Equity LifeStyle Properties, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with fiscal 2021. This is an annual filing, not a standalone fourth-quarter report.
Business context
ELS is a REIT that owns and operates manufactured-home and recreational-vehicle communities and marinas, and conducts home sales and rental operations. At year-end, its portfolio included 449 properties (including joint ventures) and approximately 171,248 sites in 35 U.S. states and British Columbia. Florida represented 44.3% of property operating revenue.
Financial and operating performance
| Metric | 2022 | Comparison with 2021 |
|---|---|---|
| Total GAAP revenue | $1.447 billion | Up 9.9% from $1.316 billion |
| Net income available to common stockholders | $284.6 million; $1.53 per diluted share | Up 8.4% in net income and 7.0% per diluted share |
| FFO available to common stock and OP unit holders | $523.6 million; $2.68 per diluted share | Up $38.0 million; per-share amount up 6.3% |
| Normalized FFO | $531.6 million; $2.72 per diluted share | Up $42.6 million; per-share amount up 7.4% |
| Property operations income | $639.2 million | Up 7.2% |
| Net cash from operating activities | $599.3 million | Up $4.3 million |
| Net cash used in investing activities | $525.6 million | Compared with $914.5 million used in 2021 |
| Net cash used in financing activities | $174.8 million | Compared with $418.7 million provided in 2021 |
Core property operating revenue, excluding deferrals, rose 6.1%; related property operating expenses, excluding deferrals and property management, rose 6.7%. Core income from property operations on that same adjusted basis increased 5.7%. Core manufactured-home occupancy held at 95.1%; base rent per site grew 5.8%, including 5.4% from rent increases and 0.4% from occupancy gains. Core RV and marina base rental income increased 9.1%, led by seasonal income growth of 38.6%; transient income declined 4.3%.
Home-sale and other income increased to $13.8 million from $8.4 million. New-home sales reached a company record of 1,176. Income from rental operations, net of depreciation, declined to $27.4 million from $32.0 million.
Debt, liquidity and distributions
Total outstanding debt principal was approximately $3.416 billion at year-end; the debt-to-market-capitalization ratio was approximately 21.3%. The weighted-average interest rate on long-term borrowings was 3.52%. Cash and restricted cash totaled $22.3 million. The $500 million unsecured line of credit had $198 million drawn and $302 million of remaining capacity. Management said it expected to meet near-term liquidity needs using cash, operating cash flow and the line of credit.
ELS entered into a $200 million unsecured term loan due January 2027, priced at SOFR plus approximately 1.30%–1.80%, and completed a $200 million secured refinancing at a fixed 3.36% rate, due May 2034. The company was in material compliance with debt covenants at year-end. Contractual obligations listed $154.8 million of long-term borrowing payments in 2023; separately, the filing identifies $92.5 million of secured debt maturing in 2023.
Common distributions declared for 2022 totaled $1.635 per share. In January 2023, the board set a 2023 annual dividend rate of $1.79 per share, subject to quarterly board decisions.
Material changes, outlook and notable items
- Growth and investment: ELS acquired five RV communities for $132.8 million and three land parcels for $9.5 million during 2022, and invested in joint ventures and development assets. It added 1,034 expansion sites. Capital improvements totaled $372.8 million, up from $290.3 million.
- Hurricane Ian: The storm damaged properties near Fort Myers and interrupted operations at four RV properties and two marinas. ELS recorded $40.6 million of cleanup expenses and an equal insurance-recovery accrual, plus a $5.4 million asset write-down offset by an equal recovery accrual. Four of the six affected properties had resumed operations; two were expected to resume by the third quarter of 2023. As of February 21, 2023, insurers had received proofs of loss totaling $19.7 million; the timing and amount of recovery remained uncertain.
- Management outlook: Management cited strong 2022 demand, particularly in the RV portfolio, and expects long-term demand from older and younger customer groups to support the business. The filing does not provide specific earnings or FFO guidance. Management notes that inflation, interest rates, financing availability, development constraints and seasonal demand could affect results.
- Key risks: Geographic concentration in Florida, California and the Northeast; hurricanes and other climate-related events; insurance costs and coverage limits; rent-control laws; rising operating and construction costs; interest-rate and refinancing exposure; and customers’ ability to obtain financing for homes and RVs. RV and marina activity is seasonal and may be affected by weather and discretionary spending.
- Contingency: A settlement concerning the Westwinds and adjacent Nicholson Plaza ground leases dismissed most pending claims with prejudice. The lessors reserved a claim alleging inadequate maintenance or repairs; ELS disputes it and intends to defend its position. The settlement had no material financial-statement impact.
ELS’s financial statements received an unqualified audit opinion, and the auditor also issued an unqualified opinion on internal control over financial reporting. The auditor identified valuation of real estate investments for impairment as a critical audit matter, involving significant assumptions about future rents, expenses and capitalization rates.
Important facts for investors to verify
- Whether Hurricane Ian insurance proceeds are collected, in what amount and on what timeline, and whether affected properties return to normal operations.
- How rent growth, occupancy and expense increases evolve, particularly in Florida and other concentrated markets.
- Debt maturities, refinancing terms, floating-rate exposure and the transition away from LIBOR.
- Whether the announced 2023 dividend rate is maintained and how operating cash flow supports distributions and capital spending.
- Progress and returns on acquisitions, expansion projects and development, including the impact of construction costs and permitting.
FFO and Normalized FFO are non-GAAP measures and should be considered alongside GAAP income and cash flows; they are not measures of cash available for distributions.