UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-11718
EQUITY LIFESTYLE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 36-3857664
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
TWO NORTH RIVERSIDE PLAZA, SUITE 800, 60606
CHICAGO, ILLINOIS (Zip Code)
(Address of principal executive offices)
(312) 279-1400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 Par Value The New York Stock Exchange
(Title of Class) (Name of exchange on which
registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this Form 10-K/A. [ ]
The aggregate market value of voting stock held by nonaffiliates was
approximately $699.2 million as of March 11, 2005 based upon the closing price
of $34.80 on such date using beneficial ownership of stock rules adopted
pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting
stock owned by Directors and Officers, some of whom may not be held to be
affiliates upon judicial determination.
At March 11, 2005, 23,172,094 shares of the Registrant's
Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates by reference the Registrant's Proxy Statement relating to
the Annual Meeting of Stockholders to be held on May 10, 2005.
EQUITY LIFESTYLE PROPERTIES, INC.
TABLE OF CONTENTS
Page
----
PART II.
Item 6. Selected Financial Data ............................................................. 3
Item 8. Financial Statements and Supplementary Data ......................................... 6
PART IV.
Item 15. Exhibits and Financial Statement Schedules .......................................... 7
EXPLANATORY NOTE
This amendment on Form 10-K/A is being filed with respect to our Annual Report
on Form 10-K for the fiscal year ended December 31, 2004, filed with the
Securities and Exchange Commission on March 29, 2005. This Amendment No. 1
includes a signed audit opinion from our independent auditors and a signed
Exhibit 23 -- Consent of Independent Registered Public Accounting Firm required
by Item 601 of Regulation S-K. These documents previously appeared in our Form
10-K unsigned. This amendment does not contain updates to reflect any events
occurring after the original March 29, 2005 filing of our Annual Report on Form
10-K for the fiscal year ended December 31, 2004.
2
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating information
on a historical basis. The historical operating data for the four years ended
December 31, 2003 have been derived from the historical financial statements of
the Company; however, they have been restated to reflect adjustments that are
further explained in Note 2 of the Notes to Consolidated Financial Statements
contained in this Form 10-K/A. The following information should be read in
conjunction with all of the financial statements and notes thereto included
elsewhere in this Form 10-K/A.
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(Amounts in thousands, except for per share and property data)
(1) YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
2003 2002 2001
2004 (Restated) (Restated) (Restated) 2000
--------- ---------- ---------- ---------- ----------
PROPERTY OPERATIONS:
Community base rental income ....................... $ 210,790 $ 196,919 $ 194,640 $ 190,982 $185,023
Resort base rental income .......................... 54,845 11,780 9,146 5,748 7,414
Utility and other income ........................... 24,893 20,150 19,684 20,381 19,357
--------- --------- --------- --------- --------
Property operating revenues ..................... 290,528 228,849 223,470 217,111 211,794
Property operating and maintenance ................. 94,955 64,996 62,843 60,807 57,973
Real estate taxes .................................. 23,679 18,917 17,827 16,882 16,407
Property management ................................ 12,852 9,373 9,292 8,984 8,690
--------- --------- --------- --------- --------
Property operating expenses (exclusive
of depreciation shown separately below) ...... 131,486 93,286 89,962 86,673 83,070
--------- --------- --------- --------- --------
Income from property operations .............. 159,042 135,563 133,508 130,438 128,724
HOME SALES OPERATIONS:
Gross revenues from inventory home sales ........... 47,636 36,606 33,537 -- --
Cost of inventory home sales ....................... (41,833) (31,767) (27,183) -- --
--------- --------- --------- --------- --------
Gross profit from inventory home sales ....... 5,803 4,839 6,354 -- --
Brokered resale revenues, net ...................... 2,186 1,724 1,592 -- --
Home selling expenses .............................. (8,708) (7,360) (7,664) -- --
Ancillary services revenues, net ................... 2,782 216 522 -- --
--------- --------- --------- --------- --------
Income (loss) from home sales operations &
other ........................................ 2,063 (581) 804 -- --
OTHER INCOME (EXPENSES):
Interest income .................................... 1,391 1,695 967 639 1,009
Equity in income of affiliates ..................... -- -- -- 1,811 2,408
Income from other investments (2) .................. 3,475 956 316 383 150
General and administrative ......................... (9,243) (8,060) (8,192) (6,687) (6,423)
Rent control initiatives ........................... (2,412) (2,352) (5,698) (2,358) --
Interest and related amortization (3) .............. (91,922) (58,402) (50,729) (51,305) (53,280)
Depreciation on corporate assets ................... (1,657) (1,240) (1,277) (1,243) (1,139)
Depreciation on real estate assets and other
costs ........................................... (48,862) (37,265) (34,826) (33,540) (33,201)
--------- --------- --------- --------- --------
Total other income (expenses) ................ (149,230) (104,668) (99,439) (92,300) (90,476)
Income before minority interests,
equity in income of unconsolidated joint
ventures, loss on extinguishment of debt,
gain on sale of property and discontinued
operations ................................... 11,875 30,314 34,873 38,138 38,248
(Income) allocated to Common OP Units .............. (936) (3,860) (4,708) (7,216) (7,968)
(Income) allocated to Perpetual Preferred OP ....... (11,284) (11,252) (11,252) (11,252) (11,252)
Units
Equity in income of unconsolidated joint
ventures ........................................ 3,739 340 235 282 8
--------- --------- --------- --------- --------
Income before loss on extinguishment of
debt, gain on sale of properties and other,
and discontinued operations .................. 3,394 15,542 19,148 19,952 19,036
--------- --------- --------- --------- --------
Loss on the extinguishment of debt ................. -- -- -- -- (1,041)
Gain on sale of properties and other ............... 638 -- -- 8,168 12,053
--------- --------- --------- --------- --------
Income from continuing operations ............ 4,032 15,542 19,148 28,120 30,048
--------- --------- --------- --------- --------
DISCONTINUED OPERATIONS:
Discontinued Operations ............................ 26 1,043 3,287 3,203 3,090
Depreciation on discontinued operations ............ (32) (135) (484) (605) (698)
Gain on sale of discontinued properties and other .. -- 10,826 13,014 -- --
Minority interests on discontinued operations ...... -- (2,144) (3,078) (521) (495)
--------- --------- --------- --------- --------
Income (loss) from discontinued operations.... (6) 9,590 12,739 2,077 1,897
--------- --------- --------- --------- --------
NET INCOME AVAILABLE FOR COMMON SHARES ....... $ 4,026 $ 25,132 $ 31,887 $ 30,197 $ 31,945
========= ========= ========= ========= ========
3
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(continued)
(Amounts in thousands, except for per share and property data)
(1) AS OF DECEMBER 31,
--------------------------------------------------------------
2003 2002 2001
2004 (Restated) (Restated) (Restated) 2000
---------- ---------- ---------- ---------- ----------
EARNINGS PER COMMON SHARE - BASIC:
Income from continuing operations ............................ $ 0.18 $ 0.71 $ 0.89 $ 1.34 $ 1.40
Income from discontinued operations .......................... $ 0.00 $ 0.43 $ 0.59 $ 0.10 $ 0.09
Net income available for Common Shares ....................... $ 0.18 $ 1.14 $ 1.48 $ 1.44 $ 1.49
EARNINGS PER COMMON SHARE - FULLY DILUTED:
Income from continuing operations ............................ $ 0.17 $ 0.69 $ 0.87 $ 1.31 $ 1.37
Income from discontinued operations .......................... $ 0.00 $ 0.42 $ 0.57 $ 0.09 $ 0.10
Net income available for Common Shares ....................... $ 0.17 $ 1.11 $ 1.44 $ 1.40 $ 1.47
Distributions declared per Common Share outstanding (3) ...... $ 0.05 $ 9.485 $ 1.90 $ 1.78 $ 1.66
Weighted average Common Shares outstanding - basic ........... 22,849 22,077 21,617 21,036 21,469
Weighted average Common OP Units outstanding ................. 6,067 5,342 5,403 5,466 5,592
Weighted average Common Shares outstanding - fully diluted ... 29,465 28,002 27,632 27,010 27,408
BALANCE SHEET DATA:
Real estate, before accumulated depreciation (4) ............. $2,035,790 $1,309,705 $1,296,007 $1,238,138 $1,218,176
Total assets ................................................. 1,886,289 1,463,507 1,154,794 1,099,447 1,104,304
Total mortgages and loans (3) ................................ 1,653,051 1,076,183 760,233 708,857 719,684
Minority interests ........................................... 134,771 124,634 166,889 170,675 171,271
Stockholders' equity (3) ..................................... 31,844 (2,528) 171,175 173,264 168,095
OTHER DATA:
Funds from operations (5) .................................... $ 54,448 $ 58,479 $ 62,695 $ 64,599 $ 63,807
Net cash flow:
Operating activities ...................................... $ 46,733 $ 75,163 $ 80,176 $ 80,708 $ 68,001
Investing activities ...................................... $ (366,654) $ (598) $ (72,973) $ (23,067) $ 23,102
Financing activities ...................................... $ (514) $ 243,905 $ (1,287) $ (59,134) $ (94,932)
Total Properties (at end of period) .......................... 275 142 142 149 154
Total sites (at end of period) ............................... 101,231 52,349 51,582 50,663 51,304
(1) See the Consolidated Financial Statements of the Company included elsewhere
herein. Certain 2003, 2002, 2001, and 2000 amounts have been reclassified
to conform to the 2004 financial presentation. Such reclassifications have
no effect on the operations or equity as originally presented.
Net Income for the years ended December 31, 2003, 2002 and 2001 have been
restated (see Note 2 of the Notes to Consolidated Financial Statements
contained in this Form 10-K/A) to reflect a change in the Company's
accounting policy with regards to its rent control initiatives. The Company
received a comment letter from the SEC with regard to prior filings. These
issues were outlined in our press release dated March 4, 2005. The issues
have been resolved and resulted in this restatement.
(2) On November 10, 2004, we acquired KTTI Holding Company, Inc., owner of 57
Properties and approximately 3,000 acres of vacant land, for $160 million
("Thousand Trails Transaction"). These Properties are leased to Thousand
Trails, the largest operator of membership-based campgrounds in the United
States. The Company has provided a long-term lease of the real estate
(excluding the vacant land) to Thousand Trails, which will continue to
operate the Properties for the benefit of its approximately 108,000 members
nationwide. The Properties are located in 16 states (primarily in the
western and southern United States) and British Columbia, and contain
17,911 sites. The lease will generate $16 million in rental income to the
Company on an absolute triple net basis, subject to annual escalations of
3.25%. As of December 31, 2004, approximately $2.3 million represents
income for November 10, 2004 through December 31, 2004.
4
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(continued)
(3) On October 17, 2003, we closed 49 mortgage loans collateralized by 51
Properties (the "Recap") providing total proceeds of approximately $501
million at a weighted average interest rate of 5.84% and with a weighted
average maturity of approximately 9 years. Approximately $170 million of
the proceeds were used to repay amounts outstanding on the Company's line
of credit and term loan. Approximately $225 million was used to pay a
special distribution of $8.00 per share on January 16, 2004. The remaining
funds were used for investment purposes in 2004. The Recap resulted in
increased interest and amortization expense and the special distribution
resulted in decreased stockholder's equity.
In connection with the $501 million borrowing and subsequent special
distribution, on February 27, 2004, the Company contributed all of its
assets to MHC Trust, a newly formed Maryland real estate investment trust,
including the Company's entire partnership interest in the Operating
Partnership. This restructuring resulted in a step-up in the Company's tax
basis in its assets, generating future depreciation deductions, which in
turn will reduce the Company's future distribution requirements. This
provides the Company with greater financial flexibility and greater growth
potential (see Note 5 of the Notes to Consolidated Financial Statements
contained in this Form 10-K/A).
(4) We believe that the book value of the Properties, which reflects the
historical costs of such real estate assets less accumulated depreciation,
is less than the current market value of the Properties.
(5) Funds from Operations ("FFO") is a non-GAAP financial measure. The Company
believes that FFO, as defined by the Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT"), to be 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.
FFO is defined as net income, computed in accordance with GAAP, excluding
gains or losses from sales of Properties, plus real estate related
depreciation and amortization, 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. The Company believes that FFO is helpful to investors as one of
several measures of the performance of an equity REIT. The Company further
believes that by excluding the effect of depreciation, amortization and
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. Investors should
review FFO, along with GAAP net income and cash flow from operating
activities, investing activities and financing activities, when evaluating
an equity REIT's operating performance. The Company computes FFO in
accordance with 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. Investors should review FFO,
along with GAAP net income and cash flow from operating activities,
investing activities and financing activities, when evaluating an equity
REIT's operating performance. FFO does not represent cash generated from
operating activities in accordance with GAAP, nor does it 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.
5
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on page F-1 of this
Form 10-K/A.
6
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
1. Financial Statements
See Index to Financial Statements and Schedules on page F-1 of this Form 10-K/A.
2. Financial Statement Schedules
See Index to Financial Statements and Schedules on page F-1 of this Form 10-K/A.
3. Exhibits:
2(a) Admission Agreement between Equity Financial and Management Co.,
Manufactured Home Communities, Inc. and MHC Operating Partnership.
3.1(g) Amended and Restated Articles of Incorporation of Manufactured Home
Communities, Inc. effective May 21, 1999.
3.2(n) Articles of Amendment of Articles of Incorporation of Manufactured
Home Communities, Inc., effective May 13, 2003.
3.3(m) Articles of Amendment to Articles of Incorporation of Manufactured
Home Communities, Inc., effective November 16, 2004.
3.4(n) Amended Bylaws of Manufactured Home Communities, Inc. dated
December 31, 2003.
4 Not applicable
9 Not applicable
10.1(a) Agreement of Limited Partnership of MHC Financing Limited
Partnership
10.2(b) Agreement of Limited Partnership of MHC Lending Limited Partnership
10.3(c) Agreement of Limited Partnership of MHC-Bay Indies Financing
Limited Partnership
10.4(c) Agreement of Limited Partnership of MHC-De Anza Financing Limited
Partnership
10.5(d) Second Amended and Restated MHC Operating Limited Partnership
Agreement of Limited Partnership, dated March 15, 1996
10.6(f) Agreement of Limited Partnership of MHC Financing Limited
Partnership Two
10.7(a) Revolving Credit Note made by Realty Systems, Inc. to Equity
Financial and Management Co.
10.8(a) Assignment to MHC Operating Limited Partnership of Revolving Credit
Note made by Realty Systems, Inc. to Equity Financial and
Management Co.
10.9(a) Loan and Security Agreement between Realty Systems, Inc. and MHC
Operating Limited Partnership
10.10(e) Form of Manufactured Home Communities, Inc. 1997 Non-Qualified
Employee Stock Purchase Plan.
10.11(i) Manufactured Home Communities, Inc. 1992 Stock Option and Stock
Award Plan.
10.12(g) $265,000,000 Mortgage Note dated December 12,1997
10.13(h) $110,000,000 Amended, Restated and Consolidated Promissory Note
(DeAnza Mortgage) dated June 28, 2000
10.14(h) $15,750,000 Promissory Note Secured by Leasehold Deed of Trust
(Date Palm Mortgage) dated July 13, 2000
10.15(j) $50,000,000 Promissory Note secured by Leasehold Deeds of Trust
(Stagecoach Mortgage) dated December 2, 2001.
10.16(k) Loan Agreement dated October 17, 2003 between MHC Sunrise Heights,
L.L.C., as Borrower, and Bank of America, N.A., as Lender.
10.16.1(k) Schedule identifying substantially identical agreements to Exhibit
No. 10.16.
10.17(k) Form of Loan Agreement dated October 17, 2003 between MHC
Countryside L.L.C., as Borrower, and Bank of America, N.A., as
Lender.
10.17.1(k) Schedule identifying substantially identical agreements to Exhibit
No. 10.17.
10.18(k) Form of Loan Agreement dated October 17, 2003 between MHC Creekside
L.L.C., as Borrower, and Bank of America, N.A., as Lender.
10.18.1(k) Schedule identifying substantially identical agreements to Exhibit
No. 10.18.
10.19(k) Form of Loan Agreement dated October 17, 2003 between MHC Golf
Vista Estates L.L.C., as Borrowers, and Bank of America, N.A., as
Lender.
10.19.1(k) Schedule identifying substantially identical agreements to Exhibit
No. 10.19.
10.20(l) Agreement of Plan of Merger (Thousand Trails), dated August 2, 2004
10.21(l) Amendment No. 1 to Agreement of Plan of Merger (Thousand Trails),
dated September 30, 2004
7
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES (CONTINUED)
10.22(l) Amendment No. 2 to Agreement of Plan of Merger (Thousand Trails),
dated November 9, 2004
10.23(l) Thousand Trails Lease Agreement, dated November 10, 2004
10.24(l) $120 million Term Loan Agreement dated November 10, 2004
10.25(l) Fifth Amended and Restated Credit Agreement ($110 million Revolving
Facility) dated November 10, 2004
10.26(l) First Amended and Restated Loan Agreement dated November 10, 2004
11 Not applicable
12(n) Computation of Ratio of Earnings to Fixed Charges
13 Not applicable
14(n) Manufactured Home Communities, Inc. Business Ethics and Conduct
Policy, dated March 2004
15 Not applicable
16 Not applicable
17 Not applicable
18 Not applicable
19 Not applicable
20 Not applicable
21(n) Subsidiaries of the registrant
22 Not applicable
23(o) Consent of Independent Auditors
24.1(n) Power of Attorney for Joseph B. McAdams dated March 1, 2005
24.2(n) Power of Attorney for Howard Walker dated February 28, 2005
24.3(n) Power of Attorney for Thomas E. Dobrowski dated March 1, 2005
24.4(n) Power of Attorney for Gary Waterman dated March 1, 2005
24.5(n) Power of Attorney for Donald S. Chisholm dated March 1, 2005
24.6(n) Power of Attorney for Sheli Z. Rosenberg dated March 1, 2005
25 Not applicable
26 Not applicable
31.1(o) Certification of Chief Financial Officer Pursuant To Section 302 of
the Sarbanes-Oxley Act Of 2002
31.2(o) Certification of Chief Executive Officer Pursuant To Section 302 of
the Sarbanes-Oxley Act Of 2002
32.1(o) Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350
32.2(o) Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350
The following documents are incorporated herein by reference.
(a) Included as an exhibit to the Company's Form S-11 Registration Statement,
File No. 33-55994.
(b) Included as an exhibit to the Company's Report on Form 10-K dated December
31, 1993.
(c) Included as an exhibit to the Company's Report on Form 10-K dated December
31, 1994.
(d) Included as an exhibit to the Company's Report on Form 10-Q for the quarter
ended June 30, 1996.
(e) Included as Exhibit A to the Company's definitive Proxy Statement dated
March 28, 1997, relating to Annual Meeting of Stockholders held on May 13,
1997.
(f) Included as an exhibit to the Company's Report on Form 10-K dated December
31, 1997.
(g) Included as an exhibit to the Company's Form S-3 Registration Statement,
filed November 12, 1999 (SEC File No. 333-90813).
(h) Included as an exhibit to the Company's Report on Form 10-K dated December
31, 2000.
(i) Included as Appendix A to the Company's Definitive Proxy Statement dated
March 30, 2001
(j) Included as an exhibit to the Company's Report on Form 10-K dated December
31, 2002.
(k) Included as an exhibit to the Company's Report on Form 10-K dated December
31, 2003.
(l) Included as an exhibit to the Company's Report on Form 8-K dated November
16, 2004
(m) Included as an exhibit to the Company's Report on Form 8-K dated November
22, 2004
(n) Included as an exhibit to the Company's Report on Form 10-K dated December
31, 2004
(o) Filed herewith.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
EQUITY LIFESTYLE PROPERTIES, INC.,
a Maryland corporation
Date: March 31, 2005 By: /s/ Thomas P. Heneghan
-------------------------------------
Thomas P. Heneghan
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 31, 2005 By: /s/ Michael B. Berman
-------------------------------------
Michael B. Berman
Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
9
INDEX TO FINANCIAL STATEMENTS
EQUITY LIFESTYLE PROPERTIES, INC.
PAGE
-----------
Report of Independent Registered Public Accounting
Firm on Internal Controls over Financial Reporting ............ F-2
Report of Independent Registered Public Accounting Firm .......... F-3
Consolidated Balance Sheets as of December 31, 2004 and 2003 ..... F-4
Consolidated Statements of Operations for the years
ended December 31, 2004, 2003 and 2002 ........................ F-5 and F-6
Consolidated Statements of Other Comprehensive Income
for the years ended December 31, 2004, 2003 and 2002 .......... F-6
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 2004, 2003 and 2002 ... F-7
Consolidated Statements of Cash Flows for the years
ended December 31, 2004, 2003 and 2002 ........................ F-8
Notes to Consolidated Financial Statements ....................... F-9
Schedule II - Valuation and Qualifying Accounts .................. S-1
Schedule III - Real Estate and Accumulated Depreciation .......... S-2
Certain schedules have been omitted as they are not applicable to the Company.
F-1
Report of Independent Registered Public Accounting Firm on Internal Control
Over Financial Reporting
The Board of Directors and Stockholders of Equity Lifestyle Properties, Inc.
We have audited management's assessment, included in the accompanying
Report of Management on Internal Control over Financial Reporting, that Equity
Lifestyle Properties, Inc. (Equity Lifestyle Properties) did not maintain
effective internal control over financial reporting as of December 31, 2004,
because of the effect of a material weakness due to inadequate controls over the
capitalization of certain costs, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Equity Lifestyle
Properties' management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of Equity Lifestyle
Properties' internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of Equity Lifestyle
Properties; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
Equity Lifestyle Properties are being made only in accordance with
authorizations of management and directors of Equity Lifestyle Properties; and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of Equity Lifestyle Properties'
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weakness has been identified and included in
management's assessment. As described in the notes to the Company's 2004
financial statements, Equity Lifestyle Properties restated previously issued
financial statements to correct for errors related to the improper
capitalization of certain costs associated with changing rent control
restrictions. In connection with its assessment of internal control over
financial reporting as of December 31, 2004, management determined that Equity
Lifestyle Properties' procedures and controls over the interpretation and
implementation of generally accepted accounting principles as they relate to the
capitalization of these costs were inadequate, and concluded that this
deficiency represented a material weakness in internal control over financial
reporting. This material weakness was considered in determining the nature,
timing, and extent of audit tests applied in our audit of the financial
statements as of December 31, 2004 and 2003 and for each of the three years in
the period ended December 31, 2004, and this report does not affect our report
dated March 24, 2005 on those financial statements.
In our opinion, management's assessment that Equity Lifestyle Properties,
Inc. did not maintain effective internal control over financial reporting as of
December 31, 2004, is fairly stated, in all material respects, based on the COSO
control criteria. Also, in our opinion, because of the effect of the material
weakness described above on the achievement of the objectives of the control
criteria, Equity Lifestyle Properties, Inc. has not maintained effective
internal control over financial reporting as of December 31, 2004, based on the
COSO control criteria.
ERNST & YOUNG LLP
Chicago, Illinois
March 24, 2005
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Equity Lifestyle Properties, Inc.
We have audited the accompanying consolidated balance sheets of Equity Lifestyle
Properties, Inc. ("Equity Lifestyle Properties", formerly known as Manufactured
Home Communities, Inc.) as of December 31, 2004 and 2003, and the related
consolidated statements of operations, other comprehensive income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2004. Our audits also included the financial statement
schedules listed in the Index at Item 15(1) and (2). These financial statements
and the schedules are the responsibility of Equity Lifestyle Properties'
management. Our responsibility is to express an opinion on these financial
statements and the schedules based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Equity
Lifestyle Properties at December 31, 2004 and 2003, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2004, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the
Company has restated its financial statements as of December 31, 2003 and for
each of the two years in the period then ended relating to expense recognition
for certain costs.
As discussed in Note 3 to the consolidated financial statements, in 2003
Equity Lifestyle Properties changed its method of accounting for stock-based
employee compensation.
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of Equity
Lifestyle Properties internal control over financial reporting as of December
31, 2004, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 24, 2005 expressed an unqualified opinion
on management's assessment of the effectiveness of internal control over
financial reporting and an adverse opinion on the effectiveness of internal
control over financial reporting.
ERNST & YOUNG LLP
Chicago, Illinois
March 24, 2005
F-3
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2003
(AMOUNTS IN THOUSANDS)
DECEMBER 31,
DECEMBER 31, 2003
2004 (Restated)
------------ ------------
ASSETS
Investment in real estate:
Land ........................................................... $ 470,587 $ 282,803
Land improvements .............................................. 1,438,923 905,785
Buildings and other depreciable property ....................... 126,280 121,117
---------- ----------
2,035,790 1,309,705
Accumulated depreciation ....................................... (322,867) (272,497)
---------- ----------
Net investment in real estate ............................... 1,712,923 1,037,208
Cash and cash equivalents ......................................... 5,305 325,740
Notes receivable .................................................. 13,290 11,551
Investment in joint ventures ...................................... 43,583 10,770
Rents receivable, net ............................................. 1,469 2,385
Deferred financing costs, net ..................................... 16,162 14,164
Inventory ......................................................... 50,654 31,604
Prepaid expenses and other assets ................................. 42,903 30,085
---------- ----------
TOTAL ASSETS ................................................... $1,886,289 $1,463,507
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable ......................................... $1,417,251 $1,076,183
Unsecured line of credit ....................................... 115,800 --
Unsecured term loan ............................................ 120,000 --
Accounts payable and accrued expenses .......................... 36,146 27,928
Accrued interest payable ....................................... 8,894 5,978
Rents received in advance and security deposits ................ 21,135 6,616
Distributions payable .......................................... 448 224,696
---------- ----------
TOTAL LIABILITIES ........................................... 1,719,674 1,341,401
Commitments and contingencies
Minority interest - Common OP Units and other ..................... 9,771 (366)
Minority interest - Perpetual Preferred OP Units .................. 125,000 125,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
10,000,000 shares authorized; none issued ................... -- --
Common stock, $.01 par value
50,000,000 shares authorized; 22,937,192 and 22,563,348
shares issued and outstanding for 2004 and 2003, respectively 224 222
Paid-in capital ................................................ 294,304 263,066
Deferred compensation .......................................... (166) (494)
Distributions in excess of accumulated earnings ................ (262,518) (265,322)
---------- ----------
Total stockholders' equity (deficit) ........................ 31,844 (2,528)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $1,886,289 $1,463,507
========== ==========
The accompanying notes are an integral part of the financial statements.
F-4
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 2002
2004 (Restated) (Restated)
--------- ---------- ----------
PROPERTY OPERATIONS:
Community base rental income ............................ $ 210,790 $ 196,919 $194,640
Resort base rental income ............................... 54,845 11,780 9,146
Utility and other income ................................ 24,893 20,150 19,684
--------- --------- --------
Property operating revenues .......................... 290,528 228,849 223,470
Property operating and maintenance ...................... 94,955 64,996 62,843
Real estate taxes ....................................... 23,679 18,917 17,827
Property management .................................... 12,852 9,373 9,292
--------- --------- --------
Property operating expenses (exclusive of
depreciation shown separately below) ................ 131,486 93,286 89,962
--------- --------- --------
Income from property operations ...................... 159,042 135,563 133,508
HOME SALES OPERATIONS:
Gross revenues from inventory home sales ................ 47,636 36,606 33,537
Cost of inventory home sales ............................ (41,833) (31,767) (27,183)
--------- --------- --------
Gross profit from inventory home sales ............... 5,803 4,839 6,354
Brokered resale revenues, net ........................... 2,186 1,724 1,592
Home selling expenses ................................... (8,708) (7,360) (7,664)
Ancillary services revenues, net ........................ 2,782 216 522
--------- --------- --------
Income (loss) from home sales operations & other ..... 2,063 (581) 804
OTHER INCOME (EXPENSES):
Interest income ......................................... 1,391 1,695 967
Income from other investments ........................... 3,475 956 316
General and administrative .............................. (9,243) (8,060) (8,192)
Rent control initiatives ................................ (2,412) (2,352) (5,698)
Interest and related amortization ....................... (91,922) (58,402) (50,729)
Depreciation on corporate assets ........................ (1,657) (1,240) (1,277)
Depreciation on real estate assets and other costs ...... (48,862) (37,265) (34,826)
--------- --------- --------
Total other income (expenses) ........................ (149,230) (104,668) (99,439)
Income before minority interests, equity in income of
unconsolidated joint ventures, gain on sale of
properties and other and discontinued operations .. 11,875 30,314 34,873
Income allocated to Common OP Units ..................... (936) (3,860) (4,708)
Income allocated to Perpetual Preferred OP Units ........ (11,284) (11,252) (11,252)
Equity in income of unconsolidated joint ventures ....... 3,739 340 235
--------- --------- --------
Income before gain on sale of properties and other
and discontinued operations ....................... 3,394 15,542 19,148
--------- --------- --------
Gain on sale of properties and other .................... 638 -- --
--------- --------- --------
Income from continuing operations .................... 4,032 15,542 19,148
--------- --------- --------
DISCONTINUED OPERATIONS:
Discontinued operations ................................. 26 1,043 3,287
Depreciation on discontinued operations ................. (32) (135) (484)
Gain on sale of properties and other .................... -- 10,826 13,014
Minority interests on discontinued operations ........... -- (2,144) (3,078)
--------- --------- --------
Income (loss) from discontinued operations ........... (6) 9,590 12,739
--------- --------- --------
NET INCOME AVAILABLE FOR COMMON SHARES ............ $ 4,026 $ 25,132 $ 31,887
========= ========= ========
The accompanying notes are an integral part of the financial statements
F-5
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 2002
2004 (Restated) (Restated)
------- ---------- ----------
EARNINGS PER COMMON SHARE - BASIC:
Income from continuing operations ......................... $ 0.18 $ 0.71 $ 0.89
Income from discontinued operations ....................... $ 0.00 $ 0.43 $ 0.59
======= ======= =======
Net income available for Common Shares .................... $ 0.18 $ 1.14 $ 1.48
======= ======= =======
EARNINGS PER COMMON SHARE - FULLY DILUTED:
Income from continuing operations ......................... $ 0.17 $ 0.69 $ 0.87
======= ======= =======
Income from discontinued operations ....................... $ 0.00 $ 0.42 $ 0.57
======= ======= =======
Net income available for Common Shares .................... $ 0.17 $ 1.11 $ 1.44
======= ======= =======
Distributions declared per Common Share outstanding ....... $ 0.05 $ 9.485 $ 1.90
======= ======= =======
Tax status of Common Shares distributions paid
during the year:
Ordinary income ........................................... $ 1.05 $ 0.68 $ 1.50
======= ======= =======
Long-term capital gain .................................... $ 4.82 $ 0.57 $ --
======= ======= =======
Unrecaptured section 1250 gain ............................ $ 2.17 $ 0.16 $ --
======= ======= =======
Return of capital ......................................... $ -- $ 0.55 $ 0.37
======= ======= =======
Weighted average Common Shares outstanding - basic ........... 22,849 22,077 21,617
======= ======= =======
Weighted average Common Shares outstanding - fully diluted ... 29,465 28,002 27,632
======= ======= =======
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS)
2003 2002
2004 (Restated) (Restated)
------ ---------- ----------
Net income available for Common Shares........................... $4,026 $25,132 $31,887
Net unrealized holding gains (losses) on derivative
instruments................................................ -- 4,498 (4,987)
------ ------- -------
Net other comprehensive income available for Common Shares.... $4,026 $29,630 $26,900
====== ======= =======
The accompanying notes are an integral part of the financial statements
F-6
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS)
2003 2002
2004 (Restated) (Restated)
--------- ---------- ----------
PREFERRED STOCK, $.01 PAR VALUE $ -- $ -- $ --
========= ========= ========
COMMON STOCK, $.01 PAR VALUE
Balance, beginning of year .............................................. $ 222 $ 218 $ 215
Issuance of Common Stock through restricted stock grants ............. -- -- 1
Exercise of options .................................................. 2 4 2
--------- --------- --------
Balance, end of year .................................................... $ 224 $ 222 $ 218
========= ========= ========
PAID - IN CAPITAL
Balance, beginning of year .............................................. $ 263,066 $ 256,394 $245,827
Issuance of Common Stock for employee notes .......................... -- -- --
Conversion of OP Units to Common Stock ............................... 155 343 227
Issuance of Common Stock through exercise of options ................. 3,058 6,323 5,782
Issuance of Common Stock through restricted stock grants ............. -- -- 2,709
Issuance of Common Stock through employee stock purchase plan ........ 2,735 3,254 2,512
Compensation expense related to stock options and restricted stock ... 2,571 611 --
Transition adjustment - FAS 123 ...................................... -- (1,047) --
Adjustment for Common OP Unitholders
in the Operating Partnership ...................................... 22,719 (2,812) (663)
--------- --------- --------
Balance, end of year .................................................... $ 294,304 $ 263,066 $256,394
========= ========= ========
DEFERRED COMPENSATION
Balance, beginning of year .............................................. $ (494) $ (3,069) $ (4,062)
Issuance of Common Stock through restricted stock grants ............. -- -- (2,709)
Transition adjustment - FAS 123 ...................................... -- 1,047 --
Recognition of deferred compensation expense ......................... 328 1,528 3,702
--------- --------- --------
Balance, end of year .................................................... $ (166) $ (494) $ (3,069)
========= ========= ========
EMPLOYEE NOTES
Balance, beginning of year .............................................. $ -- $ (2,713) $ (3,841)
Principal payments ................................................... -- 2,713 1,128
--------- --------- --------
Balance, end of year .................................................... $ -- $ -- $ (2,713)
========= ========= ========
DISTRIBUTIONS IN EXCESS OF ACCUMULATED COMPREHENSIVE EARNINGS
Balance, beginning of year .............................................. $(265,322) $ (79,655) $(64,875)
Net income ........................................................... 4,026 25,132 31,887
Other comprehensive income:
Unrealized holding (losses) gains on derivative instruments ....... -- 4,498 (4,987)
--------- --------- --------
Comprehensive income ........................................... 4,026 29,630 26,900
--------- --------- --------
Distributions ........................................................ (1,222) 215,297 (41,680)
--------- --------- --------
Balance, end of year .................................................... $(262,518) $(265,322) $(79,655)
========= ========= ========
The accompanying notes are an integral part of the financial statements
F-7
EQUITY LIFESTYLE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS)
2003 2002
2004 (Restated) (Restated)
--------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................................................... $ 4,026 $ 25,132 $ 31,887
Adjustments to reconcile net income to cash provided by operating activities:
Income allocated to minority interests ...................................... 12,220 17,256 19,038
Gain on sale of Properties and other ........................................ (638) (10,826) (13,014)
Depreciation expense ........................................................ 51,703 39,403 37,094
Amortization expense ........................................................ 2,203 5,031 963
Debt premium amortization expense ........................................... (1,317) -- --
Equity in income of affiliates and joint ventures ........................... (4,969) (1,042) (957)
Amortization of deferred compensation and other ............................. 2,899 2,139 3,930
Increase in provision for uncollectable rents receivable .................... 1,182 821 941
Changes in assets and liabilities:
Change in rents receivable .................................................. 281 (1,469) (1,186)
Change in inventory ......................................................... (17,855) 1,846 1,887
Change in prepaid expenses and other assets ................................. (9,772) (43) (2,113)
Change in accounts payable and accrued expenses ............................. 5,963 (3,055) 1,471
Change in rents received in advance and security deposits ................... 807 (30) 235
--------- --------- --------
Net cash provided by operating activities ...................................... 46,733 75,163 80,176
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of rental properties ............................................... (310,893) (6,836) (56,531)
Proceeds from dispositions of assets ........................................... 671 27,170 14,171
Distributions from (investment in) joint ventures and other .................... (27,642) 1,535 (7,149)
Proceeds from restructuring of College Heights venture, net .................... -- -- 4,647
Purchase of RSI ................................................................ -- -- (675)
Cash received in acquisition of RSI ............................................ -- -- 839
Collections (funding) of notes receivable ...................................... (1,708) (1,507) (3,784)
Improvements:
Improvements - corporate .................................................... (444) (72) (681)
Improvements - rental properties ............................................ (13,663) (11,912) (13,377)
Site development costs ...................................................... (12,975) (8,976) (10,433)
--------- --------- --------
Net cash (used in) investing activities ........................................ (366,654) (598) (72,973)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from stock options and employee stock purchase plan ............... 6,221 9,581 8,296
Distributions to Common Stockholders, Common OP Unitholders
and Perpetual Preferred OP Unitholders ...................................... (237,074) (65,687) (58,314)
Collection of principal payments on employee notes ............................. -- 2,713 1,128
Line of credit:
Proceeds .................................................................... 135,800 53,000 82,000
Repayments .................................................................. (20,000) (137,750) (13,500)
Acquisition Financing .......................................................... 124,300 -- --
Repayment of term loan ......................................................... -- (100,000) --
Refinancing - net proceeds (repayments) ........................................ 3,288 501,057 (16,096)
Principal payments ............................................................. (8,848) (4,844) (4,217)
Debt issuance costs ............................................................ (4,201) (14,165) (584)
--------- --------- --------
Net cash provided by (used in) financing activities ............................ (514) 243,905 (1,287)
--------- --------- --------
Net increase (decrease) in cash and cash equivalents .............................. (320,435) 318,470 5,916
Cash and cash equivalents, beginning of year ...................................... 325,740 7,270 1,354
--------- --------- --------
Cash and cash equivalents, end of year ............................................ $ 5,305 $ 325,740 $ 7,270
========= ========= ========
SUPPLEMENTAL INFORMATION
Cash paid during the year for interest ............................................ $ 88,883 $ 52,396 $ 46,097
========= ========= ========
The accompanying notes are an integral part of the financial statements.
F-8
EQUITY LIFESTYLE PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION
Equity Lifestyle Properties, Inc. (formerly Manufactured Home Communities,
Inc.), together with MHC Operating Limited Partnership (the "Operating
Partnership") and other consolidated subsidiaries ("Subsidiaries"), are referred
to herein as the "Company", "ELS", "we", "us", and "our". We believe that we
have qualified for taxation as a real estate investment trust ("REIT") for
federal income tax purposes since our taxable year ended December 31, 1993. We
plan to continue to meet the requirements for taxation as a REIT. Many of these
requirements, however, are highly technical and complex. We cannot, therefore,
guarantee that we have qualified or will qualify in the future as a REIT. The
determination that we are a REIT requires an analysis of various factual matters
that may not be totally within our control and we cannot provide any assurance
that the Internal Revenue Service ("IRS") will agree with our analysis. For
example, to qualify as a REIT, at least 95% of our gross income must come from
sources that are itemized in the REIT tax laws. We are also required to
distribute to stockholders at least 90% of our REIT taxable income excluding
capital gains. The fact that we hold our assets through the Operating
Partnership and its subsidiaries further complicates the application of the REIT
requirements. Even a technical or inadvertent mistake could jeopardize our REIT
status. Furthermore, Congress and the IRS might make changes to the tax laws and
regulations, and the courts might issue new rulings that make it more difficult,
or impossible, for us to remain qualified as a REIT. We do not believe, however,
that any pending or proposed tax law changes would jeopardize our REIT status.
If we fail to qualify as a REIT, we would be subject to federal income tax
at regular corporate rates. Also, unless the IRS granted us relief under certain
statutory provisions, we would remain disqualified as a REIT for four years
following the year we first failed to qualify. Even if the Company qualifies for
taxation as a REIT, the Company is subject to certain state and local taxes on
its income and property and Federal income and excise taxes on its undistributed
income.
The operations of the Company are conducted primarily through the Operating
Partnership. The Company contributed the proceeds from its initial public
offering and subsequent offerings to the Operating Partnership for a general
partnership interest. In 2004, the general partnership interest was contributed
to MHC Trust (see Note 5). The financial results of the Operating Partnership
and the Subsidiaries are consolidated in the Company's consolidated financial
statements. In addition, since certain activities, if performed by the Company,
may not be qualifying REIT activities under the Internal Revenue Code of 1986,
as amended (the "Code"), the Company has formed taxable REIT subsidiaries as
defined in the Code to engage in such activities.
Several Properties acquired during 2004 are wholly owned by taxable REIT
subsidiaries of the Company. In addition, Realty Systems, Inc. ("RSI") is a
wholly owned taxable REIT subsidiary of the Company that, doing business as
Carefree Sales, is engaged in the business of purchasing, selling and leasing
homes that are located in Properties owned and managed by the Company. Carefree
Sales also provides brokerage services to customers at such Properties.
Typically, customers move from a Property but do not relocate their homes.
Carefree Sales may provide brokerage services, in competition with other local
brokers, by seeking buyers for the homes. Carefree Sales also leases inventory
homes to prospective customers with the expectation that the tenant eventually
will purchase the home. Subsidiaries of RSI also lease from the Operating
Partnership certain real property within or adjacent to certain Properties
consisting of golf courses, pro shops, stores and restaurants.
The limited partners of the Operating Partnership (the "Common OP
Unitholders") receive an allocation of net income which is based on their
respective ownership percentage of the Operating Partnership which is shown on
the Consolidated Financial Statements as Minority Interests - Common OP Units.
As of December 31, 2004, the Minority Interests - Common OP Units represented
6,340,805 units of limited partnership interest ("OP Units") which are
convertible into an equivalent number of shares of the Company's common stock.
The issuance of additional shares of common stock or common OP Units changes the
respective ownership of the Operating Partnership for both the Minority
Interests and the Company.
F-9
EQUITY LIFESTYLE PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - RESTATEMENT OF FINANCIAL STATEMENTS
During 2004, the Company changed the way it accounted for costs incurred in
pursuing certain rent control initiatives. As a result, the Company has restated
its Consolidated Financial Statements for the years ended December 31, 2003,
2002, and 2001 to expense the costs of the initiatives in the year in which they
were incurred because the previous method of accounting for the costs was
determined to be incorrect. The Company had historically classified these costs,
primarily legal, in other assets. To the extent the Company's efforts to
effectively change the use and operations of the Properties were successful, the
Company capitalized the costs to land improvements as an increase in the
established value of the revised project and depreciated them over 30 years. To
the extent these efforts were not successful, the costs would have been
expensed.
Following is a summary of the effects of these changes on the Company's
Consolidated Balance Sheets as of December 31, 2003, 2002 and 2001 and the
Company's Consolidated Statements of Operations for the years ended December 31,
2003, 2002 and 2001 (amounts in thousands):
Consolidated Balance Sheet
-----------------------------------------
As Previously
As of December 31, 2003 Reported Adjustments As Restated
----------------------- ------------- ----------- -----------
Land improvements............................... $911,176 $(5,391) $905,785
Prepaid expenses and other assets............... 35,102 (5,017) 30,085
Minority interest - Common OP Units and other... 1,716 (2,082) (366)
Total stockholders' equity...................... 5,798 (8,326) (2,528)
As of December 31, 2002
-----------------------
Land improvements............................... $893,839 $ -- $893,839
Prepaid expenses and other assets............... 35,884 (8,056) 27,828
Minority interest - Common OP Units and other... 43,501 (1,612) 41,889
Total stockholders' equity...................... 177,619 (6,444) 171,175
As of December 31, 2001
-----------------------
Land improvements............................... $855,296 $ -- $855,296
Prepaid expenses and other assets............... 18,612 (2,358) 16,254
Minority interest - Common OP Units and other... 46,147 (472) 45,675
Total stockholders' equity...................... 175,150 (1,886) 173,264
Consolidated Statements of Operations
-----------------------------------------
As Previously
Year ended December 31, 2003 Reported Adjustments As Restated
---------------------------- ------------- ----------- -----------
Rent control initiatives.................... $ -- $(2,352) $(2,352)
Income allocated to Common OP Units......... (4,330) 470 (3,860)
Net income available for Common Shares...... 27,014 (1,882) 25,132
Earnings per Common Share - Basic........... 1.22 (.08) 1.14
Earnings per Common Share - Fully Diluted... 1.20 (.09) 1.11
Year ended December 31, 2002
----------------------------
Rent control initiatives.................... $ -- $(5,698) $(5,698)
Income allocated to Common OP Units......... (5,848) 1,140 (4,708)
Net income available for Common Shares...... 36,445 (4,558) 31,887
Earnings per Common Share - Basic........... 1.69 (.21) 1.48
Earnings per Common Share - Fully Diluted... 1.64 (.20) 1.44
Year ended December 31, 2001
----------------------------
Rent control initiatives.................... $ -- $(2,358) $(2,358)
Income allocated to Common OP Units......... (7,688) 472 (7,216)
Net income available for Common Shares...... 32,083 (1,886) 30,197
Earnings per Common Share - Basic........... 1.53 (.09) 1.44
Earnings per Common Share - Fully Diluted... 1.49 (.09) 1.40
F-10
EQUITY LIFESTYLE PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Consolidation
The Company consolidates its majority-owned subsidiaries in which it
has the ability to control the operations of the subsidiaries and all
variable interest entities with respect to which the Company is the primary
beneficiary. All inter-company transactions have been eliminated in
consolidation. The Company's acquisitions were all accounted for as
purchases in accordance with Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS No. 141").
In December 2003, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 46R, Consolidation of Variable Interest Entities
("FIN 46R") - an interpretation of ARB 51. The objective of FIN 46R is to
provide guidance on how to identify a variable interest entity ("VIE") and
determine when the assets, liabilities, non-controlling interests, and
results of operations of a VIE need to be included in a company's
consolidated financial statements. A company that holds variable interests
in an entity will need to consolidate such entity if the company absorbs a
majority of the entity's expected losses or receives a majority of the
entity's expected residual returns if they occur, or both (i.e., the
primary beneficiary). The Company will apply FIN 46R to all types of entity
ownership (general and limited partnerships and corporate interests).
The Company will re-evaluate and apply the provisions of FIN 46R to
existing entities if certain events occur which warrant re-evaluation of
such entities. In addition, the Company will apply the provisions of FIN
46R to all new entities in the future. The Company also consolidates
entities in which it has a controlling direct or indirect voting interest.
The equity method of accounting is applied to entities in which the Company
does not have a controlling direct or indirect voting interest, but can
exercise influence over the entity with respect to its operations and major
decisions. The cost method is applied when (i) the investment is minimal
(typically less than 5%) and (ii) the Company's investment is passive.
(b) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
(c) Segments
We manage all our operations on a property-by-property basis. Since
each Property has similar economic and operational characteristics the
Company has one reportable segment, which is the operation of land lease
Properties. The distribution of the Properties throughout the United States
reflects our belief that geographic diversification helps insulate the
portfolio from regional economic influences. We intend to target new
acquisitions in or near markets where the Properties are located and will
also consider acquisitions of Properties outside such markets. The
following table identifies our five largest markets by number of sites and
provides information regarding our Properties (excludes Properties owned
through Joint Ventures).
PERCENT OF TOTAL
MAJOR NUMBER OF PERCENT OF PROPERTY OPERATING
MARKET PROPERTIES TOTAL SITES TOTAL SITES REVENUES
---------- ---------- ----------- ----------- ------------------
Florida 77 32,451 36.3% 43.5%
California 44 12,865 14.4% 18.2%
Arizona 27 10,514 11.8% 10.4%
Texas 15 7,200 8.0% 2.3%
Washington 13 3,076 3.4% 0.6%
Other 71 23,280 26.1% 25.0%
--- ------ ----- -----
Total 247 89,386 100.0% 100.0%
=== ====== ===== =====
F-11
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Inventory
Inventory consists of new and used Site Set homes, is stated at the
lower of cost or market after consideration of the N.A.D.A. (National
Automobile Dealers Association) Manufactured Housing Appraisal Guide and
the current market value of each home included in the home inventory.
Inventory sales revenues and resale revenues are recognized when the home
sale is closed. Resale revenues are stated net of commissions paid to
employees of $1,163,000 and $893,000 for the years ended December 31, 2004
and 2003, respectively.
(e) Real Estate
In accordance with SFAS No. 141, we allocate the purchase price of
Properties we acquire to net tangible and identified intangible assets
acquired based on their fair values. In making estimates of fair values for
purposes of allocating purchase price, we utilize a number of sources,
including independent appraisals that may be available in connection with
the acquisition or financing of the respective property and other market
data. We also consider information obtained about each property as a result
of our due diligence, marketing and leasing activities in estimating the
fair value of the tangible and intangible assets acquired.
Real estate is recorded at cost less accumulated depreciation.
Depreciation is computed on the straight-line basis over the estimated
useful lives of the assets. We use a 30-year estimated life for buildings
acquired and structural and land improvements, a ten-to-fifteen-year
estimated life for building upgrades and a three-to-seven-year estimated
life for furniture, fixtures and equipment. The values of the above and
below market leases are amortized and recorded as either an increase (in
the case of below market leases) or a decrease (in the case of above market
leases) to rental income over the remaining term of the associated lease.
The value associated with in-place leases is amortized over the expected
term, which includes an estimated probability of lease renewal.
Expenditures for ordinary maintenance and repairs are expensed to
operations as incurred, and significant renovations and improvements that
improve the asset and extend the useful life of the asset are capitalized
and then expensed over their estimated useful life. However the useful
lives, salvage value, and customary depreciation method used for land
improvements and other significant assets may significantly and materially
overstate the depreciation of the underlying assets and therefore
understate the net income of the Company.
We evaluate our Properties for impairment when conditions exist which
may indicate that it is probable that the sum of expected future cash flows
(undiscounted) from a Property over the anticipated holding period is less
than its carrying value. Upon determination that a permanent impairment has
occurred, the applicable Property is reduced to fair value.
For Properties to be disposed of, an impairment loss is recognized
when the fair value of the property, less the estimated cost to sell, is
less than the carrying amount of the property measured at the time the
Company has a commitment to sell the property and/or is actively marketing
the property for sale. A property to be disposed of is reported at the
lower of its carrying amount or its estimated fair value, less costs to
sell. Subsequent to the date that a property is held for disposition,
depreciation expense is not recorded. The Company accounts for its
Properties held for disposition in accordance with Statement of Financial
Accounting Standards No. 144 ("SFAS No. 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets". Accordingly, the results of
operations for all assets sold or held for sale after January 1, 2003 have
been classified as discontinued operations in all periods presented.
(f) Cash and Cash Equivalents
We consider all demand and money market accounts and certificates of
deposit with a maturity, when purchased, of three months or less to be cash
equivalents.
F-12
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Notes Receivable
Notes receivable generally are stated at their outstanding unpaid
principal balances net of any deferred fees or costs on originated loans,
or unamortized discounts or premiums net of a valuation allowance. Interest
income is accrued on the unpaid principal balance. Discounts or premiums
are amortized to income using the interest method. In certain cases we
finance the sales of homes to our customers (referred to as "Chattel
Loans") which loans are secured by the homes. The valuation allowance for
the Chattel Loans is calculated based on a comparison of the outstanding
principal balance of each note compared to the N.A.D.A. value and the
current market value of the underlying manufactured home collateral.
(h) Investments in Joint Ventures
Investments in joint ventures in which the Company does not have a
controlling direct or indirect voting interest, but can exercise
significant influence over the entity with respect to its operations and
major decisions, are accounted for using the equity method of accounting
whereby the cost of an investment is adjusted for the Company's share of
the equity in net income or loss from the date of acquisition and reduced
by distributions received. The income or loss of each entity is allocated
in accordance with the provisions of the applicable operating agreements.
The allocation provisions in these agreements may differ from the ownership
interests held by each investor. Differences between the carrying amount of
the Company's investment in the respective entities and the Company's share
of the underlying equity of such unconsolidated entities are amortized over
the respective lives of the underlying assets, as applicable.
In applying the provisions of FIN 46R (see Basis of Consolidation,
above), the Company determined that its Mezzanine Investment is a VIE;
however, the Company concluded that it is not the primary beneficiary. As
such, the adoption of this pronouncement had no effect on the Company's
financial statements.
(i) Insurance Claims
The Properties are covered against fire, flood, property, earthquake,
wind storm and business interruption by insurance policies containing
various deductible requirements and coverage limits. Recoverable costs are
classified in other assets as incurred. Proceeds are applied against the
asset when received. Costs relating to capital items are treated in
accordance with the Company's capitalization policy. The book value of the
original capital item is written off in the replacement period. Insurance
proceeds relating to the capital costs will be recorded as income in the
period they are received.
(j) Fair Value of Financial Instruments
The Company's financial instruments include short-term investments,
notes receivable, accounts receivable, accounts payable, other accrued
expenses, mortgage notes payable and interest rate hedge arrangements. The
fair values of all financial instruments, including notes receivable, were
not materially different from their carrying values at December 31, 2004
and 2003.
(k) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain
long-term financing. The costs are being amortized over the terms of the
respective loans on a level yield basis. Unamortized deferred financing
fees are written-off when debt is retired before the maturity date. Upon
amendment of the Line of Credit, unamortized deferred financing fees are
accounted for in accordance with EITF No. 98-14, "Debtor's Accounting for
Changes in Line-of-Credit or Revolving-Debt Arrangements." Accumulated
amortization for such costs was $4.9 million and $2.7 million at December
31, 2004 and 2003, respectively.
F-13
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Revenue Recognition
The Company accounts for leases with its customers as operating
leases. Rental income is recognized over the term of the respective lease
or the length of a customer's stay, the majority of which are for a term of
not greater than one year. We will reserve for receivables when we believe
the ultimate collection is less than probable. Our provision for
uncollectable rents receivable was approximately $1.0 million as of
December 31, 2004 and $0.8 million as of December 31, 2003. Income from
home sales is recognized when the earnings process is complete. The
earnings process is complete when the home has been delivered, the
purchaser has accepted the home and title has transferred.
(m) Minority Interests
Net income is allocated to Common OP Unitholders based on their
respective ownership percentage of the Operating Partnership. An ownership
percentage is represented by dividing the number of Common OP Units held by
the Common OP Unitholders (6,340,805 and 5,312,387 at December 31, 2004 and
2003, respectively) by OP Units and shares of Common Stock outstanding.
Issuance of additional shares of Common Stock or Common OP Units changes
the percentage ownership of both the Minority Interests and the Company.
Due in part to the exchange rights (which provide for the conversion of
Common OP Units into shares of Common Stock on a one-for-one basis), such
transactions and the proceeds there from are treated as capital
transactions and result in an allocation between stockholders' equity and
Minority Interests to account for the change in the respective percentage
ownership of the underlying equity of the Operating Partnership.
(n) Income Taxes
Due to the structure of the Company as a REIT, the results of
operations contain no provision for Federal income taxes. However, the
Company may be subject to certain state and local income, excise or
franchise taxes. We paid state and local taxes of approximately $88,000,
$56,000 and $20,000 during the years ended December 31, 2004, 2003 and
2002, respectively. In addition, taxable income from non-REIT activities
managed through taxable REIT subsidiaries is subject to federal, state and
local income taxes. As of December 31, 2004, net investment in real estate
and notes receivable had a Federal tax basis of approximately $1,386
million and $13.3 million, respectively.
(o) Derivative Instruments and Hedging Activities
We recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings.
(p) Reclassifications
Certain 2003 and 2002 amounts have been reclassified to conform to the
2004 financial presentation. Such reclassifications have no effect on the
operations or equity as originally presented.
(q) Stock Compensation
Prior to January 1, 2003, we accounted for our stock compensation in
accordance with APB No. 25, "Accounting for Stock Issued to Employees",
based upon the intrinsic value method. This method results in no
compensation expense for options issued with an exercise price equal to or
exceeding the market value of the Common Stock on the date of grant.
Effective January 1, 2003, we elected to account for our stock compensation
in accordance with SFAS No. 123 and its amendment (SFAS No. 148),
"Accounting for Stock Based Compensation", which resulted in compensation
expense being recorded based on the fair value of the stock options and
other equity awards issued (see Note 14).
F-14
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of
common shares outstanding during each year. Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128") defines the calculation
of basic and fully diluted earnings per share. Basic and fully diluted earnings
per share are based on the weighted average shares outstanding during each year
and basic earnings per share excludes any dilutive effects of options, warrants
and convertible securities. The conversion of OP Units has been excluded from
the basic earnings per share calculation. The conversion of an OP Unit to a
share of Common Stock has no material effect on earnings per common share.
The following table sets forth the computation of basic and diluted
earnings per share for the years ended December 31, 2004, 2003 and 2002 (amounts
in thousands):
YEARS ENDED DECEMBER 31,
---------------------------------
2003 2002
2004 (Restated) (Restated)
------- ---------- ----------
NUMERATORS:
INCOME FROM CONTINUING OPERATIONS:
Income from continuing operations - basic ................ $ 4,032 $15,542 $19,148
Amounts allocated to dilutive securities ................. 936 3,860 4,708
------- ------- -------
Income from continuing operations - fully diluted ........ $ 4,968 $19,402 $23,856
======= ======= =======
INCOME FROM DISCONTINUED OPERATIONS:
Income from discontinued operations - basic .............. $ (6) $ 9,590 $12,739
Amounts allocated to dilutive securities ................. -- 2,144 3,078
------- ------- -------
Income from discontinued operations - fully diluted ...... $ (6) $11,734 $15,817
======= ======= =======
NET INCOME AVAILABLE FOR COMMON SHARES:
Net income available for Common Shares - basic ........... $ 4,026 $25,132 $31,887
Amounts allocated to dilutive securities ................. 936 6,004 7,786
------- ------- -------
Net income available for Common Shares - fully diluted $ 4,962 $31,136 $39,673
======= ======= =======
DENOMINATOR:
Weighted average Common Shares
outstanding - basic ................................... 22,849 22,077 21,617
Effect of dilutive securities:
Redemption of Common OP Units for Common Shares .......... 6,067 5,342 5,403
Employee stock options and restricted shares ............. 549 583 612
------- ------- -------
Weighted average Common Shares
outstanding - fully diluted ........................... 29,465 28,002 27,632
======= ======= =======
F-15
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - COMMON STOCK AND OTHER EQUITY RELATED TRANSACTIONS
The following table presents the changes in the Company's outstanding
Common Stock for the years ended December 31, 2004, 2003 and 2002 (excluding OP
Units of 6,340,805, 5,312,387 and 5,359,927 outstanding at December 31, 2004,
2003 and 2002, respectively):
2004 2003 2002
---------- ---------- ----------
Shares outstanding at January 1, .............................. 22,563,348 22,093,240 21,562,343
Common Stock issued through conversion of OP Units ......... 95,769 47,540 66,447
Common Stock issued through exercise of options ............ 196,834 302,526 282,959
Common Stock issued through stock grants ................... -- 35,000 108,341
Common Stock issued through Employee Stock Purchase Plan ... 81,241 85,042 73,150
Common Stock repurchased and retired ....................... -- -- --
---------- ---------- ----------
Shares outstanding at December 31, ............................ 22,937,192 22,563,348 22,093,240
========== ========== ==========
As of December 31, 2004 and 2003, the Company's percentage ownership of the
Operating Partnership was approximately 78.5% and 80%, respectively. The
remaining approximately 21.5% and 20%, respectively, is owned by the Common OP
Unitholders.
On September 30, 1999, the Operating Partnership completed a $125 million
private placement of 9.0% Series D Cumulative Perpetual Preferred Units ("POP
Units") with two institutional investors. The POP Units, which are callable by
the Company after five years, have no stated maturity or mandatory redemption.
The Operating Partnership pays distributions of 9.0% per annum on the $125
million of POP Units. Distributions on the POP Units are paid quarterly on the
last calendar day of each quarter.
The following distributions have been declared and paid to common
stockholders and Minority Interests since January 1, 2002:
DISTRIBUTION FOR THE QUARTER SHAREHOLDER RECORD
AMOUNT PER SHARE ENDING DATE PAYMENT DATE
---------------- ------------------ ------------------ ----------------
$0.4750 March 31, 2002 March 29, 2002 April 12, 2002
$0.4750 June 30, 2002 June 28, 2002 July 12, 2002
$0.4750 September 30, 2002 September 27, 2002 October 11, 2002
$0.4750 December 31, 2002 December 27, 2002 January 10, 2003
$0.4950 March 31, 2003 March 28, 2003 April 11, 2003
$0.4950 June 30, 2003 June 27, 2003 July 11, 2003
$0.4950 September 30, 2003 September 26, 2003 October 10, 2003
$8.00 December 31, 2003 January 8, 2004 January 16, 2004
$0.0125 March 31, 2004 March 26, 2004 April 9, 2004
$0.0125 June 30, 2004 June 25, 2004 July 9, 2004
$0.0125 September 30, 2004 September 24, 2004 October 8, 2004
$0.0125 December 31, 2004 December 31, 2004 January 14, 2005
On December 12, 2003, we declared a one-time special distribution of $8.00
per share payable to stockholders of record on January 8, 2004. We used proceeds
from the $501 million borrowing in October 2003 to pay the special distribution
on January 16, 2004. The special cash dividend was reflected on stockholders'
2004 1099-DIV issued in January 2005.
In connection with the $501 million borrowing and subsequent special
distribution, on February 27, 2004, the Company contributed all of its assets to
MHC Trust, a newly formed Maryland real estate investment trust, including the
Company's entire partnership interest in Operating Partnership. The Company
determined that a taxable transaction in connection with the special
distribution to stockholders would be in the Company's best interests. This was
accomplished by the contribution of the Company's interest in the Operating
Partnership to MHC Trust in exchange for all the common and preferred stock of
MHC Trust. Due to the Company's tax basis in its interest in the Operating
Partnership, the Company
F-16
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - COMMON STOCK AND OTHER EQUITY RELATED TRANSACTIONS (CONTINUED)
recognized $180 million of taxable income as a result of its contribution, as
opposed to a nontaxable reduction of the Company's tax basis in its interest in
the Operating Partnership. This restructuring resulted in a step-up in the
Company's tax basis in its assets, generating future depreciation deductions,
which in turn will reduce the Company's future distribution requirements. The
Company intends to continue to qualify as a REIT under the Code, with its assets
consisting of interests in MHC Trust. MHC Trust, in turn, intends to also
qualify as a real estate investment trust under the Code and will be the general
partner of the Operating Partnership. On May 1, 2004, in connection with the
restructuring, MHC Trust sold cumulative preferred stock to a limited number of
unaffiliated investors.
The Company adopted, effective July 1, 1997, the 1997 Non-Qualified
Employee Stock Purchase Plan ("ESPP"). Pursuant to the ESPP, certain employees
and directors of the Company may each annually acquire up to $250,000 of Common
Stock of the Company. The aggregate number of shares of Common Stock available
under the ESPP shall not exceed 1,000,000, subject to adjustment by the
Company's Board of Directors. The Common Stock may be purchased monthly at a
price equal to 85% of the lesser of: (a) the closing price for a share of Common
Stock on the last day of the offering period; and (b) the closing price for a
share of Common Stock on the first day of the offering period. Shares of Common
Stock issued through the ESPP for the years ended December 31, 2004, 2003 and
2002 were 80,955, 82,943 and 71,107, respectively.
NOTE 6- INVESTMENT IN REAL ESTATE
Land improvements consist primarily of improvements such as grading,
landscaping and infrastructure items such as streets, sidewalks or water mains.
Depreciable property consists of permanent buildings in the Properties such as
clubhouses, laundry facilities, maintenance storage facilities, and furniture,
fixtures and equipment.
All acquisitions have been accounted for utilizing the purchase method of
accounting and, accordingly, the results of operations of acquired assets are
included in the statements of operations from the dates of acquisition. We
acquired all of these Properties from unaffiliated third parties. During the
three years ended December 31, 2004, the Company acquired the following
Properties (amounts in millions, except site information):
1) During the year ended December 31, 2004, we acquired the following
Properties:
REAL NET
CLOSING DATE PROPERTY LOCATION TOTAL SITES ESTATE DEBT EQUITY
------------ ---------------------------- ------------------ ----------- ------ ------ ------
ACQUISITIONS:
January 15, 2004 O'Connell's Amboy, IL 668 $ 6.6 $ 5.0 $ 1.6
January 30, 2004 Spring Gulch New Holland, PA 420 6.4 4.8 1.6
February 3, 2004 Paradise Mesa, AZ 950 25.7 20.0 5.7
February 18, 2004 Twin Lakes Chocowinity, NC 400 5.2 3.8 1.4
February 19, 2004 Lakeside New Carlisle, IN 95 1.7 -- 1.7
February 5, 2004 Diversified Portfolio Various 2,567 64.0 41.6 20.9
February 17, 2004 NHC Portfolio (a) Various 11,311 235.0 159.0 69.0
May 3, 2004 Viewpoint Mesa, AZ 1,928 81.3 44.0 37.3
May 12, 2004 Cactus Gardens Yuma, AZ 430 7.9 4.9 3.0
May 13, 2004 Monte Vista Mesa, AZ 832 45.8 23.0 22.8
May 14, 2004 GE Portfolio Various 1,155 52.9 37.7 15.2
September 8, 2004 Yukon Trails Lyndon Station, WI 214 2.2 -- 2.2
November 10, 2004 Thousand Trail Portfolio (b) Various 17,911 161.8 120.0 42.2
November 4, 2004 Caledonia Caledonia, WI 247 1.5 -- 1.5
December 30, 2004 Fremont Fremont, WI 325 5.7 4.3 1.4
a) On February 17, 2004, the Company acquired 93% of PAMI entities'
interests in 28 Properties. On July 1, 2004, the Company acquired the
remaining minority interest of the PAMI entities for a combination of
$1.0 million in cash and common OP units. On December 20, 2004, the
Company redeemed the common OP Units for $4.5 million.
F-17
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INVESTMENT IN REAL ESTATE (CONTINUED)
b) On November 10, 2004 the Company provided a long-term lease of the
real estate to Thousand Trails, which will continue to operate the
Properties for its members. The lease will generate $16 million of
income to the Company on an absolute triple net basis subject to
annual escalations of 3.25%. The initial term of the lease is 15
years, with two five-year renewal options.
In connection with the 2004 acquisitions and not reflected in the table
above the Company acquired inventory of approximately $1.2 million, other
assets of $4.9 million, rents received in advance of approximately $13.6
million and other liabilities of approximately $5.8 million. The Company
also issued common OP Units for value of approximately $32.2 million.
Additional equity was funded through our line of credit and funds from
operations.
2) During the year ended December 31, 2003, we acquired the following
Properties:
REAL NET
CLOSING DATE PROPERTY LOCATION TOTAL SITES ESTATE DEBT EQUITY
------------ ----------- ----------- ----------- ------ ---- ------
ACQUISITIONS:
December 3, 2003 Toby's Arcadia, FL 379 $4.3 $ -- $4.3
December 15, 2003 Araby Acres Yuma, AZ 337 5.7 3.2 2.5
December 15, 2003 Foothill Yuma, AZ 180 1.8 1.4 0.4
The acquisitions were funded with monies held in short-term investments.
The acquisitions included the assumption of liabilities of approximately
$0.6 million. Also during 2003, we acquired a parcel of land adjacent to
one of our Properties for approximately $0.1 million.
3) During the year ended December 31, 2002, we acquired the following
Properties:
REAL NET
CLOSING DATE PROPERTY LOCATION TOTAL SITES ESTATE DEBT EQUITY
------------ ------------------- ------------------- ----------- ------ ----- ------
ACQUISITIONS:
March 12, 2002 Mt. Hood Village Welches, OR 450 $ 7.2 $ -- $ 7.2
July 10, 2002 Harbor View Village New Port Richey, FL 471 15.5 8.1 7.4
July 31, 2002 Golden Sun Apache Junction, AZ 329 6.3 3.1 3.2
July 31, 2002 Countryside Apache Junction, AZ 560 7.5 -- 7.5
July 31, 2002 Holiday Village Ormond Beach, FL 301 10.4 7.1 3.3
July 31, 2002 Breezy Hill Pompano Beach, FL 762 20.5 10.5 10.0
August 14, 2002 Highland Woods Pompano Beach, FL 148 3.9 2.5 1.4
August 7, 2002 Tropic Winds Harlingen, TX 531 4.9 -- 4.9
October 1, 2002 Silk Oak Lodge Clearwater, FL 180 6.2 3.9 2.3
December 18, 2002 Hacienda Village New Port Richey, FL 519 16.8 10.2 6.6
December 31, 2002 Glen Ellen Clearwater, FL 117 2.4 2.5 --
The acquisitions were funded with borrowings on our Line of Credit and the
assumption of $47.9 million of mortgage debt, which includes a $3.0 million
discount mark-to-market adjustment. In addition, we purchased adjacent land
and land improvements for several Properties for approximately $0.6
million.
During the three years ended December 31, 2004 the Company disposed of the
following Properties. The operating results have been reflected in
discontinued operations.
1) During the year ended December 31, 2004, we sold one Property located
in Lake Placid, Florida for a selling price of $3.4 million, with net
proceeds of $0.8 million received in July 2004. No gain or loss on
disposition was recognized in the period. In addition, we sold
approximately 1.4 acres of land in Montana for a gain and net proceeds
of $0.6 million.
F-18
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INVESTMENT IN REAL ESTATE (CONTINUED)
2) During the year ended December 31, 2003, we sold the three Properties
listed in the table below. Proceeds from the sales were used to repay
amounts on the Company's Line of Credit.
TOTAL DISPOSITION GAIN ON
DATE DISPOSED PROPERTY LOCATION SITES PRICE SALE
------------- ----------------- -------------- ----- ------------ ------------
($ millions) ($ millions)
June 6, 2003 Independence Hill Morgantown, WV 203 $ 3.9 $2.8
June 6, 2003 Brook Gardens Hamburg, NY 424 17.8 4.1
June 30, 2003 Pheasant Ridge Mount Airy, MD 101 5.4 3.9
3) Also during 2002, we effectively sold 17 Properties as part of a
restructuring of the College Heights Joint Venture discussed
hereinafter. In addition, we sold Camelot Acres, a 319 site Property
in Burnsville, Minnesota, for approximately $14.2 million.
The following table illustrates the effect on net income and earnings per
share if the Company had consummated the acquisitions during the year ended
December 2004 and 2003 on January 1, 2004 and 2003, respectively (amounts in
thousands, except per share data):
Pro Forma Information (unaudited): FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2004 2003
-------- --------
Property operating revenues ................. $307,477 $297,845
======== ========
Income from continuing operations ........... $ 7,088 $ 20,381
======== ========
Net income available for Common Shares ...... $ 7,114 $ 30,166
======== ========
Earnings per Common Share - Basic:
Income from continuing operations ........ $ 0.31 $ 0.92
Net income available for Common Shares.... $ 0.31 $ 1.36
Earnings per Common Share - Fully Diluted:
Income from continuing operations ........ $ 0.30 $ 0.92
Net income available for Common Shares ... $ 0.30 $ 1.34
We actively seek to acquire additional Properties and currently are engaged
in negotiations relating to the possible acquisition of a number of Properties.
At any time these negotiations are at varying stages which may include contracts
outstanding to acquire certain Properties which are subject to satisfactory
completion of our due diligence review.
F-19
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INVESTMENT IN JOINT VENTURES
On February 3, 2004, the Company invested approximately $29.7 million in
preferred equity interests (the "Mezzanine Investment") in six entities
controlled by Diversified Investments, Inc. ("Diversified"). These entities own
in the aggregate 11 Properties, containing 5,054 sites. Approximately $11.7
million of the Mezzanine Investment accrues at a per annum average rate of 10%,
with a minimum per annum pay rate of 6.5%, payable quarterly, and approximately
$17.9 million of the Mezzanine Investment accrues at a per annum average rate of
11%, with a minimum pay rate of 7%, payable quarterly. To the extent the minimum
pay rates on the respective Mezzanine Investments are not achieved, the accrual
rates increase to 12% and 13% per annum, respectively. The Company can acquire
these Properties in the future at capitalization rates of between 8% and 8.5%,
beginning in 2006. In addition, the Company has invested approximately $1.4
million in the Diversified entities managing these 11 Properties, which is
included in prepaid expenses and other assets on the Company's Consolidated
Balance Sheet as of December 31, 2004.
During the year ended December 31, 2004, the Company invested approximately
$4.1 million with Diversified in 11 separate property-owning entities. The
Company can acquire these Properties in the future at capitalization rates of
between 8% and 8.5%, beginning in 2006.
The Company recorded approximately $3.7 million, $0.3 million, and $0.2
million of income from joint ventures, net of $1.2 million, $0.8 million and
$0.7 million depreciation, in the years ended December 31, 2004, 2003 and 2002,
respectively; and received approximately $5.2 million, $0.8 million and $0.6
million in distributions from joint ventures in the years ended December 31,
2004, 2003, and 2002 respectively. Due to the Company's inability to control the
joint ventures, the Company accounts for its investment in the joint ventures
using the equity method of accounting.
The following is a summary of the Company's investments in unconsolidated joint
ventures:
NUMBER ECONOMIC INVESTMENT AS OF INVESTMENT AS OF
PROPERTY LOCATION OF SITES INTEREST (A) DEC. 31, 2004 DEC. 31, 2003
-------- -------------- -------- ------------ ---------------- ----------------
(in thousands) (in thousands)
Trails West Tucson, AZ 503 50% $ 1,731 $ 1,752
Plantation Calimesa, CA 385 50% 3,032 2,825
Manatee Bradenton, FL -- 90% -- 45
Home Hallandale, FL 136 90% -- 1,082
Villa del Sol Sarasota, FL 207 90% 630 654
Voyager Tucson, AZ 767 25% 3,010 4,412
Mezzanine Investments Various 5,054 -- 31,207 --
Indian Wells Indio, CA 350 30% 271 --
Diversified Investments Various 4,443 25% 3,702 --
------ ------- -------
11,845 $43,583 $10,770
====== ======= =======
(a) The percentages shown approximate the Company's economic interest. The
Company's legal ownership interest may differ.
F-20
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INVESTMENT IN JOINT VENTURES (CONTINUED)
UNCONSOLIDATED REAL ESTATE JOINT VENTURE FINANCIAL INFORMATION
The following tables represent combined summarized financial information of the
unconsolidated real estate joint ventures.
BALANCE SHEETS AS OF DECEMBER 31,
2004 2003
-------------- --------------
(in thousands) (in thousands)
ASSETS
Real estate, net $183,480 $49,899
Other assets 22,646 4,723
-------- -------
TOTAL ASSETS 206,126 54,622
======== =======
LIABILITIES
Mortgage debt & other loans $152,682 39,253
Other liabilities 13,485 8,393
Partner's equity 39,959 6,976
-------- -------
TOTAL LIABILITIES AND EQUITY 206,126 54,622
======== =======
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------
2004 2003
-------------- --------------
(in thousands) (in thousands)
Rentals $ 27,941 $ 9,632
Other Income 5,390 2,241
-------- -------
TOTAL REVENUES 33,331 11,873
EXPENSES
Operating expenses $ 16,454 $ 6,709
Interest 7,558 2,852
Other Income & Expenses 2,672 203
Depreciation & Amortization 10,165 676
-------- -------
TOTAL EXPENSES 36,849 10,440
-------- -------
-------- -------
NET (LOSS) INCOME ($ 3,518) $ 1,433
======== =======
F-21
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - NOTES RECEIVABLE
At December 31, 2004 and 2003, the Company had approximately $13.3 million
and $11.6 million in notes receivable, respectively. On December 28, 2000, the
Company, in connection with the Voyager Joint Venture, entered into an agreement
to loan $3.0 million to certain principals of Meadows Management Company. The
notes are collateralized with a combination of Common OP Units and partnership
interests in this and other joint ventures. The notes bear interest at prime
plus 0.5% per annum, require quarterly interest only payments and mature on
December 31, 2011. The outstanding balance on these notes as of December 31,
2004 is $0.4 million.
The Company has approximately $12.9 million in Chattel Loans receivable,
which yield interest at a per annum average rate of approximately 9.0%, have an
average term and amortization of 5 to 15 years, require monthly principal and
interest payments and are collateralized by homes at certain of the Properties.
NOTE 9 - EMPLOYEE NOTES RECEIVABLE
As of December 31, 2004 and 2003, the Company had employee notes receivable
of $0 million. During 2003, approximately $2.7 million of notes receivable were
repaid. These notes were collateralized by shares of the Company's Common Stock
and are presented as a reduction of Stockholders' Equity.
NOTE 10 - LONG-TERM BORROWINGS
As of December 31, 2004 and December 31, 2003, the Company had outstanding
mortgage indebtedness of approximately $1,417 million and $1,076 million,
respectively, encumbering 165 and 114 of the Company's Properties, respectively.
As of December 31, 2004 and December 31, 2003, the carrying value of such
Properties was approximately $1,653 million and $1,124 million, respectively.
MORTGAGE DEBT OUTSTANDING
- Approximately $499.2 million of mortgage debt (the Recap) consisting
of 49 loans collateralized by 51 Properties beneficially owned by
separate legal entities that are Subsidiaries of the Company, which we
closed on October 17, 2003. Of this Mortgage Debt, $166.1 million
bears interest at 5.35% per annum and matures November 1, 2008; $80.6
million bears interest at 5.72% per annum and matures November 1,
2010; $79.1 million bears interest at 6.02% per annum and matures
November 1, 2013; and $173.4 million bears interest at 6.33% per annum
and matures November 1, 2015. The Mortgage Debt amortizes over 30
years.
- A $265.0 million mortgage note (the "$265 Million Mortgage")
collateralized by 28 Properties beneficially owned by MHC Financing
Limited Partnership. The $265 Million Mortgage has a maturity date of
January 2, 2028 and bears interest at 7.015% per annum. There is no
principal amortization until February 1, 2008, after which principal
and interest are to be paid from available cash flow and the interest
rate will be reset at a rate equal to the then 10-year U.S. Treasury
obligations plus 2.0%. The $265 Million Mortgage is presented net of a
settled hedge of $3.0 million (net of accumulated amortization of
$466,969), which is being amortized into interest expense over the
life of the loan.
- A $90.5 million mortgage note (the "DeAnza Mortgage") collateralized
by 6 Properties beneficially owned by MHC-DeAnza Financing Limited
Partnership. The DeAnza Mortgage bears interest at a rate of 7.82% per
annum, amortizes beginning August 1, 2000 over 30 years and matures
July 1, 2010.
- A $48.4 million mortgage note (the "Stagecoach Mortgage")
collateralized by 7 Properties beneficially owned by MHC Stagecoach
L.L.C. The Stagecoach Mortgage bears interest at a rate of 6.98% per
annum, amortizes beginning September 1, 2001 over 10 years and matures
September 1, 2011.
F-22
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - LONG-TERM BORROWINGS (CONTINUED)
- A $43.7 million mortgage note (the "Bay Indies Mortgage")
collateralized by one Property beneficially owned by MHC Bay Indies,
L.L.C. The Bay Indies Mortgage bears interest at a rate of 5.69% per
annum, amortizes beginning April 17, 2003 over 25 years and matures
May 1, 2013.
- A $15.2 million mortgage note (the "Date Palm Mortgage")
collateralized by one Property beneficially owned by MHC Date Palm,
L.L.C. The Date Palm Mortgage bears interest at a rate of 7.96% per
annum, amortizes beginning August 1, 2000 over 30 years and matures
July 1, 2010
- Approximately $457.9 million of mortgage debt on 71 other Properties,
which was recorded at fair market value with the related discount or
premium being amortized over the life of the loan using the effective
interest rate method. Scheduled maturities for the outstanding
indebtedness are at various dates through November 1, 2027, and fixed
interest rates range from 5.16% to 8.55% per annum. Included in this
debt, the Company has a $2.4 million loan recorded to account for a
direct financing lease entered into in May 1997. Approximately $157
million of debt was assumed in the acquisition of 28 Properties during
the twelve months ended December 31, 2004.
UNSECURED TERM LOAN OUTSTANDING
- The Company entered into a Term Loan agreement, pursuant to which it
borrowed $120 million, on an unsecured basis, at LIBOR plus 1.75% per
annum. The loan will be due and payable on November 10, 2007, unless
this initial maturity date is extended by the borrower for an
additional two years upon satisfaction of certain conditions. Proceeds
from this debt were used to acquire KTTI Holding Company, Inc. as part
of the Thousand Trails transaction.
UNSECURED LINES OF CREDIT OUTSTANDING
- The Company entered into a $110 million facility with a group of banks
in December 2003, bearing interest at LIBOR plus 1.65% per annum that
matures on August 9, 2006, which can be extended for an additional
year to 2007. As of December 31, 2004, $35.7 million was available
under this facility.
- The Company entered into a $50 million facility with Wells Fargo Bank
in May 2004, bearing interest at LIBOR plus 1.65% per annum that
matures on May 4, 2006, which can be extended for an additional year
to 2007. As of December 31, 2004, $8.5 million was available under
this facility.
In December 2004, we fixed $180 million of this floating rate debt for 1
year with a weighted average rate of 4.7% per annum.
Aggregate payments of principal on long-term borrowings for each of the
next five years and thereafter are as follows (amounts in thousands):
YEAR AMOUNT
-------------------------------------- ----------
2005 $ 18,742
2006 169,770
2007 432,350
2008 203,903
2009 70,558
Thereafter 748,349
Net unamortized premiums and discounts 9,379
----------
Total $1,653,051
==========
F-23
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - LEASE AGREEMENTS
The leases entered into between the customer and the Company for the rental
of a site are generally month-to-month or for a period of one to ten years,
renewable upon the consent of the parties or, in some instances, as provided by
statute. Non-cancelable long-term leases are in effect at certain sites within
approximately 37 of the Properties. Rental rate increases at these Properties
are primarily a function of increases in the Consumer Price Index, taking into
consideration certain floors and ceilings. Additionally, periodic market rate
adjustments are made as deemed appropriate. Future minimum rents are scheduled
to be received under non-cancelable tenant leases at December 31, 2004 as
follows (amounts in thousands):
YEAR AMOUNT
---- --------
2005 $ 50,916
2006 52,062
2007 43,537
2008 31,983
2009 19,106
Thereafter 44,149
--------
Total $241,753
========
NOTE 12 - GROUND LEASES
The Company leases land under non-cancelable operating leases at certain of
the Properties expiring in various years from 2022 to 2032 with terms which
require 12 equal payments per year plus additional rents calculated as a
percentage of gross revenues. For the years ended December 31, 2004, 2003 and
2002, ground lease rent was approximately $1.6 million per year. Minimum future
rental payments under the ground leases are approximately $1.6 million for each
of the next five years and approximately $23.5 million thereafter.
NOTE 13 - TRANSACTIONS WITH RELATED PARTIES
Equity Group Investments, Inc. ("EGI"), an entity controlled by Mr. Samuel
Zell, Chairman of the Company's Board of Directors, and certain of its
affiliates have provided services such as administrative support and investor
relations. Fees paid to EGI and its affiliates amounted to approximately $0,
$300 and $1,000 for the years ended December 31, 2004, 2003 and 2002,
respectively. There were no significant amounts due to these affiliates as of
December 31, 2004 and 2003, respectively.
Certain related entities, affiliated with Mr. Zell, have provided services
to the Company. These entities include, but are not limited to, The Riverside
Agency, Inc. which provided insurance brokerage services and Two North Riverside
Plaza Joint Venture Limited Partnership from which the Company leases office
space. Fees paid to these entities amounted to approximately $412,000, $404,000
and $645,000 for the years December 31, 2004, 2003 and 2002, respectively.
Amounts due to these entities were approximately $0 and $32,000 as of December
31, 2004 and 2003, respectively. During 2003, we paid $25,000 to J. Green & Co.,
L.L.C. for services provided by Mr. Berman, the Company's current Chief
Financial Officer, prior to his employment by the Company.
Related party agreements or fee arrangements are generally for a term of
one year and approved by independent members of the Company's Board of
Directors.
NOTE 14 - STOCK OPTION PLAN AND STOCK GRANTS
The Company's Stock Option and Stock Award Plan (the "Plan") was adopted in
December 1992 and amended and restated from time to time, most recently
effective March 23, 2001. Pursuant to the Plan, officers, directors, employees
and consultants of the Company are offered the opportunity (i) to acquire shares
of Common Stock through the grant of stock options ("Options"), including
non-qualified stock options and, for key employees, incentive stock options
within the meaning of Section 422 of the Internal Revenue Code; and (ii) to be
awarded shares of Common Stock ("Restricted Stock Grants"), subject to
conditions and restrictions determined by the Compensation, Nominating, and
Corporate Governance Committee of the Company's Board of Directors (the
"Compensation Committee"). The Compensation Committee will determine the
F-24
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - STOCK OPTION PLAN AND STOCK GRANTS (CONTINUED)
vesting schedule, if any, of each Option and the term, which term shall not
exceed ten years from the date of grant. As to the Options that have been
granted through December 31, 2004 to officers, employees and consultants,
generally, one-third are exercisable one year after the initial grant, one-third
are exercisable two years following the date such Options were granted and the
remaining one-third are exercisable three years following the date such Options
were granted. A maximum of 6,000,000 shares of Common Stock are available for
grant under the Plan and no more than 250,000 shares may be subject to grants to
any one individual in any calendar year.
Grants under the Plan are made by the Compensation Committee, which
determines the individuals eligible to receive awards, the types of awards, and
the terms, conditions and restrictions applicable to any award. In addition, the
terms of two specific types of awards are contemplated under the Plan:
- The first type of award is a grant of Options or Restricted Stock
Grants of Common Stock made to each member of the Board at the meeting
held immediately after each annual meeting of the Company's
stockholders. Generally, if the director elects to receive Options,
the grant will cover 10,000 shares of Common Stock at an exercise
price equal to the fair market value on the date of grant. If the
director elects to receive a Restricted Stock Grant of Common Stock,
he or she will receive an award of 2,000 shares of Common Stock.
Exercisability or vesting with respect to either type of award will be
with respect to one-third of the award after six months, two-thirds of
the award after one year, and the full award after two years.
- The second type of award is a grant of Common Stock in lieu of 50% of
their bonus otherwise payable to individuals with a title of Vice
President or above. A recipient can request that the Compensation
Committee pay a greater or lesser portion of the bonus in shares of
Common Stock.
Prior to 2003, we accounted for our stock compensation in accordance with
APB No. 25, "Accounting for Stock Issued to Employees", based upon the intrinsic
value method. This method results in no compensation expense for Options issued
with an exercise price equal to or exceeding the market value of the Common
Stock on the date of grant. Effective January 1, 2003, we elected to account for
our stock-based compensation in accordance with SFAS No. 123 and its amendment
(SFAS No. 148), "Accounting for Stock Based Compensation", which will result in
compensation expense being recorded based on the fair value of the Options and
other equity awards issued. SFAS No. 148 provides three possible transition
methods for changing to the fair value method. We have elected to use the
modified-prospective method. This method requires that we recognize stock-based
employee compensation cost from the beginning of the fiscal year in which the
recognition provisions are first applied as if the fair value method had been
used to account for all employee awards granted, or settled in fiscal years
beginning after December 15, 1994. The following table illustrates the effect on
net income and earnings per share as if the fair value method was applied to all
outstanding and unvested awards in each period presented (amounts in thousands,
except per share data):
2003 2002
2004 (Restated) (Restated)
------- ---------- ----------
Net income available for Common Shares
as reported ............................. $ 4,026 $25,132 $31,887
Add: Stock-based compensation expense
included in net income as reported ...... 2,899 2,139 2,185
Deduct: Stock-based compensation
expense determined under the fair
value based method for all awards ....... (2,899) (2,139) (2,086)
------- ------- -------
Pro forma net income available for
Common Shares ........................... $ 4,026 $25,132 $31,986
======= ======= =======
Pro forma net income per Common Share
- Basic ................................. $ 0.18 $ 1.14 $ 1.48
======= ======= =======
Pro forma net income per Common Share
- Fully Diluted ......................... $ 0.17 $ 1.11 $ 1.44
======= ======= =======
F-25
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14- STOCK OPTION PLAN AND STOCK GRANTS (CONTINUED)
Restricted Stock Grants
In 2002, the Company awarded Restricted Stock Grants for 69,750 shares of
Common Stock to certain members of senior management of the Company. These
Restricted Stock Grants vest over three years, but may be restricted for a
period of up to ten years depending upon certain performance benchmarks tied to
increases in funds from operations being met. The fair market value of these
Restricted Stock Grants of approximately $2.2 million as of the date of grant
was treated in 2002 as deferred compensation and amortized in accordance with
their vesting.
In 2004, the Company awarded Restricted Stock Grants for 135,000 shares of
Common Stock to certain members of senior management of the Company. These
Restricted Stock Grants vest over three years, but may be restricted for a
period of up to ten years depending upon certain performance benchmarks tied to
increases in funds from operations being met. The fair market value of these
Restricted Stock Grants was approximately $5.0 million as of the date of grant
and is recorded as compensation expense and paid in capital over the three year
vesting period.
In 2004, 2003 and 2002, the Company awarded Restricted Stock Grants for
40,000, 35,000 and 16,000 shares of Common Stock, respectively, to directors
with a fair market value of approximately $1,386,000, $733,000 and $376,000 in
2004, 2003 and 2002, respectively.
The Company recognized compensation expense of approximately $2.7, $1.8 and
$1.5 million related to Restricted Stock Grants in 2004, 2003 and 2002
respectively. The balance of unamortized deferred compensation as of December
31, 2004 and 2003 was approximately $0.2 and $0.5 million, respectively.
Stock Options
The fair value of each grant is estimated on the grant date using the
Black-Scholes model. The following table includes the assumptions that were made
and the estimated fair values:
ASSUMPTION 2004 2003 2002
---------- --------- -------- ----------
(pro forma)
Dividend yield ............................ 5.9% 5.6% 6.3%
Risk-free interest rate ................... 4.7% 3.5% 3.5%
Expected life ............................. 10 years 5 years 5 years
Expected volatility ....................... 16% 14% 19%
--------- -------- --------
Estimated Fair Value of Options Granted ... $ 57,000 $ 40,600 $ 37,432
F-26
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - STOCK OPTION PLAN AND STOCK GRANTS (CONTINUED)
In January 2004, approximately 1.2 million options were repriced in
connection with the special dividend paid on January 16, 2004 (see Note 5). A
summary of the Company's stock option activity, and related information for the
years ended December 31, 2004, 2003 and 2002 follows:
WEIGHTED AVERAGE
SHARES SUBJECT EXERCISE PRICE PER
TO OPTIONS SHARE
-------------- ------------------
Balance at December 31, 2001 1,828,348 23.44
Options granted 20,000 33.55
Options exercised (282,959) 20.48
Options canceled (49,492) 24.94
----------
Balance at December 31, 2002 1,515,897 24.08
Options granted 20,000 32.67
Options exercised (302,526) 21.06
Options canceled (9,437) 25.60
----------
Balance at December 31, 2003 1,223,934 24.95
Options granted 1,212,367 17.28
Options exercised (195,737) 15.47
Options canceled (1,194,568) 25.04
----------
Balance at December 31, 2004 1,045,996 17.74
==========
The following table summarizes information regarding Options outstanding at
December 31, 2004:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- --------------------------
WEIGHTED
AVERAGE
OUTSTANDING WEIGHTED
RANGE OF EXERCISE CONTRACTUAL WEIGHTED AVERAGE AVERAGE
PRICES OPTIONS LIFE (IN YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE
----------------- --------- --------------- ---------------- --------- --------------
$7.62 to $14.00 169,467 1.6 $11.88 169,467 $11.88
$15.69 to $18.99 680,475 4.4 $17.38 680,475 $17.38
$22.65 to $31.53 196,054 7.4 $24.06 176,052 $23.47
--------- --- ------ --------- ------
1,045,996 4.5 $17.74 1,025,994 $17.51
========= === ====== ========= ======
As of December 31, 2004, 2003 and 2002, 1,942,025 shares, 2,119,152 shares,
and 2,166,686 shares remained available for grant, respectively; of these
861,525 shares, 1,038,853 shares, and 1,073,853 shares, respectively, remained
available for Restricted Stock Grants.
NOTE 15 - PREFERRED STOCK
The Company's Board of Directors is authorized under the Company's charter,
without further stockholder approval, to issue, from time to time, in one or
more series, 10,000,000 shares of $.01 par value preferred stock (the "Preferred
Stock"), with specific rights, preferences and other attributes as the Board may
determine, which may include preferences, powers and rights that are senior to
the rights of holders of the Company's Common Stock. However, under certain
circumstances, the issuance of preferred stock may require stockholder approval
pursuant to the rules and regulations of The New York Stock Exchange. As of
December 31, 2004 and 2003, no Preferred Stock was issued by the Company.
F-27
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - SAVINGS PLAN
The Company has a qualified retirement plan, with a salary deferral feature
designed to qualify under Section 401 of the Code (the "401(k) Plan"), to cover
its employees and those of its Subsidiaries, if any. The 401(k) Plan permits
eligible employees of the Company and those of any Subsidiary to defer up to 19%
of their eligible compensation on a pre-tax basis subject to certain maximum
amounts. In addition, the Company will match dollar-for-dollar the participant's
contribution up to 4% of the participant's eligible compensation.
In addition, amounts contributed by the Company will vest, on a prorated
basis, according to the participant's vesting schedule. After five years of
employment with the Company, the participants will be 100% vested for all
amounts contributed by the Company. Additionally, a discretionary profit sharing
component of the 401(k) Plan provides for a contribution to be made annually for
each participant in an amount, if any, as determined by the Company. All
employee contributions are 100% vested. The Company's contribution to the 401(k)
Plan was approximately $545,271, $240,000, and $248,000, for the years ended
December 31, 2004, 2003, and 2002, respectively.
The Company has established a supplemental executive retirement plan (the
"SERP") to provide certain officers and directors an opportunity to defer a
portion of their eligible compensation in order to save for retirement and for
the education of their children. The SERP is restricted to investments in
Company common shares, certain marketable securities that have been specifically
approved, or cash equivalents. In accordance with EITF 97-14 "Accounting for
Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi
Trust and Invested", the deferred compensation liability represented in the SERP
and the securities issued to fund such deferred compensation liability are
consolidated by the Company on the balance sheet. Assets held in the SERP are
included in other assets and are classified as trading securities and reported
at fair value, with unrealized gains and losses included in earnings. Company
shares held in the SERP are classified in stockholders equity due to the
inability of the Company to repurchase these shares.
NOTE 17 - COMMITMENTS AND CONTINGENCIES
DEANZA SANTA CRUZ
The customers of DeAnza Santa Cruz Mobile Estates, a Property located in
Santa Cruz, California, brought several actions opposing fees and charges in
connection with water service at the Property. As a result of one action, the
Company rebated approximately $36,000 to the customers. The DeAnza Santa Cruz
Homeowners Association ("HOA") then proceeded to a jury trial alleging these
"overcharges" entitled them to an award of punitive damages. In January 1999, a
jury awarded the HOA $6.0 million in punitive damages. On December 21, 2001 the
California Court of Appeal for the Sixth District reversed the $6.0 million
punitive damage award, the related award of attorneys' fees, and, as a result,
all post-judgment interest thereon, on the basis that punitive damages are not
available as a remedy for a statutory violation of the California Mobilehome
Residency Law ("MRL"). The decision of the appellate court left the HOA, the
plaintiff in this matter, with the right to seek a new trial in which it must
prove its entitlement to either the statutory penalty and attorneys' fees
available under the MRL or punitive damages based on causes of action for fraud,
misrepresentation or other tort. In order to resolve this matter, the Company
accrued for and agreed to pay $201,000 to the HOA. This payment resolved the
punitive damages claim. The HOA's attorney made a motion asking for an award of
attorneys' fees and costs in the amount of approximately $1.5 million as a
result of this resolution of the litigation. On April 2, 2003 the court awarded
attorney's fees to the HOA's attorney in the amount of $593,000 and court costs
of approximately $20,000. The Company appealed this award. On July 13, 2004, the
California Court of Appeal affirmed the award of attorney's fees in favor of the
HOA's attorney.
OTHER CALIFORNIA RENT CONTROL LITIGATION
As part of the Company's effort to realize the value of its Properties
subject to rent control, the Company has initiated lawsuits against several
municipalities in California. The Company's goal is to achieve a level of
regulatory fairness in California's rent control jurisdictions, and in
particular those jurisdictions that prohibit increasing rents to market upon
turnover. This regulatory feature, called vacancy control, allows tenants to
sell their homes for a premium representing the value of the future discounted
rent-controlled rents. In the Company's view, such regulation results in a
transfer of the value of the Company's stockholders' land, which would otherwise
be reflected in market rents, to tenants upon the sales of their
F-28
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
homes in the form of an inflated purchase price that cannot be attributed to the
value of the home being sold. As a result, in the Company's view, the Company
loses the value of its asset and the selling tenant leaves the Property with a
windfall premium. The Company has discovered through the litigation process that
certain municipalities considered condemning the Company's Properties at values
well below the value of the underlying land. In the Company's view, a failure to
articulate market rents for sites governed by restrictive rent control would put
the Company at risk for condemnation or eminent domain proceedings based on
artificially reduced rents. Such a physical taking, should it occur, could
represent substantial lost value to stockholders. The Company is cognizant of
the need for affordable housing in the jurisdictions, but asserts that
restrictive rent regulation with vacancy control does not promote this purpose
because the benefits of such regulation are fully capitalized into the prices of
the homes sold. The Company estimates that the annual rent subsidy to tenants in
these jurisdictions is approximately $15 million. In a more well balanced
regulatory environment, the Company would receive market rents that would
eliminate the subsidy and homes would trade at or near their intrinsic value.
In connection with such efforts, the Company announced it has entered into
a settlement agreement with the City of Santa Cruz, California and that,
pursuant to the settlement agreement, the City amended its rent control
ordinance to exempt the Company's Property from rent control as long as the
Company offers a long term lease which gives the Company the ability to increase
rents to market upon turnover and bases annual rent increases on the CPI. The
settlement agreement benefits the Company's stockholders by allowing them to
receive the value of their investment in this Property through vacancy decontrol
while preserving annual CPI based rent increases in this age restricted
Property.
The Company has filed two lawsuits in Federal court against the City of San
Rafael, challenging its rent control ordinance on constitutional grounds. The
Company believes that one of those lawsuits was settled by the City agreeing to
amend the ordinance to permit adjustments to market rent upon turnover. The City
subsequently rejected the settlement agreement. The Court initially found the
settlement agreement was binding on the City, but then reconsidered and
determined to submit the claim of breach of the settlement agreement to a jury.
In October 2002, the first case against the City went to trial, based on both
breach of the settlement agreement and the constitutional claims. A jury found
no breach of the settlement agreement; the Company then filed motions asking the
Court to rule in its favor on that claim, notwithstanding the jury verdict. The
Court has postponed decision on those motions and on the constitutional claims,
pending a ruling on some property rights issues by the United States Supreme
Court. In the event that the Court does not rule in favor of the Company on
either the settlement agreement or the constitutional claims, then the Company
has pending claims seeking a declaration that it can close the Property and
convert it to another use.
The Company's efforts to achieve a balanced regulatory environment
incentivize tenant groups to file lawsuits against the Company seeking large
damage awards. The homeowners association at Contempo Marin ("CMHOA"), a 396
site Property in San Rafael, California, sued the Company in December 2000 over
a prior settlement agreement on a capital expenditure pass-through after the
Company sued the City of San Rafael in October 2000 alleging its rent control
ordinance is unconstitutional. In the Contempo Marin case, the CMHOA prevailed
on a motion for summary judgment on an issue that permits the Company to collect
only $3.72 out of a monthly pass-through amount of $7.50 that the Company
believes had been agreed to by the CMHOA in a settlement agreement. On May 23,
2004, the California Court of Appeal affirmed the trial court's order dismissing
the Company's claims against the City of San Rafael. The trial court has set a
trial date in the second quarter of 2005 on the CMHOA's remaining claims for
damages. The Company intends to vigorously defend this matter. The Company
believes that such lawsuits will be a consequence of the Company's efforts to
change rent control since tenant groups actively desire to preserve the premium
value of their homes in addition to the discounted rents provided by rent
control. The Company has determined that its efforts to rebalance the regulatory
environment despite the risk of litigation from tenant groups are necessary not
only because of the $15 million annual subsidy to tenants, but also because of
the condemnation risk.
Similarly, in June 2003, the Company won a judgment against the City of
Santee in California Superior Court (case no. 777094). The effect of the
judgment was to invalidate, on state law grounds, two (2) rent control
ordinances the City of Santee had enforced against the Company and other
property owners. However, the Court allowed the City to continue to enforce a
rent control ordinance that predated the two invalid ordinances (the "prior
ordinance"). As a result of the judgment the Company was entitled to collect a
one-time rent increase based upon the difference in annual adjustments between
the invalid ordinance(s) and the prior ordinances and to adjust its base rents
to reflect what the Company could have charged had the prior ordinance been
continually in effect. The City of Santee appealed the judgment. The court of
appeal and California Supreme Court refused to stay enforcement of these rent
adjustments pending appeal. After the City was unable to obtain a
F-29
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
stay, the City and the tenant association each sued the Company in separate
actions alleging the rent adjustments pursuant to the judgment violate the prior
ordinance (Case Nos. GIE 020887 and GIE 020524). They seek to rescind the rent
adjustments, refunds of amounts paid, and penalties and damages in these
separate actions. On January 25, 2005, the California Court of Appeal reversed
the judgment in part and affirmed it in part with a remand. The Court of Appeal
affirmed that one ordinance was unlawfully adopted and therefore void and that
the second ordinance contained unconstitutional provisions. However, the Court
ruled the City had the authority to cure the issues with the first ordinance
retroactively. On remand the trial court is directed to decide the issue of
damages to the Company which the Company believes is consistent with the Company
receiving the economic benefit of invalidating one of the ordinances and also
consistent with the Company's position that it is entitled to market rent and
not merely a higher amount of regulated rent. The Company will petition the
Supreme Court of California for review of certain aspects of this decision. The
Company intends to vigorously defend the two new lawsuits. In addition, the
Company has sued the City of Santee in Federal court alleging all three of the
ordinances are unconstitutional under the Fifth Amendment to the United States
Constitution because they fail to substantially advance a legitimate state
interest. Thus, it is the Company's position that the ordinances are subject to
invalidation as a matter of law in the Federal court action. Separately, the
Federal District Court granted the City's Motion for Summary Judgment in the
Company's Federal Court lawsuit. This decision was based not on the merits, but
on procedural grounds, including that the Company's claims were moot given its
success in the state court case. The Company intends to appeal this ruling and
believes the outcome will be affected by the cases currently before the Ninth
Circuit and United States Supreme Court.
Moreover, in July 2004, the Ninth Circuit Court of Appeal decided the case
of Cashman v. City of Cotati, a Property owner's challenge to the City's rent
control ordinance, and stated that a rent control ordinance that does not on its
face provide for a mechanism to prevent the capture of a premium is
unconstitutional, as a matter of law, absent sufficient externalities rendering
a premium unavailable. This reasoning supports the legal position the Company
has put forth in its opposition to rent control in general and vacancy control
in particular. The City of Cotati has petitioned the Ninth Circuit for rehearing
and that petition is pending. In addition, in October 2004, the United States
Supreme Court granted certiorari in State of Hawaii vs. Chevron USA, Inc., a
Ninth Circuit Court of Appeal case that upholds the standard that a regulation
must substantially advance a legitimate state purpose in order to be
constitutionally viable. The case was argued before the United States Supreme
Court on February 22, 2005. The ultimate outcome of these cases will guide the
Company's continued efforts to realize the value of its Properties which are
subject to rent control and the Company's efforts to achieve a level of
regulatory fairness in rent control jurisdictions.
OTHER
The Company is involved in various other legal proceedings arising in the
ordinary course of business. Additionally, in the ordinary course of business,
the Company's operations are subject to audit by various taxing authorities.
Management believes that all proceedings herein described or referred to, taken
together, are not expected to have a material adverse impact on the Company. In
addition, to the extent any such proceedings or audits relate to newly acquired
Properties, the Company considers any potential indemnification obligations of
sellers in favor of the Company.
F-30
EQUITY LIFESTYLE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is unaudited quarterly data for 2004 and 2003 (amounts in
thousands, except for per share amounts):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
2004 3/31 6/30 9/30 12/31
---- ---------- ---------- ---------- ----------
(Restated) (Restated) (Restated) (Restated)
Total revenues (a)....................................... $80,320 $86,844 $89,425 $96,378
Income from continuing operations (a).................... $ 4,495 $ 481 $ (864) $ (80)
Income from discontinued operations (a).................. $ 15 $ (21) $ -- $ --
Net income (loss) available to common stockholders....... $ 4,510 $ 460 $ (864) $ (80)
Weighted average Common Shares outstanding - Basic....... 22,674 22,737 22,829 22,906
Weighted average Common Shares outstanding - Diluted..... 27,986 28,655 29,335 29,360
Net income (loss) per Common Share outstanding - Basic... $ 0.20 $ 0.02 $ (0.04) $ (0.00)
Net income (loss) per Common Share outstanding -
Diluted............................................... $ 0.19 $ 0.02 $ (0.04) $ (0.00)
(a) Amounts may differ from previously disclosed amounts due to
reclassification of discontinued operations.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
2003 3/31 6/30 9/30 12/31
---- ---------- ---------- ---------- ----------
(Restated) (Restated) (Restated) (Restated)
Total revenues (a)....................................... $64,569 $66,760 $68,760 $71,066
Income from continuing operations (a).................... $ 6,969 $ 4,709 $ 4,578 $ (714)
Income from discontinued operations (a).................. $ 294 $ 9,288 $ 8 $ --
Net income (loss) available to common stockholders....... $ 7,263 $13,997 $ 4,586 $ (714)
Weighted average Common Shares outstanding - Basic....... 21,918 22,027 22,114 22,247
Weighted average Common Shares outstanding - Diluted..... 27,276 27,371 27,458 27,568
Net income (loss) per Common Share outstanding - Basic... $ 0.33 $ 0.64 $ 0.21 $ (0.03)
Net income (loss) per Common Share outstanding -
Diluted.............................................. $ 0.32 $ 0.62 $ 0.20 $ (0.03)
(a) Amounts may differ from previously disclosed amounts due to
reclassification of discontinued operations.
F-31
SCHEDULE II
EQUITY LIFESTYLE PROPERTIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 2004
ADDITIONS
-----------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING CHARGED TO OTHER END OF
OF PERIOD INCOME ACCOUNTS DEDUCTIONS(1) PERIOD
---------- ---------- ---------- ------------- ----------
For the year ended December 31, 2002:
Allowance for doubtful accounts...... $300,000 $ 940,565 $ -- ($540,565) $ 700,000
For the year ended December 31, 2003:
Allowance for doubtful accounts...... $700,000 $ 820,822 $ -- ($693,822) $ 827,000
For the year ended December 31, 2004:
Allowance for doubtful accounts...... $827,000 $1,182,000 ($145,000) ($834,000) $1,030,000
(1) Deductions represent tenant receivables deemed uncollectible.
S-1
SCHEDULE III
EQUITY LIFESTYLE PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
Costs
Capitalized
Subsequent to
Initial Cost to Acquisition
Company (Improvements)
-------------------- ------------------
Depreciable Depreciable
Real Estate Location Encumbrances Land Property Land Property
----------- -------------------- ------------ ------ ----------- ---- -----------
Apollo Village Phoenix AZ 3,997 932 3,219 0 578
Araby Acres Yuma AZ 3,222 1,440 4,345 0 12
The Highlands at Brentwood Mesa AZ 10,910 1,997 6,024 0 738
Cactus Gardens Yuma AZ 4,849 1,992 5,984 0 12
Carefree Manor Phoenix AZ 3,394 706 3,040 0 222
Casa del Sol #1 Peoria AZ 10,629 2,215 6,467 0 1,235
Casa del Sol #2 Glendale AZ 9,983 2,103 6,283 0 928
Casa del Sol #3 Glendale AZ 11,015 2,450 7,452 0 375
Central Park Phoenix AZ 5,103 1,612 3,784 0 641
Countryside Phoenix AZ 3,737 2,056 6,241 0 206
Desert Paradise Yuma AZ 1,452 666 2,011 0 4
Desert Skies Phoenix AZ 5,046 792 3,126 0 296
Fairview Manor Tucson AZ 5,048 1,674 4,708 0 1,113
Foothill Yuma AZ 1,350 459 1,402 0 16
Golden Sun Scottsdale AZ 2,976 1,678 5,049 0 48
Hacienda De Valencia Mesa AZ 6,063 833 2,701 0 2,123
Monte Vista Mesa AZ 22,844 11,402 34,355 0 157
Palm Shadows Glendale AZ 8,471 1,400 4,218 0 391
Paradise Sun City AZ 19,813 6,414 19,263 0 56
Sedona Shadows Sedona AZ 2,465 1,096 3,431 0 538
Suni Sands Yuma AZ 3,172 1,249 3,759 0 7
Sunrise Heights Phoenix AZ 5,636 1,000 3,016 0 413
The Mark Mesa AZ 8,826 1,354 4,660 6 846
The Meadows Tempe AZ 12,436 2,613 7,887 0 1,103
Viewpoint Mesa AZ 43,703 24,890 56,340 0 99
Whispering Palms Phoenix AZ 3,219 670 2,141 0 182
California Hawaiian San Jose CA 26,968 5,825 17,755 0 1,581
Colony Park Ceres CA 5,826 890 2,837 0 319
Concord Cascade Pacheco CA 5,411 985 3,016 0 1,047
Contempo Marin San Rafael CA 25,233 4,787 16,379 0 2,376
Coralwood Modesto CA 6,200 0 5,047 0 276
Date Palm Country Club Cathedral City CA 15,194 4,138 14,064 -23 3,416
Date Palm Cathedral City CA 0 0 216 0 47
Four Seasons Fresno CA 0 756 2,348 0 245
Laguna Lake San Luis Obispo CA 4,916 2,845 6,520 0 252
Gross Amount Carried
at Close of
Period 12/31/04
-------------------------------------
Depreciable Accumulated Date of
Real Estate Location Land Property Total Depreciation Acquisition
----------- -------------------- ------ ----------- ------ ------------ -----------
Apollo Village Phoenix AZ 932 3,797 4,729 (1,302) 1994
Araby Acres Yuma AZ 1,440 4,357 5,797 (158) 2003
The Highlands at Brentwood Mesa AZ 1,997 6,762 8,759 (2,566) 1993
Cactus Gardens Yuma AZ 1,992 5,996 7,988 (102) 2004
Carefree Manor Phoenix AZ 706 3,262 3,968 (803) 1998
Casa del Sol #1 Peoria AZ 2,215 7,702 9,917 (1,587) 1996
Casa del Sol #2 Glendale AZ 2,103 7,211 9,314 (1,458) 1996
Casa del Sol #3 Glendale AZ 2,450 7,827 10,277 (1,722) 1998
Central Park Phoenix AZ 1,612 4,425 6,037 (2,947) 1983
Countryside Phoenix AZ 2,056 6,447 8,503 (510) 2002
Desert Paradise Yuma AZ 666 2,015 2,681 (63) 2004
Desert Skies Phoenix AZ 792 3,422 4,214 (809) 1998
Fairview Manor Tucson AZ 1,674 5,821 7,495 (1,352) 1998
Foothill Yuma AZ 459 1,418 1,877 (52) 2003
Golden Sun Scottsdale AZ 1,678 5,097 6,775 (407) 2002
Hacienda De Valencia Mesa AZ 833 4,824 5,657 (2,475) 1984
Monte Vista Mesa AZ 11,402 34,512 45,914 (766) 2004
Palm Shadows Glendale AZ 1,400 4,609 6,009 (1,837) 1993
Paradise Sun City AZ 6,414 19,319 25,733 (592) 2004
Sedona Shadows Sedona AZ 1,096 3,969 5,065 (979) 1997
Suni Sands Yuma AZ 1,249 3,766 5,015 (116) 2004
Sunrise Heights Phoenix AZ 1,000 3,429 4,429 (1,227) 1994
The Mark Mesa AZ 1,360 5,506 6,866 (1,892) 1994
The Meadows Tempe AZ 2,613 8,990 11,603 (3,091) 1994
Viewpoint Mesa AZ 24,890 56,439 81,329 (1,096) 2004
Whispering Palms Phoenix AZ 670 2,323 2,993 (580) 1998
California Hawaiian San Jose CA 5,825 19,336 25,161 (4,884) 1997
Colony Park Ceres CA 890 3,156 4,046 (899) 1998
Concord Cascade Pacheco CA 985 4,063 5,048 (2,467) 1983
Contempo Marin San Rafael CA 4,787 18,755 23,542 (6,419) 1994
Coralwood Modesto CA 0 5,323 5,323 (1,350) 1997
Date Palm Country Club Cathedral City CA 4,115 17,480 21,595 (5,722) 1994
Date Palm Cathedral City CA 0 263 263 (100) 1994
Four Seasons Fresno CA 756 2,593 3,349 (665) 1997
Laguna Lake San Luis Obispo CA 2,845 6,772 9,617 (1,693) 1998
S-2
SCHEDULE III
EQUITY LIFESTYLE PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
Costs Capitalized
Subsequent to
Initial Cost to Acquisition
Company (Improvements)
------------------- -------------------
Depreciable Depreciable
Real Estate Location Encumbrances Land Property Land Property
------------------------ ----------------- ------------ ----- ------------- ----- -------------
Lamplighter Spring Valley CA 3,761 633 2,201 0 675
Las Palmas Rialto CA 3,807 1,295 3,866 0 20
Meadowbrook Santee CA 0 4,345 12,528 0 1,522
Monte del Lago Castroville CA 7,673 3,150 9,469 0 1,464
Quail Meadows Riverbank CA 5,280 1,155 3,469 0 293
Nicholson Plaza San Jose CA 0 0 4,512 0 72
Pacific Dunes Ranch California CA 6,025 1,940 5,632 0 27
Central Coast
Parque La Quinta Rialto CA 5,105 1,799 5,450 0 -45
Rancho Mesa El Cajon CA 9,600 2,130 6,389 0 249
Rancho Valley El Cajon CA 3,624 685 1,902 0 794
Royal Holiday Hemet CA 0 778 2,643 0 374
Royal Oaks Visalia CA 0 602 1,921 0 281
DeAnza Santa Cruz Santa Cruz CA 6,871 2,103 7,201 0 317
Santiago Estates Sylmar CA 16,205 3,562 10,767 0 769
Sea Oaks Los Osos CA 0 871 2,703 0 267
Sunshadow San Jose CA 0 0 5,707 0 137
Tahoe Valley Campground Lake Tahoe CA 2,246 1,357 4,071 0 12
Village of Four Seasons San Jose CA 15,332 5,229 15,714 0 18
Westwinds (4 properties) San Jose CA 0 0 17,616 0 5,116
Bear Creek Sheridan CO 4,880 1,100 3,359 0 248
Cimarron Broomfield CO 4,541 863 2,790 0 584
Golden Terrace Golden CO 4,246 826 2,415 0 720
Golden Terrace South Golden CO 2,400 750 2,265 0 617
Golden Terrace West Golden CO 8,328 1,694 5,065 0 1,011
Hillcrest Village Aurora CO 10,504 1,912 5,202 289 2,397
Holiday Hills Denver CO 14,746 2,159 7,780 0 3,819
Holiday Village CO Co. Springs CO 3,471 567 1,759 0 912
Pueblo Grande Pueblo CO 1,867 241 1,069 0 432
Woodland Hills Denver CO 7,390 1,928 4,408 0 2,407
Aspen Meadows Rehoboth Beach DE 5,620 1,148 3,460 0 338
Camelot Meadows Rehoboth Beach DE 7,304 527 2,058 1,251 3,719
Mariners Cove Millsboro DE 16,452 990 2,971 0 3,909
McNicol Rehoboth Beach DE 2,710 563 1,710 0 72
Sweetbriar Rehoboth Beach DE 3,040 498 1,527 0 377
Waterford Estates Bear DE 30,954 5,250 16,202 0 614
Whispering Pines Lewes DE 9,871 1,536 4,609 0 1,005
Gross Amount Carried
at Close of
Period 12/31/04
----------------------------
Depreciable Accumulated Date of
Real Estate Location Land Property Total Depreciation Acquisition
------------------------ ----------------- ----- ----------- ------ ------------ -----------
Lamplighter Spring Valley CA 633 2,876 3,509 (1,853) 1983
Las Palmas Rialto CA 3,886 5,181 (76) 2004
Meadowbrook Santee CA 4,345 14,050 18,395 (3,073) 1998
Monte del Lago Castroville CA 3,150 10,933 14,083 (2,612) 1997
Quail Meadows Riverbank CA 1,155 3,762 4,917 (844) 1998
Nicholson Plaza San Jose CA 0 4,584 4,584 (1,126) 1997
Pacific Dunes Ranch California CA 1,940 5,659 7,599 (178) 2004
Central Coast
Parque La Quinta Rialto CA 1,799 5,405 7,204 (197) 2004
Rancho Mesa El Cajon CA 2,130 6,638 8,768 (1,453) 1998
Rancho Valley El Cajon CA 685 2,696 3,381 (1,633) 1983
Royal Holiday Hemet CA 778 3,017 3,795 (606) 1998
Royal Oaks Visalia CA 602 2,202 2,804 (554) 1997
DeAnza Santa Cruz Santa Cruz CA 2,103 7,518 15,012 (2,553) 1994
Santiago Estates Sylmar CA 3,562 11,536 15,098 (2,710) 1998
Sea Oaks Los Osos CA 871 2,970 3,841 (720) 1997
Sunshadow San Jose CA 0 5,844 5,844 (1,464) 1997
Tahoe Valley Campground Lake Tahoe CA 1,357 4,083 5,440 (124) 2004
Village of Four Seasons San Jose CA 5,229 15,732 20,961 (349) 2004
Westwinds (4 properties) San Jose CA 0 22,732 22,732 (5,844) 1997
Bear Creek Sheridan CO 1,100 3,607 4,707 (833) 1998
Cimarron Broomfield CO 863 3,374 4,237 (2,227) 1983
Golden Terrace Golden CO 826 3,135 3,961 (1,868) 1983
Golden Terrace South Golden CO 750 2,882 3,632 (717) 1997
Golden Terrace West Golden CO 1,694 6,076 7,770 (3,399) 1986
Hillcrest Village Aurora CO 2,201 7,599 9,800 (4,843) 1983
Holiday Hills Denver CO 2,159 11,599 13,758 (7,158) 1983
Holiday Village CO Co. Springs CO 567 2,671 3,238 (1,583) 1983
Pueblo Grande Pueblo CO 241 1,501 1,742 (968) 1983
Woodland Hills Denver CO 1,928 6,815 8,743 (2,522) 1994
Aspen Meadows Rehoboth Beach DE 1,148 3,798 4,946 (894) 1998
Camelot Meadows Rehoboth Beach DE 1,778 5,777 7,555 (1,318) 1998
Mariners Cove Millsboro DE 990 6,880 7,870 (2,868) 1987
McNicol Rehoboth Beach DE 563 1,782 2,345 (410) 1998
Sweetbriar Rehoboth Beach DE 498 1,904 2,402 (496) 1998
Waterford Estates Bear DE 5,250 16,816 22,066 (3,037) 1996
Whispering Pines Lewes DE 1,536 5,614 7,150 (2,844) 1998
S-3
SCHEDULE III
EQUITY LIFESTYLE PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
Costs
Capitalized
Subsequent to
Initial Cost to Acquisition
Company (Improvements)
-------------------- ------------------
Depreciable Depreciable
Real Estate Location Encumbrances Land Property Land Property
--------------------------- ------------------- ------------ ------ ----------- ---- -----------
Maralago Cay Lantana FL 21,600 5,325 15,420 0 3,073
Barrington Hills Port Richey FL 3,220 1,145 3,437 0 0
Bay Indies Venice FL 43,662 10,483 31,559 10 3,482
Bay Lake Estates Nokomis FL 3,807 990 3,390 0 951
Breezy Hill Pompano Beach FL 10,065 5,510 16,555 0 112
Buccaneer N. Ft. Myers FL 14,140 4,207 14,410 0 1,183
Bulow Village Resort Flagler Beach FL 0 0 228 0 56
Bulow Village Flagler Beach FL 10,268 3,637 949 0 5,458
Carefree Cove Fort Lauderdale FL 4,777 1,741 5,170 0 79
Carriage Cove Daytona Beach FL 8,010 2,914 8,682 0 788
Coachwood Leesburg FL 4,238 1,607 4,822 0 19
Coral Cay Margate FL 20,874 5,890 20,211 0 3,129
Coquina St Augustine FL 0 5,286 5,545 0 8,856
Meadows at Countrywood Plant City FL 18,273 4,514 13,175 0 3,869
Country Place New Port Richey FL 8,346 663 0 18 7,106
Country Side North Vero Beach FL 17,328 3,711 11,133 0 1,663
Crystal Isles Crystal River FL 2,832 926 2,787 0 5
Down Yonder Largo FL 7,707 2,652 7,981 0 69
East Bay Oaks Largo FL 5,493 1,240 3,322 0 563
Eldorado Village Largo FL 3,946 778 2,341 0 563
Fort Myers Beach Resort Fort Myers Beach FL 4,428 1,493 4,480 0 1
Glen Ellen Clearwater FL 2,395 627 1,882 0 26
Grand Island Grand Island FL 0 1,723 5,208 125 2,606
Gulf Air Resort Fort Myers Beach FL 4,021 1,609 4,830 0 13
Gulf View Punta Gorda FL 1,698 717 2,158 0 3
Hacienda Village New Port Richey FL 9,842 4,362 13,088 0 454
Harbor Lakes Port Charlotte FL 8,997 3,384 10,154 0 17
Harbor View New Port Richey FL 7,932 4,045 12,146 0 54
Heritage Village Vero Beach FL 13,520 2,403 7,259 0 690
Highland Wood Pompano Beach FL 2,358 1,043 3,130 0 10
Hillcrest Clearwater FL 4,236 1,278 3,928 0 750
Holiday Ranch Largo FL 3,785 925 2,866 0 227
Holiday Village FL Vero Beach FL 0 350 1,374 0 139
Holiday Village Ormond Beach FL 6,972 2,610 7,837 0 121
Indian Oaks Rockledge FL 4,389 1,089 3,376 0 728
Lake Fairways N. Ft. Myers FL 30,460 6,075 18,134 35 1,443
Gross Amount Carried
at Close of
Period 12/31/04
-----------------------------
Depreciable Accumulated Date of
Real Estate Location Land Property Total Depreciation Acquisition
--------------------------- ------------------- ------ ----------- ------ ------------ -----------
Maralago Cay Lantana FL 5,325 18,493 23,818 (4,258) 1997
Barrington Hills - Sunburst Port Richey FL 1,145 3,437 4,582 (105) 2004
Bay Indies Venice FL 10,493 35,041 45,534 (12,148) 1994
Bay Lake Estates Nokomis FL 990 4,341 5,331 (1,455) 1994
Breezy Hill Pompano Beach FL 5,510 16,667 22,177 (1,294) 2002
Buccaneer N. Ft. Myers FL 4,207 15,593 19,800 (5,350) 1994
Bulow Village Resort Flagler Beach FL 0 284 284 (51) 2001
Bulow Village Flagler Beach FL 3,637 6,407 10,044 (1,391) 1994
Carefree Cove Fort Lauderdale FL 1,741 5,249 6,990 (119) 2004
Carriage Cove Daytona Beach FL 2,914 9,470 12,384 (2,292) 1998
Coachwood Leesburg FL 1,607 4,841 6,448 (148) 2004
Coral Cay Margate FL 5,890 23,340 29,230 (7,538) 1994
Coquina St Augustine FL 5,286 14,401 19,687 (1,571) 1999
Meadows at Countrywood Plant City FL 4,514 17,044 21,558 (3,540) 1998
Country Place New Port Richey FL 681 7,106 7,787 (2,834) 1986
Country Side North Vero Beach FL 3,711 12,796 16,507 (3,154) 1998
Crystal Isles - Encore Crystal River FL 926 2,792 3,718 (85) 2004
Down Yonder Largo FL 2,652 8,050 10,702 (631) 1998
East Bay Oaks Largo FL 1,240 3,885 5,125 (2,579) 1983
Eldorado Village Largo FL 778 2,904 3,682 (1,850) 1983
Fort Myers Beach Resort Fort Myers Beach FL 1,493 4,481 5,974 (137) 2004
Glen Ellen Clearwater FL 627 1,908 2,535 (135) 2002
Grand Island Grand Island FL 1,848 7,814 9,662 (868) 2001
Gulf Air Resort - Sunburst Fort Myers Beach FL 1,609 4,843 6,452 (148) 2004
Gulf View - Encore Punta Gorda FL 717 2,161 2,878 (66) 2004
Hacienda Village New Port Richey FL 4,362 13,542 17,904 (922) 2002
Harbor Lakes - Encore Port Charlotte FL 3,384 10,171 13,555 (310) 2004
Harbor View New Port Richey FL 4,045 12,200 16,245 (954) 2002
Heritage Village Vero Beach FL 2,403 7,949 10,352 (2,769) 1994
Highland Wood Pompano Beach FL 1,043 3,140 4,183 (243) 2002
Hillcrest Clearwater FL 1,278 4,678 5,956 (1,195) 1998
Holiday Ranch Largo FL 925 3,093 4,018 (747) 1998
Holiday Village FL Vero Beach FL 350 1,513 1,863 (389) 1998
Holiday Village Ormond Beach FL 2,610 7,958 10,568 (621) 2002
Indian Oaks Rockledge FL 1,089 4,104 5,193 (1,051) 1998
Lake Fairways N. Ft. Myers FL 6,110 19,577 25,687 (6,537) 1994
S-4
SCHEDULE III
EQUITY LIFESTYLE PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
Costs
Capitalized
Subsequent to
Initial Cost to Acquisition
Company (Improvements)
------------------- ------------------
Depreciable Depreciable
Real Estate Location Encumbrances Land Property Land Property
--------------------------- ------------------ ------------ ----- ----------- ---- -----------
Lake Haven Dunedin FL 8,109 1,135 4,047 0 2,384
Lake Magic Orlando FL 2,818 1,595 4,793 0 45
Lakewood Village Melbourne FL 9,818 1,862 5,627 0 716
Lazy Lakes Florida Keys FL 2,048 816 2,449 0 3
Lighthouse Pointe Port Orange FL 12,535 2,446 7,483 23 894
Manatee Sarasota North FL 5,244 2,300 6,903 0 20
Mid-Florida Lakes Leesburg FL 22,639 5,997 20,635 0 5,070
Oak Bend Ocala FL 5,772 850 2,572 0 866
Park City West Fort Lauderdale FL 7,613 4,187 12,561 0 11
Pasco Tampa North FL 3,072 1,494 4,484 0 2
Pickwick Port Orange FL 10,280 2,803 8,870 0 490
Pine Lakes N. Ft. Myers FL 31,055 6,306 14,579 21 5,447
Pioneer Village N. Ft. Myers FL 10,379 4,116 12,353 0 39
Royal Coachman Nokomis FL 15,140 5,321 15,978 0 19
Shangri La Largo FL 4,496 1,730 5,200 0 36
Sherwood Forest Kissimmee FL 27,103 4,852 14,596 0 3,775
Sherwood Forest Resort Kissimmee FL 0 2,870 3,621 568 1,409
Silk Oak Clearwater FL 3,771 1,670 5,028 0 65
Silver Dollar Odessa FL 9,171 4,107 12,431 0 67
Sixth Ave Zephryhills FL 2,260 839 2,518 0 8
Southernaire Mt. Dora FL 2,092 798 2,395 0 10
Southern Palms Eustis FL 5,652 2,169 5,884 0 1,531
Spanish Oaks Ocala FL 7,008 2,250 6,922 0 877
Sunshine Key Florida Keys FL 16,522 5,273 15,822 0 23
Sunshine Holiday Daytona Beach FL 6,667 2,001 6,004 0 15
Sunshine Holiday RV & MHP Fort Lauderdale FL 8,509 3,099 9,286 0 18
Sunshine Travel Vero Beach FL 4,404 1,603 4,813 0 31
Oaks at Countrywood Plant City FL 1,300 1,111 2,513 -265 1,475
Terra Ceia Palmetto FL 2,528 967 2,905 0 15
The Heritage N. Ft. Myers FL 9,663 1,438 4,371 346 3,317
The Lakes at Countrywood Plant City FL 9,712 2,377 7,085 0 862
The Meadows, FL Palm Beach
Gardens FL 6,049 3,229 9,870 0 1,145
Toby's Arcadia FL 3,391 1,093 3,280 0 17
Topics RV Spring Hill FL 2,235 853 2,568 0 2
Tropical Palms Kissimmee FL 19,595 5,677 17,071 0 127
Vacation Village St. Petersburg FL 2,528 1,315 3,946 0 3
Gross Amount Carried
at Close of
Period 12/31/04
-----------------------------
Depreciable Accumulated Date of
Real Estate Location Land Property Total Depreciation Acquisition
--------------------------- ------------------ ----- ----------- ------ ------------ -----------
Lake Haven Dunedin FL 1,135 6,431 7,566 (3,292) 1983
Lake Magic Orlando FL 1,595 4,838 6,433 (146) 2004
Lakewood Village Melbourne FL 1,862 6,343 8,205 (2,212) 1994
Lazy Lakes Florida Keys FL 816 2,452 3,268 (75) 2004
Lighthouse Pointe Port Orange FL 2,469 8,377 10,846 (2,033) 1998
Manatee Sarasota North FL 2,300 6,923 9,223 (211) 2004
Mid-Florida Lakes Leesburg FL 5,997 25,705 31,702 (8,117) 1994
Oak Bend Ocala FL 850 3,438 4,288 (1,243) 1993
Park City West Fort Lauderdale FL 4,187 12,572 16,759 (384) 2004
Pasco Tampa North FL 1,494 4,486 5,980 (137) 2004
Pickwick Port Orange FL 2,803 9,360 12,163 (2,160) 1998
Pine Lakes N. Ft. Myers FL 6,327 20,026 26,353 (6,580) 1994
Pioneer Village N. Ft. Myers FL 4,116 12,392 16,508 (377) 2004
Royal Coachman Nokomis FL 5,321 15,997 21,318 (488) 2004
Shangri La Largo FL 1,730 5,236 6,966 (159) 2004
Sherwood Forest Kissimmee FL 4,852 18,371 23,223 (4,055) 1998
Sherwood Forest Resort Kissimmee FL 3,438 5,030 8,468 (1,101) 1998
Silk Oak Clearwater FL 1,670 5,093 6,763 (355) 2002
Silver Dollar Odessa FL 4,107 12,498 16,605 (376) 2004
Sixth Ave Zephryhills FL 839 2,526 3,365 (91) 2004
Southernaire Mt. Dora FL 798 2,405 3,203 (74) 2004
Southern Palms Eustis FL 2,169 7,415 9,584 (1,690) 1998
Spanish Oaks Ocala FL 2,250 7,799 10,049 (2,834) 1993
Sunshine Key Florida Keys FL 5,273 15,845 21,118 (483) 2004
Sunshine Holiday Daytona Beach FL 2,001 6,019 8,020 (183) 2004
Sunshine Holiday RV & MHP Fort Lauderdale FL 3,099 9,304 12,403 (180) 2004
Sunshine Travel Vero Beach FL 1,603 4,844 6,447 (147) 2004
Oaks at Countrywood Plant City FL 846 3,988 4,834 (698) 1998
Terra Ceia Palmetto FL 967 2,920 3,887 (90) 2004
The Heritage N. Ft. Myers FL 1,784 7,688 9,472 (2,475) 1993
The Lakes at Countrywood Plant City FL 2,377 7,947 10,324 (1,049) 2001
The Meadows, FL Palm Beach
Gardens FL 3,229 11,015 14,244 (2,089) 1999
Toby's Arcadia FL 1,093 3,297 4,390 (120) 2003
Topics RV Spring Hill FL 853 2,570 3,423 (79) 2004
Tropical Palms Kissimmee FL 5,677 17,198 22,875 (500) 2004
Vacation Village St. Petersburg FL 1,315 3,949 5,264 (121) 2004
S-5
SCHEDULE III
EQUITY LIFESTYLE PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
Costs
Capitalized
Subsequent to
Initial Cost to Acquisition
Company (Improvements)
------------------- ------------------
Depreciable Depreciable
Real Estate Location Encumbrances Land Property Land Property
----------- ----------------- ------------ ----- ----------- ---- -----------
Windmill Manor Bradenton FL 7,958 2,153 6,125 0 1,137
Windmill Village - Ft. Myers N. Ft. Myers FL 8,700 1,417 5,440 0 1,260
Winds of St. Armands North
(fka Windmill North) Sarasota FL 8,842 1,523 5,063 0 1,663
Winds of St. Armands South
(fka Windmill South) Sarasota FL 5,464 1,106 3,162 0 830
Five Seasons Cedar Rapids IA 0 1,053 3,436 0 679
Holiday Village, IA Sioux City IA 0 313 3,744 0 520
Golf Vistas Monee IL 14,577 2,843 4,719 0 5,948
O'Connell's Amboy IL 4,955 1,658 4,974 0 148
Willow Lake Estates Elgin IL 22,129 6,138 21,033 0 3,816
Forest Oaks
(fka BurnsHarbor) Chesterton IN 0 916 2,909 0 1,740
Lakeside New Carlisle IN 0 426 1,281 0 12
Oak Tree Village Portage IN 4,476 0 0 569 3,607
Windsong Indianapolis IN 0 1,482 4,480 0 192
Creekside Wyoming MI 3,760 1,109 3,646 0 113
Casa Village Billings MT 11,040 1,011 3,109 157 3,471
Waterway RV Resort Cedar Point NC 6,226 2,392 7,185 0 3
Goose Creek Resort Newport NC 12,491 4,612 13,848 0 814
Twin Lakes Chocowinity NC 3,739 1,719 3,361 0 19
Del Rey Albuquerque NM 0 1,926 5,800 0 727
Bonanza Las Vegas NV 4,861 908 2,643 0 984
Boulder Cascade Las Vegas NV 8,871 2,995 9,020 0 1,136
Cabana Las Vegas NV 9,245 2,648 7,989 0 301
Flamingo West Las Vegas NV 10,647 1,730 5,266 0 1,273
Villa Borega Las Vegas NV 7,011 2,896 8,774 0 592
Greenwood Village Manorville NY 17,468 3,667 9,414 484 3,542
Falcon Wood Village Eugene OR 5,200 1,112 3,426 0 213
Quail Hollow Fairview OR 0 0 3,249 0 226
Shadowbrook Clackamas OR 6,320 1,197 3,693 0 165
Mt. Hood Village Welches OR 0 1,817 5,733 0 -302
Green Acres Breinigsville PA 13,908 2,680 7,479 0 2,817
Spring Gulch New Holland PA 4,819 1,593 4,795 0 6
Country Sunshine Weslaco TX 2,266 627 1,881 0 5
Fun n Sun San Benito TX 0 2,533 0 417 9,828
Lakewood Harlingen TX 1,227 325 979 0 2
Gross Amount Carried
at Close of
Period 12/31/04
-----------------------------
Depreciable Accumulated Date of
Real Estate Location Land Property Total Depreciation Acquisition
----------- ----------------- ----- ----------- ------ ------------ -----------
Windmill Manor Bradenton FL 2,153 7,262 9,415 (1,603) 1998
Windmill Village - Ft. Myers N. Ft. Myers FL 1,417 6,700 8,117 (4,379) 1983
Winds of St. Armands North
(fka Windmill North) Sarasota FL 1,523 6,726 8,249 (3,936) 1983
Winds of St. Armands South
(fka Windmill South) Sarasota FL 1,106 3,992 5,098 (2,443) 1983
Five Seasons Cedar Rapids IA 1,053 4,115 5,168 (1,222) 1998
Holiday Village, IA Sioux City IA 313 4,264 4,577 (2,553) 1986
Golf Vistas Monee IL 2,843 10,667 13,510 (2,126) 1997
O'Connell's Amboy IL 1,658 5,122 6,780 (173) 2004
Willow Lake Estates Elgin IL 6,138 24,849 30,987 (8,048) 1994
Forest Oaks
(fka Burns Harbor) Chesterton IN 916 4,649 5,565 (1,912) 1993
Lakeside New Carlisle IN 426 1,293 1,719 (40) 2004
Oak Tree Village Portage IN 569 3,607 4,176 (1,772) 1987
Windsong Indianapolis IN 1,482 4,672 6,154 (1,278) 1998
Creekside Wyoming MI 1,109 3,759 4,868 (896) 1998
Casa Village Billings MT 1,168 6,580 7,748 (3,130) 1983
Waterway RV Resort Cedar Point NC 2,392 7,188 9,580 (221) 2004
Goose Creek Resort Newport NC 4,612 14,662 19,274 (437) 2004
Twin Lakes Chocowinity NC 1,719 3,380 5,099 (105) 2004
Del Rey Albuquerque NM 1,926 6,527 8,453 (2,602) 1993
Bonanza Las Vegas NV 908 3,627 4,535 (2,238) 1983
Boulder Cascade Las Vegas NV 2,995 10,156 13,151 (2,315) 1998
Cabana Las Vegas NV 2,648 8,290 10,938 (2,936) 1994
Flamingo West Las Vegas NV 1,730 6,539 8,269 (2,092) 1994
Villa Borega Las Vegas NV 2,896 9,366 12,262 (2,266) 1997
Greenwood Village Manorville NY 4,151 12,956 17,107 (2,609) 1998
Falcon Wood Village Eugene OR 1,112 3,639 4,751 (902) 1997
Quail Hollow Fairview OR 0 3,475 3,475 (861) 1997
Shadowbrook Clackamas OR 1,197 3,858 5,055 (1,004) 1997
Mt. Hood Village Welches OR 1,817 5,431 7,248 (564) 2002
Green Acres Breinigsville PA 2,680 10,296 12,976 (5,077) 1988
Spring Gulch New Holland PA 1,593 4,801 6,394 (163) 2004
Country Sunshine Weslaco TX 627 1,886 2,513 (57) 2004
Fun n Sun San Benito TX 2,950 9,828 12,778 (2,123) 1998
Lakewood Harlingen TX 325 981 1,306 (30) 2004
S-6
SCHEDULE III
EQUITY LIFESTYLE PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
Costs Capitalized
Subsequent to
Initial Cost to Acquisition
Company (Improvements)
---------------------- --------------------
Depreciable Depreciable
Real Estate Location Encumbrances Land Property Land Property
----------- -------------------- ------------ -------- ----------- ------ -----------
Paradise Park Rio Grande Valley TX 5,430 1,568 4,705 0 4
Paradise South Mercedes TX 1,619 448 1,345 0 5
Southern Comfort Weslaco TX 2,590 1,108 3,323 0 2
Sunshine RV Harlingen TX 4,792 1,494 4,484 0 3
Tropic Winds Harlingen TX 0 1,221 3,809 0 101
All Seasons Salt Lake City UT 3,491 510 1,623 0 211
Westwood Village Farr West UT 7,493 1,346 4,179 0 1,163
Meadows of Chantilly Chantilly VA 27,494 5,430 16,440 0 3,781
Kloshe Illahee Federal Way WA 6,084 2,408 7,286 0 277
Caledonia Caledonia WI 0 376 1,127 0 0
Freemont Freemont WI 4,300 1,432 4,296 0 0
Yukon Trails Lyndon Station WI 0 547 1,629 0 13
Thousand Trails 0 48,537 113,253 0 0
Realty Systems, Inc. 0 0 0 0 4,632
Management Business 0 0 436 0 9,424
--------- -------- ---------- ------ --------
1,417,251 $466,556 $1,361,519 $4,031 $203,684
========= ======== ========== ====== ========
Gross Amount Carried
at Close of
Period 12/31/04
-----------------------------------
Depreciable Accumulated Date of
Real Estate Location Land Property Total Depreciation Acquisition
----------- -------------------- -------- ----------- ---------- ------------ -----------
Paradise Park Rio Grande Valley TX 1,568 4,709 6,277 (144) 2004
Paradise South - Encore Mercedes TX 448 1,350 1,798 (41) 2004
Southern Comfort Weslaco TX 1,108 3,325 4,433 (102) 2004
Sunshine RV - Encore Harlingen TX 1,494 4,487 5,981 (137) 2004
Tropic Winds Harlingen TX 1,221 3,910 5,131 (329) 2002
All Seasons Salt Lake City UT 510 1,834 2,344 (491) 1997
Westwood Village Farr West UT 1,346 5,342 6,688 (1,369) 1997
Meadows of Chantilly Chantilly VA 5,430 20,221 25,651 (6,764) 1994
Kloshe Illahee Federal Way WA 2,408 7,563 9,971 (1,846) 1997
Caledonia Caledonia WI 376 1,127 1,503 0 2004
Freemont Freemont WI 1,432 4,296 5,728 0 2004
Yukon Trails Lyndon Station WI 547 1,642 2,189 (10) 2004
Thousand Trails 48,537 113,253 161,790 (629) 2004
Realty Systems, Inc. 0 4,632 4,632 (2) 2002
Management Business 0 9,860 9,860 (10,359) 1990
-------- ---------- ---------- --------
$470,587 $1,565,203 $2,035,790 ($322,867)
======== ========== ========== ========
NOTES:
(1) For depreciable property, the Company uses a 30-year estimated life for
buildings acquired and structural and land improvements, a ten-to-fifteen
year estimated life for building upgrades and a three-to-seven year
estimated life for furniture and fixtures.
(2) The schedule excludes Properties in which the Company has a non-controlling
joint venture interest and accounts for using the equity method of
accounting.
(3) The balance of furniture and fixtures included in the total amounts was
approximately $21.3 million as of December 31, 2004.
(4) The aggregate cost of land and depreciable property for Federal income tax
purposes was approximately $2.0 billion, as of December 31, 2004.
(5) All Properties were acquired, except for Country Place Village, which was
constructed.
S-7
SCHEDULE III
EQUITY LIFESTYLE PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
The changes in total real estate for the years ended December 31, 2004, 2003 and
2002 were as follows:
2004 2003 2002
---------- ---------- ----------
Balance, beginning of year ... $1,309,705 $1,296,007 $1,238,138
Acquisitions (1) .......... 702,538 12,116 107,138
Improvements .............. 27,082 15,569 24,491
Dispositions and other..... (3,535) (13,987) (73,760)
---------- ---------- ----------
Balance, end of year ......... $2,035,790 $1,309,705 $1,296,007
========== ========== ==========
(1) Acquisitions for the year ended December 31, 2004 include the non-cash
assumption by the Company of $347 million of mortgage debt.
The changes in accumulated depreciation for the years ended December 31, 2004,
2003 and 2002 were as follows:
2004 2003 2002
-------- -------- --------
Balance, beginning of year ... $272,497 $238,098 $211,878
Depreciation expense ...... 51,703 39,409 37,188
Dispositions and other .... (1,333) (5,010) (10,968)
-------- -------- --------
Balance, end of year ......... $322,867 $272,497 $238,098
======== ======== ========
S-8