ELS Reports First Quarter Results

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:

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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.

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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.

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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.

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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.

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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.

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1. Represents actual performance of five properties we acquired during 2013 and two properties we acquired during 2014. Excludes property management expenses.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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.