ELS 6.30.2013 10-Q Disc Ops


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________ 
FORM 10-Q
_________________________________________________________ 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
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 of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
 
 
Two North Riverside Plaza, Suite 800, Chicago, Illinois
60606
(Address of Principal Executive Offices)
(Zip Code)
(312) 279-1400
(Registrant’s Telephone Number, Including Area Code)
_________________________________________________________ 
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  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
83,354,463 shares of Common Stock as of August 1, 2013.
 



Equity LifeStyle Properties, Inc.
Table of Contents
 
 
 
Page
Item 1.
Financial Statements
 
Index To Financial Statements
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2




Equity LifeStyle Properties, Inc.
Consolidated Balance Sheets
As of June 30, 2013 and December 31, 2012
(amounts in thousands, except share and per share data (adjusted for stock split))

 
June 30,
2013
 
December 31,
2012
 
(unaudited)
 
Assets
 
 
 
Investment in real estate:
 
 
 
Land
$
984,224

 
$
984,224

Land improvements
2,573,046

 
2,565,299

Buildings and other depreciable property
515,801

 
495,127

 
4,073,071

 
4,044,650

Accumulated depreciation
(1,004,300
)
 
(948,581
)
Net investment in real estate
3,068,771

 
3,096,069

Cash
177,895

 
37,126

Notes receivable, net
43,078

 
45,469

Investment in joint ventures
9,519

 
8,420

Rent and other customer receivables, net
909

 
1,046

Deferred financing costs, net
19,561

 
20,620

Retail inventory
2,283

 
1,569

Deferred commission expense
23,959

 
22,841

Escrow deposits, goodwill, and other assets, net
55,105

 
45,214

Assets held for disposition
120,049

 
119,852

Total Assets
$
3,521,129

 
$
3,398,226

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Mortgage notes payable
$
2,122,883

 
$
2,061,610

Term loan
200,000

 
200,000

Unsecured lines of credit
—

 
—

Accrued payroll and other operating expenses
71,723

 
63,672

Deferred revenue – upfront payments from right-to-use contracts
65,569

 
62,979

Deferred revenue – right-to-use annual payments
14,949

 
11,088

Accrued interest payable
10,144

 
10,500

Rents and other customer payments received in advance and security deposits
60,988

 
54,017

Distributions payable
25,020

 
—

Liabilities held for disposition
10,815

 
10,058

Total Liabilities
2,582,091

 
2,473,924

Equity:
 
 
 
Stockholders’ Equity:
 
 
 
Preferred stock, $0.01 par value 9,945,539 shares authorized as of June 30, 2013 and December 31, 2012; none issued and outstanding as of June 30, 2013 and December 31, 2012
—

 
—

6.75% Series C Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value, 54,461 shares authorized and 54,458 issued and outstanding as of June 30, 2013 and December 31, 2012 at liquidation value
136,144

 
136,144

Common stock, $0.01 par value 100,000,000 shares authorized; 83,365,446 and 83,193,310 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively
834

 
832

Paid-in capital
1,014,170

 
1,012,514

Distributions in excess of accumulated earnings
(276,448
)
 
(287,652
)
Accumulated other comprehensive loss
(1,718
)
 
(2,590
)
Total Stockholders’ Equity
872,982

 
859,248

Non-controlling interests – Common OP Units
66,056

 
65,054

Total Equity
939,038

 
924,302

Total Liabilities and Equity
$
3,521,129

 
$
3,398,226




The accompanying notes are an integral part of the financial statements.

3


Equity LifeStyle Properties, Inc.
Consolidated Statements of Income and Comprehensive Income
For the Quarters Ended and Six Months Ended June 30, 2013 and 2012
(amounts in thousands, except per share data (adjusted for stock split))
(unaudited)
 
Quarters Ended
 
Six Months Ended
 
June 30,
2013
 
June 30,
2012
 
June 30,
2013
 
June 30,
2012
Revenues:
 
 
 
 
 
 
 
Community base rental income
$
101,468

 
$
98,336

 
$
202,244

 
$
196,433

Rental home income
3,598

 
2,786

 
6,992

 
5,367

Resort base rental income
33,197

 
30,408

 
73,936

 
67,987

Right-to-use annual payments
12,043

 
12,221

 
23,566

 
23,972

Right-to-use contracts current period, gross
3,361

 
2,942

 
6,192

 
5,186

Right-to-use contracts, deferred, net of prior period amortization
(1,550
)
 
(1,285
)
 
(2,590
)
 
(1,891
)
Utility and other income
15,787

 
17,097

 
32,470

 
33,053

Gross revenues from home sales
4,217

 
1,921

 
6,913

 
3,925

Brokered resale revenues and ancillary services revenues, net
932

 
482

 
2,727

 
2,225

Interest income
2,076

 
1,908

 
3,974

 
4,012

Income from other investments, net
1,624

 
1,567

 
4,104

 
3,055

Total revenues
176,753

 
168,383

 
360,528

 
343,324

Expenses:
 
 
 
 
 
 
 
Property operating and maintenance
58,345

 
56,882

 
113,401

 
109,850

Rental home operating and maintenance
1,487

 
1,281

 
3,357

 
2,694

Real estate taxes
11,888

 
11,510

 
24,290

 
23,367

Sales and marketing, gross
3,333

 
2,632

 
5,694

 
4,275

Sales and marketing, deferred commissions, net
(655
)
 
(655
)
 
(1,118
)
 
(897
)
Property management
10,170

 
9,312

 
20,303

 
18,947

Depreciation on real estate assets and rental homes
29,313

 
25,523

 
55,333

 
50,947

Amortization of in-place leases
159

 
15,650

 
318

 
31,265

Cost of home sales
3,919

 
2,514

 
6,700

 
4,681

Home selling expenses
454

 
399

 
981

 
728

General and administrative
6,946

 
6,810

 
13,655

 
12,909

Early debt retirement
1,381

 
—

 
1,381

 
—

Rent control initiatives and other
1,624

 
367

 
1,856

 
846

Interest and related amortization
30,377

 
30,705

 
60,500

 
61,528

Total expenses
158,741

 
162,930

 
306,651

 
321,140

Income from continuing operations before equity in income of unconsolidated joint ventures
18,012

 
5,453

 
53,877

 
22,184

Equity in income of unconsolidated joint ventures
609

 
492

 
1,185

 
1,255

Consolidated income from continuing operations
18,621

 
5,945

 
55,062

 
23,439

 
 
 
 
 
 
 
 
Discontinued Operations:
 
 
 
 
 
 
 
Income from discontinued operations before gain on sale of property
3,165

 
353

 
6,233

 
513

Gain on sale of property, net of tax
—

 
—

 
958

 
—

           Consolidated income from discontinued operations
3,165

 
353

 
7,191

 
513

Consolidated net income
21,786

 
6,298

 
62,253

 
23,952

 
 
 
 
 
 
 
 
Income allocated to non-controlling interests – Common OP Units
(1,597
)
 
(197
)
 
(4,730
)
 
(1,388
)
Series A Redeemable Perpetual Preferred Stock Dividends
—

 
(4,038
)
 
—

 
(8,069
)
Series C Redeemable Perpetual Preferred Stock Dividends
(2,329
)
 
—

 
(4,640
)
 
—

Net income available for Common Shares
$
17,860

 
$
2,063

 
$
52,883

 
$
14,495

 
 
 
 
 
 
 
 
Consolidated net income
$
21,786

 
$
6,298

 
$
62,253

 
$
23,952

Other comprehensive income:
 
 
 
 
 
 
 
Adjustment for fair market value of swap
430

 
(34
)
 
872

 
(412
)
Consolidated comprehensive income
22,216

 
6,264

 
63,125

 
23,540

Comprehensive income allocated to non-controlling interests – Common OP Units
(1,633
)
 
(195
)
 
(4,802
)
 
(1,353
)
Series A Redeemable Perpetual Preferred Stock Dividends
—

 
(4,038
)
 
—

 
(8,069
)
Series C Redeemable Perpetual Preferred Stock Dividends
(2,329
)
 
—

 
(4,640
)
 
—

Comprehensive income attributable to Common Stockholders
$
18,254

 
$
2,031

 
$
53,683

 
$
14,118

The accompanying notes are an integral part of the financial statements.

4


Equity LifeStyle Properties, Inc.
Consolidated Statements of Income and Comprehensive Income (Continued)
For the Quarters Ended and Six Months Ended June 30, 2013 and 2012
(amounts in thousands, except per share data (adjusted for stock split))
(unaudited)
 
 
Quarters Ended
 
Six Months Ended
 
June 30,
2013
 
June 30,
2012
 
June 30,
2013
 
June 30,
2012
Earnings per Common Share – Basic:
 
 
 
 
 
 
 
Income from continuing operations
$
0.18

 
$
0.02

 
$
0.55

 
$
0.17

Income from discontinued operations
$
0.04

 
$
0.01

 
$
0.09

 
$
0.01

Net income available for Common Shares
$
0.22

 
$
0.03

 
$
0.64

 
$
0.18

Earnings per Common Share – Fully Diluted:
 
 
 
 
 
 
 
Income from continuing operations
$
0.18

 
$
0.02

 
$
0.55

 
$
0.17

Income from discontinued operations
$
0.03

 
$
—

 
$
0.08

 
$
—

Net income available for Common Shares
$
0.21

 
$
0.02

 
$
0.63

 
$
0.17

 
 
 
 
 
 
 
 
Distributions declared per Common Share outstanding
$
0.25

 
$
0.2188

 
$
0.50

 
$
0.438

Weighted average Common Shares outstanding – basic
83,021

 
82,262

 
83,024

 
82,220

Weighted average Common Shares outstanding – fully diluted
91,128

 
90,780

 
91,110

 
90,774

























The accompanying notes are an integral part of the financial statements.

5


Equity LifeStyle Properties, Inc.
Consolidated Statements of Changes in Equity
For the Six Months Ended June 30, 2013
(amounts in thousands; adjusted for stock split)
(unaudited)
 
 
Common
Stock
 
Paid-in
Capital
 
6.75%  Series C Cumulative
Redeemable
Perpetual
Preferred  Stock
 
Distributions
in Excess of
Accumulated
Earnings
 
Non-
controlling
interests –
Common OP
Units
 
Accumulated
Other
Comprehensive
Loss
 
Total
Equity
Balance, December 31, 2012
$
832

 
$
1,012,514

 
$
136,144

 
$
(287,652
)
 
$
65,054

 
$
(2,590
)
 
$
924,302

Issuance of common stock through exercise of options
1

 
247

 
—

 
—

 
—

 
—

 
248

Issuance of common stock through employee stock purchase plan
1

 
329

 
—

 
—

 
—

 
—

 
330

Compensation expenses related to stock options and restricted stock
—

 
2,716

 
—

 
—

 
—

 
—

 
2,716

Adjustment for fair market value of swap
—

 
—

 
—

 
—

 
—

 
872

 
872

Release of common shares from escrow
—

 
(1,157
)
 
—

 
—

 
—

 
—

 
(1,157
)
Net income
—

 
—

 
4,640

 
52,883

 
4,730

 
—

 
62,253

Distributions
—

 
—

 
(4,640
)
 
(41,679
)
 
(3,728
)
 
—

 
(50,047
)
Other
—

 
(479
)
 
—

 
—

 
—

 
—

 
(479
)
Balance, June 30, 2013
$
834

 
$
1,014,170

 
$
136,144

 
$
(276,448
)
 
$
66,056

 
$
(1,718
)
 
$
939,038





















The accompanying notes are an integral part of the financial statements.

6


Equity LifeStyle Properties, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2013 and 2012
(amounts in thousands)
(unaudited) 
 
June 30,
2013
 
June 30,
2012
Cash Flows From Operating Activities:
 
 
 
Consolidated net income
$
62,253

 
$
23,952

Adjustments to reconcile consolidated net income to net cash provided by operating activities:
 
 
 
Gain on sale of property, net of tax
(958
)
 
—

Depreciation expense
57,210

 
53,235

Amortization of in-place leases
318

 
36,766

Amortization of loan costs
2,749

 
2,788

Debt premium amortization
(2,895
)
 
(3,435
)
Equity in income of unconsolidated joint ventures
(1,185
)
 
(1,838
)
Distributions from unconsolidated joint ventures
1,099

 
1,107

Amortization of stock-related compensation
2,716

 
3,285

Revenue recognized from right-to-use contract upfront payments
(3,602
)
 
(3,295
)
Commission expense recognized related to right-to-use contracts
1,275

 
1,113

Long term incentive plan compensation
956

 
390

Provision for uncollectible rents receivable
187

 
(29
)
Changes in assets and liabilities:
 
 
 
Notes receivable, net
306

 
268

Rent and other customer receivables, net
(28
)
 
257

Retail inventory
(714
)
 
(86
)
Deferred commission expense
(2,393
)
 
(2,010
)
Escrow deposits, goodwill and other assets
(5,427
)
 
(1,919
)
Accrued payroll and other operating expenses
8,966

 
4,249

Deferred revenue – upfront payments from right-to-use contracts
6,192

 
5,186

Deferred revenue – right-to-use annual payments
3,861

 
4,146

Rents received in advance and security deposits
7,186

 
4,896

Net cash provided by operating activities
138,072

 
129,026

Cash Flows From Investing Activities:
 
 
 
Investment in joint ventures
(1,120
)
 
—

Repayments of notes receivable
6,494

 
6,592

Issuance of notes receivable
(4,431
)
 
(2,911
)
Capital improvements
(35,850
)
 
(30,560
)
Net cash used in investing activities
(34,907
)
 
(26,879
)
Cash Flows From Financing Activities:
 
 
 
Net proceeds from stock options and employee stock purchase plan
578

 
696

Distributions:
 
 
 
Common Stockholders
(16,692
)
 
(33,280
)
Common OP Unitholders
(3,728
)
 
(3,462
)
Preferred Stockholders
(4,640
)
 
(8,069
)
Stock repurchase and Unit redemption
—

 
(43
)
Principal payments and mortgage debt payoff
(45,925
)
 
(78,297
)
New mortgage notes payable financing proceeds
110,000

 
85,500

Debt issuance costs
(1,510
)
 
(667
)
Other
(479
)
 
(18
)
Net cash provided by (used in) financing activities
37,604

 
(37,640
)
Net increase in cash
140,769

 
64,507

Cash, beginning of period
37,126

 
70,460

Cash, end of period
$
177,895

 
$
134,967






The accompanying notes are an integral part of the financial statements.

7


Equity LifeStyle Properties, Inc.
Consolidated Statements of Cash Flows (continued)
For the Six Months Ended June 30, 2013 and 2012
(amounts in thousands)
(unaudited)
 
 
June 30,
2013
 
June 30,
2012
Supplemental Information:
 
 
 
Cash paid during the period for interest
$
59,210

 
$
58,672

Non-cash activities (increase/(decrease)):
 
 
 
Capital improvements – used homes acquired by repossessions
$
1,186

 
$
3,993

Net repayments of notes receivable – used homes acquired by repossessions
$
(1,186
)
 
$
(3,993
)
Building and other depreciable property – reclassification of rental homes
$
5,823

 
$
3,091

Escrow deposits and other assets – reclassification of rental homes
$
(5,823
)
 
$
(3,091
)
 
 
 
 
     

























The accompanying notes are an integral part of the financial statements.

8

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Definition of Terms
Equity LifeStyle Properties, Inc., a Maryland corporation, together with MHC Operating Limited Partnership (the “Operating Partnership”) and other consolidated subsidiaries (“Subsidiaries”) are referred to herein as “we,” “us,” and “our.” Capitalized terms used but not defined herein are as defined in our Annual Report on Form 10-K (“2012 Form 10-K”) for the year ended December 31, 2012.
Basis of Presentation
These unaudited Consolidated Financial Statements have been prepared pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in the 2012 Form 10-K. The following notes to the Consolidated Financial Statements highlight significant changes to the notes included in the 2012 Form 10-K and present interim disclosures as required by the SEC. The accompanying Consolidated Financial Statements reflect, in the opinion of management, all adjustments and estimates necessary for a fair presentation of the interim financial statements, which are of a normal, recurring nature. Revenues are subject to seasonal fluctuations and accordingly, quarterly interim results may not be indicative of full year results.
On July 15, 2013, we effected a two-for-one stock split of our common stock (see Note 2 in the Notes to Consolidated Financial Statements contained in this Form 10-Q). All Common Operating Partnership Unit share and per share data in the accompanying consolidated financial statements and notes, for all periods presented, have been adjusted to reflect the stock split.

Note 1 – Summary of Significant Accounting Policies
We follow accounting standards set by the Financial Accounting Standards Board, commonly referred to as the “FASB.” The FASB sets GAAP, which we follow to ensure that we consistently report our financial condition, results of operations and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (the “Codification”).
(a)
Basis of Consolidation
The accompanying Consolidated Financial Statements include the consolidation of our accounts. We do not have controlling interests in any of our joint ventures, which are therefore treated under the equity method of accounting and not consolidated in our financial statements. The holders of limited partnership interests in the Operating Partnership (“Common OP Unitholders”) receive an allocation of net income that is based on their respective ownership percentage of the Operating Partnership which is shown in our Consolidated Financial Statements as Non-controlling interests-Common OP Units. All significant intercompany balances and transactions have been eliminated in consolidation.
(b)
Identified Intangibles and Goodwill
We record acquired intangible assets at their estimated fair value separate and apart from goodwill. We amortize identified intangible assets and liabilities that are determined to have finite lives over the period the assets and liabilities are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. In accordance with the Codification Sub-Topic “Impairment or Disposal of Long Lived Assets” (“FASB ASC 360-10-35”), intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.
The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. In accordance with Codification Topic “Goodwill and Other Intangible Assets” (“FASB ASC 350”), goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
As of June 30, 2013 and December 31, 2012, the gross carrying amounts of identified intangible assets and goodwill, a component of “Escrow deposits, goodwill and other assets, net” on our consolidated balance sheets, were approximately $12.1 million. As of June 30, 2013 and December 31, 2012, this amount was comprised of approximately $4.3 million of identified intangible assets and approximately $7.8 million of goodwill. Accumulated amortization of identified intangible assets was approximately $1.7 million and $1.5 million as of June 30, 2013 and December 31, 2012, respectively. For each of the quarters ended June 30, 2013 and 2012, amortization expense for the identified intangible assets was approximately $0.1 million. For each

9

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 1 – Summary of Significant Accounting Policies (continued)
of the six months ended June 30, 2013 and 2012, amortization expense for the identified intangible assets was approximately $0.2 million.
Estimated amortization of identified intangible assets for each of the next five years are as follows (amounts in thousands):
Year ending December 31,
Amount
2013
$
349

2014
$
349

2015
$
349

2016
$
251

2017
$
87

(c)
Restricted Cash
Cash as of June 30, 2013 and December 31, 2012 included approximately $5.2 million and $4.9 million, respectively, of restricted cash for the payment of capital improvements, insurance or real estate taxes.
(d)
Fair Value of Financial Instruments
We disclose the estimated fair value of our financial instruments according to a fair value hierarchy (Level 1, 2 and 3). Our financial instruments include notes receivable, accounts receivable, accounts payable, other accrued expenses, interest rate swaps and mortgage notes payable.
Our mortgage notes payable and term loan had a fair value of approximately $2.4 billion as of June 30, 2013 and December 31, 2012, respectively, measured using quoted prices and observable inputs from similar liabilities (Level 2). At June 30, 2013 and December 31, 2012, our cash flow hedge of interest rate risk included in accrued payroll and other operating expenses was measured using quoted prices and observable inputs from similar assets and liabilities (Level 2). We consider our own credit risk as well as the credit risk of our counterparties when evaluating the fair value of our derivative. The fair values of our remaining financial instruments approximate their carrying or contract values.
(e)
Deferred Financing Costs, net
Deferred financing costs, net include fees and costs incurred to obtain long-term financing. The costs are being amortized over the terms of the respective loans on a basis that approximates level yield. Unamortized deferred financing fees are written-off when debt is retired before the maturity date. Upon amendment of the line of credit or refinancing of mortgage debt, unamortized deferred financing fees are accounted for in accordance with Codification Sub-Topic “Modifications and Extinguishments” (“FASB ASC 470-50-40”). Accumulated amortization for such costs was $23.1 million and $20.5 million at June 30, 2013 and December 31, 2012, respectively.

(f)
Reclassifications

Certain 2012 amounts have been reclassified to conform to 2013 presentation. At June 30, 2013, balance sheet amounts for Properties held for disposition have been reclassified on the Consolidated Balance Sheets to “Assets held for disposition” and “Liabilities held for disposition.” Income statement amounts for Properties held for disposition have been reclassified to “Discontinued operations” on the Consolidated Statements of Income and Comprehensive Income for all periods presented. In addition, certain prior period disclosures in the accompanying footnotes have been revised to exclude amounts which have been reclassified to discontinued operations. These reclassifications had no material effect on the Consolidated Balance Sheets or Consolidated Statements of Income and Comprehensive Income.
(g)
Recent Accounting Pronouncements
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under

10

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 1 – Summary of Significant Accounting Policies (continued)
U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The provisions of ASU 2013-02 are effective for annual reporting periods beginning after December 15, 2012. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

Note 2 – Earnings Per Common Share
Earnings per common share are based on the weighted average number of common shares outstanding during each year. Codification Topic “Earnings Per Share” (“FASB ASC 260”) 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 exclude any dilutive effects of options, unvested restricted shares and convertible securities. The conversion of OP Units has been excluded from the basic earnings per share calculation. The conversion of an OP Unit for a share of common stock has no material effect on earnings per common share on a fully diluted basis.
On June 25, 2013, management announced a two-for-one split, to be effected by and in the form of a stock dividend, to take effect on July 15, 2013. On July 15, 2013, each common shareholder of record on July 5, 2013, received one additional share of common stock for each share held. The incremental par value was recorded as an increase to the common stock account on our balance sheet to reflect the newly issued shares and such amount was offset by a reduction in the paid-in capital account on our balance sheet. Pursuant to the anti-dilution provision in the Operating Partnership’s Agreement of Limited Partnership, the stock split also affected the common OP units.
The following table sets forth the computation of the basic and diluted earnings per common share, as adjusted for the stock split, for the quarters and six months ended June 30, 2013 and 2012 (amounts in thousands, except per share data):
 
Quarters Ended
June 30,
 
Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Numerators:
 
 
 
 
 
 
 
Income from Continuing Operations:
 
 
 
 
 
 
 
Income from continuing operations
$
18,621

 
$
5,945

 
$
55,062

 
$
23,439

Amounts allocated to dilutive securities
(1,337
)
 
(166
)
 
(4,196
)
 
(1,368
)
Preferred Stock distributions
(2,329
)
 
(4,038
)
 
(4,640
)
 
(8,069
)
Income from continuing operations available to Common Shares – basic
14,955

 
1,741

 
46,226

 
14,002

Amounts allocated to dilutive securities
1,337

 
197

 
4,196

 
1,388

Income from continuing operations available to Common Shares – fully diluted
$
16,292

 
$
1,938

 
$
50,422

 
$
15,390

Income from Discontinued Operations:
 
 
 
 
 
 
 
Income from discontinued operations, net of amounts allocated to dilutive securities-basic and fully diluted
$
2,905

 
$
322

 
$
6,657

 
$
493

Net Income Available for Common Shares:
 
 
 
 
 
 
 
Net income available for Common Shares – basic
$
17,860

 
$
2,063

 
$
52,883

 
$
14,495

Amounts allocated to dilutive securities
1,597

 
197

 
4,730

 
1,388

Net income available for Common Shares – fully diluted
$
19,457

 
$
2,260

 
$
57,613

 
$
15,883

Denominator:
 
 
 
 
 
 
 
Weighted average Common Shares outstanding – basic
83,021

 
82,262

 
83,024

 
82,220

Effect of dilutive securities:
 
 
 
 
 
 
 
Redemption of Common OP Units for Common Shares
7,456

 
7,913

 
7,456

 
7,936

Employee stock options and restricted shares
651

 
605

 
630

 
618

Weighted average Common Shares outstanding – fully diluted
91,128

 
90,780

 
91,110

 
90,774

 
 
 
 
 
 
 
 
Earnings per Common Share – Basic:
 
 
 
 
 
 
 
Income from continuing operations
$
0.18

 
$
0.02

 
$
0.55

 
$
0.17

Income from discontinued operations
0.04

 
0.01

 
0.09

 
0.01

Net income available for Common Shares
$
0.22

 
$
0.03

 
$
0.64

 
$
0.18

 
 
 
 
 
 
 
 
Earnings per Common Share – Fully Diluted:
 
 
 
 
 
 
 
Income from continuing operations
$
0.18

 
$
0.02

 
$
0.55

 
$
0.17

Income from discontinued operations
0.03

 
—

 
0.08

 
—

Net income available for Common Shares
$
0.21

 
$
0.02

 
$
0.63

 
$
0.17


    

11

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements



Note 3 – Common Stock and Other Equity Related Transactions
On July 1, 2013, we paid a $0.421875 per share distribution on our Depositary Shares (each representing 1/100 of a share of our Series C Preferred Stock) to stockholders of record on June 20, 2013. On April 1, 2013, we paid a $0.421875 per share distribution on our Depositary Shares (each representing 1/100 of a share of our Series C Preferred Stock) to stockholders of record on March 21, 2013.
On July 12, 2013, we paid a $0.25 per share distribution to common stockholders of record on June 28, 2013. On April 12, 2013, we paid a $0.25 per share distribution to common stockholders of record on March 28, 2013.
    On July 15, 2013, a two-for-one stock split of our common stock, effected by and in the form of a stock dividend, was paid to stockholders of record on July 5, 2013.

Note 4 – Investment in Real Estate
Land improvements consist primarily of improvements such as grading, landscaping and infrastructure items such as streets, sidewalks or water mains. Buildings and other depreciable property consist of permanent buildings in the Properties such as clubhouses, laundry facilities, maintenance storage facilities, rental units and furniture, fixtures, equipment, and in-place leases.
During the six months ended June 30, 2013, we recorded an additional $3.4 million in accumulated depreciation to correct amounts recorded in prior periods related to certain assets.
Acquisitions
All acquisitions have been accounted for utilizing the acquisition method of accounting and, accordingly, the results of operations of acquired assets are included in the statements of operations from the dates of acquisition. Certain purchase price adjustments may be made within one year following the acquisition and applied retroactively to the date of acquisition.
During the six months ended June 30, 2013, we recognized approximately $1.0 million of gain on the sale of property as a result of a new U.S. Federal tax law that eliminated a previously accrued built-in-gain tax liability related to the disposition of the Cascade property during 2012.
On July 19, 2013, our Operating Partnership entered into a Purchase and Sale Agreement with certain affiliates of Riverside Communities to acquire three manufactured home communities located in the Chicago metropolitan area collectively containing approximately 1,207 sites for a stated purchase price of $102.0 million (the “Acquisition”). We closed on the Acquisition on August 1, 2013 and funded the purchase price with available cash and limited partnership interests in our Operating Partnership. Patrick Waite, our Senior Vice President of Operations, was formerly employed by an affiliate of Riverside Communities, as a result of which he has financial interests in the sale that will result in his receiving approximately $3.4 million in cash upon the closing of the Acquisition. Mr. Waite did not participate in our management’s analysis, decision-making or recommendation to the Board of Directors with respect to the Acquisition. In addition, David Helfand, the founder and CEO of Riverside Communities, served before 2005 in various positions with us, including at various times as our Chief Financial Officer, Chief Executive Officer, and as a member of our Board of Directors. Mr. Helfand is currently Co-President of Equity Group Investments, L.L.C., an entity affiliated with Sam Zell, Chairman of our Board of Directors.
We are the beneficiary of an escrow funded by the seller of the Properties acquired in 2011 with approximately 227,586 shares of our common stock. The escrow provides for distributions of the escrowed stock on a quarterly basis to protect us from future scheduled ground lease payments as well as scheduled increases in the option purchase price over time. On April 1, 2013, we received a distribution of 29,918 shares of our common stock which resulted in a balance at June 30, 2013 of 197,668 shares. We reflected the shares received as a redemption in paid-in capital in the Consolidated Statements of Changes in Equity. The returned shares were canceled and treated as authorized, but not issued and outstanding. In addition, on July 1, 2013, we received a distribution of 30,268 shares of our common stock from the escrow. We revalue the contingent consideration asset as of each reporting date and recognize in earnings any increase or decrease in fair value of the contingent consideration asset. The fair value estimate of the contingent consideration asset at June 30, 2013 is $6.7 million.


12

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 4 – Investment in Real Estate (continued)
Dispositions and real estate held for disposition
    
On May 8, 2013, we entered into a purchase and sale agreement to sell 11 manufactured home communities located in Michigan (the “Michigan Properties”) collectively containing approximately 5,344 sites for a net purchase price of approximately $165.0 million. We closed on ten of the Michigan Properties on July 23, 2013, and expect to close on the eleventh Michigan Property during the third quarter of 2013. We expect to recognize a gain on sale of real estate assets of approximately $41.0 million in the third quarter of 2013. The closing of the disposition of the remaining Michigan Property is subject to customary closing conditions and no assurances can be given that the disposition will be completed in accordance with the anticipated timing or at all.

Pursuant to ASC 360-10-35 we classified the real estate assets and liabilities associated with the Michigan Properties as held for disposition in the Consolidated Balance Sheets as of June 30, 2013.
The following table sets forth the Properties held for disposition as of June 30, 2013:
Property
Location
Sites
Avon on the Lake
Rochester Hills, MI
616

Cranberry Lake
White Lake, MI
328

Fairchild Lake
Chesterfield, MI
344

Ferrand Estates (a)
Wyoming, MI
419

Grand Blanc Crossing
Grand Blanc, MI
478

Holly Hills
Holly, MI
241

Oakland Glens
Novi, MI
724

Old Orchard
Davison, MI
200

Royal Estates
Kalamazoo, MI
183

Westbrook
Macomb, MI
387

Westbridge Manor
Macomb, MI
1,424

Total
 
5,344

______________________
(a)
We expect to close on this Property during the third quarter of 2013.
    

13

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 4 – Investment in Real Estate (continued)
The major classes of assets and liabilities associated with the real estate held for disposition included in the Consolidated Balance Sheets are as follows (amounts in thousands):
 
June 30,
 
December 31,
 
2013
 
2012
Assets
 
 
 
Investment in real estate
 
 
 
   Land
$
28,611

 
$
28,611

   Building and improvements
101,048

 
98,255

Accumulated depreciation
(16,609
)
 
(15,077
)
Other assets
6,999

 
8,063

   Total assets held for disposition
$
120,049

 
$
119,852

Liabilities
 
 
 
   Mortgage payable (a)
$
8,163

 
$
8,256

   Other liabilities
2,652

 
1,802

   Total liabilities held for disposition
$
10,815

 
$
10,058

______________________
(a)
Includes approximately $0.4 million debt premium adjustment as of June 30, 2013 and December 31, 2012.
FASB ASC 360 requires that assets classified as held for disposition be carried at the lesser of their carrying amount or estimated fair value, less estimated selling costs. Since these assets were under contract for more than their carrying amount, as of June 30, 2013, we carry them at the carrying amount.
Results of operations for Properties held for disposition have been presented separately as discontinued operations for all periods presented in the Consolidated Statements of Income and Comprehensive Income. The following table summarizes the components of income and expense relating to discontinued operations for the quarters and six months ended June 30, 2013 and 2012 (amounts in thousands):
 
Quarters Ended
Six Months Ended
 
June 30,
June 30,
 
2013
2012
2013
2012
Community base rental home income
$
5,080

$
4,861

$
10,117

$
9,718

Rental income
849

572

1,620

1,034

Utility and other income
515

485

997

932

Discontinued property operating revenues
6,444

5,918

12,734

11,684

Property operating expenses
2,473

2,148

4,923

4,479

Income from discontinued property operations
3,971

3,770

7,811

7,205

Loss from home sales operations
(40
)
(46
)
(75
)
(40
)
Other income and expenses
(635
)
(3,238
)
(1,243
)
(6,386
)
Interest and amortization
(131
)
(133
)
(260
)
(266
)
Discontinued operations, net
$
3,165

$
353

$
6,233

$
513


Note 5 – Investment in Joint Ventures
We recorded approximately $1.2 million and $1.3 million (net of approximately $0.5 million and $0.6 million of depreciation expense) of equity in income from unconsolidated joint ventures for each of the six months ended June 30, 2013 and 2012, respectively. We received approximately $1.1 million from such joint ventures, which were classified as a return on capital and included in operating activities on the Consolidated Statements of Cash Flows for each of the six months ended June 30, 2013 and 2012.
    On April 19, 2013, we entered into an agreement with an unaffiliated third party to create a new joint venture named ECHO Investments, LLC (“ECHO financing”). We entered into ECHO financing in order to offer another financing option to purchasers of homes at our Properties. Each party to the venture made an initial contribution of $1.0 million in exchange for a pro rata ownership interest in the joint venture, which resulted in us owning 50% of ECHO financing. We account for our investment in ECHO financing using the equity method of accounting, since we do not have a controlling direct or indirect voting interest, but we can exercise significant influence with respect to its operations and major decisions.

14

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 5 – Investment in Joint Ventures (continued)
The following table summarizes our investment in unconsolidated joint ventures (with the number of Properties shown parenthetically as of June 30, 2013 and December 31, 2012):
 
 
 
 
 
 
 
 
Investment as of
 
JV Income for the
Six Months Ended
Investment
Location
 
 Number of 
Sites
 
Economic
Interest (a)
 
 
June 30,
2013
 
December 31,
2012
 
June 30,
2013
 
June 30,
2012
Meadows
Various (2,2)
 
1,027

 
50
%

 
$
1,175

 
$
916

 
$
532

 
$
511

Lakeshore
Florida (2,2)
 
342

 
65
%

 
125

 
121

 
141

 
118

Voyager
Arizona (1,1)
 
1,706

 
50
%
(b) 
 
7,099

 
7,195

 
699

 
632

Other
Various (0,0)
 
—

 
20
%

 
—

 
188

 
(187
)
 
(6
)
ECHO financing
Various (0,0)
 
—

 
50
%
 
 
1,120

 
—

 
—

 
—

 
 
 
3,075

 
 
 
 
$
9,519

 
$
8,420

 
$
1,185

 
$
1,255

______________________
(a)
The percentages shown approximate our economic interest as of June 30, 2013. Our legal ownership interest may differ.
(b)
Voyager joint venture primarily consists of a 50% interest in Voyager RV Resort and 25% interest in the utility plant servicing the Property.

Note 6 – Notes Receivable

In certain cases, we make loans to finance the sale of homes to our customers or purchase loans made by others to finance the sale of homes to our customers (referred to as “Chattel Loans”). The Chattel Loans receivable require monthly principal and interest payments and are collateralized by homes at certain of the Properties. As of June 30, 2013 and December 31, 2012, we had approximately $23.1 million and $25.0 million, respectively, of these Chattel Loans included in notes receivable for Properties held for long term investment. In addition, as of June 30, 2013 and December 31, 2012, we had approximately $6.5 million and $7.7 million, respectively, of these Chattel Loans included in notes receivable for Properties held for disposition. As of June 30, 2013, the Chattel Loans receivable had a stated per annum average rate of approximately 7.8%, with a yield of 18.6%, and had an average term remaining of approximately 13 years. These Chattel Loans are recorded net of allowances of approximately $0.4 million as of June 30, 2013 and December 31, 2012. During the six months ended June 30, 2013 and June 30, 2012, approximately $2.6 million and $2.9 million, respectively, were repaid, and we issued an additional $1.1 million and $0.3 million of loans, respectively. In addition, during the six months ended June 30, 2013 and June 30, 2012 approximately $1.2 million and $4.0 million, respectively, of homes serving as collateral for Chattel Loans were repossessed and converted to rental units. Chattel Loans receivable at June 30, 2013 includes $22.1 million of Chattel Loans with deteriorated credit quality at Properties acquired in 2011. No significant changes in the yield were noted during the six months ended June 30, 2013. Increases in default rates or declines in recovery rates in the future could, if significant, result in an impairment of the loans. Changes in default rates or recovery rates in the future could, if significant, result in future changes to the yield. 
We also provide financing for nonrefundable upgrades of new or existing right to use contracts (“Contracts Receivable”). As of June 30, 2013 and December 31, 2012, we had approximately $16.1 million of Contracts Receivable, including allowances of approximately $0.6 million and $0.7 million, respectively. These Contracts Receivable represent loans to customers who have entered into right-to-use contracts. The Contracts Receivable yield interest at a stated per annum average rate of 16%, have a weighted average term remaining of approximately four years and require monthly payments of principal and interest. During the six months ended June 30, 2013 and June 30, 2012, approximately $3.8 million and $3.7 million, respectively, were repaid and an additional $3.3 million and $2.6 million, respectively, were lent to customers. We periodically review the performance of these loans and do not expect to make significant adjustments to income recognition assumptions due to the small remaining value of the loans.

Note 7 – Borrowing Arrangements
Mortgage Notes Payable
As of June 30, 2013 and December 31, 2012, we had outstanding mortgage indebtedness on Properties held for long term investment of approximately $2,123 million and $2,062 million, respectively, and approximately $8.2 million and $8.3 million, respectively, on Properties held for disposition (including $0.4 million of debt premium adjustment). The weighted average interest rate including the impact of premium/discount amortization on this mortgage indebtedness for the six months ended June 30, 2013 was approximately 5.5% per annum. The debt bears interest at stated rates of 3.9% to 8.9% per annum and matures on various dates ranging from 2013 to 2023. The debt encumbered a total of 177 and 170 of our Properties as of June 30, 2013 and December 31, 2012, respectively, and the carrying value of such Properties was approximately $2,547 million and $2,485 million, respectively, as of such dates.

15

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 7 – Borrowing Arrangements (continued)
During the six months ended June 30, 2013, we paid off four mortgages totaling approximately $29.8 million, with a weighted average interest rate of 5.7% per annum. In connection with two of these transactions, we incurred an aggregate of $1.4 million in defeasance costs associated with the early retirement of those mortgages.
During the quarter ended June 30, 2013, we closed on a $110.0 million loan. This loan is secured by a portfolio of RV properties, matures in 2023 and bears a stated interest rate of 4.87% per annum. During the term of the loan, we will be subject to customary affirmative and negative covenants.
On July 1, 2013, the proceeds from the new loan, along with available cash, were used to pay off six mortgages with maturity dates in 2015. The retired loans had an outstanding principal balance of approximately $120.0 million, with a weighted average interest rate of 5.7% per annum. In connection with these mortgage payoffs, we incurred an aggregate of $15.0 million in defeasance costs associated with the early retirement of these mortgages.
On July 18, 2013, in connection with the disposition of our Michigan Properties (see Note 4 in the Notes to Consolidated Financial Statements in this Form 10-Q), we paid off the mortgage on one manufactured home community, which was scheduled to mature in 2020, for approximately $7.8 million with a stated interest rate of 7.2% per annum. In addition, we paid a prepayment fee of $1.45 million to be reimbursed upon closing of the remaining Michigan Property during the third quarter of 2013.
On July 30, 2013, we closed on a loan of $70.5 million secured by two manufactured home communities and bears a stated interest rate of 4.35% per annum maturing in 2038. During the term of the loan, we will be subject to customary affirmative and negative covenants. The loan proceeds and available cash were used to defease approximately $20.9 million of debt maturing in 2015, with a weighted average rate of 6.3% per annum, which was secured by three manufactured home communities. We paid approximately $2.8 million in defeasance costs associated with the early retirement of these mortgages.
On August 1, 2013, we closed five loans totaling approximately $166.6 million in proceeds, which are secured by seven manufactured home communities and have a weighted average interest rate of 4.25% per annum, with $115.0 million maturing in 2028 and the remainder maturing in 2038. During the term of the loans, we will be subject to customary affirmative and negative covenants. We also used loan proceeds and available cash to defease $154.5 million of debt maturing in 2015, which was secured by 18 manufactured home communities and had a weighted average interest rate of 5.56% per annum. We paid an aggregate of approximately $18.9 million in defeasance costs associated with the early retirement of that debt. We also repaid $60.7 million of debt maturing in 2013, which had a weighted average interest rate of 6.02% per annum and constituted the remainder of our 2013 maturities. 

Term Loan
Our $200.0 million Term Loan (the “Term Loan”) matures on June 30, 2017 and has a one-year extension option, an interest rate of LIBOR plus 1.85% to 2.80% per annum and, subject to certain conditions, may be prepaid at any time without premium or penalty after July 1, 2014. Prior to July 1, 2014, a prepayment penalty of 2% of the amount prepaid would be owed. The spread over LIBOR is variable based on leverage measured quarterly throughout the loan term. The Term Loan contains customary representations, warranties and negative and affirmative covenants, and provides for acceleration of principal and payment of all other amounts payable thereunder upon the occurrence of certain events of default. In connection with the Term Loan, we also entered into a three year, $200.0 million LIBOR notional Swap Agreement (the “Swap”) allowing us to trade our variable interest rate for a fixed interest rate on the Term Loan. (see Note 8 in the Notes to Consolidated Financial Statements contained in this Form 10-Q for further information on the accounting for the Swap.)
Unsecured Line of Credit
As of June 30, 2013 and December 31, 2012, our unsecured Line of Credit (“LOC”) had an availability of $380 million of which no amounts were outstanding. Our amended LOC bears a LIBOR rate plus a maximum of 1.40% to 2.00%, contains a 0.25% to 0.40% facility rate and has a maturity date of September 15, 2016. We have a one year extension option under our LOC. We incurred commitment and arrangement fees of approximately $1.3 million to enter into the amended LOC in 2012, subject to payment of certain administrative fees and the satisfaction of certain other enumerated conditions.
As of June 30, 2013, we are in compliance with covenants in our borrowing arrangements.


16

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 8 – Derivative Instruments and Hedging Activities
Cash Flow Hedges of Interest Rate Risk
In connection with the Term Loan, we entered into a Swap (see Note 7 in the Notes to the Consolidated Financial Statements contained in this Form 10-Q for information about the Term Loan related to the Swap) that fixes the underlying LIBOR rate on the Term Loan at 1.11% per annum for the first three years. Based on actual leverage as of June 30, 2013, our spread over LIBOR was 1.95%, resulting in an actual all-in interest rate of 3.06% per annum. We have designated the Swap as a cash flow hedge. No gain or loss was recognized in the Consolidated Statements of Income and Comprehensive Income related to hedge ineffectiveness or to amounts excluded from effectiveness testing on our cash flow hedge during the quarter and six months ended June 30, 2013.
Amounts reported in accumulated other comprehensive loss on the Consolidated Balance Sheets related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve months, we estimate that an additional $1.9 million will be reclassified as an increase to interest expense.
Derivative Instruments and Hedging Activities
The table below presents the fair value of our derivative financial instrument as well as our classification on our Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012 (amounts in thousands).
 
Balance Sheet Location
 
June 30,
2013
 
December 31,
2012
Interest Rate Swap
Accrued payroll and other operating expenses
 
$
1,719

 
$
2,591

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement
The tables below present the effect of our derivative financial instrument on the Consolidated Statements of Income and Comprehensive Income for the quarters ended June 30, 2013 and 2012 (amounts in thousands).
Derivatives in Cash Flow Hedging Relationship
Amount of loss recognized
in OCI on derivative
(effective portion)
 
Location of loss
reclassified from
accumulated OCI into income
(effective portion)
 
Amount of loss
reclassified from
accumulated OCI into
income (effective
portion)
June 30,
2013
 
June 30,
2012
 
 
June 30,
2013
 
June 30,
2012
Interest Rate Swap
$
27

 
$
471

 
Interest Expense
 
$
457

 
$
437

The tables below present the effect of our derivative financial instrument on the Consolidated Statements of Income and Comprehensive Income for the six months ended June 30, 2013 and 2012 (amounts in thousands).
Derivatives in Cash Flow Hedging Relationship
Amount of loss recognized
in OCI on derivative
(effective portion)
 
Location of loss
reclassified from
accumulated OCI into income
(effective portion)
 
Amount of loss
reclassified from
accumulated OCI into
income (effective
portion)
June 30,
2013
 
June 30,
2012
 
 
June 30,
2013
 
June 30,
2012
Interest Rate Swap
$
34

 
$
1,271

 
Interest Expense
 
$
906

 
$
859

We determined that no adjustment was necessary for nonperformance risk on our derivative obligation. As of June 30, 2013, we have not posted any collateral related to this agreement.


17


Note 9 – Deferred Revenue-Right-to-use Contracts and Deferred Commission Expense
Upfront payments received upon the entry of right-to-use contracts are recognized in accordance with FASB ASC 605. We recognize the up-front non-refundable payments over the estimated customer life, which, based on historical attrition rates, we have estimated to be between one to 31 years. The commissions paid on the entry of right-to-use contracts are deferred and amortized over the same period as the related revenue.
Components of the change in deferred revenue-right-to-use contracts and deferred commission expense are as follows (amounts in thousands):
 
Six Months Ended
June 30,
 
2013
 
2012
Deferred revenue – right-to-use contracts, as of January 1,
$
62,979

 
$
56,285

Deferral of new right-to-use contracts
6,192

 
5,186

Deferred revenue recognized
(3,602
)
 
(3,295
)
Net increase in deferred revenue
2,590

 
1,891

Deferred revenue – right-to-use contracts, as of June 30,
$
65,569

 
$
58,176

 
 
 
 
Deferred commission expense, as of January 1,
$
22,841

 
$
19,687

Costs deferred
2,393

 
2,010

Commission expense recognized
(1,275
)
 
(1,113
)
Net increase in deferred commission expense
1,118

 
897

Deferred commission expense, as of June 30,
$
23,959

 
$
20,584


Note 10 – Stock Option Plan and Stock Grants
We account for our stock-based compensation in accordance with the Codification Topic “Compensation – Stock Compensation” (“FASB ASC 718”).
Stock-based compensation expense, reported in “General and administrative” on the Consolidated Statements of Income and Comprehensive Income, for the quarters ended June 30, 2013 and 2012 was approximately $1.6 million and $1.9 million, respectively, and for the six months ended June 30, 2013 and 2012, was approximately $2.7 million and $3.3 million, respectively.
On January 31, 2013, we awarded Restricted Stock Grants for 31,000 shares of common stock at a fair market value of approximately $2.2 million to certain members of the Board of Directors for services rendered in 2012. One-third of the shares of restricted common stock covered by these awards vest on each of December 31, 2013, December 31, 2014, and December 31, 2015. The fair market value of our restricted stock grants is recorded as compensation expense and paid in capital over the vesting period.
On February 1, 2013, we awarded Restricted Stock Grants for 34,333 shares of common stock at a fair market value of $2.5 million to certain members of our senior management. These Restricted Stock Grants will vest on December 31, 2013.
On March 13, 2013, we awarded Restricted Stock Grants for 333 shares of common stock at a fair market value of approximately $24,800 to a member of the Board of Directors for services rendered in 2012. One-third of the shares of restricted common stock covered by these awards vests on each of September 13, 2013, March 13, 2014, and March 13, 2015.
On April 10, 2013, we awarded Restricted Stock Grants for 1,000 shares of common stock at a fair market value of $80,200 to a member of our senior management. These Restricted Stock Grants will vest on December 31, 2013.
On May 8, 2013, we awarded Restricted Stock Grants for 20,000 shares of common stock at a fair market value of approximately $1.7 million to certain members of the Board of Directors. One-third of the shares of restricted common stock covered by these awards vest on each of November 8, 2013, May 8, 2014, and May 8, 2015.

Note 11 – Long-Term Cash Incentive Plan
On January 24, 2013, our Compensation, Nominating and Corporate Governance Committee (the “Committee”) approved a Long-Term Cash Incentive Plan Award (the “2013 LTIP”) to provide a long-term cash bonus opportunity to certain members of our management. The 2013 LTIP was approved by the Committee pursuant to the authority set forth in the Long Term Cash Incentive Plan approved by the Board of Directors on May 15, 2007. The total cumulative payment for all participants (the “Eligible Payment”) is based upon certain performance conditions being met over a three year period ending December 31, 2015.

18

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 11 – Long-Term Cash Incentive Plan (continued)
The Committee has responsibility for administering the 2013 LTIP and may use its reasonable discretion to adjust the performance criteria or Eligible Payments to take into account the impact of any major or unforeseen transaction or event. Our executive officers are not participants in the 2013 LTIP. The Eligible Payment will be paid in cash upon completion of our annual audit for the 2015 fiscal year and upon satisfaction of the vesting conditions as outlined in the 2013 LTIP and, including employer costs, is currently estimated to be approximately $5.8 million. For the quarter and six months ended June 30, 2013, we had accrued compensation expense of approximately $0.5 million and $1.0 million, respectively.
The amount accrued for the 2013 LTIP reflects our evaluation of the 2013 LTIP based on forecasts and other available information and is subject to performance in line with forecasts and final evaluation and determination by the Committee. There can be no assurances that our estimates of the probable outcome will be representative of the actual outcome.

Note 12 – Commitments and Contingencies
California Rent Control Litigation
As part of our effort to realize the value of our Properties subject to rent control, we have initiated lawsuits against certain localities in California. Our 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. Such regulations allow tenants to sell their homes for a price that includes a premium above the intrinsic value of the homes. The premium represents the value of the future discounted rent-controlled rents, which is fully capitalized into the prices of the homes sold. In our view, such regulations result in a transfer to the tenants of the value of our land, which would otherwise be reflected in market rents. We have discovered through the litigation process that certain municipalities considered condemning our Properties at values well below the value of the underlying land. In our view, a failure to articulate market rents for sites governed by restrictive rent control would put us 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. We are cognizant of the need for affordable housing in the jurisdictions, but assert that restrictive rent regulation does not promote this purpose because tenants pay to their sellers as part of the purchase price of the home all the future rent savings that are expected to result from the rent control regulations, eliminating any supposed improvement in the affordability of housing. In a more well-balanced regulatory environment, we would receive market rents that would eliminate the price premium for homes, which would trade at or near their intrinsic value. Such efforts include the following matters:
City of San Rafael
We sued the City of San Rafael on October 13, 2000 in the U.S. District Court for the Northern District of California, challenging its rent control ordinance (the “Ordinance”) on constitutional grounds. We believe the litigation was settled by the City’s agreement to amend the ordinance to permit adjustments to market rent upon turnover. The City subsequently rejected the settlement agreement. The Court refused to enforce the settlement agreement, and submitted to a jury the claim that it had been breached. In October 2002, a jury found no breach of the settlement agreement.
Our constitutional claims against the City were tried in a bench trial during April 2007. On April 17, 2009, the Court issued its Order for Entry of Judgment in our favor (the “April 2009 Order”). On June 10, 2009, the Court ordered the City to pay us net fees and costs of approximately $2.1 million. On June 30, 2009, as anticipated by the April 2009 Order, the Court entered final judgment that gradually phased out the City’s site rent regulation scheme that the Court found unconstitutional. Pursuant to the final judgment, existing residents of our Property in San Rafael would be able to continue to pay site rent as if the Ordinance were to remain in effect for a period of 10 years, enforcement of the Ordinance was immediately enjoined with respect to new residents of the Property, and the Ordinance would expire entirely ten years from the June 30, 2009 date of judgment.
The City and the residents’ association (which intervened in the case) appealed, and we cross-appealed. On April 17, 2013, the United States Court of Appeals for the Ninth Circuit issued an opinion in which, among other rulings, it reversed the trial court’s determinations that the Ordinance had unconstitutionally taken our property and that we were entitled to an award of attorneys’ fees and costs, and affirmed the jury verdict that the City had not breached the settlement agreement and affirmed the award to the City of approximately $1.25 million of attorneys’ fees and costs on the settlement agreement claims. On May 1, 2013, we filed with the Court of Appeals a petition for panel rehearing and rehearing en banc, which was denied on June 3, 2013. On June 26, 2013, the Court of Appeals’ mandate issued. We intend to file a petition for review by the U.S. Supreme Court, which is due to be filed on September 3, 2013.

19

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 12 – Commitments and Contingencies (continued)
During the quarter ended June 30, 2013, we accrued approximately $1.4 million related to the ruling of the Court of Appeals. On July 10, 2013, we paid to the City $1.27 million to satisfy, including interest, the attorneys’ fees and costs judgment affirmed by the Court of Appeals. The City has also requested an additional award of approximately $0.13 million for attorney’s fees on appeal, the amount of which we have contested and remains to be determined.
City of Santee
In June 2003, we 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 rent control ordinances the City of Santee had enforced against us 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 we were entitled to collect a one-time rent increase based upon the difference in annual adjustments between the invalid ordinance(s) and the Prior Ordinance and to adjust our base rents to reflect what we could have charged had the Prior Ordinance been continually in effect. The City of Santee appealed the judgment. The City and the Homeowners’ Association of Meadowbrook Estates (“Tenant Association”) also each sued us in separate actions in the California Superior Court (Case Nos. GIE 020887 and GIE 020524) alleging that the rent adjustments pursuant to the judgment violated the Prior Ordinance, sought to rescind the rent adjustments, and sought refunds of amounts paid, and penalties and damages in these separate actions. As a result of further proceedings and a series of appeals and remands, we were required to and did release the additional rents to the Tenant Association’s counsel for disbursement to the tenants, and we have ceased collecting the disputed rent amounts.
The Tenant Association continued to seek damages, penalties and fees in their separate action based on the same claims the City made on the tenants’ behalf in the City’s case. We moved for judgment on the pleadings in the Tenant Association’s case on the ground that the Tenant Association’s case was moot in light of the result in the City’s case. On November 6, 2008, the Court granted us motion for judgment on the pleadings without leave to amend. The Tenant Association appealed. In June 2010, the Court of Appeal remanded the case for further proceedings. On remand, on December 12, 2011, the Court granted us motion for summary judgment and denied the Tenant Association’s motion for summary judgment. On January 9, 2012, the Court entered judgment in our favor, specifying that the Tenant Association shall recover nothing. On January 26, 2012, the Court set March 30, 2012 as the date for hearing our motion for attorneys’ fees and the Tenant Associations’ motion to reduce our claim for costs. On March 26, 2012, the Tenant Association filed a notice of appeal. On August 16, 2012, we and the Tenant Association entered a settlement agreement pursuant to which the Tenant Association dismissed its appeal in exchange for our agreement to dismiss our claims for attorneys’ fees and other costs. Because the matter was a class action by the Tenant Association, on January 18, 2013 the Court held a fairness hearing to consider final approval of the settlement, and approved the settlement.
In addition, we sued the City of Santee in United States District for the Southern District of California alleging all three of the ordinances are unconstitutional under the Fifth and Fourteenth Amendments to the United States Constitution. On October 13, 2010, the District Court: (1) dismissed our claims without prejudice on the ground that they were not ripe because we had not filed and received from the City a final decision on a rent increase petition, and (2) found that those claims are not foreclosed by any of the state court rulings. On November 10, 2010, we filed a notice of appeal from the District Court’s ruling dismissing our claims. On April 20, 2011, the appeal was voluntarily dismissed pursuant to stipulation of the parties.
In order to ripen our claims, we filed a rent increase petition with the City. At a hearing held on October 6, 2011, the City’s Manufactured Home Fair Practices Commission voted to deny that petition, and subsequently entered written findings denying it. We appealed that determination to the Santee City Council, which on January 25, 2012 voted to deny the appeal. In view of that adverse final decision on our rent increase petition, on January 31, 2012 we filed a new complaint in United States District for the Southern District of California alleging that the City’s ordinance effectuates a regulatory and private taking of our property and is unconstitutional under the Fifth and Fourteenth Amendments to the United States Constitution. On April 2, 2012, the City filed a motion to dismiss the new complaint. On December 21, 2012, the Court entered an order in which it: (a) denied the City’s motion to dismiss our private taking and substantive due process claims; (b) granted the City’s motion to dismiss our procedural due process claim as not cognizable because of the availability of a state remedy of a writ of mandamus; and (c) granted the City’s motion to dismiss our regulatory taking claim as being not ripe.
In addition, we also filed in the California Superior Court on February 1, 2012 a petition for a writ of administrative mandamus, and on September 28, 2012 a motion for writ of administrative mandamus, seeking orders correcting and vacating the decisions of the City and its Manufactured Home Fair Practices Commission, and directing that our rent increase petition be granted. On April 5, 2013, the Court denied our petition for writ of administrative mandamus. On June 3, 2013, we filed an appeal to the California Court of Appeal from the denial of our petition for writ of administrative mandamus.

20

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 12 – Commitments and Contingencies (continued)
Colony Park
On December 1, 2006, a group of tenants at our Colony Park Property in Ceres, California filed a complaint in the California Superior Court for Stanislaus County alleging that we had failed to properly maintain the Property and had improperly reduced the services provided to the tenants, among other allegations. We answered the complaint by denying all material allegations and filed a counterclaim for declaratory relief and damages. The case proceeded in Superior Court because our motion to compel arbitration was denied and the denial was upheld on appeal. Trial of the case began on July 27, 2010. After just over three months of trial in which the plaintiffs asked the jury to award a total of approximately $6.8 million in damages, the jury rendered verdicts awarding a total of less than $44,000 to six out of the 72 plaintiffs, and awarding nothing to the other 66 plaintiffs. The plaintiff’s who were awarded nothing filed a motion for a new trial or alternatively for judgment notwithstanding the jury’s verdict, which the Court denied on February 14, 2011. All but three of the 66 plaintiffs to whom the jury awarded nothing have appealed. The briefing on that appeal has been completed, but a date for oral argument remains to be set by the California Court of Appeal.
By orders entered on December 14, 2011, the Superior Court awarded us approximately $2.0 million in attorneys’ fees and other costs jointly and severally against the plaintiffs to whom the jury awarded nothing, and awarded no attorneys’ fees or costs to either side with respect to the six plaintiffs to whom the jury awarded less than $44,000. Plaintiffs have filed an appeal from the approximately $2.0 million award of our attorneys’ fees and other costs, on which the briefing has been completed but a date for oral argument remains to be set by the California Court of Appeal.
California Hawaiian
On April 30, 2009, a group of tenants at our California Hawaiian Property in San Jose, California filed a complaint in the California Superior Court for Santa Clara County alleging that we have failed to properly maintain the Property and have improperly reduced the services provided to the tenants, among other allegations. We moved to compel arbitration and stay the proceedings, to dismiss the case, and to strike portions of the complaint. By order dated October 8, 2009, the Court granted our motion to compel arbitration and stayed the court proceedings pending the outcome of the arbitration. The plaintiffs filed with the California Court of Appeal a petition for a writ seeking to overturn the trial court’s arbitration and stay orders. On May 10, 2011, the Court of Appeal granted the petition and ordered the trial court to vacate its order compelling arbitration and to restore the matter to its litigation calendar for further proceedings. On May 24, 2011, we filed a petition for rehearing requesting the Court of Appeal to reconsider its May 10, 2011 decision. On June 8, 2011, the Court of Appeal denied the petition for rehearing. On June 16, 2011, we filed with the California Supreme Court a petition for review of the Court of Appeal’s decision. On August 17, 2011, the California Supreme Court denied the petition for review. Discovery in the case is proceeding. The case has been set for trial on November 4, 2013. We believe that the allegations in the complaint are without merit, and intend to vigorously defend the litigation.
Hurricane Claim Litigation
On June 22, 2007, we filed suit in the Circuit Court of Cook County, Illinois (Case No. 07CH16548), against our insurance carriers, Hartford Fire Insurance Company, Essex Insurance Company (“Essex”), Lexington Insurance Company and Westchester Surplus Lines Insurance Company (“Westchester”), regarding a coverage dispute arising from losses we suffered as a result of hurricanes that occurred in Florida in 2004 and 2005. We also brought claims against Aon Risk Services, Inc. of Illinois (“Aon”), our former insurance broker, regarding the procurement of our appropriate insurance coverage. We are seeking declaratory relief establishing the coverage obligations of our carriers, as well as a judgment for breach of contract, breach of the covenant of good faith and fair dealing, unfair settlement practices and, as to Aon, for failure to provide ordinary care in the selling and procuring of insurance. The claims involved in this action are approximately $11 million.
In response to motions to dismiss, the trial court dismissed: (1) the requests for declaratory relief as being duplicative of the claims for breach of contract and (2) certain of the breach of contract claims as being not ripe until the limits of underlying insurance policies have been exhausted. On or about January 28, 2008, we filed our Second Amended Complaint (“SAC”), which the insurers answered. In response to the court’s dismissal of the SAC’s claims against Aon, we ultimately filed, on February 2, 2009, a new Count VIII against Aon alleging a claim for breach of contract, which Aon answered. In January 2010, the parties engaged in a settlement mediation, which did not result in a settlement. In June 2010, we filed motions for partial summary judgment against the insurance companies seeking a finding that our hurricane debris cleanup costs are within the extra expense coverage of our excess insurance policies. On December 13, 2010, the Court granted the motion. Discovery is proceeding with respect to various remaining issues, including the amounts of the debris cleanup costs we are entitled to collect pursuant to the Court’s order granting us partial summary judgment.

21

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 12 – Commitments and Contingencies (continued)
On August 6, 2012, we were served with motions by Essex and Westchester seeking leave to amend their pleadings, which the Court subsequently allowed, to add affirmative defenses seeking to bar recovery on the alleged ground that the claim we submitted for hurricane-related losses allegedly intentionally concealed and misrepresented that a portion of that claim was not hurricane-related, and to add a counterclaim seeking on the same alleged ground reimbursement of approximately $2.4 million Essex previously paid (the “Additional Affirmative Defenses and Counterclaim”). We believe that the Additional Affirmative Defenses and Counterclaim are without merit, and intend to vigorously contest them. The parties filed motions for partial summary judgment with respect to certain of the claims that remain in the case, on which the court heard oral argument on April 2, 2013 and took under advisement. On April 22, 2013, Essex and Westchester filed an additional motion for summary judgment, which relates to their Additional Affirmative Defenses and Counterclaim, on which the court heard oral arguments on June 27, 2013 and took under advisement. The case has been set for trial on December 2, 2013.
We have entered settlements of our claims with certain of the insurers and also received additional payments from certain of the insurers since filing the lawsuit, collectively totaling approximately $7.4 million.
Membership Class Action
On July 29, 2011, we were served with a class action lawsuit in California state court filed by two named plaintiffs, who are husband and wife. Among other allegations, the suit alleges that the plaintiffs purchased a membership in our Thousand Trails network of campgrounds and paid annual dues; that they were unable to make a reservation to utilize one of the campgrounds because, they were told, their membership did not permit them to utilize that particular campground; that we failed to comply with the written disclosure requirements of various states’ membership camping statutes; that we misrepresented that we provide a money-back guaranty; and that we misrepresented that the campgrounds or portions of the campgrounds would be limited to use by members.
Allegedly on behalf of “between 100,000 and 200,000” putative class members, the suit asserts claims for alleged violation of: (1) the California Civil Code §§ 1812.300, et seq.; (2) the Arizona Revised Statutes §§ 32-2198, et seq.; (3) Chapter 222 of the Texas Property Code; (4) Florida Code §§ 509.001, et seq.; (5) Chapter 119B of the Nevada Administrative Code; (6) Business & Professions Code §§ 17200, et seq., (7) Business & Professions Code §§ 17500; (8) Fraud - Intentional Misrepresentation and False Promise; (9) Fraud - Omission; (10) Negligent Misrepresentation; and (11) Unjust Enrichment. The complaint seeks, among other relief, rescission of the membership agreements and refund of the member dues of plaintiffs and all others who purchased a membership from or paid membership dues to us since July 21, 2007; general and special compensatory damages; reasonable attorneys’ fees, costs and expenses of suit; punitive and exemplary damages; a permanent injunction against the complained of conduct; and pre-judgment interest.
On August 19, 2011, we filed an answer generally denying the allegations of the complaint, and asserting affirmative defenses. On August 23, 2011, we removed the case from the California state court to the federal district court in San Jose. On July 23, 2012, we filed a motion to deny class certification. On July 24, 2012, the plaintiffs filed a motion for leave to amend their class action complaint to add four additional named plaintiffs. On August 28, 2012, the Court held a hearing on our motion to deny class certification and on the plaintiffs’ motion for leave to amend. Separately, on September 14, 2012, the plaintiffs filed a motion for class certification, on which the Court held a hearing on November 6, 2012.
On March 18, 2013, the Court entered an order denying class certification and denying the plaintiffs’ motion for leave to amend their class action complaint. The individual claims of the two named plaintiffs remain pending. On April 1, 2013, the plaintiffs filed with the United States Court of Appeals for the Ninth Circuit a petition for leave to appeal from the order denying class certification. On May 15, 2013, the plaintiffs withdrew their petition for leave to appeal.
Litigation Relating to Potential Acquisition of Certain RV Resorts
On November 9, 2012, we entered a letter of intent with Morgan RV Resorts (“Morgan”), which granted us a right of exclusive dealing and a right of first refusal (“ROFR”) with respect to the purchase of 15 of Morgan’s RV resorts. On December 13, 2012, Sun Communities, Inc. announced in an SEC filing that certain of its affiliates (collectively, “Sun”) had entered into a contract with Morgan to purchase 11 of those same properties, as a result of which we subsequently exercised our ROFR. In a suit initiated by Sun on December 26, 2012 against us and Morgan in the Oakland County (Michigan) Circuit Court, the parties are litigating the issue of who has the right to the properties. On February 12, 2013, Sun announced in an SEC filing that it had closed its purchase from Morgan on ten of the 11 properties at issue. The case has been set for trial on December 2, 2013.

22

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 12 – Commitments and Contingencies (continued)
Other
We are involved in various other legal and regulatory proceedings arising in the ordinary course of business. Such proceedings include, but are not limited to, notices, consent decrees, information requests, and additional permit requirements and other similar enforcement actions by governmental agencies relating to our water and wastewater treatment plants and other waste treatment facilities. Additionally, in the ordinary course of business, our 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 us. In addition, to the extent any such proceedings or audits relate to newly acquired Properties, we consider any potential indemnification obligations of sellers in our favor.

Note 13 – Reportable Segments
Operating segments are defined as components of an entity for which separate financial information is available that is evaluated regularly by the chief operating decision maker. The chief operating decision maker evaluates and assesses performance on a monthly basis. Segment operating performance is measured on Net Operating Income (“NOI”). NOI is defined as total operating revenues less total operating expenses. Segments are assessed before interest income, depreciation and amortization of in-place leases.
We have two reportable segments which are: (i) Property Operations and (ii) Home Sales and Rentals Operations. The Property Operations segment owns and operates land lease Properties and the Home Sales and Rentals Operations segment purchases, sells and leases homes at the Properties.
All revenues are from external customers and there is no customer who contributed 10% or more of our total revenues during the quarters or six months ended June 30, 2013 or 2012.
The following tables summarize our segment financial information for the quarters ended June 30, 2013 and 2012 (amounts in thousands):
Quarter Ended June 30, 2013
 
Property
Operations
 
Home Sales
and Rentals
Operations
 
Consolidated
Operations revenues
$
164,940

 
$
8,113

 
$
173,053

Operations expenses
(83,081
)
 
(5,860
)
 
(88,941
)
Income from segment operations
81,859

 
2,253

 
84,112

Interest income
932

 
1,025

 
1,957

Depreciation on real estate and rental homes
(27,599
)
 
(1,714
)
 
(29,313
)
Amortization of in-place leases
(159
)
 
—

 
(159
)
Income from operations
$
55,033

 
$
1,564

 
56,597

Reconciliation to Consolidated net income
 
 
 
 
 
Other revenues
 
 
 
 
1,743

General and administrative
 
 
 
 
(6,946
)
Interest and related amortization
 
 
 
 
(30,377
)
Early debt retirement
 
 
 
 
(1,381
)
Rent control initiatives and other
 
 
 
 
(1,624
)
Equity in income of unconsolidated joint ventures
 
 
 
 
609

Discontinued operations
 
 
 
 
3,165

Consolidated net income
 
 
 
 
$
21,786

 
 
 
 
 
 
Assets held for use
$
3,104,484

 
$
296,596

 
$
3,401,080

Assets held for disposition
 
 
 
 
$
120,049

Total assets
 
 
 
 
$
3,521,129


23

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 13 – Reportable Segments (continued)

Quarter Ended June 30, 2012

 
Property
Operations
 
Home Sales
and  Rentals
Operations
 
Consolidated
Operations revenues
$
159,870

 
$
5,038

 
$
164,908

Operations expenses
(79,681
)
 
(4,194
)
 
(83,875
)
Income from segment operations
80,189

 
844

 
81,033

Interest income
782

 
1,015

 
1,797

Depreciation on real estate and rental homes
(24,149
)
 
(1,374
)
 
(25,523
)
Amortization of in-place leases
(15,346
)
 
(304
)
 
(15,650
)
Income from operations
$
41,476

 
$
181

 
41,657

Reconciliation to Consolidated net income
 
 
 
 
 
Other revenues
 
 
 
 
1,678

General and administrative
 
 
 
 
(6,810
)
Interest and related amortization
 
 
 
 
(30,705
)
Rent control initiatives and other
 
 
 
 
(367
)
Equity in income of unconsolidated joint ventures
 
 
 
 
492

Discontinued operations
 
 
 
 
353

Consolidated net income
 
 
 
 
$
6,298

 
 
 
 
 
 
Assets held for use
$
3,175,796

 
$
204,602

 
$
3,380,398

Assets held for disposition
 
 
 
 
$
118,252

Total assets
 
 
 
 
$
3,498,650

The following tables summarize our segment financial information for the six months ended June 30, 2013 and 2012 (amounts in thousands):
Six Months Ended June 30, 2013
 
Property
Operations
 
Home Sales
and Rentals
Operations
 
Consolidated
Operations revenues
$
337,930

 
$
14,520

 
$
352,450

Operations expenses
(162,570
)
 
(11,038
)
 
(173,608
)
Income from segment operations
175,360

 
3,482

 
178,842

Interest income
1,733

 
2,002

 
3,735

Depreciation on real estate and rental homes
(51,975
)
 
(3,358
)
 
(55,333
)
Amortization of in-place leases
(318
)
 
—

 
(318
)
Income from operations
$
124,800

 
$
2,126

 
126,926

Reconciliation to Consolidated net income
 
 
 
 
 
Other revenues
 
 
 
 
4,343

General and administrative
 
 
 
 
(13,655
)
Interest and related amortization
 
 
 
 
(60,500
)
Early debt retirement
 
 
 
 
(1,381
)
Rent control initiatives and other
 
 
 
 
(1,856
)
Equity in income of unconsolidated joint ventures
 
 
 
 
1,185

Discontinued operations
 
 
 
 
6,233

Gain on sale of property, net of tax
 
 
 
 
958

Consolidated net income
 
 
 
 
$
62,253

 
 
 
 
 
 
Assets held for use
$
3,104,484

 
$
296,596

 
$
3,401,080

Assets held for disposition
 
 
 
 
$
120,049

Total assets
 
 
 
 
$
3,521,129

Capital improvements
$
13,571

 
$
22,279

 
$
35,850



24

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 13 – Reportable Segments (continued)
Six Months Ended June 30, 2012

 
Property
Operations
 
Home Sales
and  Rentals
Operations
 
Consolidated
Operations revenues
$
326,306

 
$
9,951

 
$
336,257

Operations expenses
(155,542
)
 
(8,103
)
 
(163,645
)
Income from segment operations
170,764

 
1,848

 
172,612

Interest income
1,636

 
2,156

 
3,792

Depreciation on real estate and rental homes
(48,257
)
 
(2,690
)
 
(50,947
)
Amortization of in-place leases
(30,657
)
 
(608
)
 
(31,265
)
Income from operations
$
93,486

 
$
706

 
94,192

Reconciliation to Consolidated net income
 
 
 
 
 
Other revenues
 
 
 
 
3,275

General and administrative
 
 
 
 
(12,909
)
Interest and related amortization
 
 
 
 
(61,528
)
Rent control initiatives and other
 
 
 
 
(846
)
Equity in income of unconsolidated joint ventures
 
 
 
 
1,255

Discontinued operations
 
 
 
 
513

Consolidated net income
 
 
 
 
$
23,952

 
 
 
 
 
 
Assets held for use
$
3,175,796

 
$
204,602

 
$
3,380,398

Assets held for disposition
 
 
 
 
$
118,252

Total assets
 
 
 
 
$
3,498,650

Capital improvements
$
13,349

 
$
17,211

 
$
30,560

The following table summarizes our financial information for the Property Operations segment, specific to continuing operations, for the quarters and six months ended June 30, 2013 and 2012 (amounts in thousands):        
 
Quarters Ended
 
Six Months Ended
 
June 30,
2013
 
June 30,
2012
 
June 30,
2013
 
June 30,
2012
Revenues:
 
 
 
 
 
 
 
Community base rental income
$
101,468

 
$
98,336

 
$
202,244

 
$
196,433

Resort base rental income
33,197

 
30,408

 
73,936

 
67,987

Right-to-use annual payments
12,043

 
12,221

 
23,566

 
23,972

Right-to-use contracts current period, gross
3,361

 
2,942

 
6,192

 
5,186

Right-to-use contracts current period, deferred
(1,550
)
 
(1,285
)
 
(2,590
)
 
(1,891
)
Utility income and other
15,787

 
17,097

 
32,470

 
33,053

Ancillary services revenues, net
634

 
151

 
2,112

 
1,566

Total property operations revenues
164,940

 
159,870

 
337,930

 
326,306

Expenses:
 
 
 
 
 
 
 
Property operating and maintenance
58,345

 
56,882

 
113,401

 
109,850

Real estate taxes
11,888

 
11,510

 
24,290

 
23,367

Sales and marketing, gross
3,333

 
2,632

 
5,694

 
4,275

Sales and marketing deferred commissions, net
(655
)
 
(655
)
 
(1,118
)
 
(897
)
Property management
10,170

 
9,312

 
20,303

 
18,947

Total property operations expenses
83,081

 
79,681

 
162,570

 
155,542

Income from property operations segment
$
81,859

 
$
80,189

 
$
175,360

 
$
170,764

    

25

Equity LifeStyle Properties, Inc.
Notes to Consolidated Financial Statements


Note 13 – Reportable Segments (continued)
The following table summarizes our financial information for the Home Sales and Rentals Operations segment, specific to continuing operations, for the quarters and six months ended June 30, 2013 and 2012 (amounts in thousands):
 
Quarters Ended
 
Six Months Ended
June 30,
2013