ELS Reports Third Quarter Results
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Issues 2010 Preliminary Guidance
CHICAGO--(BUSINESS WIRE)-- Equity LifeStyle Properties, Inc. (NYSE: ELS) (the "Company") today announced results for the quarter and nine months ended September 30, 2009.
a) Financial Results
For the third quarter 2009, Funds From Operations ("FFO") were $28.8 million, or $0.82 per share on a fully-diluted basis, compared to $22.7 million, or $0.74 per share on a fully-diluted basis for the same period in 2008. For the nine months ended September 30, 2009, FFO was $90.4 million, or $2.81 per share on a fully-diluted basis, compared to $77.1 million, or $2.53 per share on a fully-diluted basis for the same period in 2008.
Net income available to common stockholders totaled $11.1 million, or $0.37 per share on a fully-diluted basis for the quarter ended September 30, 2009. This compares to net income available to common stockholders of $1.5 million, or $0.06 per share on a fully-diluted basis for the same period in 2008. Net income available to common stockholders totaled $27.7 million, or $1.02 per share on a fully-diluted basis for the nine months ended September 30, 2009. This compares to net income available to common stockholders of $18.3 million, or $0.74 per share on a fully-diluted basis for the same period in 2008.
On June 29, 2009, the Company issued 4.6 million shares of common stock in an equity offering for approximately $146.4 million, net of offering costs. On an as adjusted basis, assuming the equity offering had not occurred, FFO per share on a fully-diluted basis would have been $0.94 and $3.28 for the quarter and nine months ended September 30, 2009, respectively. As adjusted net income available to common stockholders, assuming the equity offering did not occur, would have been $0.42 and $1.19 per share on a fully diluted basis for the quarter and nine months ended September 30, 2009, respectively.
See the attachment to this press release for reconciliation of FFO and FFO per share to net income available to common shares and net income per common share, respectively, the most directly comparable GAAP measure.
b) Portfolio Performance
Third quarter 2009 property operating revenues were $123.8 million, compared to $108.3 million in the third quarter of 2008. Our property operating revenues for the nine months ended September 30, 2009 were $364.3 million, compared to $309.0 million for the nine months ended September 30, 2008.
For the quarter ended September 30, 2009, our Core property operating revenues increased approximately 2.7 percent and Core property operating expenses decreased approximately 1.5 percent, resulting in an increase of approximately 6.5 percent to income from Core property operations over the quarter ended September 30, 2008. For the nine months ended September 30, 2009, our Core property operating revenues increased approximately 2.7 percent and Core property operating expenses decreased approximately 1.6 percent, resulting in an increase to income from Core property operations of approximately 6.3 percent over the nine months ended September 30, 2008.
For the quarter ended September 30, 2009, the Company had 38 new home sales (including 13 third-party dealer sales), which represents a 56.3 percent decrease as compared to the quarter ended September 30, 2008. Gross revenues from home sales were $2.1 million for the quarter ended September 30, 2009, compared to $5.3 million for the quarter ended September 30, 2008. Net income from home sales and other was $1.5 million for the quarter ended September 30, 2009, compared to a net loss from home sales and other of ($0.7) million for the same period in 2008. For the nine months ended September 30, 2009, the Company had 79 new home sales (including 19 third-party dealer sales), a 75.5 percent decrease over the same period in 2008. Gross revenues from home sales were $5.1 million for the nine months ended September 30, 2009, compared to $18.3 million for the same period in 2008. Net income from home sales and other was $1.0 million for the nine months ended September 30, 2009 compared to a net loss from home sales and other of ($2.7) million for the nine months ended September 30, 2008.
Property management expenses were $8.7 million for the quarter ended September 30, 2009, compared to $6.4 million for the same period last year. A significant portion of the increase in property management expenses was due to the acquisition and consolidation of Privileged Access, L.P. ("Privileged Access") and the 82 Company properties that Privileged Access had been leasing and operating prior to the Company's acquisition of Privileged Access on August 14, 2008.
c) Asset-related Transactions
On July 20, 2009, the Company sold the 490-site property known as Casa Village in Billings, Montana. The buyer assumed approximately $10.6 million of mortgage indebtedness on the property.
d) Balance Sheet
Our average long-term secured debt balance was approximately $1.6 billion in the quarter, with a weighted average interest rate, including amortization, of approximately 6.02 percent per annum. Our unsecured debt balance currently has an availability of $370.0 million. Interest coverage was approximately 2.4 times in the quarter ended September 30, 2009.
During the quarter ended September 30, 2009, the Company closed on approximately $21.1 million of financings on two manufactured home properties with a weighted average interest rate of 6.25 percent per annum, maturing in 2019. The Company also paid off twelve maturing mortgages totaling approximately $47.9 million, with a weighted average interest rate of 7.94 percent per annum.
During the fourth quarter of 2009 and the second quarter of 2010, the Company expects to close on approximately $74 million of financing on four manufactured home properties at a weighted average interest rate of 6.96 percent per annum, maturing in 10 years. We have locked rate with Fannie Mae on these loans. There can be no assurance if such financings will occur or as to the timing and terms of our anticipated financing.
The Company expects to satisfy its secured debt maturities occurring prior to December 31, 2010 with the proceeds from the four financings noted above and its existing cash balance, which is approximately $160 million as of September 30, 2009. The expected timing and amounts of the most significant payoffs are as follows: i) approximately $32 million during the fourth quarter of 2009, ii) approximately $100 million in April of 2010, and iii) approximately $76 million in August of 2010.
e) Guidance
ELS management projects 2009 FFO per share, on a fully-diluted basis, to be in the range of $0.60 to $0.70 for the quarter ending December 31, 2009.
Preliminary guidance for 2010 FFO per share, on a fully-diluted basis, is projected to be in the range of $3.39 to $3.59 and is based on the following assumptions provided below. The following are based on current projections, make no assumptions regarding free cash flow and are forward-looking:
-- Core property operating revenue for 2010 is expected to grow at
approximately 1.0 to 1.5 percent over 2009, assuming stable occupancy.
The 2010 Core properties are expected to earn approximately $493.5
million in property operating revenues in 2009. The 2010 Core properties
will include the 82 Privileged Access properties the Company started
operating on August 14, 2008.
-- Income from Core property operations, excluding property management
expenses, is expected to grow at approximately 1.0 to 2.0 percent over
2009. Excluding property management expenses, the 2010 Core properties
are expected to contribute approximately $268.5 million to income from
property operations in 2009.
-- Non-Core properties are expected to contribute approximately $1.8
million to income from property operations in 2010.
-- Property management and corporate general and administrative expenses
are expected to be approximately $55 million in 2010.
-- Other income, including sales operations, interest income, other
corporate income and depreciation, rent control initiatives and income
from joint ventures (before related depreciation expense), is expected
to be approximately $11 million in 2010.
-- Interest and related amortization expense and payments to perpetual
preferred OP Unit holders is expected to be approximately $107 million
in 2010.
The Company's guidance ranges acknowledge the existence of volatile economic conditions, which may impact our current guidance assumptions. Factors impacting 2009 and 2010 guidance include (i) the mix of site usage within the portfolio; (ii) yield management on our short-term resort sites; (iii) scheduled or implemented rate increases on community and resort sites; (iv) scheduled or implemented rate increases of annual payments under right-to-use contracts; (v) occupancy changes; and (vi) our ability to retain and attract customers renewing or purchasing right-to-use contracts. Results for 2009 and 2010 also may be impacted by, among other things, (i) continued competitive housing options and new home sales initiatives impacting occupancy levels at certain properties; (ii) variability in income from home sales operations, including anticipated expansion projects; (iii) potential effects of uncontrollable factors such as environmental remediation costs and hurricanes; (iv) potential acquisitions, investments and dispositions; (v) mortgage debt maturing during 2010; (vi) changes in interest rates; and (vii) continued initiatives regarding rent control legislation in California and related legal fees. Quarter-to-quarter results during the year are impacted by the seasonality at certain of the properties.
Equity LifeStyle Properties, Inc. owns or has an interest in 307 quality properties in 27 states and British Columbia consisting of 110,363 sites. The Company is a self-administered, self-managed, real estate investment trust (REIT) with headquarters in Chicago.
A live webcast of Equity LifeStyle Properties, Inc.'s conference call discussing these results will be available via the Company's website in the Investor Info section at www.equitylifestyle.com at 10:00 a.m. Central time on October 20, 2009.
This news release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as "anticipate," "expect," "believe," "project," "intend," "may be" and "will be" and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:
-- our ability to control costs, real estate market conditions, the actual
rate of decline in customers, the actual use of sites by customers and
our success in acquiring new customers at our Properties (including
those recently acquired);
-- our ability to maintain historical rental rates and occupancy with
respect to Properties currently owned or that we may acquire;
-- our assumptions about rental and home sales markets;
-- in the age-qualified Properties, home sales results could be impacted by
the ability of potential homebuyers to sell their existing residences as
well as by financial, credit and capital markets volatility;
-- in the all-age Properties, results from home sales and occupancy will
continue to be impacted by local economic conditions, lack of affordable
manufactured home financing and competition from alternative housing
options including site-built single-family housing;
-- the completion of future acquisitions, if any, and timing with respect
thereto and the effective integration and successful realization of cost
savings;
-- ability to obtain financing or refinance existing debt on favorable
terms or at all;
-- the effect of interest rates;
-- the dilutive effects of issuing additional common stock;
-- the effect of accounting for the sale of agreements to customers
representing a right-to-use the Properties previously leased by
Privileged Access under Financial Accounting Standards Board Accounting
Standards Codification Topic "Revenue Recognition" (prior authoritative
guidance: Staff Accounting Bulletin No. 104,Revenue Recognition in
Consolidated Financial Statements, Corrected); and
-- other risks indicated from time to time in our filings with the
Securities and Exchange Commission.
These forward-looking statements are based on management's present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.
Tables follow:
Equity LifeStyle Properties, Inc.
Selected Financial Data
(Unaudited)
(Amounts in thousands except for per share data)
Quarters Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Property Operations:
Community base rental $ 63,389 $ 61,554 $ 189,891 $184,018
income
Resort base rental 34,561 29,343 97,766 86,973
income
Right-to-use annual 12,796 6,746 38,393 6,746
payments
Right-to-use
contracts current 5,080 5,003 16,526 5,003
period, gross
Right-to-use
contracts current
period, deferred, net (4,327 ) (4,940 ) (14,761 ) (4,940 )
of prior period
amortization
Utility and other 12,331 10,572 36,455 31,222
income
Property operating 123,830 108,278 364,270 309,022
revenues
Property operating 50,409 42,148 137,978 109,847
and maintenance
Real estate taxes 7,955 7,794 24,646 22,712
Sales and marketing, 3,422 3,098 10,166 3,098
gross
Sales and marketing,
deferred commissions, (1,410 ) (1,598 ) (4,535 ) (1,598 )
net
Property management 8,725 6,446 25,159 16,983
Property operating 69,101 57,888 193,414 151,042
expenses
Income from property 54,729 50,390 170,856 157,980
operations
Home Sales
Operations:
Gross revenues from 2,127 5,260 5,075 18,254
home sales
Cost of inventory (1,842 ) (5,365 ) (5,606 ) (18,974 )
home sales
Gross profit (loss) 285 (105 ) (531 ) (720 )
from home sales
Brokered resale 171 237 556 905
revenues, net
Home selling expenses (278 ) (1,482 ) (1,990 ) (4,630 )
Ancillary services 1,341 607 2,915 1,728
revenues, net
Income (loss) from 1,519 (743 ) 950 (2,717 )
home sales and other
Other Income and
Expenses:
Interest income 1,177 885 3,783 1,566
Income from other 2,339 2,783 6,728 16,398
investments, net
General and (5,281 ) (5,315 ) (17,654 ) (15,548 )
administrative
Rent control (93 ) (102 ) (408 ) (1,967 )
initiatives
Interest and related (24,492 ) (24,930 ) (74,068 ) (74,604 )
amortization
Depreciation on (458 ) (84 ) (860 ) (266 )
corporate assets
Depreciation on real
estate and other (17,400 ) (17,132 ) (51,942 ) (49,664 )
costs
Total other expenses, (44,208 ) (43,895 ) (134,421 ) (124,085 )
net
Equity in income of
unconsolidated joint 229 62 2,607 3,445
ventures
Consolidated income
from continuing 12,269 5,814 39,992 34,623
operations
Discontinued
operations:
Discontinued (53 ) 32 160 177
operations
Gain (loss) from
discontinued real 4,743 --- 4,723 (80 )
estate
Income from
discontinued 4,690 32 4,883 97
operations
Consolidated net $ 16,959 $ 5,846 $ 44,875 $ 34,720
income
Income allocated to
non-controlling
interests:
Common OP Units (1,797 ) (332 ) (5,092 ) (4,300 )
Perpetual OP Units (4,031 ) (4,032 ) (12,104 ) (12,104 )
Net income available $ 11,131 $ 1,482 $ 27,679 $ 18,316
for Common Shares
Net income per Common $0.37 $0.06 $1.04 $0.75
Share - Basic
Net income per Common $0.37 $0.06 $1.02 $0.74
Share - Fully Diluted
Average Common Shares 29,993 24,527 26,719 24,366
- Basic
Average Common Shares 34,958 30,181 31,848 30,119
and OP Units - Basic
Average Common Shares
and OP Units - Fully 35,242 30,572 32,168 30,504
Diluted
Equity LifeStyle Properties, Inc.
(Unaudited)
Reconciliation of
Net Income to FFO Quarters Ended Nine Months Ended
and FAD
(amounts in 000s,
except for per share September 30, September 30, September 30, September 30,
data)
2009 2008 2009 2008
Computation of funds
from operations:
Net income $11,131 $1,482 $27,679 $18,316
Income allocated to 1,797 332 5,092 4,300
common OP Units
Right-to-use
contract sales, 4,327 4,940 14,761 4,940
deferred, net (1)
Right-to-use
contract (1,410 ) (1,598 ) (4,535 ) (1,598 )
commissions,
deferred, net(2)
Depreciation on
real estate assets 17,400 17,132 51,942 49,664
and other
Depreciation on
unconsolidated 305 446 945 1,349
joint ventures
(Gain) loss on real (4,743 ) --- (5,526 ) 80
estate
Funds from $28,807 $22,734 $90,358 $77,051
operations (FFO)
Non-revenue
producing (4,888 ) (5,229 ) (12,950 ) (10,516 )
improvements to
real estate
Funds available for $23,919 $17,505 $77,408 $66,535
distribution (FAD)
FFO per Common Share $0.82 $0.75 $2.84 $2.56
- Basic
FFO per Common Share $0.82 $0.74 $2.81 $2.53
- Fully Diluted
FAD per Common Share $0.68 $0.58 $2.43 $2.21
- Basic
FAD per Common Share $0.68 $0.57 $2.41 $2.18
- Fully Diluted
________________________________
(1) The Company is required by GAAP to defer recognition of the non-refundable upfront payments from the sale of right-to-use contracts over the estimated customer life. The customer life is currently estimated to range from one to 31 years and is determined based upon historical attrition rates provided to the Company by Privileged Access. The amount shown represents the deferral of a substantial portion of current period contract sales, offset by the amortization of prior period sales, if any. (2) The Company is required by GAAP to defer recognition of the commission paid related to the sale of right-to-use contracts. The deferred commissions will be amortized on the same method as the related non-refundable upfront payments from the sale of right-to-use contracts The amount shown represents the deferral of a substantial portion of current period contract commissions, offset by the amortization of prior period commissions, if any.
Income from Property Operations Detail
(Amounts in thousands)
Equity LifeStyle Privileged Access Consolidated
Quarters Ended Quarters Ended Quarters Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008 2009 2008
Community base $63,389 $61,554 $--- $--- $63,389 $61,554
rental income
Resort base 28,346 26,938 6,215 2,405 34,561 29,343
rental income
Right-to-use --- --- 12,796 6,746 12,796 6,746
annual payments
Right-to-use
contracts --- --- 5,080 5,003 5,080 5,003
current period,
gross
Utility and 10,259 9,751 2,072 821 12,331 10,572
other income
Property
operating
revenues 101,994 98,243 26,163 14,975 128,157 113,218
excluding
deferrals
Property
operating and 34,933 35,193 15,476 6,955 50,409 42,148
maintenance
Real estate 7,052 7,382 903 412 7,955 7,794
taxes
Sales and
marketing, --- --- 3,422 3,098 3,422 3,098
gross
Property
operating
expenses 41,985 42,575 19,801 10,465 61,786 53,040
excluding
deferrals
Income from
property
operations,
excluding 60,009 55,668 6,362 4,510 66,371 60,178
deferrals and
Property
management
Right-to-use
contract sales --- --- (4,327 ) (4,940 ) (4,327 ) (4,940 )
deferred, net
Right-to-use
contract --- --- 1,410 1,598 1,410 1,598
commissions
deferred net
Income from
property
operations, 60,009 55,668 3,445 1,168 63,454 56,836
excluding
Property
management
Property 8,725 6,446
management
Income from
property $54,729 $50,390
operations
Equity LifeStyle Properties, Inc.
(Unaudited)
Income from Property Operations Detail
(Amounts in thousands)
Equity LifeStyle Privileged Access Consolidated
Nine Months Ended Nine Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008 2009 2008
Community
base rental $189,891 $184,018 $--- $--- $189,891 $184,018
income
Resort base 84,714 84,568 13,052 2,405 97,766 86,973
rental income
Right-to-use
annual --- --- 38,393 6,746 38,393 6,746
payments
Right-to-use
contracts --- --- 16,526 5,003 16,526 5,003
current
period, gross
Utility and 31,992 30,401 4,463 821 36,455 31,222
other income
Property
operating
revenues 306,597 298,987 72,434 14,975 379,031 313,962
excluding
deferrals
Property
operating and 100,299 102,892 37,679 6,955 137,978 109,847
maintenance
Real estate 21,908 22,300 2,738 412 24,646 22,712
taxes
Sales and
marketing, --- --- 10,166 3,098 10,166 3,098
gross
Property
operating
expenses 122,207 125,192 50,583 10,465 172,790 135,657
excluding
deferrals
Income from
property
operations,
excluding 184,390 173,795 21,851 4,510 206,241 178,305
deferrals and
Property
management
Right-to-use
contract --- --- (14,761 ) (4,940 ) (14,761 ) (4,940 )
sales
deferred, net
Right-to-use
contract --- --- 4,535 1,598 4,535 1,598
commissions
deferred net
Income from
property
operations, 184,390 173,795 11,625 1,168 196,015 174,963
excluding
Property
management
Property 25,159 16,983
management
Income from
property $170,856 $157,980
operations
As of As of
Total Common Shares and OP Units September 30, December 31,
Outstanding:
2009 2008
Total Common Shares Outstanding 30,361,634 25,051,322
Total Common OP Units Outstanding 4,920,540 5,366,741
Selected Balance Sheet Data: September 30, December 31,
2009 2008
(amounts in 000s) (amounts in 000s)
Total real estate, net $ 1,917,232 $ 1,929,788
Cash and cash equivalents $ 160,178 $ 45,312
Total assets $ 2,198,033 $ 2,091,647
Mortgage notes payable $ 1,568,185 $ 1,569,403
Unsecured debt $ --- $ 93,000
Total liabilities $ 1,740,552 $ 1,795,413
Perpetual Preferred OP Units $ 200,000 $ 200,000
Total equity $ 257,482 $ 92,234
Equity LifeStyle Properties, Inc.
(Unaudited)
Summary of Total Sites as of September 30, 2009:
Sites
Community sites (1) 44,400
Resort sites:
Annuals 20,700
Seasonal 8,900
Transient 8,900
Membership (2) 24,300
Joint Ventures (3) 3,100
110,300
_________________________________________
(1) Includes 165 sites from discontinued operations. (2) Sites primarily utilized by approximately 113,000 members. (3) Joint Venture income is included in equity in income from unconsolidated joint ventures.
Manufactured Home Site Figures and Quarters Ended Nine Months Ended
Occupancy Averages:(1) Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Total Sites 44,230 44,202 44,231 44,174
Occupied Sites 39,849 39,934 39,924 39,949
Occupancy % 90.1 % 90.3 % 90.3 % 90.4 %
Monthly Base Rent Per Site $530 $514 $528 $512
Core(2)Monthly Base Rent Per Site $530 $514 $528 $512
Quarters Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
Home Sales:(1)(Dollar amounts in 2009 2008 2009 2008
thousands)
New Home Sales Volume (3) 38 87 79 323
New Home Sales Gross Revenues $948 $4,207 $2,449 $15,948
Used Home Sales Volume (4) 263 134 518 302
Used Home Sales Gross Revenues $1,179 $1,053 $2,626 $2,306
Brokered Home Resale Volume 140 178 461 635
Brokered Home Resale Revenues, net $171 $237 $556 $905
________________________________
(1) Results of continuing operations, excludes discontinued operations. (2) The Core Portfolio may change from time-to-time depending on acquisitions, dispositions and significant transactions or unique situations. The 2009 Core Portfolio includes all Properties acquired prior to December 31, 2007 and which have been owned and operated by the Company continuously since January 1, 2008. (3) Quarter and nine months ended September 30, 2009, includes 13 and 19 third-party dealer sales. Quarter and nine months ended September 30, 2008, includes 18 and 63 third-party dealer sales, respectively. (4) Quarter and nine months ended September 30, 2009, includes three and six third-party dealer sales, respectively. Quarter and nine months ended September 30, 2008, includes zero and one third-party dealer sale, respectively.
Net Income and FFO per Common Share Guidance Full Year 2009 Full Year 2010
on a fully diluted basis (unaudited):
Low High Low High
Projected net income (1) $ 1.02 $ 1.12 $1.12 $1.32
Projected depreciation 2.17 2.17 1.93 1.93
Projected (gain) loss on real estate (.17 ) (.17 ) --- ---
Projected net deferral of right-to-use sales 0.38 0.38 0.34 0.34
and commissions
Projected FFO $ 3.40 $ 3.50 $ 3.39 $ 3.59
________________________________
(1) Due to the uncertain timing and extent of right-to-use sales and the resulting deferrals, actual net income could differ materially from expected net income.
Non-GAAP Financial Measures
Funds from Operations ("FFO"), is a non-GAAP financial measure. The Company believes that FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), is generally an appropriate measure of performance for an equity REIT. While FFO is a relevant and widely used measure of operating performance for equity REITs, it does not represent cash flow from operations or net income as defined by GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance.
We define FFO as net income, computed in accordance with GAAP, excluding gains or actual or estimated losses from sales of properties, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. The Company receives up-front non-refundable payments from the sale of right-to-use contracts. In accordance with GAAP, the upfront non-refundable payments and related commissions are deferred and amortized over the estimated customer life. Although the NAREIT definition of FFO does not address the treatment of nonrefundable right-to-use payments, the Company believes that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO. The Company believes that FFO is helpful to investors as one of several measures of the performance of an equity REIT. The Company further believes that by excluding the effect of depreciation, amortization and gains or actual or estimated losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. The Company believes that the adjustment to FFO for the net revenue deferral of upfront non-refundable payments and expense deferral of right-to-use contract commissions also facilitates the comparison to other equity REITs. Investors should review FFO, along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT's operating performance. The Company computes FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. Funds available for distribution ("FAD") is a non-GAAP financial measure. FAD is defined as FFO less non-revenue producing capital expenditures. Investors should review FFO and FAD, along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT's operating performance. FFO and FAD do not represent cash generated from operating activities in accordance with GAAP, nor do they represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.
Source: Equity LifeStyle Properties, Inc.
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