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ELS > SEC Filings for ELS > Form 10-Q on 5-Nov-2012All Recent SEC Filings




Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The Company is a self-administered, self-managed, real estate investment trust ("REIT") with headquarters in Chicago, Illinois. The Company is a fully integrated owner and operator of lifestyle-oriented properties ("Properties"). The Company leases individual developed areas ("sites") with access to utilities for placement of factory built homes, cottages, cabins or recreational vehicles ("RVs"). Customers may lease individual sites or purchase right-to-use contracts providing the customer access to specific Properties for limited stays. The Company was formed to continue the property operations, business objectives and acquisition strategies of an entity that had owned and operated Properties since 1969. As of September 30, 2012, the Company owned or had an ownership interest in a portfolio of 382 Properties located throughout the United States and Canada containing 141,077 residential sites. These Properties are located in 32 states and British Columbia, with the number of Properties in each state or province shown parenthetically, as follows: Florida (119), California (49), Arizona (41), Michigan (15), Pennsylvania (15), Texas (15), Washington (15), Colorado (10), Oregon (9), North Carolina (8), Delaware (7), Indiana (7), Nevada (7), New York
(7), Virginia (7), Maine (5), Massachusetts (5), Wisconsin (5), Idaho (4), Illinois (4), Minnesota (4), New Jersey (4), South Carolina (3), Utah (3), Maryland (2), New Hampshire (2), North Dakota (2), Ohio (2), Tennessee (2), Alabama (1), Connecticut (1), Kentucky (1) and British Columbia (1). This report 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 the Company's expectations, goals or intentions regarding the future, and the expected effect of the recent acquisitions on the Company. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:
the Company's ability to control costs, real estate market conditions, the actual rate of decline in customers, the actual use of sites by customers and its success in acquiring new customers at its Properties (including those that it may acquire);

          the Company's ability to maintain historical rental rates and
           occupancy with respect to Properties currently owned or that the
           Company may acquire;

          the Company's ability to retain and attract customers renewing,
           upgrading and entering right-to-use contracts;

the Company's assumptions about rental and home sales markets;

the Company's 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

          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 the recent acquisitions and the Company's
           estimates regarding the future performance of recent acquisitions;

          unanticipated costs or unforeseen liabilities associated with the
           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 the Company's 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. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.

Table of Contents

The following chart lists the Properties acquired, invested in, or sold since January 1, 2011 through September 30, 2012.

Property                                                Transaction Date       Sites

Total Sites as of January 1, 2011                                              111,002
Property or Portfolio (# of Properties in parentheses):
Acquisition Properties (35)                             July 1, 2011            12,044
Acquisition Properties (16)                             August 1, 2011           7,817
Acquisition Properties (7)                              September 1, 2011        3,105
Acquisition Properties (2)                              October 3, 2011          1,573
Acquisition Properties (1)                              October 11, 2011           521
Acquisition Properties (7)                              October 21, 2011         2,810
Acquisition Properties (7)                              December 7, 2011         2,259
Expansion Site Development and other:
Sites added (reconfigured) in 2011                                                   1
Sites added (reconfigured) in 2012                                                 (55 )
Total Sites as of September 30, 2012                                           141,077

Since January 1, 2011, the gross investment in real estate has increased from $2,585 million to $4,126 million as of September 30, 2012 Outlook
Occupancy in the Company's Properties as well as its ability to increase rental rates directly affects revenues. The Company's revenue streams are predominantly derived from customers renting its sites on a long-term basis. Revenues are subject to seasonal fluctuations and as such quarterly interim results may not be indicative of full fiscal year results.
The Company has approximately 95,100 annual sites, approximately 9,000 seasonal sites, which are leased to customers generally for three to six months, and approximately 9,600 transient sites, occupied by customers who lease sites on a short-term basis. The revenue from seasonal and transient sites is generally higher during the first and third quarters. The Company expects to service over 100,000 customers at its transient sites and the Company considers this revenue stream to be its most volatile. It is subject to weather conditions, gas prices, and other factors affecting the marginal RV customer's vacation and travel preferences. Finally, the Company has approximately 24,300 sites designated as right-to-use sites which are primarily utilized to service the approximately 98,000 customers who have entered into right-to-use contracts. The Company also has interests in Properties containing approximately 3,100 sites for which revenue is classified as Equity in income from unconsolidated joint ventures in the Consolidated Statements of Income and Comprehensive Income.

Total Sites as of
September 30, 2012
(rounded to 000's)

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