$
|
9.5
|
|
|
$
|
2.2
|
|
___________________________________
1. The acquisition properties include five properties acquired during
2013 and two 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.
|
|
|
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,
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014 (1)
|
|
Member Count (2)
|
|
102,726
|
|
|
99,567
|
|
|
96,687
|
|
|
98,277
|
|
|
97,000
|
|
Right-to-use annual payments (3)
|
|
$
|
49,831
|
|
|
$
|
49,122
|
|
|
$
|
47,662
|
|
|
$
|
47,967
|
|
|
$
|
45,300
|
|
Number of Zone Park Passes (ZPPs) (4)
|
|
4,487
|
|
|
7,404
|
|
|
10,198
|
|
|
15,607
|
|
|
18,000
|
|
Number of annuals (5)
|
|
3,062
|
|
|
3,555
|
|
|
4,280
|
|
|
4,830
|
|
|
5,130
|
|
Resort base rental income from annuals
|
|
$
|
6,712
|
|
|
$
|
8,069
|
|
|
$
|
9,585
|
|
|
$
|
11,148
|
|
|
$
|
12,375
|
|
Number of upgrades (6)
|
|
3,659
|
|
|
3,930
|
|
|
3,069
|
|
|
2,999
|
|
|
3,150
|
|
Upgrade contract initiations (7)
|
|
$
|
17,430
|
|
|
$
|
17,663
|
|
|
$
|
13,431
|
|
|
$
|
13,142
|
|
|
$
|
13,600
|
|
Resort base rental income from seasonals/transients
|
|
$
|
10,967
|
|
|
$
|
10,852
|
|
|
$
|
11,042
|
|
|
$
|
12,692
|
|
|
$
|
13,500
|
|
Utility and other income
|
|
$
|
2,059
|
|
|
$
|
2,444
|
|
|
$
|
2,407
|
|
|
$
|
2,293
|
|
|
$
|
2,350
|
________________________________
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.
For the years ended December 31, 2012, 2013 and 2014, includes
approximately 1,300, 7,000 and 9,550 RV dealer ZPPs, respectively.
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 zones 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 (prior period adjusted for stock
split) and per share data)
|
|
|
|
|
|
|
|
|
|
March 31,
2014
(unaudited)
|
|
December 31,
2013
|
|
Assets
|
|
|
|
|
|
Investment in real estate:
|
|
|
|
|
|
Land
|
|
$
|
1,065,368
|
|
|
$
|
1,025,246
|
|
|
Land improvements
|
|
2,685,613
|
|
|
2,667,213
|
|
|
Buildings and other depreciable property
|
|
545,148
|
|
|
535,647
|
|
|
|
|
4,296,129
|
|
|
4,228,106
|
|
|
Accumulated depreciation
|
|
(1,087,380
|
)
|
|
(1,058,540
|
)
|
|
Net investment in real estate
|
|
3,208,749
|
|
|
3,169,566
|
|
|
Cash
|
|
56,427
|
|
|
58,427
|
|
|
Notes receivable, net
|
|
38,610
|
|
|
42,990
|
|
|
Investment in joint ventures
|
|
14,477
|
|
|
11,583
|
|
|
Deferred financing costs, net
|
|
18,984
|
|
|
19,873
|
|
|
Deferred commission expense
|
|
25,806
|
|
|
25,251
|
|
|
Escrow deposits, goodwill, and other assets, net
|
|
47,509
|
|
|
63,949
|
|
|
Total Assets
|
|
$
|
3,410,562
|
|
|
$
|
3,391,639
|
|
|
Liabilities and Equity
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Mortgage notes payable
|
|
$
|
1,976,426
|
|
|
$
|
1,992,368
|
|
|
Term loan
|
|
200,000
|
|
|
200,000
|
|
|
Unsecured lines of credit
|
|
—
|
|
|
—
|
|
|
Accrued payroll and other operating expenses
|
|
72,585
|
|
|
65,157
|
|
|
Deferred revenue – upfront payments from right-to-use contracts
|
|
69,820
|
|
|
68,673
|
|
|
Deferred revenue – right-to-use annual payments
|
|
15,341
|
|
|
11,136
|
|
|
Accrued interest payable
|
|
9,712
|
|
|
9,416
|
|
|
Rents and other customer payments received in advance and security
deposits
|
|
62,466
|
|
|
58,931
|
|
|
Distributions payable
|
|
29,478
|
|
|
22,753
|
|
|
Total Liabilities
|
|
2,435,828
|
|
|
2,428,434
|
|
|
Equity:
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
Preferred stock, $0.01 par value 9,945,539 shares authorized as of
March 31, 2014 and December 31, 2013; none issued and outstanding as
of March 31, 2014 and December 31, 2013. As of March 31, 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 March 31, 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
March 31, 2014 and December 31, 2013; 83,324,703 and 83,313,677
shares issued and outstanding as of March 31, 2014 and December 31,
2013, respectively
|
|
834
|
|
|
834
|
|
|
Paid-in capital
|
|
1,020,925
|
|
|
1,021,365
|
|
|
Distributions in excess of accumulated earnings
|
|
(253,065
|
)
|
|
(264,083
|
)
|
|
Accumulated other comprehensive loss
|
|
(482
|
)
|
|
(927
|
)
|
|
Total Stockholders’ Equity
|
|
904,356
|
|
|
893,333
|
|
|
Non-controlling interests – Common OP Units
|
|
70,378
|
|
|
69,872
|
|
|
Total Equity
|
|
974,734
|
|
|
963,205
|
|
|
Total Liabilities and Equity
|
|
$
|
3,410,562
|
|
|
$
|
3,391,639
|
|
|
|
|
Debt Maturity Schedule & Summary
|
|
|
|
Secured Debt Maturity Schedule as of March 31, 2014
|
|
(In thousands, unaudited)
|
|
|
|
|
|
Year
|
|
Amount
|
|
2014
|
|
65,959
|
|
2015
|
|
286,924
|
|
2016
|
|
224,627
|
|
2017
|
|
94,200
|
|
2018
|
|
209,360
|
|
2019
|
|
210,725
|
|
2020
|
|
127,698
|
|
2021+
|
|
739,195
|
|
Total (1)
|
|
$
|
1,958,688
|
|
Debt Summary as of March 31, 2014
|
|
(In millions, except weighted average interest and average
years to maturity, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Secured
|
|
Unsecured
|
|
|
|
Balance
|
|
Weighted
Average
Interest (2)
|
|
Average
Years to
Maturity
|
|
Balance
|
|
Weighted
Average
Interest (2)
|
|
Average
Years to
Maturity
|
|
Balance
|
|
Weighted
Average
Interest (2)
|
|
Average
Years to
Maturity
|
|
Consolidated Debt
|
|
$
|
2,176
|
|
|
5.1
|
%
|
|
6.5
|
|
$
|
1,976
|
|
|
5.3
|
%
|
|
6.8
|
|
|
$200
|
|
3.1%
|
|
3.3
|
____________________________
1. Represents our mortgage notes payable excluding $17.7 million net
note premiums and our $200 million term loan as of March 31, 2014. As of
March 31, 2014, we had an unsecured line of credit with a borrowing
capacity of $380.0 million, $0 outstanding, an interest rate of LIBOR
plus 1.40% to 2.00% per annum and a 0.25% to 0.40% facility fee
depending on leverage as defined in the loan agreement. The unsecured
line of credit matures on September 15, 2016 and has a one-year
extension option.
2. Includes loan costs amortization.
|
|
|
Market Capitalization
|
|
|
|
(In millions, except share and OP Unit data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Structure as of March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
% of Total
|
|
Total
|
|
% of Total
|
|
% of Total
|
|
|
|
Secured debt
|
|
|
|
|
|
$
|
1,976
|
|
|
90.8
|
%
|
|
|
|
|
|
Unsecured debt
|
|
|
|
|
|
200
|
|
|
9.2
|
%
|
|
|
|
|
|
Total debt
|
|
|
|
|
|
$
|
2,176
|
|
|
100.0
|
%
|
|
36.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
83,324,703
|
|
|
91.6
|
%
|
|
|
|
|
|
|
|
|
|
OP Units
|
|
7,613,463
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
Total Common Shares and OP Units
|
|
90,938,166
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Common Share price
|
|
$
|
40.65
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of Common Shares
|
|
|
|
|
|
$
|
3,697
|
|
|
96.4
|
%
|
|
|
|
|
|
Perpetual Preferred Equity
|
|
|
|
|
|
136
|
|
|
3.5
|
%
|
|
|
|
|
|
Total Equity
|
|
|
|
|
|
$
|
3,833
|
|
|
100.0
|
%
|
|
63.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market capitalization
|
|
|
|
|
|
$
|
6,009
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perpetual Preferred Equity as of March 31, 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.
Copyright Business Wire 2014