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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
 
     
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the Fiscal Year Ended December 31, 2009
or
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
(State or Other Jurisdiction of
Incorporation or Organization)
  36-3857664
(I.R.S. Employer
Identification No.)
Two North Riverside Plaza, Suite 800,
Chicago, Illinois
(Address of Principal Executive Offices)
  60606
(Zip Code)
 
(Registrant’s telephone number, including area code)
(312) 279-1400
Securities registered pursuant to Section 12(b) of the Act:
 
     
(Title of Class)
 
(Name of Exchange on Which Registered)
 
Common Stock, $.01 Par Value
  New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:
None
 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
 
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 þ     No o
 
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, 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 o     No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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 þ
  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 þ
 
The aggregate market value of voting stock held by non-affiliates was approximately $1,019.6 million as of June 30, 2009 based upon the closing price of $37.18 on such date using beneficial ownership of stock rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting stock owned by Directors and Officers, some of whom may not be held to be affiliates upon judicial determination.
 
At February 23, 2010, 30,349,089 shares of the Registrant’s common stock were outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE:
 
Part III incorporates by reference portions of the Registrant’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 11, 2010.
 


 

 
Equity LifeStyle Properties, Inc.
 
 
TABLE OF CONTENTS
 
                 
       
Page
 
      Business     3  
      Risk Factors     10  
      Unresolved Staff Comments     19  
      Properties     19  
      Legal Proceedings     27  
      Submission of Matters to a Vote of Security Holders     27  
 
PART II.
      Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     28  
      Selected Financial Data     29  
      Management’s Discussion and Analysis of Financial Condition and Results of Operations     31  
      Quantitative and Qualitative Disclosures About Market Risk     53  
        Forward-Looking Statements     53  
      Financial Statements and Supplementary Data     54  
      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     54  
      Controls and Procedures     54  
      Other Information     55  
 
PART III.
      Directors, Executive Officers and Corporate Governance     56  
      Executive Compensation     56  
      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     56  
      Certain Relationships and Related Transactions and Director Independence     56  
      Principal Accountant Fees and Services     56  
 
PART IV.
      Exhibits and Financial Statement Schedules     57  
 EX-12
 EX-21
 EX-23
 EX-24.1
 EX-24.2
 EX-24.3
 EX-24.4
 EX-24.5
 EX-24.6
 EX-24.7
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2


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PART I
 
Item 1.   Business
 
Equity LifeStyle Properties, Inc.
 
General
 
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 the “Company,” “ELS,” “we,” “us,” and “our.” ELS has elected to be taxed as a real estate investment trust (“REIT”), for U.S. federal income tax purposes commencing with its taxable year ended December 31, 1993.
 
The Company is a fully integrated owner and operator of lifestyle-oriented properties (“Properties”). The Company leases individual developed areas (“sites”) with access to utilities for placement of factory built homes, cottages, cabins or recreational vehicles (“RVs”). Customers may lease individual sites or enter into right-to-use contracts providing the customer access to specific Properties for limited stays. The Company was formed in December 1992 to continue the property operations, business objectives and acquisition strategies of an entity that had owned and operated Properties since 1969. As of December 31, 2009, we owned or had an ownership interest in a portfolio of 304 Properties located throughout the United States and Canada consisting of 110,575 residential sites. These Properties are located in 27 states and British Columbia (with the number of Properties in each state or province shown parenthetically) as follows: Florida (86), California (48), Arizona (35), Texas (15), Pennsylvania (12), Washington (14), Colorado (10), Oregon (9), North Carolina (8), Delaware (7), New York (6), Nevada (6), Virginia (6), Indiana (5), Maine (5), Wisconsin (5), Illinois (4), Massachusetts (3), Michigan (3), New Jersey (3), South Carolina (3), New Hampshire (2), Ohio (2), Tennessee (2), Utah (2), Alabama (1), Kentucky (1), and British Columbia (1).
 
Properties are designed and improved for several home options of various sizes and designs that are produced off-site, installed and set on designated sites (“Site Set”) within the Properties. These homes can range from 400 to over 2,000 square feet. The smallest of these are referred to as “Resort Cottages.” Properties may also have sites that can accommodate a variety of RVs. Properties generally contain centralized entrances, internal road systems and designated sites. In addition, Properties often provide a clubhouse for social activities and recreation and other amenities, which may include restaurants, swimming pools, golf courses, lawn bowling, shuffleboard courts, tennis courts, laundry facilities and cable television service. In some cases, utilities are provided or arranged for by us; otherwise, the customer contracts for the utility directly. Some Properties provide water and sewer service through municipal or regulated utilities, while others provide these services to customers from on-site facilities. Properties generally are designed to attract retirees, empty-nesters, vacationers and second home owners; however, certain of our Properties focus on affordable housing for families. We focus on owning properties in or near large metropolitan markets and retirement and vacation destinations.
 
Employees and Organizational Structure
 
We have approximately 3,200 full-time, part-time and seasonal employees dedicated to carrying out our operating philosophy and strategies of value enhancement and service to our customers. The operations of each Property are coordinated by an on-site team of employees that typically includes a manager, clerical staff and maintenance workers, each of whom works to provide maintenance and care of the Properties. Direct supervision of on-site management is the responsibility of our regional vice presidents and regional and district managers. These individuals have significant experience in addressing the needs of customers and in finding or creating innovative approaches to maximize value and increase cash flow from property operations. Complementing this field management staff are approximately 138 full-time corporate employees who assist on-site and regional management in all property functions.


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Formation of the Company
 
The operations of the Company are conducted primarily through the Operating Partnership. The Company contributed the proceeds from its initial public offering in 1993 and subsequent offerings to the Operating Partnership for a general partnership interest. In 2004, the general partnership interest was contributed to MHC Trust, a private REIT subsidiary owned by the Company. The financial results of the Operating Partnership and the Subsidiaries are consolidated in the Company’s consolidated financial statements. In addition, since certain activities, if performed by the Company, may not be qualifying REIT activities under the Internal Revenue Code of 1986, as amended (the “Code”), the Company has formed taxable REIT subsidiaries, as defined in the Code, to engage in such activities.
 
Realty Systems, Inc. (“RSI”) is a wholly owned taxable REIT subsidiary of the Company that is engaged in the business of purchasing and selling or leasing Site Set homes that are located in Properties owned and managed by the Company. RSI also provides brokerage services to residents at such Properties for those residents who move from a Property but do not relocate their homes. RSI may provide brokerage services, in competition with other local brokers, by seeking buyers for the Site Set homes. Subsidiaries of RSI also operate ancillary activities at certain Properties consisting of operations such as golf courses, pro shops, stores and restaurants. Several Properties are also wholly owned by taxable REIT subsidiaries of the Company.
 
Business Objectives and Operating Strategies
 
Our strategy seeks to maximize both current income and long-term growth in income. We focus on properties that have strong cash flow and we expect to hold such properties for long-term investment and capital appreciation. In determining cash flow potential, we evaluate our ability to attract and retain high quality customers in our Properties who take pride in the Property and in their home. These business objectives and their implementation are determined by our Board of Directors and may be changed at any time. Our investment, operating and financing approach includes:
 
  •  Providing consistently high levels of services and amenities in attractive surroundings to foster a strong sense of community and pride of home ownership;
 
  •  Efficiently managing the Properties to increase operating margins by controlling expenses, increasing occupancy and maintaining competitive market rents;
 
  •  Increasing income and property values by continuing the strategic expansion and, where appropriate, renovation of the Properties;
 
  •  Utilizing management information systems to evaluate potential acquisitions, identify and track competing properties and monitor customer satisfaction;
 
  •  Selectively acquiring properties that have potential for long-term cash flow growth and to create property concentrations in and around major metropolitan areas and retirement or vacation destinations to capitalize on operating synergies and incremental efficiencies; and
 
  •  Managing our debt balances such that we maintain financial flexibility, minimize exposure to interest rate fluctuations, and maintain an appropriate degree of leverage to maximize return on capital.
 
Our strategy is to own and operate the highest quality properties in sought-after locations near urban areas, retirement and vacation destinations across the United States. We focus on creating an attractive residential environment by providing a well-maintained, comfortable Property with a variety of recreational and social activities and superior amenities as well as offering a multitude of lifestyle housing choices. In addition, we regularly conduct evaluations of the cost of housing in the marketplaces in which our Properties are located and survey rental rates of competing properties. From time to time we also conduct satisfaction surveys of our customers to determine the factors they consider most important in choosing a property. We improve site utilization and efficiency by tracking types of customers and usage patterns and marketing to those specific customer groups.


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Acquisitions and Dispositions
 
Over the last decade our portfolio of Properties has grown significantly from owning or having an interest in 157 Properties with over 53,000 sites to owning or having an interest in 304 Properties with over 110,000 sites. We continually review the Properties in our portfolio to ensure that they fit our business objectives. Over the last five years we sold 16 Properties, and we redeployed capital to markets we believe have greater long-term potential. In that same time period we acquired 46 Properties located in high growth areas such as Florida, Arizona and California.
 
We believe that opportunities for property acquisitions are still available. Increasing acceptability of and demand for a lifestyle that includes Site Set homes and RVs as well as continued constraints on development of new properties continue to add to their attractiveness as an investment. We believe we have a competitive advantage in the acquisition of additional properties due to our experienced management, significant presence in major real estate markets and substantial capital resources. We are actively seeking to acquire additional properties and are engaged in various stages of negotiations relating to the possible acquisition of a number of properties.
 
We anticipate that new acquisitions will generally be located in the United States, although we may consider other geographic locations provided they meet our acquisition criteria. We utilize market information systems to identify and evaluate acquisition opportunities, including a market database to review the primary economic indicators of the various locations in which we expect to expand our operations. Acquisitions will be financed from the most appropriate sources of capital, which may include undistributed funds from operations, issuance of additional equity securities, sales of investments, collateralized and uncollateralized borrowings and issuance of debt securities. In addition, the Company may acquire properties in transactions that include the issuance of limited partnership interests in the Operating Partnership (“Units”) as consideration for the acquired properties. We believe that an ownership structure that includes the Operating Partnership will permit us to acquire additional properties in transactions that may defer all or a portion of the sellers’ tax consequences.
 
When evaluating potential acquisitions, we consider such factors as:
 
  •  The replacement cost of the property including land values, entitlements and zoning;
 
  •  The geographic area and type of the property;
 
  •  The location, construction quality, condition and design of the property;
 
  •  The current and projected cash flow of the property and the ability to increase cash flow;
 
  •  The potential for capital appreciation of the property;
 
  •  The terms of tenant leases or usage rights, including the potential for rent increases;
 
  •  The potential for economic growth and the tax and regulatory environment of the community in which the property is located;
 
  •  The potential for expansion of the physical layout of the property and the number of sites;
 
  •  The occupancy and demand by customers for properties of a similar type in the vicinity and the customers’ profile;
 
  •  The prospects for liquidity through sale, financing or refinancing of the property; and
 
  •  The competition from existing properties and the potential for the construction of new properties in the area.
 
When evaluating potential dispositions, we consider such factors as:
 
  •  The ability to sell the Property at a price that we believe will provide an appropriate return for our stockholders;
 
  •  Our desire to exit certain non-core markets and recycle the capital into core markets; and
 
  •  Whether the Property meets our current investment criteria.


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When investing capital we consider all potential uses of the capital including returning capital to our stockholders. Our Board of Directors continues to review the conditions under which we will repurchase our stock. These conditions include, but are not limited to, market price, balance sheet flexibility, other opportunities and capital requirements.
 
Property Expansions
 
Several of our Properties have available land for expanding the number of sites available to be utilized by our customers. Development of these sites (“Expansion Sites”) is evaluated based on the following: local market conditions; ability to subdivide; accessibility through the Property or externally; infrastructure needs including utility needs and access as well as additional common area amenities; zoning and entitlement; costs; topography; and ability to market new sites. When justified, development of Expansion Sites allows us to leverage existing facilities and amenities to increase the income generated from the Properties. Where appropriate, facilities and amenities may be upgraded or added to certain Properties to make those Properties more attractive in their markets. Our acquisition philosophy has included the desire to own Properties with potential Expansion Site development. Approximately 83 of our Properties have expansion potential, with approximately 5,600 acres available for expansion.
 
Leases or Usage Rights
 
At our Properties, a typical lease entered into between the owner of a home and the Company for the rental of a site is for a month-to-month or year-to-year term, renewable upon the consent of both parties or, in some instances, as provided by statute. These leases are cancelable, depending on applicable law, for non-payment of rent, violation of Property rules and regulations or other specified defaults. Non-cancelable long-term leases, with remaining terms ranging up to ten years, are in effect at certain sites within 31 of the Properties. Some of these leases are subject to rental rate increases based on the Consumer Price Index (“CPI”), in some instances taking into consideration certain floors and ceilings and allowing for pass-throughs of certain items such as real estate taxes, utility expenses and capital expenditures. Generally, market rate adjustments are made on an annual basis. At Properties zoned for RV use, long-term customers typically enter into rental agreements and many typically prepay for their stay. Many resort customers will also leave deposits to reserve a site for the following year. Generally these customers cannot live full time on the Property. At resort Properties designated for use by customers who have purchased a right-to-use or membership contract, the contract generally grants the customer access to designated Properties on a continuous basis of up to 14 days. The customer typically makes a nonrefundable upfront payment and annual dues payments are required to renew the contract. The contracts provide for an annual dues increase generally based on increases in the CPI. Approximately 31% of the current customers are not subject to annual dues increases because their dues were frozen in accordance with the terms of their contract, generally because the customer is over 61 years old or disabled.
 
Regulations and Insurance
 
General.  Our Properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, clubhouses and other common areas, regulations relating to providing utility services, such as electricity, to our customers, and regulations relating to operating water and wastewater treatment facilities at certain of our Properties. We believe that each Property has all material permits and approvals necessary to operate.
 
Rent Control Legislation.  At certain of our Properties, state and local rent control laws, principally in California, limit our ability to increase rents and to recover increases in operating expenses and the costs of capital improvements. Enactment of such laws has been considered from time to time in other jurisdictions. We presently expect to continue to maintain Properties, and may purchase additional properties, in markets that are either subject to rent control or in which rent-limiting legislation exists or may be enacted. For example, Florida has enacted a law that generally provides that rental increases must be reasonable. Also, certain jurisdictions in California in which we own Properties limit rent increases to changes in the CPI or some percentage thereof. As part of our effort to realize the value of our Properties subject to restrictive regulation, we have initiated lawsuits against several municipalities imposing such regulation in an attempt to balance the interests of our stockholders


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with the interests of our customers (see Item 3. “Legal Proceedings”). Further, at certain of our Properties primarily used as membership campgrounds, some state statutes limit our ability to close the Property unless we make a reasonable substitute property available for the members’ use. Many states also have consumer protection laws regulating right-to-use or campground membership sales and the financing of such sales. Some states have laws requiring the Company to register with a state agency and obtain a permit to market (see Item 1A. “Risk Factors”).
 
Insurance.  The Properties are covered against fire, flood, property damage, earthquake, windstorm and business interruption by insurance policies containing various deductible requirements and coverage limits. Recoverable costs are classified in other assets as incurred. Insurance proceeds are applied against the asset when received. Recoverable costs relating to capital items are treated in accordance with the Company’s capitalization policy. The book value of the original capital item is written off once the value of the impaired asset has been determined. Insurance proceeds relating to capital costs are recorded as income in the period they are received.
 
Our current property and casualty insurance policies, which we plan to renew, expire on March 31, 2010. We have a $100 million loss limit with respect to our all-risk property insurance program including Named Windstorm and a $25 million loss limit for California Earthquake. Policy deductibles primarily range from $100,000 to 5% of insurable values specifically for Named Windstorm, Named Storm Flood and California Earthquake. Losses in a 100-year Flood zone are subject to varying deductibles with a maximum exposure of $500,000. A deductible indicates ELS’ maximum exposure, subject to policy sub-limits, in the event of a loss.
 
INDUSTRY
 
We believe that modern properties similar to ours provide an opportunity for increased cash flows and appreciation in value. These may be achieved through increases in occupancy rates and rents, as well as expense controls, expansion of existing Properties and opportunistic acquisitions, for the following reasons:
 
  •  Barriers to Entry:  We believe that the supply of new properties in locations targeted by the Company will be constrained due to barriers to entry. The most significant barrier has been the difficulty of securing zoning from local authorities. This has been the result of (i) the public’s historically poor perception of manufactured housing, and (ii) the fact that properties generate less tax revenue because the homes are treated as personal property (a benefit to the homeowner) rather than real property. Another factor that creates substantial barriers to entry is the length of time between investment in a property’s development and the attainment of stabilized occupancy and the generation of revenues. The initial development of the infrastructure may take up to two or three years. Once a property is ready for occupancy, it may be difficult to attract customers to an empty property. Substantial occupancy levels may take several years to achieve.
 
  •  Industry Consolidation:  According to various industry reports, there are approximately 50,000 manufactured home properties and approximately 8,500 RV properties (excluding government owned properties) in North America. Most of these properties are not operated by large owner/operators and of the RV properties approximately 1,200 contain 200 sites or more. We believe that this relatively high degree of fragmentation provides us, as a national organization with experienced management and substantial financial resources, the opportunity to purchase additional properties.
 
  •  Customer Base:  We believe that properties tend to achieve and maintain a stable rate of occupancy due to the following factors: (i) customers typically own their own homes, (ii) properties tend to foster a sense of community as a result of amenities such as clubhouses and recreational and social activities, (iii) since moving a Site Set home from one property to another involves substantial cost and effort, customers often sell their home in-place (similar to site-built residential housing) with no interruption of rental payments to us.
 
  •  Lifestyle Choice:  According to the Recreational Vehicle Industry Association, nearly 1 in 10 U.S. vehicle-owning households owns an RV and there are eight million current RV owners. The 78 million people born from 1946 to 1964 or “baby boomers” make up the fastest growing segment of this market. Every


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  day 11,000 Americans turn 50 according to U.S. Census figures. We believe that this population segment, seeking an active lifestyle, will provide opportunities for future cash flow growth for the Company. Current RV owners, once finished with the more active RV lifestyle, will often seek more permanent retirement or vacation establishments. The Site Set housing choice has become an increasingly popular housing alternative for retirement, second-home, and “empty-nest” living. According to U.S. Census figures, the baby-boom generation will constitute almost 16% of the U.S. population within the next 20 years. Among those individuals who are nearing retirement (age 46 to 64), approximately 33% plan on moving upon retirement.
 
We believe that the housing choices in our Properties are especially attractive to such individuals throughout this lifestyle cycle. Our Properties offer an appealing amenity package, close proximity to local services, social activities, low maintenance and a secure environment. In fact, many of our Properties allow for this cycle to occur within a single Property.
 
  •  Construction Quality:  Since 1976, all factory built housing has been required to meet stringent federal standards, resulting in significant increases in quality. The Department of Housing and Urban Development’s (“HUD”) standards for Site Set housing construction quality are the only federally regulated standards governing housing quality of any type in the United States. Site Set homes produced since 1976 have received a “red and silver” government seal certifying that they were built in compliance with the federal code. The code regulates Site Set home design and construction, strength and durability, fire resistance and energy efficiency, and the installation and performance of heating, plumbing, air conditioning, thermal and electrical systems. In newer homes, top grade lumber and dry wall materials are common. Also, manufacturers are required to follow the same fire codes as builders of site-built structures. In addition, although Resort Cottages do not come under the same regulation, many of the manufacturers of Site Set homes also produce Resort Cottages with many of the same quality standards.
 
  •  Comparability to Site-Built Homes:  The Site Set housing industry has experienced a trend towards multi-section homes. Many modern Site Set homes are longer (up to 80 feet, compared to 50 feet in the 1960’s) and wider than earlier models. Many such homes have nine-foot ceilings or vaulted ceilings, fireplaces and as many as four bedrooms, and closely resemble single-family ranch style site-built homes.
 
  •  Second Home Demographics:  According to 2009 National Association of Realtors (“NAR”) reports, sales of second homes in 2008 accounted for 30% of residential transactions, or 1.63 million second-home sales in 2008. There were approximately 8.1 million vacation homes in 2008. The typical vacation-home buyer is 46 years old and earned $97,200 in 2008. According to 2008 NAR reports, approximately 57% of vacation home-owners prefer to be near an ocean, river or lake; 38% close to boating activities; 32% close to hunting or fishing activities; and 17% close to winter recreations. In looking ahead, NAR believes that baby boomers are still in their peak earning years, and the leading edge of their generation is approaching retirement. As they continue to have the financial wherewithal to purchase second homes as a vacation property, investment opportunity, or perhaps as a retirement retreat, those baby boomers will continue to drive the market for second-homes. We believe it is likely that over the next decade we will continue to see historically high levels of second home sales and resort homes and cottages in our Properties will also continue to provide a viable second home alternative to site-built homes.
 
Notwithstanding our belief that the industry information highlighted above provides the Company with significant long-term growth opportunities, our short-term growth opportunities could be disrupted by the following:
 
  •  Shipments — According to statistics compiled by the U.S. Census Bureau, shipments of new manufactured homes have been declining since 2005. Shipments of new manufactured homes for the first eleven months in 2009 decreased over 40% to 46,200 units as compared to shipments of new manufactured homes for the first eleven months in 2008 of 77,500 units. The decline for 2008 as compared to 2007 was almost 15%. According to the Recreational Vehicle Industry Association (“RVIA”), wholesale shipments of RVs declined 30.1% in 2009 to 165,700 units as compared to 2008, but experienced an increase of almost 25% in the last six months of 2009 as compared to the last six months of 2008. Industry experts have predicted that 2010 RV shipments will increase almost 30%, as compared to 2009, to 215,900.


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Manufactured Housing and Recreation Vehicle
Annual Shipments 2000-2009 (MH 2009 YTD: through November)
 
(PERFORMANCE GRAPH)
 
 
(1) Source: Institute for Building Technology and Safety
 
(2) Source: RVIA
 
  •  Sales — Retail sales of RVs declined almost 25% to 161,100 for the first 11 months of 2009, as compared to 214,400 the first 11 months of 2008. A total of 232,000 RVs were sold during the year ended December 31, 2008, representing a decline of almost 25% over the prior year. RVIA has indicated that the RV industry is seeing signs of improvement and the recovery is expected to strengthen slowly as credit availability, job security, and consumer confidence improve. Gains are expected in 2010 as negative financial factors give way to improved market conditions.
 
  •  Availability of financing — The current credit crisis has made it difficult for manufactured home and RV manufacturers to obtain floor plan financing and for potential customers to obtain loans for manufactured home or RV purchases. RVIA states that the federal economic credit and stimulus packages designed to stimulate RV lending and which provide tax deductions to buyers of RVs may help promote sales of RVs. However, there is very little availability in terms of financing for manufactured home buyers. As compared to financing available to owners and purchasers of site-built single family homes, financing of a manufactured home involves higher down payments, higher FICO scores, higher interest rates and shorter maturity. Additionally, certain government stimulus packages have resulted in government guarantees of site-built single family home loans, thereby increasing the supply of financing for that market.
 
Please see our risk factors, financial statements and related notes contained in this Form 10-K for more information.


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Available Information
 
We file reports electronically with the Securities and Exchange Commission (“SEC”). The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy information and statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. We maintain an Internet site with information about the Company and hyperlinks to our filings with the SEC at http://www.equitylifestyle.com, free of charge. Requests for copies of our filings with the SEC and other investor inquiries should be directed to:
 
Investor Relations Department
Equity LifeStyle Properties, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Phone: 1-800-247-5279
e-mail: investor_relations@equitylifestyle.com
 
Item 1A.   Risk Factors
 
Our Performance and Common Stock Value Are Subject to Risks Associated With the Real Estate Industry.
 
Adverse Economic Conditions and Other Factors Could Adversely Affect the Value of Our Properties and Our Cash Flow.  Several factors may adversely affect the economic performance and value of our Properties. These factors include:
 
  •  changes in the national, regional and local economic climate;
 
  •  local conditions such as an oversupply of lifestyle-oriented properties or a reduction in demand for lifestyle-oriented properties in the area, the attractiveness of our Properties to customers, competition from manufactured home communities and other lifestyle-oriented properties and alternative forms of housing (such as apartment buildings and site-built single family homes);
 
  •  the ability of manufactured home and RV manufacturers to adapt to changes in the economic climate and the availability of units from these manufacturers;
 
  •  the ability of our potential customers to sell their existing site-built residence in order to purchase a resort home or cottage in our Properties and heightened price sensitivity for seasonal and second homebuyers;
 
  •  the ability of our potential customers to obtain financing on the purchase of a resort home, resort cottage or RV;
 
  •  government stimulus intended to primarily benefit purchasers of site-built housing;
 
  •  availability and price of gasoline, especially for our transient customers;
 
  •  our ability to collect rent, annual payments and principal and interest from customers and pay or control maintenance, insurance and other operating costs (including real estate taxes), which could increase over time;
 
  •  the failure of our assets to generate income sufficient to pay our expenses, service our debt and maintain our Properties, which may adversely affect our ability to make expected distributions to our stockholders;
 
  •  our inability to meet mortgage payments on any Property that is mortgaged, in which case the lender could foreclose on the mortgage and take the Property;
 
  •  interest rate levels and the availability of financing, which may adversely affect our financial condition;


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  •  changes in laws and governmental regulations (including rent control laws and regulations governing usage, zoning and taxes), which may adversely affect our financial condition;
 
  •  poor weather, especially on holiday weekends in the summer, could reduce the economic performance of our Northern resort Properties; and
 
  •  our ability to sell new or upgraded right-to-use contracts and to retain customers who have previously purchased a right-to-use contract.
 
New Acquisitions May Fail to Perform as Expected and Competition for Acquisitions May Result in Increased Prices for Properties.  We intend to continue to acquire properties. Newly acquired Properties may fail to perform as expected. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management attention. Additionally, we expect that other real estate investors with significant capital will compete with us for attractive investment opportunities. These competitors include publicly traded REITs, private REITs and other types of investors. Such competition increases prices for properties. We expect to acquire properties with cash from secured or unsecured financings, proceeds from offerings of equity or debt, undistributed funds from operations and sales of investments. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms.
 
Because Real Estate Investments Are Illiquid, We May Not be Able to Sell Properties When Appropriate. Real estate investments generally cannot be sold quickly. We may not be able to vary our portfolio promptly in response to economic or other conditions, forcing us to accept lower than market value. This inability to respond promptly to changes in the performance of our investments could adversely affect our financial condition and ability to service debt and make distributions to our stockholders.
 
Some Potential Losses Are Not Covered by Insurance.  We carry comprehensive insurance coverage for losses resulting from property damage, liability claims and business interruption on all of our Properties. In addition we carry liability coverage for other activities not specifically related to property operations. These coverages include, but are not limited to, Directors & Officers liability, Employer Practices liability and Fiduciary liability. We believe that the policy specifications and coverage limits of these policies should be adequate and appropriate. There are, however, certain types of losses, such as lease and other contract claims that generally are not insured. Should an uninsured loss or a loss in excess of coverage limits occur, we could lose all or a portion of the capital we have invested in a Property or the anticipated future revenue from a Property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the Property.
 
Our current property and casualty insurance policies, which we plan to renew, expire on March 31, 2010. We have a $100 million loss limit with respect to our all-risk property insurance program including Named Windstorm and a $25 million loss limit for California Earthquake. Policy deductibles primarily range from $100,000 to 5% of insurable values specifically for Named Windstorm, Named Storm Flood and California Earthquake. Losses in a 100-year Flood zone are subject to varying deductibles with a maximum exposure of $500,000. A deductible indicates ELS’ maximum exposure, subject to policy sub-limits, in event of a loss.
 
There can be no assurance that the actions of the U.S. government, Federal Reserve and other governmental and regulatory bodies for the purpose of stabilizing the financial markets, or market response to those actions, will achieve the intended effect, and our business may not benefit from and may be adversely impacted by these actions and further government or market developments could adversely impact us.  Since mid-2007, and particularly during the second half of 2008, the financial services industry and the securities markets generally were materially and adversely affected by significant declines in the values of nearly all asset classes and by a serious lack of liquidity. This was initially triggered by declines in the values of subprime mortgages, but spread to all mortgage and real estate asset classes, to leveraged bank loans and to nearly all asset classes, including equities. The global markets have been characterized by substantially increased volatility and short-selling and an overall loss of investor confidence, initially in financial institutions, but more recently in companies in a number of other industries and in the broader markets. The decline in asset values has caused increases in margin calls for investors, requirements that derivatives counterparties post additional collateral and


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redemptions by mutual and hedge fund investors, all of which have increased the downward pressure on asset values and outflows of client funds across the financial services industry. In addition, the increased redemptions and unavailability of credit have required hedge funds and others to rapidly reduce leverage, which has increased volatility and further contributed to the decline in asset values.
 
In response to the recent unprecedented financial issues affecting the banking system and financial markets and going concern threats to investment banks and other financial institutions, the Emergency Economic Stabilization Act of 2008 (the “EESA”), was signed into law on October 3, 2008. The EESA provides the U.S. Secretary of Treasury with the authority to establish a Troubled Asset Relief Program (“TARP”), to purchase from financial institutions up to $700 billion of residential or commercial mortgages and any securities, obligations, or other instruments that are based on, or related to, such mortgages, that in each case was originated or issued on or before March 14, 2008. EESA also provides for a program that would allow companies to insure their troubled assets. On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion stimulus bill for the purpose of stabilizing the economy by creating jobs, among other things. As of February 25, 2010, the U.S. Treasury is managing or overseeing the following programs under TARP: the Capital Purchase Program (“CPP”), the Systemically Significant Failing Institutions Program (“SSFIP”), the Auto Industry Financing Program (“AIFP”), the Legacy Securities Public-Private Investment Program (“S-PPIP”) and the Homeowner Affordability and Stability Plan (“HASP”) which is partially financed by TARP. HASP, also known as “The Making Home Affordable Program”, offers the following options for homeowners: (1) refinancing mortgage loans through the Home Affordable Refinance Program (“HARP”), (2) modifying first and second mortgage loans through the Home Affordable Modification Program (“HAMP”) and the Second Lien Modification Program (“2MP”) and (3) offering other alternatives to foreclosure through the Home Affordable Foreclosure Alternatives Program (HAFA). According to a U.S. Treasury press releases, HASP, along with other financial stability programs have improved credit conditions as evidenced by statistics such as: 1) near historic lows on residential mortgage rates and 2) stabilization of home prices.
 
These can be no assurance that the EESA, TARP or other programs will have a beneficial impact on the financial markets or the economy. In addition, the U.S. Government, Federal Reserve and other governmental and regulatory bodies have taken or are considering taking other actions to address the financial crisis. We cannot predict whether or when such actions may occur or what impact, if any, such actions could have on our business, results of operations and financial condition. In fact, such actions may have a significant negative impact on our customers to the extent they benefit only owners of site-built single family housing and not to purchasers of Site Set homes who lease the underlying land and RVs.
 
Adverse changes in general economic conditions may adversely affected our business.
 
Our success is dependent upon economic conditions in the U.S. generally, and in the geographic areas in which a substantial number of our Properties are located. Adverse changes in national economic conditions and in the economic conditions of the regions in which we conduct substantial business may have an adverse effect on the real estate values of our Properties and our financial performance and the market price of our common stock.
 
In a recession or under other adverse economic conditions, non-earning assets and write-downs are likely to increase as debtors fail to meet their payment obligations. Although we maintain reserves for credit losses and an allowance for doubtful accounts in amounts that we believe should be sufficient to provide adequate protection against potential write-downs in our portfolio, these amounts could prove to be insufficient.
 
Campground Membership Properties Laws and Regulations Could Adversely Affect the Value of Certain Properties and Our Cash Flow.
 
Many of the states in which the Company does business have laws regulating right-to-use or campground membership sales. These laws generally require comprehensive disclosure to prospective purchasers, and give purchasers the right to rescind their purchase generally between three-to-five days after the date of sale. Some states have laws requiring the Company to register with a state agency and obtain a permit to market. The


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Company is subject to changes, from time to time, in the application or interpretation of such laws that can affect its business or the rights of its members.
 
In some states, including California, Oregon and Washington, laws place limitations on the ability of the owner of a campground property to close the property unless the customers at the property receive access to a comparable property. The impact of the rights of customers under these laws is uncertain and could adversely affect the availability or timing of sale opportunities or the ability of the Company to realize recoveries from Property sales.
 
The government authorities regulating the Company’s activities have broad discretionary power to enforce and interpret the statutes and regulations that they administer, including the power to enjoin or suspend sales activities, require or restrict construction of additional facilities and revoke licenses and permits relating to business activities. The Company monitors its sales and marketing programs and debt collection activities to control practices that might violate consumer protection laws and regulations or give rise to consumer complaints.
 
Certain consumer rights and defenses that vary from jurisdiction to jurisdiction may affect the Company’s portfolio of contracts receivable. Examples of such laws include state and federal consumer credit and truth-in-lending laws requiring the disclosure of finance charges, and usury and retail installment sales laws regulating permissible finance charges.
 
In certain states, as a result of government regulations and provisions in certain of the right-to-use or campground membership agreements, the Company is prohibited from selling more than ten memberships per site. At the present time, these restrictions do not preclude the Company from selling memberships in any state. However, these restrictions may limit the Company’s ability to utilize Properties for public usage and/or the Company’s ability to convert sites to more profitable or predictable uses, such as annual rentals.
 
Debt Financing, Financial Covenants and Degree of Leverage Could Adversely Affect Our Economic Performance.
 
Scheduled Debt Payments Could Adversely Affect Our Financial Condition.  Our business is subject to risks normally associated with debt financing. The total principal amount of our outstanding indebtedness was approximately $1.5 billion as of December 31, 2009. Our substantial indebtedness and the cash flow associated with serving our indebtedness could have important consequences, including the risks that:
 
  •  our cash flow could be insufficient to pay distributions at expected levels and meet required payments of principal and interest;
 
  •  we will be required to use a substantial portion of our cash flow from operations to pay our indebtedness, thereby reducing the availability of our cash flow to fund the implementation of our business strategy, acquisitions, capital expenditures and other general corporate purposes;
 
  •  our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
 
  •  we may not be able to refinance existing indebtedness (which in virtually all cases requires substantial principal payments at maturity) and, if we can, the terms of such refinancing might not be as favorable as the terms of existing indebtedness;
 
  •  if principal payments due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow will not be sufficient in all years to repay all maturing debt; and
 
  •  if prevailing interest rates or other factors at the time of refinancing (such as the possible reluctance of lenders to make commercial real estate loans) result in higher interest rates, increased interest expense would adversely affect cash flow and our ability to service debt and make distributions to stockholders.
 
Ability to obtain mortgage financing or to refinance maturing mortgages may adversely affect our financial condition.  During 2009, we have received financing proceeds from Fannie Mae secured by mortgages on


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individual manufactured home Properties. The terms of the Fannie Mae financings have been relatively attractive as compared to other potential lenders. If financing proceeds are no longer available from Fannie Mae for any reason or if Fannie Mae terms are no longer attractive, it may adversely affect cash flow and our ability to service debt and make distributions to stockholders.
 
Financial Covenants Could Adversely Affect Our Financial Condition.  If a Property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose on the Property, resulting in loss of income and asset value. The mortgages on our Properties contain customary negative covenants, which among other things, limit our ability, without the prior consent of the lender, to further mortgage the Property and to discontinue insurance coverage. In addition, our credit facilities contain certain customary restrictions, requirements and other limitations on our ability to incur indebtedness, including total debt to assets ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt. Foreclosure on mortgaged Properties or an inability to refinance existing indebtedness would likely have a negative impact on our financial condition and results of operations.
 
Our Degree of Leverage Could Limit Our Ability to Obtain Additional Financing.  Our debt to market capitalization ratio (total debt as a percentage of total debt plus the market value of the outstanding common stock and Units held by parties other than the Company) was approximately 47% as of December 31, 2009. The degree of leverage could have important consequences to stockholders, including an adverse effect on our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes, and makes us more vulnerable to a downturn in business or the economy generally.
 
We Depend on Our Subsidiaries’ Dividends and Distributions.
 
Substantially all of our assets are indirectly held through the Operating Partnership. As a result, we have no source of operating cash flow other than from distributions from the Operating Partnership. Our ability to pay dividends to holders of common stock depends on the Operating Partnership’s ability first to satisfy its obligations to its creditors and make distributions payable to third party holders of its preferred Units and then to make distributions to MHC Trust and common Unit holders. Similarly, MHC Trust must satisfy its obligations to its creditors and preferred stockholders before making common stock distributions to us.
 
Stockholders’ Ability to Effect Changes of Control of the Company is Limited.
 
Provisions of Our Charter and Bylaws Could Inhibit Changes of Control.  Certain provisions of our charter and bylaws may delay or prevent a change of control of the Company or other transactions that could provide our stockholders with a premium over the then-prevailing market price of their common stock or which might otherwise be in the best interest of our stockholders. These include the Ownership Limit described below. Also, any future series of preferred stock may have certain voting provisions that could delay or prevent a change of control or other transaction that might involve a premium price or otherwise be beneficial to our stockholders.
 
Maryland Law Imposes Certain Limitations on Changes of Control.  Certain provisions of Maryland law prohibit “business combinations” (including certain issuances of equity securities) with any person who beneficially owns 10%or more of the voting power of outstanding common stock, or with an affiliate of the Company who, at any time within the two-year period prior to the date in question, was the owner of 10% or more of the voting power of the outstanding voting stock (an “Interested Stockholder”), or with an affiliate of an Interested Stockholder. These prohibitions last for five years after the most recent date on which the Interested Stockholder became an Interested Stockholder. After the five-year period, a business combination with an Interested Stockholder must be approved by two super-majority stockholder votes unless, among other conditions, our common stockholders receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the Interested Stockholder for its shares of common stock. The Board of Directors has exempted from these provisions under the Maryland law any business combination with Samuel Zell, who is the Chairman of the Board of the Company, certain holders of Units who received them at the time of our initial public offering, the General Motors Hourly Rate Employees Pension


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Trust and the General Motors Salaried Employees Pension Trust, and our officers who acquired common stock at the time we were formed and each and every affiliate of theirs.
 
We Have a Stock Ownership Limit for REIT Tax Purposes.  To remain qualified as a REIT for U.S. federal income tax purposes, not more than 50% in value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the federal income tax laws applicable to REITs) at any time during the last half of any taxable year. To facilitate maintenance of our REIT qualification, our charter, subject to certain exceptions, prohibits Beneficial Ownership (as defined in our charter) by any single stockholder of more than 5% (in value or number of shares, whichever is more restrictive) of our outstanding capital stock. We refer to this as the “Ownership Limit.” Within certain limits, our charter permits the Board of Directors to increase the Ownership Limit with respect to any class or series of stock. The Board of Directors, upon receipt of a ruling from the IRS, opinion of counsel, or other evidence satisfactory to the Board of Directors and upon 15 days prior written notice of a proposed transfer which, if consummated, would result in the transferee owning shares in excess of the Ownership Limit, and upon such other conditions as the Board of Directors may direct, may exempt a stockholder from the Ownership Limit. Absent any such exemption, capital stock acquired or held in violation of the Ownership Limit will be transferred by operation of law to us as trustee for the benefit of the person to whom such capital stock is ultimately transferred, and the stockholder’s rights to distributions and to vote would terminate. Such stockholder would be entitled to receive, from the proceeds of any subsequent sale of the capital stock transferred to us as trustee, the lesser of (i) the price paid for the capital stock or, if the owner did not pay for the capital stock (for example, in the case of a gift, devise of other such transaction), the market price of the capital stock on the date of the event causing the capital stock to be transferred to us as trustee or (ii) the amount realized from such sale. A transfer of capital stock may be void if it causes a person to violate the Ownership Limit. The Ownership Limit could delay or prevent a change in control of the Company and, therefore, could adversely affect our stockholders’ ability to realize a premium over the then-prevailing market price for their common stock.
 
Conflicts of Interest Could Influence the Company’s Decisions.
 
Certain Stockholders Could Exercise Influence in a Manner Inconsistent With the Stockholders’ Best Interests.  As of December 31, 2009, Mr. Samuel Zell and certain affiliated holders beneficially owned approximately 11.9% of our outstanding common stock (in each case including common stock issuable upon the exercise of stock options and the exchange of Units). Mr. Zell is the chairman of the Company’s Board of Directors. Accordingly, Mr. Zell has significant influence on our management and operation. Such influence could be exercised in a manner that is inconsistent with the interests of other stockholders.
 
Mr. Zell and His Affiliates Continue to be Involved in Other Investment Activities.  Mr. Zell and his affiliates have a broad and varied range of investment interests, including interests in other real estate investment companies involved in other forms of housing, including multifamily housing. Mr. Zell and his affiliates may acquire interests in other companies. Mr. Zell may not be able to control whether any such company competes with the Company. Consequently, Mr. Zell’s continued involvement in other investment activities could result in competition to the Company as well as management decisions, which might not reflect the interests of our stockholders.
 
Members of Management May Have a Conflict of Interest Over Whether To Enforce Terms of Mr. McAdams’s Employment and Noncompetition Agreement.  Mr. McAdams is our President and has entered into an employment and noncompetition agreement with us. For the most part these restrictions apply to him both during his employment and for two years thereafter. Mr. McAdams is also prohibited from otherwise disrupting or interfering with our business through the solicitation of our employees or clients or otherwise. To the extent that we choose to enforce our rights under any of these agreements, we may determine to pursue available remedies, such as actions for damages or injunctive relief, less vigorously than we otherwise might because of our desire to maintain our ongoing relationship with Mr. McAdams. Additionally, the non-competition provisions of his agreement, despite being limited in scope and duration, could be difficult to enforce, or may be subject to limited enforcement, should litigation arise over it in the future. See Note 13 in the Notes to Consolidated Financial Statements contained in this Form 10-K.


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Risk of Eminent Domain and Tenant Litigation.
 
We own Properties in certain areas of the country where real estate values have increased faster than rental rates in our Properties either because of locally imposed rent control or long term leases. In such areas, we have learned that certain local government entities have investigated the possibility of seeking to take our Properties by eminent domain at values below the value of the underlying land. While no such eminent domain proceeding has been commenced, and we would exercise all of our rights in connection with any such proceeding, successful condemnation proceedings by municipalities could adversely affect our financial condition. Moreover, certain of our Properties located in California are subject to rent control ordinances, some of which not only severely restrict ongoing rent increases but also prohibit us from increasing rents upon turnover. Such regulation allows customers to sell their homes for a premium representing the value of the future discounted rent-controlled rents. As part of our effort to realize the value of our Properties subject to rent control, we have initiated lawsuits against several municipalities in California. In response to our efforts, tenant groups have filed lawsuits against us seeking not only to limit rent increases, but to be awarded large damage awards. If we are unsuccessful in our efforts to challenge rent control ordinances, it is likely that we will not be able to charge rents that reflect the intrinsic value of the affected Properties. Finally, tenant groups in non-rent controlled markets have also attempted to use litigation as a means of protecting themselves from rent increases reflecting the rental value of the affected Properties. An unfavorable outcome in the tenant group lawsuits could have an adverse impact on our financial condition.
 
Environmental and Utility-Related Problems Are Possible and Can be Costly.
 
Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at such property. The owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with the contamination. Such laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site.
 
Environmental laws also govern the presence, maintenance and removal of asbestos. Such laws require that owners or operators of property containing asbestos properly manage and maintain the asbestos, that they notify and train those who may come into contact with asbestos and that they undertake special precautions, including removal or other abatement, if asbestos would be disturbed during renovation or demolition of a building. Such laws may impose fines and penalties on real property owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.
 
Utility-related laws and regulations also govern the provision of utility services and operations of water and wastewater treatment facilities. Such laws regulate, for example, how and to what extent owners or operators of property can charge renters for provision of, for example, electricity, and whether and to what extent such utility services can be charged separately from the base rent. Such laws also regulate the operations and performance of water treatment facilities and wastewater treatment facilities. Such laws may impose fines and penalties on real property owners or operators who fail to comply with these requirements.
 
We Have a Significant Concentration of Properties in Florida and California, and Natural Disasters or Other Catastrophic Events in These or Other States Could Adversely Affect the Value of Our Properties and Our Cash Flow.
 
As of December 31, 2009, we owned or had an ownership interest in 304 Properties located in 27 states and British Columbia, including 86 Properties located in Florida and 48 Properties located in California. The occurrence of a natural disaster or other catastrophic event in any of these areas may cause a sudden decrease in the value of our Properties. While we have obtained insurance policies providing certain coverage against


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damage from fire, flood, property damage, earthquake, wind storm and business interruption, these insurance policies contain coverage limits, limits on covered property and various deductible amounts that the Company must pay before insurance proceeds are available. Such insurance may therefore be insufficient to restore our economic position with respect to damage or destruction to our Properties caused by such occurrences. Moreover, each of these coverages must be renewed every year and there is the possibility that all or some of the coverages may not be available at a reasonable cost. In addition, in the event of such natural disaster or other catastrophic event, the process of obtaining reimbursement for covered losses, including the lag between expenditures incurred by us and reimbursements received from the insurance providers, could adversely affect our economic performance.
 
Market Interest Rates May Have an Effect on the Value of Our Common Stock.
 
One of the factors that investors consider important in deciding whether to buy or sell shares of a REIT is the distribution rates with respect to such shares (as a percentage of the price of such shares) relative to market interest rates. If market interest rates go up, prospective purchasers of REIT shares may expect a higher distribution rate. Higher interest rates would not, however, result in more funds for us to distribute and, in fact, would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our publicly traded securities to go down.
 
We Are Dependent on External Sources of Capital.
 
To qualify as a REIT, we must distribute to our stockholders each year at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and excluding any net capital gain). In addition, we intend to distribute all or substantially all of our net income so that we will generally not be subject to U.S. federal income tax on our earnings. Because of these distribution requirements, it is not likely that we will be able to fund all future capital needs, including for acquisitions, from income from operations. We therefore will have to rely on third-party sources of debt and equity capital financing, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including conditions in the capital markets generally and the market’s perception of our growth potential and our current and potential future earnings. As a result of the current credit crisis it may be difficult for us to meet one or more of the requirements for qualification as a REIT, including but not limited to our distribution requirement. Moreover, additional equity offerings may result in substantial dilution of stockholders’ interests, and additional debt financing may substantially increase our leverage.
 
Our Qualification as a REIT is Dependent on Compliance With U.S. Federal Income Tax Requirements.
 
We believe we have been organized and operated in a manner so as to qualify for taxation as a REIT, and we intend to continue to operate so as to qualify as a REIT for U.S. federal income tax purposes. Qualification as a REIT for U.S. federal income tax purposes, however, is governed by highly technical and complex provisions of the Code for which there are only limited judicial or administrative interpretations. In connection with certain transactions, we have received, and relied, on advice of counsel as to the impact of such transactions on our qualification as a REIT. Our qualification as a REIT requires analysis of various facts and circumstances that may not be entirely within our control, and we cannot provide any assurance that the Internal Revenue Service (the “IRS”) will agree with our analysis or the analysis of our tax counsel. In particular, the proper federal income tax treatment of right-to-use membership contracts is uncertain and there is no assurance that the IRS will agree with the Company’s treatment of such contracts. If the IRS were to disagree with our analysis or our tax counsel’s analysis of facts and circumstances, our ability to qualify as a REIT may be adversely affected. These matters can affect our qualification as a REIT. In addition, legislation, new regulations, administrative interpretations or court decisions might significantly change the tax laws with respect to the requirements for qualification as a REIT or the U.S. federal income tax consequences of qualification as a REIT.
 
If, with respect to any taxable year, we fail to maintain our qualification as a REIT (and specified relief provisions under the Code were not applicable to such disqualification), we could not deduct distributions to stockholders in computing our net taxable income and we would be subject to U.S. federal income tax on our net


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taxable income at regular corporate rates. Any U.S. federal income tax payable could include applicable alternative minimum tax. If we had to pay U.S. federal income tax, the amount of money available to distribute to stockholders and pay indebtedness would be reduced for the year or years involved, and we would no longer be required to distribute money to stockholders. In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless we were entitled to relief under the relevant statutory provisions. Although we currently intend to operate in a manner designed to allow us to qualify as a REIT, future economic, market, legal, tax or other considerations may cause us to revoke the REIT election.
 
Interpretation of and Changes to Accounting Policies and Standards Could Adversely Affect Our Reported Financial Results.
 
Our Accounting Policies and Methods Are the Basis on Which We Report Our Financial Condition and Results of Operations, and They May Require Management to Make Estimates About Matters that Are Inherently Uncertain.  Our accounting policies and methods are fundamental to the manner in which we record and report our financial condition and results of operations. Management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure that they comply with generally accepted accounting principles and reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances yet might result in reporting materially different amounts than would have been reported under a different alternative.
 
Changes in Accounting Standards Could Adversely Affect Our Reported Financial Results.  The bodies that set accounting standards for public companies, including the Financial Accounting Standards Board (“FASB”), the SEC and others, periodically change or revise existing interpretations of the accounting and reporting standards that govern the way that we report our financial condition and results of operations. These changes can be difficult to predict and can materially impact our reported financial results. In some cases, we could be required to apply a new or revised accounting standard, or a revised interpretation of an accounting standard, retroactively, which could have a negative impact on reported results or result in the restatement of our financial statements for prior periods.
 
The FASB sets generally accepted accounting principles (“GAAP”) that we follow to ensure we consistently report our financial condition, results of operations and cash flows. References to GAAP issued by the FASB in this Form 10-K are to the FASB Accounting Standards Codification (the “Codification”). The FASB finalized the Codification effective for periods ending on or after September 15, 2009. The Codification does not change how the Company accounts for its transactions or the nature of the related disclosures made.
 
Our Accounting Policies for the Sale of Right-To-Use Contracts Will Result in a Substantial Deferral of Revenue in our Financial Results.  Beginning August 14, 2008, the Company began selling right-to-use contracts. Customers who purchase right-to-use contracts are generally required to make an upfront nonrefundable payment to the Company. The Company incurs significant selling and marketing expenses to originate the right-to-use contracts, and the majority of expenses must be expensed in the period incurred, while the related sales revenues are generally deferred and recognized over the expected life of the contract which is estimated based upon historical attrition rates. The expected life of a right-to-use contract is currently estimated to be between one and 31 years. As a result, the Company may incur a loss from the sale of right-to-use contracts, build up a substantial deferred sales revenue liability balance, and recognize substantial non-cash revenue in years subsequent to the original sale. This accounting may make it difficult for investors to interpret the financial results from the sale of right-to-use contracts. The Company submitted correspondence to the Office of the Chief Accountant at the SEC describing the right-to-use contracts and subsequently discussed the revenue recognition policy with respect to the contracts with the SEC. The SEC does not object to the Company’s application of the Codification Topic “Revenue Recognition” (“FASB ASC 605”) (prior authoritative guidance: Staff Accounting Bulletin 104, “Revenue Recognition in Consolidated Financial Statements, Corrected”) with respect to the deferral of the upfront nonrefundable payments received from the sale of right-to-use contracts.


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See Note 2 (n) in the Notes to Consolidated Financial Statements contained in this Form 10-K for the Company’s revenue recognition policy.
 
Item 1B.   Unresolved Staff Comments
 
On December 23, 2009, the SEC sent us a letter with comments on our Proxy Statement and Form 10-K for the year ended December 31, 2008. The comments relate to income statement presentation, segment reporting, the transfer of inventory homes to fixed assets, revenue recognition policies related to right-to-use contracts, footnote disclosure of the Privileged Access acquisition, footnote disclosure of joint venture investments and disclosure of senior management bonus targets. We responded to the SEC’s letter on January 25, 2010 and as of February 24, 2010 we have not received a response from the SEC.
 
Item 2.   Properties
 
General
 
Our Properties provide attractive amenities and common facilities that create a comfortable and attractive home for our customers, with most offering a clubhouse, a swimming pool, laundry facilities and cable television service. Many also offer additional amenities such as sauna/whirlpool spas, golf courses, tennis, shuffleboard and basketball courts, exercise rooms and various social activities such as concerts. Since most of our customers generally rent our sites on a long-term basis, it is their responsibility to maintain their homes and the surrounding area. It is our role to ensure that customers comply with our Property policies and to provide maintenance of the common areas, facilities and amenities. We hold periodic meetings with our Property management personnel for training and implementation of our strategies. The Properties historically have had, and we believe they will continue to have, low turnover and high occupancy rates.
 
Property Portfolio
 
As of December 31, 2009, we owned or had an ownership interest in a portfolio of 304 Properties located throughout the United States and British Columbia containing 110,575 residential sites.
 
The distribution of our Properties throughout the United States reflects our belief that geographic diversification helps insulate the portfolio from regional economic influences. We intend to target new acquisitions in or near markets where our Properties are located and will also consider acquisitions of Properties outside such markets. Refer to Note 2 (c) of the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
Bay Indies located in Venice, Florida and Viewpoint located in Mesa, Arizona, our two largest properties as determined by property operating revenues, accounted for approximately 2.0% and 1.9%, respectively, of our total property operating revenues for the year ended December 31, 2009.
 
The following table sets forth certain information relating to the Properties we owned as of December 31, 2009, categorized by our major markets (excluding Properties owned through joint ventures).
 
                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Florida
                                                                                                   
                                                                                                     
East Coast:
                                                                                                   
                                                                                                     
Sunshine Key
  38801 Overseas Hwy   Big Pine Key   FL     33043       RV       54                       409       55       100.0 %     100.0 %   $ 9,128     $ 10,418  
                                                                                                     
Carriage Cove
  Five Carriage Cove Way   Daytona Beach   FL     32119       MH       59                       418       418       90.2 %     91.6 %   $ 5,604     $ 5,572  
                                                                                                     
Coquina Crossing
  4536 Coquina Crossing Dr.   Elkton   FL     32033       MH       316       26       145       563       563       92.9 %     91.1 %   $ 5,459     $ 5,193  
                                                                                                     
Bulow Plantation
  3165 Old Kings Road South   Flagler Beach   FL     32136       MH       323       181       722       276       276       98.2 %     98.6 %   $ 5,734     $ 5,326  
                                                                                                     
Bulow RV
  3345 Old Kings Road South   Flagler Beach   FL     32136       RV       (f )                     352       79       100.0 %     100.0 %   $ 5,109     $ 4,944  
                                                                                                     
Carefree Cove
  3273 N.W. 37th St   Ft. Lauderdale   FL     33309       MH       20                       164       164       93.3 %     93.3 %   $ 6,470     $ 6,328  
                                                                                                     
Park City West
  10550 W. State Road 84   Ft. Lauderdale   FL     33324       MH       60                       363       363       89.5 %     89.3 %   $ 5,882     $ 5,734  


19


Table of Contents

                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Sunshine Holiday
  2802 W. Oakland Park Blvd.   Ft. Lauderdale   FL     33311       MH       32                       274       274       82.8 %     88.1 %   $ 6,195     $ 5,835  
                                                                                                     
Sunshine Holiday RV
  2802 W. Oakland Park Blvd.   Ft. Lauderdale   FL     33311       RV       (f )                     131       45       100.0 %     100.0 %   $ 5,658     $ 5,515  
                                                                                                     
Maralago Cay
  6280 S. Ash Lane   Lantana   FL     33462       MH       102       5               603       603       90.9 %     90.7 %   $ 7,347     $ 7,001  
                                                                                                     
Coral Cay
  2801 NW 62nd Avenue   Margate   FL     33063       MH       121                       819       819       86.7 %     84.7 %   $ 6,094     $ 6,028  
                                                                                                     
Lakewood Village
  3171 Hanson Avenue   Melbourne   FL     32901       MH       68                       349       349       87.7 %     87.1 %   $ 5,892     $ 5,664  
                                                                                                     
Holiday Village
  1335 Fleming Ave Box 228   Ormond Beach   FL     32174       MH       43                       301       301       87.7 %     85.7 %   $ 4,866     $ 4,814  
                                                                                                     
Sunshine Holiday
  1701 North US Hwy 1   Ormond Beach   FL     32174       RV       69                       349       132       100.0 %     100.0 %   $ 4,590     $ 4,323  
                                                                                                     
The Meadows
  2555 PGA Boulevard   Palm Beach Gardens   FL     33410       MH       55                       379       379       84.4 %     85.2 %   $ 6,439     $ 6,263  
                                                                                                     
Breezy Hill RV
  800 NE 48th Street   Pompano Beach   FL     33064       RV       52                       762       355       100.0 %     100.0 %   $ 5,999     $ 5,810  
                                                                                                     
Highland Wood RV
  900 NE 48th street   Pompano Beach   FL     33064       RV       15                       148       13       100.0 %     100.0 %   $ 5,184     $ 5,075  
                                                                                                     
Lighthouse Pointe
  155 Spring Drive   Port Orange   FL     32129       MH       64                       433       433       85.7 %     86.6 %   $ 4,932     $ 4,708  
                                                                                                     
Pickwick
  4500 S. Clyde Morris Blvd   Port Orange   FL     32119       MH       84       4               432       432       100.0 %     100.0 %   $ 5,111     $ 4,923  
                                                                                                     
Indian Oaks
  780 Barnes Boulevard   Rockledge   FL     32955       MH       38                       208       208       100.0 %     100.0 %   $ 4,411     $ 4,137  
                                                                                                     
Countryside
  8775 20th Street   Vero Beach   FL     32966       MH       125                       644       644       89.8 %     89.6 %   $ 5,646     $ 5,395  
                                                                                                     
Heritage Plantation
  1101 Ranch Road   Vero Beach   FL     32966       MH       64                       435       435       83.7 %     83.4 %   $ 5,550     $ 5,312  
                                                                                                     
Holiday Village
  1000 S.W. 27th Avenue   Vero Beach   FL     32968       MH       20                       128       128       17.2 %     28.9 %   $ 3,959     $ 4,239  
                                                                                                     
Sunshine Travel
  9455 108th Avenue   Vero Beach   FL     32967       RV       30       6       48       300       159       100.0 %     100.0 %   $ 4,533     $ 4,200  
                                                                                                     
Central:
                                                                                                   
                                                                                                     
Clerbrook
  20005 U.S. Highway 27   Clermont   FL     34711       RV       288                       1,255       461       100.0 %     100.0 %   $ 4,323     $ 4,251  
                                                                                                     
Lake Magic
  9600 Hwy 192 West   Clermont   FL     34714       RV       69                       471       126       100.0 %     100.0 %   $ 4,303     $ 4,018  
                                                                                                     
Orlando
  2110 US Highway 27 S   Clermont   FL     34714       RV       270       30       136       850       72       100.0 %     (b)   $ 3,290        
                                                                                                     
Southern Palms
  One Avocado Lane   Eustis   FL     32726       RV       120                       950       362       100.0 %     100.0 %   $ 4,087     $ 4,016  
                                                                                                     
Grand Island
  13310 Sea Breeze Lane   Grand Island   FL     32735       MH       35                       362       362       58.8 %     58.8 %   $ 5,169     $ 4,903  
                                                                                                     
Sherwood Forest
  5302 W. Irlo Bronson Hwy   Kissimmee   FL     34746       MH       124                       769       769       93.4 %     94.3 %   $ 5,119     $ 4,847  
                                                                                                     
Sherwood Forest RV
  5300 W. Irlo Bronson Hwy   Kissimmee   FL     34746       RV       107       43       149       513       149       100.0 %     100.0 %   $ 4,907     $ 4,692  
                                                                                                     
Tropical Palms(g)
  2650 Holiday Trail   Kissimmee   FL     34746       RV       59                       541                                
                                                                                                     
Coachwood Colony
  2610 Dogwood Place   Leesburg   FL     34748       MH       29                       202       202       87.6 %     90.1 %   $ 3,882     $ 3,879  
                                                                                                     
Mid-Florida Lakes
  199 Forest Dr.   Leesburg   FL     34788       MH       290                       1,225       1,225       80.7 %     80.7 %   $ 5,616     $ 5,406  
                                                                                                     
Southernaire
  1700 Sanford Road   Mt. Dora   FL     32757       MH       14                       114       114       80.7 %     84.3 %   $ 3,616     $ 4,151  
                                                                                                     
Oak Bend
  10620 S.W. 27th Ave.   Ocala   FL     34476       MH       62       3               262       262       89.3 %     89.3 %   $ 4,620     $ 4,330  
                                                                                                     
Villas at Spanish Oaks
  3150 N.E. 36th Avenue   Ocala   FL     34479       MH       69                       459       459       87.4 %     86.5 %   $ 4,588     $ 4,373  
                                                                                                     
Three Flags RV Resort
  1755 E State Rd 44
  Wildwood   FL     34785       RV       23                       221                                
                                                                                                     
Winter Garden
  13905 W. Colonial Dr.   Winter Garden   FL     34787       RV       27                       350       142       100.0 %     100.0 %   $ 4,183     $ 4,074  
                                                                                                 
Gulf Coast (Tampa/Naples):
                                                                                               
                                                                                                     
Toby’s RV
  3550 N.E. Hwy 70   Arcadia   FL     34266       RV       44                       379       274       100.0 %     100.0 %   $ 2,487     $ 2,543  
                                                                                                     
Manatee
  800 Kay Road NE   Bradenton   FL     34212       RV       42                       415       216       100.0 %     100.0 %   $ 4,635     $ 4,806  
                                                                                                     
Windmill Manor
  5320 53rd Ave. East   Bradenton   FL     34203       MH       49                       292       292       95.9 %     95.9 %   $ 5,426     $ 5,417  
                                                                                                     
Glen Ellen
  2882 Gulf to Bay Blvd   Clearwater   FL     33759       MH       12                       106       106       86.8 %     90.6 %   $ 4,907     $ 4,722  
                                                                                                     
Hillcrest
  2346 Druid Road East   Clearwater   FL     33764       MH       25                       278       278       92.1 %     93.9 %   $ 4,782     $ 4,701  
                                                                                                     
Holiday Ranch
  4300 East Bay Drive   Clearwater   FL     33764       MH       12                       150       150       86.0 %     89.3 %   $ 4,365     $ 4,229  
                                                                                                     
Silk Oak
  28488 US Highway 19 N   Clearwater   FL     33761       MH       19                       181       181       89.5 %     90.1 %   $ 4,899     $ 4,728  
                                                                                                     
Crystal Isles
  11419 W. Ft. Island Drive   Crystal River   FL     34429       RV       32                       260       46       100.0 %     100.0 %   $ 4,996     $ 5,154  
                                                                                                     
Lake Haven
  1415 Main Street   Dunedin   FL     34698       MH       48                       379       379       88.4 %     90.8 %   $ 6,584     $ 6,482  
                                                                                                     
Fort Myers Beach Resort
  16299 San Carlos Blvd.   Fort Myers   FL     33908       RV       31                       306       88       100.0 %     100.0 %   $ 5,728     $ 5,689  
                                                                                                     
Gulf Air Resort
  17279 San Carlos Blvd. SW   Fort Myers   FL     33931       RV       25                       246       154       100.0 %     100.0 %   $ 4,849     $ 4,775  
                                                                                                     
Barrington Hills
  9412 New York Avenue   Hudson   FL     34667       RV       28                       392       261       100.0 %     100.0 %   $ 3,046     $ 2,920  

20


Table of Contents

                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Down Yonder
  7001 N. 142nd Avenue   Largo   FL     33771       MH       50                       361       361       97.5 %     98.9 %   $ 6,351     $ 6,113  
                                                                                                     
East Bay Oaks
  601 Starkey Road   Largo   FL     33771       MH       40                       328       328       96.3 %     97.3 %   $ 4,795     $ 4,762  
                                                                                                     
Eldorado Village
  2505 East Bay Drive   Largo   FL     33771       MH       25                       227       227       96.9 %     97.4 %   $ 4,872     $ 4,661  
                                                                                                     
Shangri La
  249 Jasper Street N.W.   Largo   FL     33770       MH       14                       160       160       81.3 %     89.4 %   $ 4,825     $ 5,263  
                                                                                                     
Vacation Village
  6900 Ulmerton Road   Largo   FL     33771       RV       29                       293       174       100.0 %     100.0 %   $ 4,230     $ 4,173  
                                                                                                     
Pasco
  21632 State Road 54   Lutz   FL     33549       RV       27                       255       176       100.0 %     100.0 %   $ 3,575     $ 3,522  
                                                                                                     
Buccaneer
  2210 N. Tamiami Trail N.E.   N. Ft. Myers   FL     33903       MH       223       39       162       971       971       98.5 %     98.5 %   $ 5,897     $ 5,805  
                                                                                                     
Island Vista MHC
  3000 N. Tamiami Trail   N. Ft. Myers   FL     33903       MH       121                       616       616       82.1 %     84.7 %   $ 3,908     $ 4,049  
                                                                                                     
Lake Fairways
  19371 Tamiami Trail   N. Ft. Myers   FL     33903       MH       259                       896       896       99.7 %     99.4 %   $ 6,087     $ 5,819  
                                                                                                     
Pine Lakes
  10200 Pine Lakes Blvd.   N. Ft. Myers   FL     33903       MH       314                       584       584       100.0 %     100.0 %   $ 7,233     $ 6,781  
                                                                                                     
Pioneer Village
  7974 Samville Rd.   N. Ft. Myers   FL     33917       RV       90                       733       381       100.0 %     100.0 %   $ 4,077     $ 3,890  
                                                                                                     
The Heritage
  3000 Heritage Lakes Blvd.   N. Ft. Myers   FL     33917       MH       214       22       132       453       453       98.0 %     98.7 %   $ 5,362     $ 5,084  
                                                                                                     
Windmill Village
  16131 N. Cleveland Ave.   N. Ft. Myers   FL     33903       MH       69                       491       491       88.6 %     91.6 %   $ 4,906     $ 4,723  
                                                                                                     
Country Place
  2601 Country Place Blvd.   New Port Richey   FL     34655       MH       82                       515       515       99.6 %     99.8 %   $ 5,053     $ 4,905  
                                                                                                     
Hacienda Village
  7107 Gibraltar Ave   New Port Richey   FL     34653       MH       66                       505       505       96.4 %     97.8 %   $ 5,058     $ 4,773  
                                                                                                     
Harbor View
  6617 Louisna Ave   New Port Richey   FL     34653       MH       69                       471       471       98.1 %     98.5 %   $ 4,255     $ 3,993  
                                                                                                     
Bay Lake Estates
  1200 East Colonia Lane   Nokomis   FL     34275       MH       34                       228       228       94.7 %     93.0 %   $ 5,955     $ 6,150  
                                                                                                     
Royal Coachman
  1070 Laurel Road East   Nokomis   FL     34275       RV       111                       546       430       100.0 %     100.0 %   $ 6,139     $ 6,042  
                                                                                                     
Silver Dollar
  12515 Silver Dollar Drive   Odessa   FL     33556       RV       412                       459       392       100.0 %     100.0 %   $ 5,323     $ 4,776  
                                                                                                     
Terra Ceia
  9303 Bayshore Road   Palmetto   FL     34221       RV       18                       203       132       100.0 %     100.0 %   $ 3,581     $ 3,555  
                                                                                                     
Lakes at Countrywood
  745 Arbor Estates Way   Plant City   FL     33565       MH       122                       424       424       93.4 %     92.7 %   $ 4,190     $ 3,959  
                                                                                                     
Meadows at Countrywood
  745 Arbor Estates Way   Plant City   FL     33565       MH       140       13       110       799       799       95.6 %     95.4 %   $ 5,008     $ 4,699  
                                                                                                     
Oaks at Countrywood
  745 Arbor Estates Way   Plant City   FL     33565       MH       44                       168       168       76.2 %     76.2 %   $ 4,290     $ 3,984  
                                                                                                     
Harbor Lakes
  3737 El Jobean Road #294   Port Charlotte   FL     33953       RV       80                       528       294       100.0 %     100.0 %   $ 4,555     $ 4,470  
                                                                                                     
Gulf View
  10205 Burnt Store Road   Punta Gorda   FL     33950       RV       78                       206       53       100.0 %     100.0 %   $ 4,505     $ 4,328  
                                                                                                     
Tropical Palms MHC
  17100 Tamiami Trailem
  Punta Gorda   FL     33955       MH       50                       294       294       88.1 %     86.5 %   $ 3,473     $ 3,240  
                                                                                                     
Winds of St. Armands No
  4000 N. Tuttle Ave.
  Sarasota   FL     34234       MH       74                       471       471       94.9 %     94.9 %   $ 6,427     $ 6,402  
                                                                                                     
Winds of St. Armands So
  3000 N. Tuttle Ave.
  Sarasota   FL     34234       MH       61                       306       306       98.4 %     99.3 %   $ 6,291     $ 5,915  
                                                                                                     
Peace River
  2555 US Highway 17   South Wauchula   FL     33873       RV       72       38               454       18       100.0 %     (b)   $ 1,979        
                                                                                                     
Topics
  13063 County Line Road   Spring Hill   FL     34609       RV       35                       230       197       100.0 %     100.0 %   $ 3,022     $ 2,889  
                                                                                                     
Pine Island
  5120 Stringfellow Road   St. James City   FL     33956       RV       31                       363       81       100.0 %     100.0 %   $ 4,927     $ 5,010  
                                                                                                     
Bay Indies
  950 Ridgewood Ave   Venice   FL     34285       MH       210                       1,309       1,309       93.1 %     93.3 %   $ 7,127     $ 6,683  
                                                                                                     
Ramblers Rest
  1300 North River Rd.   Venice   FL     34293       RV       117                       647       431       100.0 %     100.0 %   $ 4,747     $ 4,677  
                                                                                                     
Sixth Avenue
  39345 6th Avenue   Zephyrhills   FL     33542       MH       14                       140       140       87.1 %     91.0 %   $ 2,468     $ 2,436  
                                                                                                     
                                                                                                     
Total Florida Market:
                                7,162       410       1,604       36,802       28,233       93.2 %     93.6 %   $ 4,996     $ 4,925  
                                                                                                     
                                                                                                     
California
                                                                                                   
                                                                                                 
Northern California:
                                                                                               
                                                                                                     
Monte del Lago
  13100 Monte del Lago   Castroville   CA     95012       MH       54                       310       310       95.5 %     96.8 %   $ 12,679     $ 12,282  
                                                                                                     
Colony Park
  3939 Central Avenue   Ceres   CA     95307       MH       20                       186       186       94.1 %     90.9 %   $ 6,417     $ 6,713  
                                                                                                     
Russian River
  33655 Geysers Rd   Cloverdale   CA     95425       RV       41                       135       10       100.0 %     (b)   $ 2,468        
                                                                                                     
Snowflower
  41776 Yuba Gap Dr   Emigrant Gap   CA     95715       RV       551       200               268                                
                                                                                                     
Four Seasons
  3138 West Dakota   Fresno   CA     93722       MH       40                       242       242       90.5 %     88.4 %   $ 4,194     $ 4,163  
                                                                                                     
Yosemite Lakes
  31191 Harden Flat Rd   Groveland   CA     95321       RV       403       30       111       299                                

21


Table of Contents

                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Tahoe Valley
  1175 Melba Drive   Lake Tahoe   CA     96150       RV       86       20       200       413                                
                                                                                                     
Sea Oaks
  1675 Los Osos Valley Rd., #221   Los Osos   CA     93402       MH       18                       125       125       98.4 %     98.4 %   $ 6,063     $ 6,012  
                                                                                                     
Ponderosa
  7291 Highway 49   Lotus   CA     95651       RV       22                       170       6       100.0 %     (b)   $ 2,616        
                                                                                                     
Turtle Beach
  703 E Williamson Rd   Manteca   CA     95337       RV       39                       79       8       100.0 %     (b)   $ 2,979        
                                                                                                     
Coralwood
  331 Coralwood   Modesto   CA     95356       MH       22                       194       194       76.3 %     78.9 %   $ 8,587     $ 8,433  
                                                                                                     
Lake Minden
  1256 Marcum Rd   Nicolaus   CA     95659       RV       165       82       540       323       4       100.0 %     (b)   $ 2,710        
                                                                                                     
Lake of the Springs
  14152 French Town Rd   Oregon House   CA     95962       RV       954       507       1,014       541       68       100.0 %     (b)   $ 2,233        
                                                                                                     
Concord Cascade
  245 Aria Drive   Pacheco   CA     94553       MH       31                       283       283       98.9 %     100.0 %   $ 7,842     $ 7,682  
                                                                                                     
San Francisco RV
  700 Palmetto Ave   Pacifica   CA     94044       RV       12                       182                                
                                                                                                     
Quail Meadows
  5901 Newbrook Drive   Riverbank   CA     95367       MH       20                       146       146       94.5 %     96.6 %   $ 8,157     $ 8,238  
                                                                                                     
California Hawaiian
  3637 Snell Avenue   San Jose   CA     95136       MH       50                       418       418       98.6 %     99.3 %   $ 10,573     $ 10,209  
                                                                                                     
Sunshadow
  1350 Panoche Avenue   San Jose   CA     95122       MH       30                       121       121       98.3 %     98.3 %   $ 10,143     $ 9,884  
                                                                                                     
Village of the Four Seasons
  200 Ford Road
  San Jose   CA     95138       MH       30                       271       271       94.5 %     95.2 %   $ 9,610     $ 9,348  
                                                                                                     
Westwinds (4 Properties)
  500 Nicholson Lane
  San Jose   CA     95134       MH       88                       723       723       93.1 %     92.1 %   $ 11,137     $ 11,034  
                                                                                                     
Laguna Lake
  1801 Perfumo Canyon Road   San Luis Obispo   CA     93405       MH       100                       300       300       99.3 %     100.0 %   $ 5,694     $ 5,514  
                                                                                                     
Contempo Marin
  400 Yosemite Road   San Rafael   CA     94903       MH       63                       396       396       97.5 %     97.2 %   $ 8,789     $ 8,482  
                                                                                                     
DeAnza Santa Cruz
  2395 Delaware Avenue   Santa Cruz   CA     95060       MH       30                       198       198       93.9 %     93.9 %   $ 11,280     $ 10,165  
                                                                                                     
Santa Cruz Ranch RV Resort
  917 Disc Drive
  Scotts Valley   CA     95066       RV       7                       106                                
                                                                                                     
Royal Oaks
  415 Akers Drive N.   Visalia   CA     93291       MH       20                       149       149       98.7 %     90.6 %   $ 5,122     $ 5,215  
                                                                                                 
Southern California:
                                                                                               
                                                                                                     
Soledad Canyon
  4700 Crown Valley Rd   Acton   CA     93510       RV       273       45       182       1,251       23       100.0 %     (b)   $ 2,887        
                                                                                                     
Date Palm Country Club
  36-200 Date Palm Drive   Cathedral City   CA     92234       MH       232       3       24       538       538       97.6 %     98.3 %   $ 11,186     $ 10,694  
                                                                                                     
Date Palm RV
  36-100 Date Palm Drive   Cathedral City   CA     92234       RV       (f )                     140                                
                                                                                                     
Oakzanita
  11053 Highway 79   Descanso   CA     91916       RV       145       5               146       8       100.0 %     (b)   $ 2,895        
                                                                                                     
Rancho Mesa
  450 East Bradley Ave.   El Cajon   CA     92021       MH       20                       158       158       69.0 %     65.8 %   $ 11,413     $ 11,259  
                                                                                                     
Rancho Valley
  12970 Hwy 8 Business   El Cajon   CA     92021       MH       19                       140       140       97.9 %     97.9 %   $ 11,498     $ 11,191  
                                                                                                     
Royal Holiday
  4400 W Florida Ave   Hemet   CA     92545       MH       22                       196       196       63.3 %     66.5 %   $ 4,882     $ 4,860  
                                                                                                     
Idyllwild
  24400 Canyon Trail Drive   Idyllwild   CA     92549       RV       191       52       120       287       27       100.0 %     (b)   $ 2,424        
                                                                                                     
Pio Pico
  14615 Otay Lakes Rd   Jamul   CA     91935       RV       176       10               512       80       100.0 %     (b)   $ 3,509        
                                                                                                     
Wilderness Lakes
  30605 Briggs Rd   Menifee   CA     92584       RV       73                       529       11       100.0 %     (b)   $ 3,774        
                                                                                                     
Morgan Hill
  12895 Uvas Rd   Morgan Hill   CA     95037       RV       62                       339       17       100.0 %     (b)   $ 3,191        
                                                                                                     
Pacific Dunes Ranch
  1205 Silver Spur Place   Oceana   CA     93445       RV       48                       215                                
                                                                                                     
San Benito
  16225 Cienega Rd   Paicines   CA     95043       RV       199       23               523       27       100.0 %     (b)   $ 2,647        
                                                                                                     
Palm Springs
  77500 Varner Rd   Palm Desert   CA     92211       RV       35                       401       42       100.0 %     (b)   $ 3,311        
                                                                                                     
Las Palmas
  1025 S. Riverside Ave.   Rialto   CA     92376       MH       18                       136       136       100.0 %     100.0 %   $ 5,713     $ 5,452  
                                                                                                     
Parque La Quinta
  350 S. Willow Ave. #120   Rialto   CA     92376       MH       19                       166       166       100.0 %     99.4 %   $ 5,698     $ 5,407  
                                                                                                     
Rancho Oso
  3750 Paradise Rd   Santa Barbara   CA     93105       RV       310       40               187       17       100.0 %     (b)   $ 3,229        
                                                                                                     
Meadowbrook
  8301 Mission Gorge Rd.   Santee   CA     92071       MH       43                       338       338       99.4 %     97.9 %   $ 9,018     $ 8,926  
                                                                                                     
Lamplighter
  10767 Jamacha Blvd.   Spring Valley   CA     91978       MH       32                       270       270       95.6 %     96.7 %   $ 11,828     $ 11,471  
                                                                                                     
Santiago Estates
  13691 Gavina Ave. #632   Sylmar   CA     91342       MH       113       9               300       300       100.0 %     100.0 %   $ 11,031     $ 10,555  
                                                                                                     
                                                                                                 
Total California Market
                            4,926       1,026       2,191       13,350       6,652       95.9 %     93.3 %   $ 6,564     $ 8,466  
                                                                                                 
                                                                                                     
Arizona
                                                                                                   
                                                                                                     
Countryside RV
  2701 S. Idaho Rd   Apache Junction   AZ     85219       RV       53                       560       294       100.0 %     100.0 %   $ 3,022     $ 2,931  
                                                                                                     
Golden Sun RV
  999 W Broadway Ave   Apache Junction   AZ     85220       RV       33                       329       217       100.0 %     100.0 %   $ 2,998     $ 2,845  
                                                                                                     
Casita Verde RV
  2200 N. Trekell Rd.
  Casa Grande   AZ     85222       RV       14                       192       104       100.0 %     100.0 %   $ 2,309     $ 2,222  
                                                                                                     
Fiesta Grande RV
  1511 East Florence Blvd.   Casa Grande   AZ     85222       RV       77                       767       485       100.0 %     100.0 %   $ 2,719     $ 2,610  
                                                                                                     
Foothills West RV
  10167 N. Encore Dr.
  Casa Grande   AZ     85222       RV       16                       188       129       100.0 %     100.0 %   $ 2,299     $ 2,199  

22


Table of Contents

                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Verde Valley
  6400 Thousand Trails Rd, SP # 16   Cottonwood   AZ     86326       RV       273       129       515       352       37       100.0 %     (b)   $ 2,685        
                                                                                                     
Casa del Sol East II
  10960 N. 67th Avenue   Glendale   AZ     85304       MH       29                       239       239       84.1 %     84.5 %   $ 6,756     $ 6,733  
                                                                                                     
Casa del Sol East III
  10960 N. 67th Avenue   Glendale   AZ     85304       MH       28                       236       236       78.8 %     81.8 %   $ 6,912     $ 6,720  
                                                                                                     
Palm Shadows
  7300 N. 51st. Avenue   Glendale   AZ     85301       MH       33                       294       294       90.5 %     82.7 %   $ 5,484     $ 5,257  
                                                                                                     
Monte Vista
  8865 E. Baseline Road   Mesa   AZ     85209       RV       142       56       515       832       765       100.0 %     100.0 %   $ 5,295     $ 5,111  
                                                                                                     
Viewpoint
  8700 E. University   Mesa   AZ     85207       RV       332       55       467       1,954       1,537       100.0 %     100.0 %   $ 4,873     $ 4,695  
                                                                                                     
Hacienda de Valencia
  201 S. Greenfield Rd.
  Mesa   AZ     85206       MH       51                       366       366       97.0 %     98.4 %   $ 6,016     $ 5,897  
                                                                                                     
The Highlands at Brentwood
  120 North Val Vista Drive   Mesa   AZ     85213       MH       45                       268       268       99.3 %     99.3 %   $ 6,635     $ 6,551  
                                                                                                     
The Mark
  625 West McKellips   Mesa   AZ     85201       MH       60       4               410       410       64.1 %     62.9 %   $ 5,656     $ 5,383  
                                                                                                     
Apollo Village
  10701 N. 99th Ave.   Peoria   AZ     85345       MH       29       3               238       238       97.1 %     92.4 %   $ 5,194     $ 5,393  
                                                                                                     
Casa del Sol West I
  11411 N. 91st Avenue   Peoria   AZ     85345       MH       31                       245       245       94.7 %     94.3 %   $ 6,273     $ 6,293  
                                                                                                     
Carefree Manor
  19602 N. 32nd Street
  Phoenix   AZ     85050       MH       16                       130       130       97.7 %     93.1 %   $ 4,832     $ 4,929  
                                                                                                     
Central Park
  205 West Bell Road   Phoenix   AZ     85023       MH       37                       293       293       99.3 %     99.0 %   $ 5,992     $ 5,901  
                                                                                                     
Desert Skies
  19802 N. 32 Street   Phoenix   AZ     85024       MH       24                       165       165       99.4 %     100.0 %   $ 5,306     $ 5,130  
                                                                                                     
Sunrise Heights
  17801 North 16th Street   Phoenix   AZ     85022       MH       28                       199       199       98.0 %     94.0 %   $ 5,733     $ 5,657  
                                                                                                     
Whispering Palms
  19225 N. Cave Creek Rd.   Phoenix   AZ     85024       MH       15                       116       116       96.6 %     94.8 %   $ 4,644     $ 4,507  
                                                                                                     
Sedona Shadows
  6770 W. U.S. Hwy 89A   Sedona   AZ     86336       MH       48       6       10       198       198       99.5 %     100.0 %   $ 7,503     $ 7,074  
                                                                                                     
Venture In
  270 N. Clark Rd.   Show Low   AZ     85901       RV       26                       389       278       100.0 %     100.0 %   $ 2,835     $ 2,699  
                                                                                                     
Paradise
  10950 W. Union Hill Drive   Sun City   AZ     85373       RV       80                       950       816       100.0 %     100.0 %   $ 3,957     $ 3,764  
                                                                                                     
The Meadows
  2401 W. Southern Ave.   Tempe   AZ     85282       MH       60                       391       391       97.2 %     94.4 %   $ 6,430     $ 6,171  
                                                                                                     
Fairview Manor
  3115 N. Fairview Avenue   Tucson   AZ     85705       MH       28                       237       237       81.9 %     80.9 %   $ 4,564     $ 4,636  
                                                                                                     
Araby
  6649 E. 32nd. St.   Yuma   AZ     85365       RV       25                       337       294       100.0 %     100.0 %   $ 3,123     $ 3,015  
                                                                                                     
Cactus Gardens
  10657 S. Ave. 9-E   Yuma   AZ     85365       RV       43                       430       295       100.0 %     100.0 %   $ 2,120     $ 2,057  
                                                                                                     
Capri RV
  3380 South 4th Ave   Yuma   AZ     85365       RV       20                       303       243       100.0 %     100.0 %   $ 2,795     $ 2,791  
                                                                                                     
Desert Paradise
  10537 South Ave., 9E   Yuma   AZ     85365       RV       26                       260       122       100.0 %     100.0 %   $ 2,170     $ 2,076  
                                                                                                     
Foothill
  12705 E. South Frontage Rd.   Yuma   AZ     85367       RV       18                       180       74       100.0 %     100.0 %   $ 2,131     $ 2,115  
                                                                                                     
Mesa Verde
  3649 & 3749 South 4th Ave.   Yuma   AZ     85365       RV       28                       345       311       100.0 %     100.0 %   $ 2,679     $ 2,637  
                                                                                                     
Suni Sands
  1960 East 32nd Street   Yuma   AZ     85365       RV       34                       336       197       100.0 %     100.0 %   $ 2,607     $ 2,539  
                                                                                                     
                                                                                                     
Total Arizona Market
                                1,802       253       1,507       12,729       10,223       96.2 %     95.4 %   $ 4,380     $ 4,329  
                                                                                                     
                                                                                                     
Colorado
                                                                                                   
                                                                                                     
Hillcrest Village
  1600 Sable Boulevard   Aurora   CO     80011       MH       72                       601       601       83.7 %     81.0 %   $ 6,771     $ 6,672  
                                                                                                     
Cimarron
  12205 North Perry   Broomfield   CO     80020       MH       50                       327       327       81.7 %     82.6 %   $ 6,756     $ 6,483  
                                                                                                     
Holiday Village
  3405 Sinton Road   Co. Springs   CO     80907       MH       38                       240       240       73.3 %     75.8 %   $ 6,869     $ 6,678  
                                                                                                     
Bear Creek
  3500 South King Street   Denver   CO     80236       MH       12                       124       124       89.5 %     91.8 %   $ 6,659     $ 6,498  
                                                                                                     
Holiday Hills
  2000 West 92nd Avenue   Denver   CO     80260       MH       99                       736       736       81.8 %     83.3 %   $ 6,654     $ 6,525  
                                                                                                     
Golden Terrace
  17601 West Colfax Ave.   Golden   CO     80401       MH       32                       265       265       80.8 %     82.6 %   $ 7,293     $ 7,211  
                                                                                                     
Golden Terrace South
  17601 West Colfax Ave.   Golden   CO     80401       MH       15                       80       80       60.0 %     67.5 %   $ 7,146     $ 7,080  
                                                                                                     
Golden Terrace South RV
  17801 West Colfax Ave.   Golden   CO     80401       RV       (f )                     80                                
                                                                                                     
Golden Terrace West
  17601 West Colfax Ave.   Golden   CO     80401       MH       39       7               316       316       76.6 %     81.3 %   $ 7,112     $ 7,049  
                                                                                                     
Pueblo Grande
  999 Fortino Blvd. West   Pueblo   CO     81008       MH       33                       251       251       79.7 %     84.1 %   $ 4,046     $ 4,005  
                                                                                                     
Woodland Hills
  1500 W. Thornton Pkwy.   Thorton   CO     80260       MH       55                       434       434       80.2 %     80.2 %   $ 6,464     $ 6,208  
                                                                                                     
                                                                                                     
Total Colorado Market
                                445       7       0       3,454       3,374       78.7 %     81.0 %   $ 6,577     $ 6,441  
                                                                                                     

23


Table of Contents

                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Northeast
                                                                                                   
                                                                                                     
Waterford
  205 Joan Drive   Bear   DE     19701       MH       159                       731       731       96.4 %     95.5 %   $ 6,300     $ 6,134  
                                                                                                     
Whispering Pines
  32045 Janice Road   Lewes   DE     19958       MH       67       2               393       393       80.7 %     82.4 %   $ 4,842     $ 4,580  
                                                                                                     
Mariners Cove
  35356 Sussex Lane #1   Millsboro   DE     19966       MH       101                       375       375       96.8 %     95.7 %   $ 6,926     $ 6,923  
                                                                                                     
Aspen Meadows
  303 Palace Lane   Rehoboth   DE     19971       MH       46                       200       200       100.0 %     100.0 %   $ 5,476     $ 5,117  
                                                                                                     
Camelot Meadows
  303 Palace Lane   Rehoboth   DE     19971       MH       61                       301       301       100.0 %     99.7 %   $ 5,157     $ 4,854  
                                                                                                     
McNicol
  303 Palace Lane   Rehoboth   DE     19971       MH       25                       93       93       98.9 %     98.9 %   $ 4,865     $ 4,565  
                                                                                                     
Sweetbriar
  83 Big Burn Lane   Rehoboth   DE     19958       MH       38                       146       146       98.6 %     98.6 %   $ 4,872     $ 4,677  
                                                                                                     
Gateway to Cape Cod
  90 Stevens Rd PO Box 217   Rochester   MA     02770       RV       80                       194       33       100.0 %     (b)   $ 1,672        
                                                                                                     
Old Chatham RV
  310 Old Chatham Road   South Dennis   MA     02660       RV       47       11               312       266       100.0 %     100.0 %   $ 3,621     $ 3,625  
                                                                                                     
Sturbridge
  19 Mashapaug Rd   Sturbridge   MA     01566       RV       223                       155       23       100.0 %     (b)   $ 2,092        
                                                                                                     
Mount Desert Narrows
  1219 State Highway 3   Bar Harbor   ME     04609       RV       90       12               206       5       100.0 %         $ 2,600        
                                                                                                     
Patten Pond
  1470 Bucksport Road   Ellsworth   ME     04605       RV       43       60               137       21       100.0 %     100.0 %   $ 2,248     $ 2,450  
                                                                                                     
Moody Beach
  266 Post Road   Moody   ME     04054       RV       48                       203       53       100.0 %     (b)   $ 2,621        
                                                                                                     
Pinehurst RV Park
  7 Oregon Avenue, P.O. Box 174   Old Orchard Beach   ME     04064       RV       58                       550       506       100.0 %     100.0 %   $ 2,782     $ 2,700  
                                                                                                     
Narrows Too
  1150 Bar Harbor Road   Trenton   ME     04605       RV       42                       207       7       100.0 %     100.0 %   $ 2,357     $ 3,165  
                                                                                                     
Forest Lake
  192 Thousand Trails Dr   Advance   NC     27006       RV       306       81               305       16       100.0 %     (b)   $ 2,117        
                                                                                                     
Scenic
  1314 Tunnel Rd.   Asheville   NC     28805       MH       28                       205       205       77.1 %     94.2 %   $ 3,790     $ 3,537  
                                                                                                     
Waterway RV
  850 Cedar Point Blvd.   Cedar Point   NC     28584       RV       27                       336       324       100.0 %     100.0 %   $ 3,458     $ 3,220  
                                                                                                     
Twin Lakes
  1618 Memory Lane   Chocowinity   NC     27817       RV       132       8       54       400       322       100.0 %     100.0 %   $ 2,765     $ 2,611  
                                                                                                     
Green Mountain Park
  2495 Dimmette Rd   Lenoir   NC     28645       RV       1077       400       360       447       74       100. %     (b)   $ 1,001        
                                                                                                     
Lake Gaston
  561 Fleming Dairy Road   Littleton   NC     27850       RV       69                       235       99       100.0 %     (b)   $ 1,780        
                                                                                                     
Lake Myers RV
  2862 US Highway 64 West   Mocksville   NC     27028       RV       74                       425       297       100.0 %     100.0 %   $ 2,070     $ 2,046  
                                                                                                     
Goose Creek
  350 Red Barn Road   Newport   NC     28570       RV       92       6       51       735       615       100.0 %     100.0 %   $ 3,519     $ 3,227  
                                                                                                     
Sandy Beach RV
  677 Clement Hill Road   Contoocook   NH     03229       RV       40                       190       104       100.0 %     100.0 %   $ 3,213     $ 3,188  
                                                                                                     
Tuxbury Resort
  88 Whitehall Road   South Hampton   NH     03827       RV       193       100               305       193       100.0 %     100.0 %   $ 2,903     $ 2,982  
                                                                                                     
Lake & Shore
  545 Corson Tavern Rd   Ocean View   NJ     08230       RV       162                       401       146       100.0 %     (b)   $ 3,754        
                                                                                                     
Chestnut Lake
  631 Chestnut Neck Rd   Port Republic   NJ     08241       RV       32                       185       37       100.0 %     (b)   $ 1,838        
                                                                                                     
Sea Pines
  US Route #9 Box 1535   Swainton   NJ     08210       RV       75                       549       191       100.0 %     (b)   $ 2,732        
                                                                                                     
Rondout Valley Resort
  105 Mettachonts Rd   Accord   NY     12404       RV       184       94               398       41       100.0 %     (b)   $ 2,759        
                                                                                                     
Alpine Lake
  78 Heath Road   Corinth   NY     12822       RV       200       54               500       286       100.0 %     100.0 %   $ 2,768     $ 2,697  
                                                                                                     
    175 E. Schroon River Road, P.O.                                                                                                
                                                                                                     
Lake George Escape
  Box 431
  Lake George   NY     12845       RV       178       30               576       20       100.0 %     100.0 %   $ 4,710     $ 4,898  
                                                                                                     
Greenwood Village
  370 Chapman Boulevard   Manorville   NY     11949       MH       79       14       7       512       512       100.0 %     100.0 %   $ 7,098     $ 6,865  
                                                                                                     
Brennan Beach
  80 Brennan Beach   Pulaski   NY     13142       RV       201                       1,377       1,153       100.0 %     100.0 %   $ 1,993     $ 1,977  
                                                                                                     
Lake George Schroon Valley
  1730 Schroon River Rd   Warrensburg   NY     12885       RV       151                       151       20       100.0 %         $ 2,403        
                                                                                                     
Sun Valley
  451 E. Maple Grove Rd.   Bowmansville   PA     17507       RV       86                       265       177       100.0 %     (a)   $ 2,375        
                                                                                                     
Green Acres
  8785 Turkey Ridge Road   Breinigsville   PA     18031       MH       149                       595       595       91.3 %     91.9 %   $ 6,748     $ 6,584  
                                                                                                     
Gettysburg Farm
  6200 Big Mountain Rd   Dover   PA     17315       RV       124                       265       33       100.0 %     (b)   $ 1,647        
                                                                                                     
Timothy Lake South
  RR #6,Box 6627 Timothy Lake Rd   East Stroudsburg   PA     18301       RV       65                       327       16       100.0 %     (b)   $ 1,922        
                                                                                                     
Timothy Lake North
  RR #6,Box 6627 Timothy Lake Rd   East Stroudsburg   PA     18301       RV       98                       323       43       100.0 %     (b)   $ 1,843        
                                                                                                     
Circle M
  2111 Millersville Road   Lancaster   PA     17603       RV       103                       380       44       100.0 %     (b)   $ 2,068        
                                                                                                     
Hershey Preserve
  493 S. Mt. Pleasant Rd   Lebanon   PA     17042       RV       196       20               297       35       100.0 %     (b)   $ 2,428        
                                                                                                     
Robin Hill
  149 Robin Hill Rd.   Lenhartsville   PA     19534       RV       44                       270       181       100.0 %     (a)   $ 2,725        

24


Table of Contents

                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
PA Dutch County
  185 Lehman Road   Manheim   PA     17545       RV       102                       269       41       100.0 %         $ 1,505        
                                                                                                     
Spring Gulch
  475 Lynch Road   New Holland   PA     17557       RV       114                       420       96       100.0 %     100.0 %   $ 3,811     $ 3,709  
                                                                                                     
Scotrun
  PO Box 428 Route 611   Scotrun   PA     18355       RV       66                       178       51       100.0 %         $ 1,891        
                                                                                                     
Appalachian
  60 Motel Drive   Shartlesville   PA     19554       RV       86       30       200       357       141       100.0 %         $ 2,541        
                                                                                                     
Carolina Landing
  120 Carolina Landing Dr   Fair Play   SC     29643       RV       73                       192       9       100.0 %         $ 1,456        
                                                                                                     
Inlet Oaks
  5350 Highway 17   Murrells Inlet   SC     29576       MH       35                       172       172       98.3 %     94.9 %   $ 3,569     $ 3,545  
                                                                                                     
The Oaks at Point South
  1292 Campground Rd
  Yemassee   SC     29945       RV       10                       93                                
                                                                                                     
Meadows of Chantilly
  4200 Airline Parkway   Chantilly   VA     22021       MH       82                       500       500       94.4 %     93.4 %   $ 10,081     $ 9,625  
                                                                                                     
Harbor View
  15 Harbor View Circle   Colonial Beach   VA     22443       RV       76                       146             100.0 %     (b)            
                                                                                                     
Lynchburg
  405 Mollies Creek Rd   Gladys   VA     24554       RV       170       59               222       15       100.0 %     (b)   $ 1,030        
                                                                                                     
Chesapeake Bay
  12014 Trails Lane   Gloucester   VA     23061       RV       282       80               392       96       100.0 %     (b)   $ 2,457        
                                                                                                     
Virginia Landing
  40226 Upshur Neck Rd   Quinby   VA     23423       RV       839       178               233       13       100.0 %     (b)   $ 630        
                                                                                                     
Williamsburg
  4301 Rochambeau Drive   Williamsburg   VA     23188       RV       65                       211       28       100.0 %     (b)   $ 1,700        
                                                                                                     
                                                                                                 
Total Northeast Market
                            7,293       1,239       672       18,542       10,094       98.7 %     98.1 %   $ 3,161     $ 4,212  
                                                                                                 
                                                                                                     
Midwest
                                                                                                   
                                                                                                     
Hidden Cove Outdoor Resort
  687 Country Road 3916   Arley   AL     35541       RV       81       60       200       79       3       100.0 %     (b)   $ 1,600        
                                                                                                     
O’Connell’s
  970 Green Wing Road   Amboy   IL     61310       RV       286       100       600       668       355       100.0 %     100.0 %   $ 2,648     $ 2,632  
                                                                                                     
Pine Country
  5710 Shattuck Road   Belvidere   IL     61008       RV       131                       126       64       100.0 %     (b)   $ 1,606        
                                                                                                     
Willow Lake Estates
  161 West River Road   Elgin   IL     60123       MH       111                       617       617       66.6 %     68.2 %   $ 9,237     $ 9,225  
                                                                                                     
Golf Vista Estates
  25807 Firestone Drive   Monee   IL     60449       MH       144       4               408       408       93.4 %     94.6 %   $ 6,995     $ 6,891  
                                                                                                     
Indian Lakes
  7234 E. SR Highway 46   Batesville   IN     47006       RV       545       159       318       1,000       182       100.0 %     (b)   $ 1,664        
                                                                                                     
Horsehoe Lakes
  12962 S. 225 W.   Clinton   IN     47842       RV       289       96       96       123       2       100.0 %     (b)   $ 1,040        
                                                                                                     
Twin Mills RV
  1675 W SR 120   Howe   IN     46746       RV       137       5       50       501       210       100.0 %     100.0 %   $ 2,076     $ 2,042  
                                                                                                     
Lakeside
  7089 N. Chicago Road   New Carlisle   IN     46552       RV       13                       91       65       100.0 %     100.0 %   $ 2,312     $ 2,187  
                                                                                                     
Oak Tree Village
  254 Sandalwood Ave.   Portage   IN     46368       MH       76                       361       361       69.0 %     70.6 %   $ 5,159     $ 5,036  
                                                                                                     
Diamond Caverns Resort
  1878 Mammoth Cave Pkwy   Park City   KY     42160       RV       714       350       469       220                                
                                                                                                     
Bear Cave Resort
  4085 N. Red Bud Trail   Buchanan   MI     49107       RV       26       10               136                                
                                                                                                     
Saint Claire
  1299 Wadhams Rd   Saint Claire   MI     48079       RV       210       100               229       15       100.0 %     (b)   $ 1,729        
                                                                                                     
Creekside
  5100 Clyde Pk. Ave. SW   Wyoming   MI     49509       MH       29                       165       165       57.6 %     64.2 %   $ 5,747     $ 5,722  
                                                                                                     
Kenisee Lake
  2021 Mill Creek Rd   Jefferson   OH     44047       RV       143       50               119       2       100.0 %     (b)   $ 1,150        
                                                                                                     
Wilmington
  1786 S.R. 380   Wilmington   OH     45177       RV       109       41               169       43       100.0 %     (b)   $ 1,435        
                                                                                                     
Natchez Trace
  1363 Napier Rd   Hohenwald   TN     38462       RV       672       140               531                                
                                                                                                     
Cherokee Landing
  PO Box 37   Middleton   TN     38052       RV       254       124               339                                
                                                                                                     
Fremont
  E. 6506 Highway 110   Fremont   WI     54940       RV       98       5               325       61       100.0 %     100.0 %   $ 2,816     $ 2,750  
                                                                                                     
Yukon Trails
  N2330 Co Rd. HH   Lyndon Station   WI     53944       RV       150       30               214       124       100.0 %     100.0 %   $ 1,660     $ 1,616  
                                                                                                     
Plymouth Rock
  N. 7271 Lando St.   Plymouth   WI     53073       RV       133                       609       406       100.0 %     (a)   $ 2,048        
                                                                                                     
Tranquil Timbers
  3668 Grondin Road   Sturgeon Bay   WI     54235       RV       125                       270       141       100.0 %     100.0 %   $ 1,742     $ 1,719  
                                                                                                     
Arrowhead
  W1530 Arrowhead Road   Wisconsin Dells   WI     53965       RV       166       40       200       377       151       100.0 %     100.0 %   $ 1,644     $ 1,578  
                                                                                                     
                                                                                                     
Total Midwest Market
                                4,642       1,314       1,933       7,677       3,375       94.0 %     90.7 %   $ 2,858     $ 3,808  
                                                                                                     
                                                                                                     
Nevada, Utah, New Mexico
                                                                                                   
                                                                                                     
Bonanza
  3700 East Stewart Ave   Las Vegas   NV     89110       MH       43                       353       353       64.3 %     63.5 %   $ 6,083     $ 6,053  
                                                                                                     
Boulder Cascade
  1601 South Sandhill Rd   Las Vegas   NV     89104       MH       39                       299       299       80.9 %     77.3 %   $ 6,567     $ 6,599  
                                                                                                     
Cabana
  5303 East Twain   Las Vegas   NV     89122       MH       37                       263       263       95.8 %     98.5 %   $ 6,848     $ 6,566  
                                                                                                     
Flamingo West
  8122 West Flamingo Rd.   Las Vegas   NV     89147       MH       37                       258       258       96.9 %     99.6 %   $ 7,536     $ 7,216  
                                                                                                     
Villa Borega
  1111 N. Lamb Boulevard   Las Vegas   NV     89110       MH       40                       293       293       80.2 %     84.0 %   $ 6,595     $ 6,714  

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Table of Contents

                                                                                                     
                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Las Vegas
  4295 Boulder Highway   Las Vegas   NV     89121       RV       11                       217       10       100.0 %     (b)   $ 2,950        
                                                                                                     
Westwood Village
  1111 N. 2000 West   Farr West   UT     84404       MH       46                       314       314       93.3 %     94.3 %   $ 4,539     $ 4,295  
                                                                                                     
All Seasons
  290 N. Redwood Rd   Salt Lake City   UT     84116       MH       19                       121       121       84.3 %     83.5 %   $ 5,393     $ 5,321  
                                                                                                     
                                                                                             
Total Nevada, Utah, New Mexico Market
                        272       0       0       2,118       1,911       87.0 %     85.8 %   $ 5,814     $ 6,109  
                                                                                             
                                                                                                     
Northwest
                                                                                                   
                                                                                                     
Cultus Lake (Canada)
  1855 Columbia Valley Hwy   Lindell Beach   BC     V2R 4W6       RV       15                       178       22       100.0 %     (b)   $ 3,000        
                                                                                                     
Thousand Trails Bend
  17480 S Century Dr   Bend   OR     97707       RV       289       100       145       351       10       100.0 %     (b)   $ 2,306        
                                                                                                     
Pacific City
  30000 Sandlake Rd   Cloverdale   OR     97112       RV       105                       307       11       100.0 %     (b)   $ 3,653        
                                                                                                     
South Jetty
  05010 South Jetty Rd   Florence   OR     97439       RV       57                       204       3       100.0 %     (b)   $ 1,433        
                                                                                                     
Seaside Resort
  1703 12th Ave   Seaside   OR     97138       RV       80                       251       14       100.0 %     (b)   $ 3,314        
                                                                                                     
Whaler’s Rest Resort
  50 SE 123rd St   South Beach   OR     97366       RV       39                       170       12       100.0 %     (b)   $ 2,499        
                                                                                                     
Mt. Hood
  65000 E Highway 26   Welches   OR     97067       RV       115       30       202       436       97       100.0 %     100.0 %   $ 5,381     $ 5,229  
                                                                                                     
Shadowbrook
  13640 S.E. Hwy 212   Clackamas   OR     97015       MH       21                       156       156       96.8 %     97.4 %   $ 7,031     $ 7,456  
                                                                                                     
Falcon Wood Village
  1475 Green Acres Road   Eugene   OR     97408       MH       23                       183       183       86.9 %     86.9 %   $ 5,519     $ 5,766  
                                                                                                     
Quail Hollow
  2100 N.E. Sandy Blvd.   Fairview   OR     97024       MH       21                       137       137       94.9 %     94.2 %   $ 6,882     $ 7,314  
                                                                                                     
Birch Bay
  8418 Harborview Rd   Blaine   WA     98230       RV       31                       246       9       100.0 %     (b)   $ 2,356        
                                                                                                     
Mt. Vernon
  5409 N. Darrk Ln   Bow   WA     98232       RV       311       200       600       251       10       100.0 %     (b)   $ 2,589        
                                                                                                     
Chehalis
  2228 Centralia-Alpha Rd   Chehalis   WA     98532       RV       309       85               360                                
                                                                                                     
Grandy Creek
  7370 Russell Rd   Concrete   WA     98237       RV       63                       179       4       100.0 %     (b)   $ 2,535        
                                                                                                     
La Conner
  16362 Snee Oosh Rd   La Conner   WA     98257       RV       106       5               319       19       100.0 %     (b)   $ 3,288        
                                                                                                     
Leavenworth
  20752-4 Chiwawa Loop Rd   Leavenworth   WA     98826       RV       300       50               266       1       100.0 %     (b)   $ 2,620        
                                                                                                     
Thunderbird Resort
  26702 Ben Howard Rd   Monroe   WA     98272       RV       45       2               136       1       100.0 %     (b)   $ 3,200        
                                                                                                     
Little Diamond
  1002 McGowen Rd   Newport   WA     99156       RV       360       119               520       6       100.0 %     (b)   $ 1,612        
                                                                                                     
Oceana Resort
  2733 State Route 109   Oceana City   WA     98569       RV       16                       84       6       100.0 %     (b)   $ 1,500        
                                                                                                     
Crescent Bar Resort
  9252 Crescent Bar Rd NW   Quincy   WA     98848       RV       14                       115       2       100.0 %     (b)   $ 2,200        
                                                                                                     
Long Beach
  2215 Willows Rd   Seaview   WA     98644       RV       17                       144       3       100.0 %     (b)   $ 2,100        
                                                                                                     
Paradise Resort
  173 Salem Plant Rd   Silver Creek   WA     98585       RV       60                       214       5       100.0 %     (b)   $ 1,502        
                                                                                                     
Cascade Resort(g)
  34500 SE 99th St   Snoqualmie   WA     98065       RV       20                       163                                
                                                                                                     
Kloshe Illahee
  2500 S. 370th Street   Federal Way   WA     98003       MH       50                       258       258       97.7 %     98.8 %   $ 8,877     $ 8,640  
                                                                                                     
                                                                                                 
Total Northwest Market
                            2467       591       947       5,628       969       98.9 %     95.5 %   $ 3,427     $ 6,439  
                                                                                                 
                                                                                                     
Texas
                                                                                                   
                                                                                                     
Bay Landing
  2305 Highway 380 W   Bridgeport   TX     76426       RV       443       235               293       24       100.0 %     (b)   $ 1,619        
                                                                                                     
Colorado River
  1062 Thousand Trails Lane   Columbus   TX     78934       RV       218       51               132       24       100.0 %     (b)   $ 2,583        
                                                                                                     
Lake Texoma
  209 Thousand Trails Dr   Gordonville   TX     76245       RV       201       79               301       65       100.0 %     (b)   $ 1,737        
                                                                                                     
Lakewood
  4525 Graham Road   Harlingen   TX     78552       RV       30                       301       112       100.0 %     100.0 %   $ 1,925     $ 1,970  
                                                                                                     
Paradise Park RV
  1201 N. Expressway 77   Harlingen   TX     78552       RV       60                       563       300       100.0 %     100.0 %   $ 2,974     $ 2,965  
                                                                                                     
Sunshine RV
  1900 Grace Avenue   Harlingen   TX     78550       RV       84                       1,027       403       100.0 %     100.0 %   $ 2,367     $ 2,380  
                                                                                                     
Tropic Winds
  1501 N Loop 499   Harlingen   TX     78550       RV       112       74               531       108       100.0 %     100.0 %   $ 2,788     $ 2,778  
                                                                                                     
Medina Lake
  215 Spettle Rd   Lakehills   TX     78063       RV       208       50               387       75       100.0 %     (b)   $ 1,826        
                                                                                                     
Paradise South
  9909 N. Mile 2 West Rd.   Mercedes   TX     78570       RV       49                       493       175       100.0 %     100.0 %   $ 2,017     $ 2,080  
                                                                                                     
Lake Tawakoni
  1246 Rains Co. Rd 1470   Point   TX     75472       RV       480       11               320       55       100.0 %     (b)   $ 1,522        
                                                                                                     
Fun n Sun RV
  1400 Zillock Rd   San Benito   TX     78586       RV       135       40               1,435       625       100.0 %     100.0 %   $ 2,966     $ 2,880  
                                                                                                     
Southern Comfort
  1501 South Airport Drive   Weslaco   TX     78596       RV       40                       403       330       100.0 %     100.0 %   $ 2,627     $ 2,658  
                                                                                                     
Country Sunshine
  1601 South Airport Road   Weslaco   TX     78596       RV       37                       390       181       100.0 %     100.0 %   $ 2,620     $ 2,638  
                                                                                                     
Lake Whitney
  417 Thousand Trails Dr   Whitney   TX     76692       RV       403       158               261       46       100.0 %     (b)   $ 1,959        

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                                                    Total
                         
                                              Total
    Number
    Annual
    Annual
             
                                  Develo-
          Number
    of Annual
    Site
    Site
    Annual
    Annual
 
                                  pable
          of Sites
    Sites
    Occupancy
    Occupancy
    Rent
    Rent
 
                            Acres
    Acres
    Expansion
    as of
    as of
    as of
    as of
    as of
    as of
 
Property
  Address   City   State   ZIP     MH/RV     (c)     (d)     Sites(e)     12/31/09     12/31/09     12/31/09     12/31/08     12/31/09     12/31/08  
 
                                                                                                     
Lake Conroe
  11720 Old Montgomery Rd   Willis   TX     77318       RV       129       30       300       363       125       100.0 %     (b)   $ 2,668        
                                                                                                     
                                                                                                 
Total Texas Market
                            2629       728       300       7,200       2,648       100.00 %     100.00 %   $ 2,280     $ 2,544  
                                                                                                 
                                                                                         
Grand Total All Markets
                    31,638       5,568       9,154       107,500       67,479       93.63 %     92.59 %   $ 4,451     $ 5,253  
                                                                                         
 
 
(a) Represents a former joint venture Property acquired in 2009.
 
(b) Property is primarily designated for use by customers with right-to-use contracts. Annual sites, if any, as of 12/31/2008 have been omitted from the table, as the information would not provide meaningful comparisons.
 
(c) Acres are approximate. Acreage for some recent acquisitions was estimated based upon 10 sites per acre.
 
(d) Acres are approximate. There can be no assurance that developable acres will be developed. Development is contingent on many factors including, but not limited to, cost, ability to subdivide, accessibility, infrastructure needs, zoning, entitlement and topography.
 
(e) Expansion sites are approximate and only represent sites that could be developed and is further dependent upon necessary approvals. Certain Properties with expansion sites noted may have vacancy and therefore, expansion sites may not be added.
 
(f) Acres for this RV park are included in the acres for the adjacent manufactured home community listed directly above this Property.
 
(g) Property not operated by the Company during all of 2009. Property is leased to a third party operator or was closed for all or a portion of 2009.
 
Item 3.   Legal Proceedings
 
The legal proceedings disclosure is incorporated herein by reference from Note 18 in the Notes to Consolidated Financial Statements in this Form 10-K.
 
Item 4.   Submission of Matters to a Vote of Security Holders
 
None.

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PART II
 
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol ELS. On February 23, 2010, the reported closing price per share of ELS common stock on the NYSE was $48.86 and there were approximately 10,060 beneficial holders of record. The high and low sales prices and closing sales prices on the NYSE and distributions for our common stock during 2009 and 2008 are set forth in the table below:
 
                                 
                Distributions
    Close   High   Low   Declared
 
2009
                               
1st Quarter
  $ 38.10     $ 42.44     $ 28.34     $ 0.250  
2nd Quarter
    37.18       46.28       33.56       0.250  
3rd Quarter
    42.79       47.47       34.09       0.300  
4th Quarter
    50.47       51.18       40.57       0.300  
2008
                               
1st Quarter
  $ 49.37     $ 52.26     $ 39.77     $ 0.200  
2nd Quarter
    44.00       53.64       43.62       0.200  
3rd Quarter
    53.03       56.00       40.93       0.200  
4th Quarter
    38.36       52.90       22.64       0.200  
 
Issuer Purchases of Equity Securities
 
                             
            Total Number of Shares
  Maximum Number of
    Total Number
  Average Price
  Purchased as Part of
  Shares that May Yet
    of Shares
  Paid per
  Publicly Announced
  be Purchased Under
Period
  Purchased(a)   Share(a)   Plans or Programs   the Plans or Programs
 
  10/1/09-10/31/09                 None   None
  11/1/09-11/30/09       277     $ 47.66     None   None
  12/1/09-12/31/09       21,116     $ 50.22     None   None
 
 
(a) Of the common stock repurchased from October 1, 2009 through December 31, 2009, 21,393 shares were repurchased at the open market price and represent common stock surrendered to the Company to satisfy income tax withholding obligations due as a result of the vesting of Restricted Share Grants. Certain executive officers of the Company may from time to time adopt non-discretionary, written trading plans that comply with Commission Rule 10b5-1, or otherwise monetize their equity-based compensation. Commission Rule 10b5-1 provides executives with a method to monetize their equity-based compensation in an automatic and non-discretionary manner over time.


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Item 6.   Selected Financial Data
 
The following table sets forth selected financial and operating information on a historical basis. The historical operating data has been derived from the historical financial statements of the Company. The following information should be read in conjunction with all of the financial statements and notes thereto included elsewhere in this Form 10-K.
 
Equity LifeStyle Properties, Inc.
 
Consolidated Historical Financial Information
 
                                         
    (1)Years Ended December 31,  
    2009     2008     2007     2006     2005  
    (Amounts in thousands, except for per share and property data)  
 
Property Operations:
                                       
Community base rental income
  $ 253,379     $ 245,833     $ 236,933     $ 225,815     $ 213,280  
Resort base rental income
    124,822       111,876       102,372       89,925       74,371  
Right-to-use annual payments(2)
    50,765       19,667                    
Right-to-use contracts current period, gross(2)
    21,526       10,951                    
Right-to-use contracts, deferred, net of prior period amortization(2)
    (18,882 )     (10,611 )                  
Utility and other income
    47,685       41,633       36,849       30,643       27,367  
                                         
Property operating revenues
    479,295       419,349       376,154       346,383       315,018  
Property operating and maintenance
    180,870       152,363       127,342       116,179       103,832  
Real estate taxes
    31,674       29,457       27,429       26,246       24,671  
Sales and marketing, gross(2)
    13,536       7,116                    
Sales and marketing, deferred commissions, net(2)
    (5,729 )     (3,644 )                  
Property management
    33,383       25,451       18,385       17,079       15,919  
Property operating expenses (exclusive of depreciation shown separately below)
    253,734       210,743       173,156       159,504       144,422  
                                         
Income from property operations
    225,561       208,606       202,998       186,879       170,596  
Home Sales Operations:
                                       
Gross revenues from home sales
    7,136       21,845       33,333       61,247       66,014  
Cost of home sales
    (7,471 )     (24,069 )     (30,713 )     (54,498 )     (57,471 )
                                         
Gross (loss) profit from home sales
    (335 )     (2,224 )     2,620       6,749       8,543  
Brokered resale revenues, net
    758       1,094       1,528       2,129       2,714  
Home selling expenses
    (2,383 )     (5,776 )     (7,555 )     (9,836 )     (8,838 )
Ancillary services revenues, net
    2,745       1,197       2,436       3,027       2,227  
                                         
Income (loss) from home sales operations and other
    785       (5,709 )     (971 )     2,069       4,646  
Other Income and Expenses:
                                       
Interest income
    5,119       3,095       1,732       1,975       1,406  
Income from other investments, net(3)
    8,168       17,006       22,476       20,102       16,609  
General and administrative
    (22,279 )     (20,617 )     (15,591 )     (12,760 )     (13,624 )
Rent control initiatives
    (456 )     (1,555 )     (2,657 )     (1,157 )     (1,081 )
Interest and related amortization
    (98,311 )     (99,406 )     (103,070 )     (103,161 )     (100,712 )
Loss on early debt retirement(4)
          (24 )                 (20,630 )
Depreciation on corporate assets
    (1,039 )     (390 )     (437 )     (410 )     (804 )
Depreciation on real estate and other costs
    (69,049 )     (66,193 )     (63,554 )     (60,276 )     (55,608 )
                                         
Total other expenses, net
    (177,847 )     (168,084 )     (161,101 )     (155,687 )     (174,444 )
Equity in income of unconsolidated joint ventures
    2,896       3,753       2,696       3,583       6,508  
                                         
Consolidated income from continuing operations
    51,395       38,566       43,622       36,844       7,306  
                                         
Discontinued Operations:
                                       
Discontinued operations
    181       257       289       520       1,927  
Depreciation on discontinued operations
                      (84 )     (410 )
Gain (loss) from discontinued real estate
    4,685       (79 )     12,036       (192 )     2,279  
                                         
Income from discontinued operations
    4,866       178       12,325       244       3,796  
                                         
Consolidated net income
    56,261       38,744       55,947       37,088       11,102  
(Income) loss allocated to non-controlling interests:
                                       
Common OP Units
    (6,113 )     (4,297 )     (7,705 )     (4,318 )     539  
Perpetual Preferred OP Units(5)
    (16,143 )     (16,144 )     (16,140 )     (16,138 )     (13,974 )
                                         
Net income (loss) available for Common Shares
  $ 34,005     $ 18,303     $ 32,102     $ 16,632     $ (2,333 )
                                         


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Equity LifeStyle Properties, Inc.
 
Consolidated Historical Financial Information (continued)
 
                                         
    (1)As of December 31,  
    2009     2008     2007     2006     2005  
    (Amounts in thousands, except for per share and property data)  
 
Earnings per Common Share — Basic:
                                       
Income (loss) from continuing operations
  $ 1.08     $ 0.74     $ 0.92     $ 0.70     $ (0.23 )
Income from discontinued operations
  $ 0.15     $ 0.01     $ 0.41     $ 0.01     $ 0.13  
Net income (loss) available for Common Shares
  $ 1.23     $ 0.75     $ 1.33     $ 0.71     $ (0.10 )
Earnings per Common Share — Fully Diluted:
                                       
Income (loss) from continuing operations
  $ 1.07     $ 0.74     $ 0.90     $ 0.68     $ (0.23 )
Income from discontinued operations
  $ 0.15     $ 0.01     $ 0.41     $ 0.01     $ 0.13  
Net income (loss) available for Common Shares
  $ 1.22     $ 0.75     $ 1.31     $ 0.69     $ (0.10 )
Distributions declared per Common Share outstanding
  $ 1.10     $ 0.80     $ 0.60     $ 0.30     $ 0.10  
Weighted average Common Shares outstanding — basic
    27,582       24,466       24,089       23,444       23,081  
Weighted average Common OP Units outstanding
    5,075       5,674       5,870       6,165       6,285  
Weighted average Common Shares outstanding — fully diluted
    32,944       30,498       30,414       30,241       29,366  
Balance Sheet Data:
                                       
Real estate, before accumulated depreciation(6)
  $ 2,538,215     $ 2,491,021     $ 2,396,115     $ 2,337,460     $ 2,152,567  
Total assets
    2,166,319       2,091,647       2,033,695       2,055,831       1,948,874  
Total mortgages and loans
    1,547,901       1,662,403       1,659,392       1,717,212       1,638,281  
Non-controlling interests
    200,000       200,000       200,000       200,000       200,000  
Total equity(7)
    254,427       96,234       88,717       59,912       41,895  
Other Data:
                                       
Funds from operations(8)
  $ 118,082     $ 97,615     $ 92,752     $ 82,367     $ 52,827  
Total Properties (at end of period)
    304       309       311       311       285  
Total sites (at end of period)
    110,575       112,211       112,779       112,956       106,337  
 
 
(1) See the Consolidated Financial Statements of the Company contained in this Form 10-K. Certain revenue amounts reported in previously issued statements of operations have been reclassified in the attached statements of operations due to the Company’s expansion of the related revenue activity.
 
Property operations, home sale operations, and other income and expenses are discussed in Item 7 contained in this Form 10-K.
 
(2) New activity starting on August 14, 2008 due to the acquisition of the operations of Privileged Access, LP (“Privileged Access”).
 
(3) Between November 10, 2004 and August 13, 2008, Income from other investments, net included rental income from the lease of membership Properties to Thousand Trails (“TT”) or its subsequent owner, Privileged Access. On August 14, 2008, the Company acquired substantially all of the assets and certain liabilities of Privileged Access, which included the operations of TT. The lease of membership Properties to TT was terminated upon closing. As a result of the lease termination, beginning August 14, 2008, Income from other investments, net no longer included rental income from the lease of membership Properties. See Note 2 (j) in the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
(4) On December 2, 2005, we refinanced approximately $293 million of secured debt maturing in 2007 with an effective interest rate of 6.8% per annum. This refinanced debt was secured by two cross-collateralized loan pools consisting of 35 Properties. The transaction generated approximately $337 million in proceeds from loans secured by individual mortgages on 20 Properties. The blended interest rate on the refinancing was approximately 5.3% per annum, and the loans mature in 2015. Transaction costs resulting from early debt retirement were approximately $20.0 million.
 
(5) During 2005, we issued $25 million of 8.0625% Series D and $50 million of 7.95% Series F Cumulative Redeemable Perpetual Preference Units to institutional investors. Proceeds were used to pay down amounts outstanding under the Company’s lines of credit.
 
(6) We believe that the book value of the Properties, which reflects the historical costs of such real estate assets less accumulated depreciation, is less than the current market value of the Properties.


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(7) On June 29, 2009, we issued 4.6 million shares of common stock in an equity offering for proceeds of approximately $146.4 million, net of offering costs.
 
(8) Refer to Item 7 contained in this Form 10-K for information regarding why we present funds from operations and for a reconciliation of this non-GAAP financial measure to net income.
 
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion should be read in conjunction with “Selected Financial Data” and the historical Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.
 
2009 Accomplishments
 
  •  Issued 4.6 million shares of common stock in an equity offering for proceeds of approximately $146.4 million, net of offering costs.
 
  •  Raised annual dividend to $1.10 per share in 2009, up from $0.80 per share in 2008.
 
  •  Paid off 20 maturing mortgages totaling approximately $106.7 million, funded with approximately $107.5 million of new and refinanced debt on six properties.
 
Overview and Outlook
 
Occupancy in our Properties as well as our ability to increase rental rates directly affects revenues. Our revenue streams are predominantly derived from customers renting our sites on a long-term basis.
 
We have approximately 65,000 annual sites, approximately 8,900 seasonal sites, which are leased to customers generally for three to six months, and approximately 9,300 transient sites, occupied by customers who lease sites on a short-term basis. The revenue from seasonal and transient sites is generally higher during the first and third quarters. We expect to service over 100,000 customers at our transient sites and we consider this revenue stream to be our most volatile. It is subject to weather conditions, gas prices, and other factors affecting the marginal RV customer’s vacation and travel preferences. Finally, we have approximately 24,300 sites designated as right-to-use sites which are primarily utilized to service the approximately 112,000 customers who own right-to-use contracts. We also have interests in Properties containing approximately 3,100 sites for which revenue is classified as Equity in income from unconsolidated joint ventures in the Consolidated Statements of Operations.
 
         
    Total Sites as of Dec. 31, 2009  
    (Rounded to 000s)  
 
Community sites(1)
    44,400  
Resort sites:
       
Annual
    20,600  
Seasonal
    8,900  
Transient
    9,300  
Right-to-use(2)
    24,300  
Joint Ventures(3)
    3,100  
         
      110,600  
         
 
 
(1) Includes 165 sites from discontinued operations.
 
(2) Includes approximately 2,500 sites rented on an annual basis.
 
(3) Joint Venture income is included in Equity in income of unconsolidated joint ventures.
 
A significant portion of our rental agreements on community sites are directly or indirectly tied to published CPI statistics that are issued during June through September each year. We currently expect our 2010


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community base rental income to increase approximately 2% as compared to 2009. We have already notified approximately 65% of our community site customers with rent increases reflecting this revenue growth.
 
Our home sales volumes and gross profits have been declining since 2005. We believe that the disruption in the site-built housing market may be contributing to the decline in our home sales operations as potential customers are not able to sell their existing site-built homes as well as increased price sensitivity for seasonal and second homebuyers. We believe that our potential customers are also having difficulty obtaining financing on resort homes, resort cottages and RV purchases. There are few options for potential customers who seek to obtain manufactured home financing. The options that are available currently require at least a 5% down payment and interest rates ranging from approximately 8% to 13%. This is in contrast to purchasers of site-built homes, who own the underlying land and that may benefit from various government stimulus packages designed to keep interest rates and down payments low. The continued decline in homes sales activity resulted in our decision to significantly reduce our new homes sales operation during the last couple of months of 2008 and until such time as new home sales markets improve. We believe that renting our vacant new homes may represent an attractive source of occupancy and potentially convert to a new homebuyer in the future. We are also focusing on smaller, more energy efficient and more affordable homes in our manufactured home Properties. We also believe that some customers that are capable of purchasing are opting instead to rent due to the current economic environment.
 
Our rental operations have been increasing since 2007. For the year ended December 31, 2009, occupied manufactured home rentals increased to 1,753, or 93.3%, from 907 for the year ended December 31, 2007. Net operating income increased to approximately $11.2 million in 2009 from approximately $5.9 million in 2007. We believe that unlike the home sales business, at this time we compete effectively with other types of rentals (i.e. apartments). We are currently evaluating whether we want to continue to invest in additional rental units.
 
In our resort Properties, we continue to work on extending customer stays. We have had success converting transient customers to seasonal customers and seasonal customers to annual customers. We also have and continue to introduce low-cost products that focus on the installed base of almost eight million RV owners. Such products may include right-to-use contracts that entitle the purchasers to use certain properties (the “Agreements”).
 
Several different Agreements are currently offered to new customers. These front-line Agreements are generally distinguishable from each other by the number of Properties a customer can access. The Agreements generally grant the customer the contractual right-to-use designated space within the Properties on a continuous basis for up to 14 days. The Agreements generally require nonrefundable upfront payments as well as annual payments.
 
Existing customers may be offered an upgrade Agreement from time-to-time. The upgrade Agreement is currently distinguishable from a new Agreement that a customer would enter into by (1) increased length of consecutive stay by 50% (i.e. up to 21 days); (2) ability to make earlier advance reservations; (3) discounts on rental units and (4) access to additional properties, which may include discounts at non-membership RV Properties. Each upgrade requires an additional nonrefundable upfront payment. The Company may finance the upfront nonrefundable payment under any Agreement.
 
Government Stimulus
 
In response to recent market disruptions, legislators and financial regulators implemented a number of mechanisms designed to add stability to the financial markets, including the provision of direct and indirect assistance to distressed financial institutions, assistance by the banking authorities in arranging acquisitions of weakened banks and broker-dealers, implementation of programs by the Federal Reserve to provide liquidity to the commercial paper markets and temporary prohibitions on short sales of certain financial institution securities. Numerous actions have been taken by the Federal Reserve, Congress, U.S. Treasury, the SEC and others to address the current liquidity and credit crisis that has followed the sub-prime crisis that commenced in 2007. These measures include, but are not limited to various legislative and regulatory efforts, homeowner relief that encourages loan restructuring and modification; the establishment of significant liquidity


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and credit facilities for financial institutions and investment banks; the lowering of the federal funds rate, including two 50 basis point decreases in October of 2008; emergency action against short selling practices; a temporary guaranty program for money market funds; the establishment of a commercial paper funding facility to provide back-stop liquidity to commercial paper issuers; and coordinated international efforts to address illiquidity and other weaknesses in the banking sector. It is not clear at this time what impact these liquidity and funding initiatives of the Federal Reserve and other agencies that have been previously announced, and any additional programs that may be initiated in the future will have on the financial markets, including the extreme levels of volatility and limited credit availability currently being experienced, or on the U.S. banking and financial industries and the broader U.S. and global economies. The Company believes that programs intended to provide relief to current or potential site-built single family homeowners negatively impacts its business.
 
Further, the overall effects of the legislative and regulatory efforts on the financial markets is uncertain, and they may not have the intended stabilization effects. Should these legislative or regulatory initiatives fail to stabilize and add liquidity to the financial markets, our business, financial condition, results of operations and prospects could be materially and adversely affected. Even if legislative or regulatory initiatives or other efforts successfully stabilize and add liquidity to the financial markets, we may need to modify our strategies, businesses or operations, and we may incur increased capital requirements and constraints or additional costs in order to satisfy new regulatory requirements or to compete in a changed business environment. It is uncertain what effects recently enacted or future legislation or regulatory initiatives will have on us. Given the volatile nature of the current market disruption and the uncertainties underlying efforts to mitigate or reverse the disruption, we may not timely anticipate or manage existing, new or additional risks, contingencies or developments, including regulatory developments and trends in new products and services, in the current or future environment. Our failure to do so could materially and adversely affect our business, financial condition, results of operations and prospects.
 
Insurance
 
Approximately 70 Florida Properties suffered damage from the five hurricanes that struck the state during August and September 2004. As of January 27, 2010, the Company estimates its total claim to be approximately $21.0 million. The Company has made claims for full recovery of these amounts, subject to deductibles. Through December 31, 2009, the Company has made total expenditures of approximately $18.0 million. The Company has reserved approximately $2.0 million related to these expenditures ($0.7 million in 2005 and $1.3 million in 2004). Approximately $6.9 million of these expenditures have been capitalized per the Company’s capitalization policy through December 31, 2009.
 
The Company has received proceeds from insurance carriers of approximately $10.7 million through December 31, 2009. For the year ended December 31, 2009, approximately $1.6 million has been recognized as a gain on insurance recovery, which is net of approximately $0.3 million of legal fees and included in income from other investments, net. On June 22, 2007, the Company filed a lawsuit related to some of the unpaid claims against certain insurance carriers and its insurance broker. See Note 18 in the Notes to Consolidated Financial Statements contained in this Form 10-K for further discussion of this lawsuit.
 
Supplemental Property Disclosure
 
We provide the following disclosures with respect to certain assets:
 
  •  Tropical Palms — On July 15, 2008, Tropical Palms, a 541-site resort Property located in Kissimmee, Florida, was leased to a new operator for 12 years. The lease provides for an initial fixed annual lease payment of $1.6 million, which escalates at the greater of CPI or 3%. Percentage rent payments are provided for beginning in 2010, subject to gross revenue floors. The Company will match the lessee’s capital investment in new rental units at the Property up to a maximum of $1.5 million. The lessee will pay the Company additional rent equal to 8% per year on the Company’s capital investment. The lease income recognized during the years ended December 31, 2009 and 2008 was approximately $1.9 million and $0.9 million, respectively, and is included in income from other investments, net. During the years ended December 31, 2009 and 2008, the Company spent approximately $0.6 million and zero, respectively, to match the lessee’s investment in new rental units at the Property.


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Property Acquisitions, Joint Ventures and Dispositions
 
The following chart lists the Properties or portfolios acquired, invested in, or sold since January 1, 2008:
 
             
Property
  Transaction Date   Sites  
 
Total Sites as of January 1, 2008
        112,779  
Property or Portfolio (# of Properties in parentheses):
           
Grandy Creek(1)
  January 14, 2008     179  
Lake George Schroon Valley Resort(1)
  January 23, 2008     151  
Expansion Site Development and other:
           
Sites added (reconfigured) in 2008
        282  
Sites added (reconfigured) in 2009
        (1 )
Dispositions:
           
Morgan Portfolio JV(5)
  2008     (1,134 )
Round Top JV(1)
  February 13, 2009     (319 )
Pine Haven JV(1)
  February 13, 2009     (625 )
Caledonia(1)
  April 17, 2009     (247 )
Casa Village(1)
  July 20, 2009     (490 )
             
Total Sites as of December 31, 2009
        110,575  
             
 
Since December 31, 2007, the gross investment in real estate increased from $2,396 million to $2,538 million as of December 31, 2009, due primarily to the aforementioned acquisitions and dispositions of Properties during the period.
 
Markets
 
The following table identifies our five largest markets by number of sites and provides information regarding our Properties (excluding Properties owned through Joint Ventures and our 82 right-to-use Properties).
 
                                 
                      Percent of Total
 
    Number of
          Percent of
    Property Operating
 
Major Market
  Properties     Total Sites     Total Sites     Revenues(1)  
 
Florida
    81       35,277       42.4 %     42.8 %
Arizona
    32       12,377       14.9 %     13.0 %
California
    31       7,360       8.8 %     17.2 %
Texas
    8       5,143       6.2 %     2.2 %
Colorado
    10       3,454       4.1 %     4.8 %
Other
    55       19,619       23.6 %     20.0 %
                                 
Total
    217       83,230       100.0 %     100.0 %
                                 
 
 
(1) Property operating revenues for this calculation excludes approximately $75.3 million of property operating revenue from our right-to-use Properties.
 
Critical Accounting Policies and Estimates
 
Our consolidated financial statements have been prepared in accordance with U.S. GAAP, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures. We believe that the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.


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The FASB finalized the Codification of GAAP effective for periods ending on or after September 15, 2009. References to GAAP issued by the FASB are to the Codification. The Codification does not change how the Company accounts for its transactions or the nature of the related disclosures made.
 
Long-Lived Assets
 
In accordance with the Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”), we allocated the purchase price of Properties we acquired on or prior to December 31, 2008 to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be available in connection with the acquisition or financing of the respective Property and other market data. We also consider information obtained about each Property as a result of our due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.
 
For business combinations for which the acquisition date is on or after January 1, 2009, the purchase price of Properties will be in accordance with the Codification Topic “Business Combinations” (“FASB ASC 805”) (prior authoritative guidance: Statement of Financial Accounting Standard No. 141R, “Business Combinations”). FASB ASC 805 replaces SFAS No. 141 but retains the fundamental requirements set forth in SFAS No. 141 that the acquisition method of accounting (also known as the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. FASB ASC 805 replaces, with limited exceptions as specified in the statement, the cost allocation process in SFAS No. 141 with a fair value based allocation process.
 
We periodically evaluate our long-lived assets, including our investments in real estate, for impairment indicators. Our judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal factors. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted.
 
Real estate is recorded at cost less accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. We generally use a 30-year estimated life for buildings acquired and structural and land improvements (including site development), a ten-year estimated life for building upgrades and a five-year estimated life for furniture, fixtures and equipment. New rental units are generally depreciated using a 20-year estimated life from each model year down to a salvage value of 40% of the original costs. Used rental units are generally depreciated based on the estimated life of the unit with no estimated salvage value.
 
The values of above-and below-market leases are amortized and recorded as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income over the remaining term of the associated lease. The value associated with in-place leases is amortized over the expected term, which includes an estimated probability of lease renewal. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve the asset and extend the useful life of the asset are capitalized over their estimated useful life.
 
Revenue Recognition
 
The Company accounts for leases with its customers as operating leases. Rental income is recognized over the term of the respective lease or the length of a customer’s stay, the majority of which are for a term of not greater than one year. We will reserve for receivables when we believe the ultimate collection is less than probable. Our provision for uncollectible rents receivable was approximately $2.2 million and $1.5 million as of December 31, 2009 and December 31, 2008, respectively.
 
The Company accounts for the sales of right-to-use contracts in accordance with the Codification Topic “Revenue Recognition” (“FASB ASC 605”) (prior authoritative guidance: Staff Accounting Bulletin 104, “Revenue Recognition in Consolidated Financial Statements, Corrected”). A right-to-use contract gives the customer the right to a set schedule of usage at a specified group of properties. Customers may choose to upgrade their contracts to increase their usage and the number of properties they may access. A contract


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requires the customer to make an upfront nonrefundable payment and annual payments during the term of the contract. The stated term of a right-to-use contract is generally three years and the customer may renew his contract by continuing to make the annual payments. The Company will recognize the upfront non-refundable payments over the estimated customer life which, based on historical attrition rates, the Company has estimated to be from one to 31 years. For example, we have currently estimated that 7.9% of customers who purchase a new right-to-use contract will terminate their contract after five years. Therefore, the upfront nonrefundable payments from 7.9% of the contracts sold in any particular period are amortized on a straight-line basis over a period of five years as the estimated customer life for 7.9% of our customers who purchase a contract is five years. The historical attrition rates for upgrade contracts are lower than for new contacts, and therefore, the nonrefundable upfront payments for upgrade contracts are amortized at a different rate than for new contracts. The decision to recognize this revenue in accordance with FASB ASC 605 was made after corresponding with the Office of the Chief Accountant at the SEC during September and October of 2008.
 
Right-to-use annual payments paid by customers under the terms of the right-to-use contracts are deferred and recognized ratably over the one-year period in which the services are provided.
 
Income from home sales is recognized when the earnings process is complete. The earnings process is complete when the home has been delivered, the purchaser has accepted the home and title has transferred.
 
Allowance for Doubtful Accounts
 
Rental revenue from our tenants is our principal source of revenue and is recognized over the term of the respective lease or the length of a customer’s stay, the majority of which are for a term of not greater than one year. We monitor the collectibility of accounts receivable from our tenants on an ongoing basis. We will reserve for receivables when we believe the ultimate collection is less than probable and maintain an allowance for doubtful accounts. An allowance for doubtful accounts is recorded during each period and the associated bad debt expense is included in our property operating and maintenance expense in our Consolidated Statements of Operations. The allowance for doubtful accounts is netted against rent and other customer receivables, net on our consolidated balance sheets. Our provision for uncollectible rents receivable was approximately $2.2 million and $1.5 million as of December 31, 2009 and December 31, 2008, respectively.
 
We may also finance the sale of homes to our customers through loans (referred to as “Chattel Loans”). The valuation of an allowance for doubtful accounts for the Chattel Loans is calculated based on delinquency trends and a comparison of the outstanding principal balance of each note compared to the N.A.D.A. (National Automobile Dealers Association) value and the current market value of the underlying manufactured home collateral. A bad debt expense is recorded in home selling expense in our Consolidated Statements of Operations. The allowance for doubtful accounts is netted against the notes receivables on our consolidated balance sheets. The allowance for these Chattel Loans as of December 31, 2009 and December 31, 2008 was $0.3 million and $0.2 million, respectively.
 
The Company may also finance the nonrefundable upfront payments on sales of right-to-use contracts (“Contracts Receivable”). Based upon historical collection rates and current economic trends, when a sale is financed a reserve is established for a portion of the Contracts Receivable balance estimated to be uncollectible. The allowance and the rate at which the Company provides for losses on its Contracts Receivable could be increased or decreased in the future based on the Company’s actual collection experience. The allowance for these Contract Receivables as of December 31, 2009 and December 31, 2008 was $1.2 million and $0.3 million, respectively.
 
Variable Interest Entities
 
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R),” the current authoritative guidance of which is the Codification Topic “Consolidation” (“FASB ASC 810”). FASB ASC 810 seeks to improve financial reporting by enterprises involved with variable interest entities. The Statement addresses the effects on certain provisions of FASB ASC 810-10-15, Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in FASB Statement No. 166, Accounting for Transfers of Financial Assets. It also discusses the application of


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certain key provisions of FASB ASC 810-10-15, including those in which the accounting and disclosures under FASB ASC 810-10-15 do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This Statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.
 
The Company will re-evaluate and apply the provisions of FASB ASC 810-10-15 to existing entities if certain events occur which warrant re-evaluation of such entities. In addition, the Company will apply the provisions of FASB ASC 810-10-15 to all new entities in the future. The Company also consolidates entities in which it has a controlling direct or indirect voting interest. The equity method of accounting is applied to entities in which the Company does not have a controlling direct or indirect voting interest, but can exercise influence over the entity with respect to its operations and major decisions. The cost method is applied when (i) the investment is minimal (typically less than 5%) and (ii) the Company’s investment is passive.
 
Valuation of Financial Instruments
 
The valuation of financial instruments under the Codification Topic “Financial Instruments” (“FASB ASC 825”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 107, “Disclosures About Fair Value of Financial Instruments”) and the Codification Topic “Derivatives and Hedging” (“FASB ASC 815”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”) requires us to make estimates and judgments that affect the fair value of the instruments. Where possible, we base the fair values of our financial instruments on listed market prices and third party quotes. Where these are not available, we base our estimates on other factors relevant to the financial instrument.
 
The Company currently does not have any financial instruments that require the application of FASB ASC 825 or FASB ASC 815.
 
Stock-Based Compensation
 
The Company adopted the fair-value-based method of accounting for share-based payments effective January 1, 2003 using the modified prospective method described in FASB Statement No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”. The Company adopted the Codification Topic “Stock Compensation” (“FASB ASC 718”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 123(R), “Share Based Payment”) on July 1, 2005, which did not have a material impact on the Company’s results of operations or its financial position. The Company uses the Black-Scholes-Merton formula to estimate the value of stock options granted to employees, consultants and directors.
 
Non-controlling Interests
 
In December 2007, the FASB issued the Codification Topic “Consolidation” (“FASB ASC 810”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements”), an amendment of Accounting Research Bulletin No. 51. FASB ASC 810 seeks to improve uniformity and transparency in reporting of the net income attributable to non-controlling interests in the consolidated financial statements of the reporting entity. The statement requires, among other provisions, the disclosure, clear labeling and presentation of non-controlling interests in the Consolidated Balance Sheets and Consolidated Statements of Operations. Per FASB ASC 810, a non-controlling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. The ownership interests in the subsidiary that are held by owners other than the parent are non-controlling interests. Under FASB ASC 810, such non-controlling interests are reported on the consolidated balance sheets within equity, separately from the Company’s equity. However, securities that are redeemable for cash or other assets at the option of the holder, not solely within the control of the issuer, must be classified outside of permanent equity. This would result in certain outside ownership interests being included as redeemable non-controlling interests outside of permanent equity in the consolidated balance sheets. The Company makes this determination based on terms in applicable agreements, specifically in relation to redemption provisions. Additionally, with respect to


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non-controlling interests for which the Company has a choice to settle the contract by delivery of its own shares, the Company considered the guidance in the Codification Topic “Derivatives and Hedging — Contracts in Entity’s Own Equity” (“FASB ASC 815-40”) (prior authoritative guidance: EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”) to evaluate whether the Company controls the actions or events necessary to issue the maximum number of shares that could be required to be delivered under share settlement of the contract.
 
In accordance with FASB ASC 810, effective January 1, 2009, the Company, for all periods presented, has reclassified the non-controlling interest for Common OP Units from the mezzanine section under Total Liabilities to the Equity section of the consolidated balance sheets. The caption Common OP Units on the consolidated balance sheets also includes $0.5 million of private REIT Subsidiaries preferred stock. Based on the Company’s analysis, Perpetual Preferred OP Units will remain in the mezzanine section. The presentation of income allocated to Common OP Units and Perpetual Preferred OP Units on the consolidated statements of operations has been moved to the bottom of the statement prior to Net income available to Common Shares.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements with any unconsolidated investments or joint ventures that we believe have or are reasonably likely to have a material effect on our financial condition, results of operations, liquidity or capital resources.
 
Recent Accounting Pronouncements
 
In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events,” the current authoritative guidance of which is the Codification Sub-Topic “Subsequent Events” (“FASB ASC 855-10”). FASB ASC 855-10 seeks to establish general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. The Statement sets forth the period and circumstances after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. The Statement introduces the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The Statement applies to interim or annual financial periods ending after June 15, 2009. The adoption of FASB ASC 855-10 has had no material effect on the Company’s financial statements. Our management evaluated for subsequent events through the time of our filing on February 25, 2010.


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Results of Operations
 
Comparison of Year Ended December 31, 2009 to Year Ended December 31, 2008
 
The following table summarizes certain financial and statistical data for the Property Operations for all Properties owned and operated for the same period in both years (“Core Portfolio”) and the Total Portfolio for the years ended December 31, 2009 and 2008 (amounts in thousands). The Core Portfolio may change from time-to-time depending on acquisitions, dispositions and significant transactions or unique situations. The Core Portfolio in this comparison of the year ended December 31, 2009 to December 31, 2008 includes all Properties acquired on or prior to December 31, 2007 and which were owned and operated by the Company during the year ended December 31, 2009.
 
                                                                 
    Core Portfolio     Total Portfolio  
                Increase/
    %
                Increase/
    %
 
    2009     2008     (Decrease)     Change     2009     2008     (Decrease)     Change  
 
Community base rental income
  $ 253,379     $ 245,833     $ 7,546       3.1 %   $ 253,379     $ 245,833     $ 7,546       3.1 %
Resort base rental income
    105,601       104,304       1,297       1.2 %     124,822       111,876       12,946       11.6 %
Right-to-use annual payments
                            50,765       19,667       31,098       158.1 %
Right-to-use contracts current period, gross
                            21,526       10,951       10,575       96.6 %
Right-to-use contracts, deferred, net of prior period amortization
                            (18,882 )     (10,611 )     8,271       77.9 %
Utility and other income
    41,422       38,921       2,501       6.4 %     47,685       41,633       6,052       14.5 %
                                                                 
Property operating revenues
    400,402       389,058       11,344       2.9 %     479,295       419,349       59,946       14.3 %
Property operating and maintenance
    130,473       131,821       (1,348 )     (1.0 )%     180,870       152,363       28,507       18.7 %
Real estate taxes
    28,012       27,963       49       0.2 %     31,674       29,457       2,217       7.5 %
Sales and marketing, gross
                            13,536       7,116       6,420       90.2 %
Sales and marketing, deferred commissions, net
                            (5,729 )     (3,644 )     (2,085 )     (57.2 %)
Property management
    20,095       20,999       (904 )     (4.3 )%     33,383       25,451       7,932       31.2 %
                                                                 
Property operating expenses
    178,580       180,783       (2,203 )     (1.2 )%     253,734       210,743       42,991       20.4 %
                                                                 
Income from property operations
  $ 221,822     $ 208,275     $ 13,547       6.5 %   $ 225,561     $ 208,606     $ 16,955       8.1 %
                                                                 
 
Property Operating Revenues
 
The 2.9% increase in the Core Portfolio property operating revenues reflects (i) a 3.3% increase in rates for our community base rental income offset by a 0.2% decrease in occupancy, (ii) a 1.2% increase in revenues for our core resort base income comprised of an increase of 5.5% in annual revenues, offset by a 8.4% decrease in seasonal resort revenue and a 2.7% decrease in transient revenue, and (iii) an increase of 6.4% in core utility and other income primarily due to increased pass-throughs at certain Properties. The Total Portfolio property operating revenues increase of 14.3% is primarily due to the consolidation of the right-to-use Properties beginning August 14, 2008 as a result of the PA Transaction. The right-to-use annual payments represent the annual payments earned on right-to-use contracts acquired in the PA Transaction or sold since the PA


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Transaction on August 14, 2008. The right-to-use contracts current period, gross represents all right-to-use contract sales during the year. The right-to-use contracts, deferred represents the deferral of current period sales into future periods, offset by the amortization of revenue deferred in prior periods. See Note 2 (n) in the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
Property Operating Expenses
 
The 1.2% decrease in property operating expenses in the Core Portfolio reflects a 1.0% decrease in property operating and maintenance expenses and a 4.3% decrease in property management expenses. Our Total Portfolio property operating and maintenance expenses and real estate taxes increased due to the consolidation of the right-to-use Properties beginning August 14, 2008 as a result of the PA Transaction. Total Portfolio sales and marketing expense are all related to the costs incurred for the sale of right-to-use contracts. Sales and marketing, deferred commissions, net represents commissions on right-to-use contract sales deferred until future periods to match the deferral of the right-to-use contract sales, offset by the amortization of prior period commission. Total Portfolio property management expenses primarily increased due to the PA Transaction.
 
Home Sales Operations
 
The following table summarizes certain financial and statistical data for the Home Sales Operations for the years ended December 31, 2009 and 2008 (amounts in thousands, except sales volumes).
 
                                 
    2009     2008     Variance     % Change  
 
Gross revenues from new home sales
  $ 3,397     $ 19,013     $ (15,616 )     (82.1 )%
Cost of new home sales
    (4,681 )     (21,219 )     16,538       77.9 %
                                 
Gross loss from new home sales
    (1,284 )     (2,206 )     922       41.8 %
Gross revenues from used home sales
    3,739       2,832       907       32.0 %
Cost of used home sales
    (2,790 )     (2,850 )     60       2.1 %
                                 
Gross profit (loss) from used home sales
    949       (18 )     967       5,372.2 %
Brokered resale revenues, net
    758       1,094       (336 )     (30.7 )%
Home selling expenses
    (2,383 )     (5,776 )     3,393       58.7 %
Ancillary services revenues, net
    2,745       1,197       1,548       129.3 %
                                 
Income (loss) from home sales operations and other
  $ 785     $ (5,709 )   $ 6,494       113.8 %
                                 
Home sales volumes:
                               
New home sales(1)
    113       378       (265 )     (70.1 )%
Used home sales(2)
    747       407       340       83.5 %
Brokered home resales
    612       786       (174 )     (22.1 %)
 
 
(1) Includes third party home sales of 28 and 71 for the years ended December 31, 2009 and 2008, respectively.
 
(2) Includes third party home sales of seven and one for the years ended December 31, 2009 and 2008, respectively.
 
Income from home sales operations increased primarily as a result of lower home selling expenses and increased ancillary services revenues, net. Gross loss from new home sales was offset by profit from used home sales and resales. Gross loss from new home sales includes an increase in inventory reserve of approximately $0.9 million. The increase in used home sales profit and volumes is primarily due to sales of resort cottages at the right-to-use Properties. Home selling expenses for 2009 have decreased compared to 2008 as a result of lower new home sales volumes and decreased advertising costs. Ancillary services revenues, net, increased primarily due to the inclusion of the ancillary activities of the right-to-use Properties consolidated by the Company as of August 14, 2008.


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Rental Operations
 
The following table summarizes certain financial and statistical data for manufactured home Rental Operations for the years ended December 31, 2009 and 2008 (dollars in thousands). Except as otherwise noted, the amounts below are included in Ancillary services revenue, net, in the Home Sales Operations table in previous section.
 
                                 
    2009     2008     Variance     % Change  
 
Manufactured homes:
                               
New Home
  $ 6,570     $ 3,870     $ 2,700       69.8 %
Used Home
    9,187       7,100       2,087       29.4 %
                                 
Rental operations revenue(1)
    15,757       10,970       4,787       43.6 %
Property operating and maintenance
    2,036       2,022       14       0.7 %
Real estate taxes
    176       127       49       38.6 %
                                 
Rental operations expenses
    2,212       2,149       63       2.9 %
Income from rental operations
    13,545       8,821       4,724       53.6 %
Depreciation
    (2,361 )     (1,222 )     (1,139 )     (93.2 )%
                                 
Income from rental operations, net of depreciation
  $ 11,184     $ 7,599     $ 3,585       47.2 %
                                 
Number of occupied rentals — new, end of period
    595       433       162       37.4 %
Number of occupied rentals — used, end of period
    1,158       799       359       44.9 %
 
 
(1) Approximately $11.9 million and $8.4 million as of December 31, 2009 and 2008, respectively, are included in Community base rental income in the Property Operations table.
 
The increase in income from rental operations and depreciation expense is primarily due to the increase in the number of occupied rentals.
 
Other Income and Expenses
 
The following table summarizes other income and expenses for the years ended December 31, 2009 and 2008 (amounts in thousands).
 
                                 
    2009     2008     Variance     % Change  
 
Interest income
  $ 5,119     $ 3,095     $ 2,024       65.4 %
Income from other investments, net
    8,168       17,006       (8,838 )     (52.0 )%
General and administrative
    (22,279 )     (20,617 )     (1,662 )     (8.1 )%
Rent control initiatives
    (456 )     (1,555 )     1,099       70.7 %
Interest and related amortization
    (98,311 )     (99,430 )     1,119       1.1 %
Depreciation on corporate assets
    (1,039 )     (390 )     (649 )     (166.4 )%
Depreciation on real estate and other costs
    (69,049 )     (66,193 )     (2,856 )     (4.3 )%
                                 
Total other expenses, net
  $ (177,847 )   $ (168,084 )   $ (9,763 )     (5.8 )%
                                 
 
Interest income is higher primarily due to interest income on Contracts Receivable purchased on August 14, 2008 in the PA Transaction or originated after the PA Transaction. Income from other investments, net, decreased primarily due to lower Privileged Access lease income of $14.9 million received during 2008 offset by the following incremental increases in 2009: $1.1 million of insurance proceeds, $1.1 million in Tropical Palms lease payments, Caledonia sale and Caledonia lease income of $1.0 million, and net RPI and TTMSI income of $1.9 million. General and administrative expense increased primarily due to higher payroll, professional fees, and rent and utilities. General and administrative in 2009 includes approximately $0.4 million of costs related to


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transactions required to be expensed in accordance with FASB ASC 805. Prior to 2009, such costs were capitalized in accordance with SFAS No. 141.
 
The Company has determined that certain depreciable assets acquired during years prior to 2009 were inadvertently omitted from prior year depreciation expense calculations. Since the total amounts involved were immaterial to the Company’s financial position and results of operations, the Company has decided to record additional depreciation expense in 2009 to reflect this adjustment. As a result, the year ended December 31, 2009 includes approximately $1.8 million of prior period depreciation expense.
 
Equity in Income of Unconsolidated Joint Ventures
 
For the year ended December 31, 2009, equity in income of unconsolidated joint ventures decreased $0.9 million primarily due to a $1.1 million gain in 2009 on the sale of our 25% interest in two Diversified Portfolio joint ventures, offset by a $0.6 million gain in 2008 on the payoff of our share of seller financing in excess of basis on one Lakeshore investment, and a gain of $1.6 million in 2008 on the sale of our interest in four Morgan joint venture Properties in 2008.
 
Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007
 
The following table summarizes certain financial and statistical data for the Property Operations for all Properties owned and operated for the same period in both years (“Core Portfolio”) and the Total Portfolio for the years ended December 31, 2008 and 2007 (amounts in thousands). The Core Portfolio may change from time-to-time depending on acquisitions, dispositions and significant transactions or unique situations. The Core Portfolio in this comparison of the year ended December 31, 2008 to December 31, 2007 includes all Properties acquired on or prior to December 31, 2006 and which were owned and operated by the Company during the year ended December 31, 2008.
 
                                                                 
    Core Portfolio     Total Portfolio  
                Increase/
    %
                Increase/
    %
 
    2008     2007     (Decrease)     Change     2008     2007     (Decrease)     Change  
 
Community base rental income
  $ 245,833     $ 236,933     $ 8,900       3.8 %   $ 245,833     $ 236,933     $ 8,900       3.8 %
Resort base rental income
    98,884       95,895       2,989       3.1 %     111,876       102,372       9,504       9.3 %
Right-to-use annual payments
                            19,667             19,667       100.0 %
Right-to-use contracts current period, gross
                            10,951             10,951       100.0 %
Right-to-use contracts, deferred, net of prior period amortization
                            (10,611 )           (10,611 )     (100.0 )%
Utility and other income
    38,389       36,380       2,009       5.5 %     41,633       36,849       4,784       13.0 %
                                                                 
Property operating revenues
    383,106       369,208       13,898       3.8 %     419,349       376,154       43,195       11.5 %
Property operating and maintenance
    128,738       123,656       5,082       4.1 %     152,363       127,342       25,021       19.6 %
Real estate taxes
    27,434       27,046       388       1.4 %     29,457       27,429       2,028       7.4 %
Sales and marketing, gross
                            7,116             7,116       100.0 %
Sales and marketing, deferred commissions, net
                            (3,644 )           (3,644 )     (100.0 )%
Property management
    20,293       18,147       2,146       11.8 %     25,451       18,385       7,066       38.4 %
                                                                 
Property operating expenses
    176,465       168,849       7,616       4.5 %     210,743       173,156       37,587       21.7 %
                                                                 
Income from property operations
  $ 206,641     $ 200,359     $ 6,282       3.1 %   $ 208,606     $ 202,998     $ 5,608       2.8 %
                                                                 


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Property Operating Revenues
 
The 3.8% increase in the Core Portfolio property operating revenues reflects (i) a 3.7% increase in rates for our community base rental income combined with a 0.1% increase in occupancy, (ii) a 3.1% increase in revenues for our resort base income comprised of an increase of 6.9% in annual and 2.8% in seasonal resort revenue, offset by a decrease of 8.5% in transient revenue, and (iii) an increase of 5.5% in utility and other income primarily due to increased pass-throughs at certain Properties. The Total Portfolio property operating revenues increase of 11.5% was primarily due to the consolidation of the right-to-use Properties beginning August 14, 2008 as a result of the PA Transaction. The right-to-use annual payments represent the annual payments earned on right-to-use contracts acquired in the PA Transaction or sold since the PA Transaction on August 14, 2008. The right-to-use contracts current period, gross represents all right-to-use contract sales since the PA Transaction. The right-to-use contracts, deferred represents the deferral of current period sales into future periods. See Note 2 (n) in the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
Property Operating Expenses
 
The 4.5% increase in property operating expenses in the Core Portfolio reflects a 4.1% increase in property operating and maintenance expenses and a 11.8% increase in property management expenses. The Core property operating and maintenance expense increase is primarily due to payroll and utility expenses. Our Total Portfolio property operating and maintenance expenses increased by 21.7% due to the consolidation of the right-to-use Properties beginning August 14, 2008 as a result of the PA Transaction. Total Portfolio sales and marketing expense, including commissions, are all related to the costs incurred for the sale of right-to-use contracts since the PA Transaction on August 14, 2008. Total Portfolio property management expenses primarily increased due to the PA Transaction and the increase in computer software costs. The sales and marketing, deferred commissions, net represents commissions on right-to-use contract sales deferred until future periods to match the deferral of the right-to-use contract sales.
 
Home Sales Operations
 
The following table summarizes certain financial and statistical data for the Home Sales Operations for the years ended December 31, 2008 and 2007 (amounts in thousands, except sales volumes).
 
                                 
    2008     2007     Variance     % Change  
 
Gross revenues from new home sales
  $ 19,013     $ 31,116     $ (12,103 )     (38.9 )%
Cost of new home sales
    (21,219 )     (28,067 )     6,848       (24.4 )%
                                 
Gross (loss) profit from new home sales
    (2,206 )     3,049       (5,255 )     (172.4 )%
Gross revenues from used home sales
    2,832       2,217       615       27.7 %
Cost of used home sales
    (2,850 )     (2,646 )     (204 )     (7.7 )%
                                 
Gross loss from used home sales
    (18 )     (429 )     411       95.8 %
Brokered resale revenues, net
    1,094       1,528       (434 )     (28.4 )%
Home selling expenses
    (5,776 )     (7,555 )     1,779       23.5 %
Ancillary services revenues, net
    1,197       2,436       (1,239 )     (50.9 )%
                                 
Loss from home sales operations and other
  $ (5,709 )   $ (971 )   $ (4,738 )     (488.0 )%
                                 
Home sales volumes:
                               
New home sales(1)
    378       440       (62 )     (14.1 )%
Used home sales(2)
    407       296       111       37.5 %
Brokered home resales
    786       967       (181 )     (18.7 %)
 
 
(1) Includes third party home sales of 71 and 45 for the years ended December 31, 2008 and 2007, respectively.
 
(2) Includes third party home sales of one and nine for the years ended December 31, 2008 and 2007, respectively.


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Loss from home sales operations increased as a result of lower new and brokered resale volumes, lower gross profits per home sold and the write-off of inventory home rebate receivable. The decrease in home selling expenses is primarily due to lower sales volumes and decreased advertising costs. During the year ended December 31, 2008, the Company reclassified all of its new and used manufactured home inventory to Buildings and other depreciable property. The homes were reclassified as the Company expects to rent the homes due to the decline in home sales. Ancillary service revenues, net decreased by 50.9% primarily due to $1.2 million of depreciation on new and used rental homes.
 
Rental Operations
 
During the year ended December 31, 2008, $57.8 million of manufactured home inventory, including reserves of approximately $0.8 million, was reclassified to Buildings and other depreciable property on our Consolidated Balance Sheets. The inventory moved included all new and used manufactured home inventory, which the Company is primarily renting. The following table summarizes certain financial and statistical data for manufactured home Rental Operations for the years ended December 31, 2008 and 2007 (dollars in thousands). Except as otherwise noted, the amounts below are included in Ancillary services revenue, net in the Home Sales Operations table in previous section.
 
                                 
    2008     2007     Variance     % Change  
 
Manufactured homes:
                               
New Home Revenues
  $ 3,870     $ 1,596     $ 2,274       142.5 %
Used Home Revenues
    7,100       5,446       1,654       30.4 %
                                 
Rental operations revenue(1)
    10,970       7,042       3,928       55.8 %
Property operating and maintenance
    2,022       1,105       917       83.0 %
Real estate taxes
    127       67       60       89.6 %
                                 
Rental operations expenses
    2,149       1,172       977       83.4 %
Income from rental operations
    8,821       5,870       2,951       50.3 %
Depreciation
    (1,222 )           (1,222 )     (100.0 )%
                                 
Income from rental operations, net of depreciation
  $ 7,599     $ 5,870     $ 1,729       29.5 %
                                 
Number of occupied rentals — new, end of period
    433       191       242       126.7 %
Number of occupied rentals — used, end of period
    799       716       83       11.6 %
 
 
(1) Approximately $8.4 million and $5.4 million as of December 31, 2008 and 2007, respectively, are included in Community base rental income in the Property Operations table.
 
The increase in rental operations revenue and expenses is primarily due to the increase in the number of occupied rentals. The increase in depreciation is due to the depreciation of the rental units starting during 2008 after being reclassified to Buildings and other depreciable property.


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Other Income and Expenses
 
The following table summarizes other income and expenses for the years ended December 31, 2008 and 2007 (amounts in thousands).
 
                                 
    2008     2007     Variance     % Change  
 
Interest income
  $ 3,095     $ 1,732     $ 1,363       78.7 %
Income from other investments, net
    17,006       22,476       (5,470 )     (24.3 )%
General and administrative
    (20,617 )     (15,591 )     (5,026 )     (32.2 )%
Rent control initiatives
    (1,555 )     (2,657 )     1,102       41.5 %
Interest and related amortization
    (99,430 )     (103,070 )     3,640       3.5 %
Depreciation on corporate assets
    (390 )     (437 )     47       10.8 %
Depreciation on real estate assets
    (66,193 )     (63,554 )     (2,639 )     (4.2 )%
                                 
Total other expenses, net
  $ (168,084 )   $ (161,101 )   $ (6,983 )     (4.3 )%
                                 
 
Interest income is higher primarily due to interest income on Contracts Receivable purchased in the PA Transaction. Income from other investments, net decreased due to the reduction in Privileged Access lease payments of $4.6 million and a $0.9 million write off of a Privileged Access restatement bonus. General and administrative expense increased due to higher compensation cost increases, including the Long-term Inventive Plan, of $3.8 million and increased professional fees of $0.8 million. Rent control initiatives decreased as a result of the refunding of $0.4 million in legal fees from 21st Mortgage Corporation suit in 2008 as well as a decrease in trial activity compared to 2007 (see Note 18 in the Notes to Consolidated Financial Statements contained in this Form 10-K). Interest and related amortization decreased due to lower interest rates and amounts outstanding. Depreciation on real estate assets includes $0.8 million of unamortized lease costs expensed related to the termination of the Privileged Access leases.
 
Equity in Income of Unconsolidated Joint Ventures
 
For the year ended December 31, 2008, equity in income of unconsolidated joint ventures increased $1.1 million primarily due to a $0.6 million gain on the payoff of our share of seller financing in excess of our basis on one Lakeshore investment, and a gain of $1.6 million on the sale of our interest in four Morgan joint venture Properties. The increase was offset by distributions received in 2007 from three joint ventures relating to debt financings by the joint ventures. These distributions exceeded the Company’s basis and were included in income from unconsolidated joint ventures in 2007. In addition, 2007 included activity at nine former joint ventures, which have been purchased by the Company.
 
Liquidity and Capital Resources
 
Liquidity
 
As of December 31, 2009, the Company had $145.1 million in cash and cash equivalents primarily held in treasury reserve accounts, and $370.0 million available on its lines of credit. The increase in the cash balance during the year ended December 31, 2009 is primarily due to $146.4 million of net proceeds generated from the sale of 4.6 million shares of our common stock in a public offering that closed on June 29, 2009. The Company expects to meet its short-term liquidity requirements, including its distributions, generally through its working capital, net cash provided by operating activities, proceeds from the sale of Properties and availability under the existing lines of credit. The Company expects to meet certain long-term liquidity requirements such as scheduled debt maturities, property acquisitions and capital improvements by use of its current cash balance, long-term collateralized and uncollateralized borrowings including borrowings under its existing lines of credit and the issuance of debt securities or additional equity securities in the Company, in addition to net cash provided by operating activities. During 2009 and 2008, we received financing proceeds from Fannie Mae secured by mortgages on individual manufactured home Properties. The terms of the Fannie Mae financings were relatively attractive as compared to other potential lenders. If financing proceeds are no longer available from Fannie Mae for any reason or if Fannie Mae terms are no longer attractive, it may adversely affect cash flow


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and our ability to service debt and make distributions to stockholders. The Company has approximately $183 million of scheduled debt maturities in 2010 (excluding scheduled principal payments on debt maturing in 2011 and beyond). The Company expects to satisfy its 2010 maturities with its existing cash balance and approximately $64.2 million of new financing proceeds we expect to receive in 2010.
 
The table below summarizes cash flow activity for the years ended December 31, 2009, 2008 and 2007 (amounts in thousands).
 
                         
    For the Twelve Months Ended
 
    December 31,  
    2009     2008     2007  
 
Net cash provided by operating activities
  $ 150,389     $ 113,890     $ 122,791  
Net cash used in investing activities
    (34,756 )     (33,104 )     (25,604 )
Net cash used in financing activities
    (15,817 )     (41,259 )     (93,007 )
                         
Net increase in cash and cash equivalents
  $ 99,816     $ 39,527     $ 4,180  
                         
 
Operating Activities
 
Net cash provided by operating activities increased $36.5 million for the year ended December 31, 2009 from $113.9 million for the year ended December 31, 2008. The increase in 2009 is primarily due to increases in income from property operations, income from home sales operations and increases in our deferred revenue from the sale of right-to-use contracts. Net cash provided by operating activities decreased $8.9 million for the year ended December 31, 2008 from $122.8 million for the year ended December 31, 2007. This decrease reflects increases in property operating income and interest income, offset by an increase in depreciation expense, decreases in income from other investments, net, and home sales.
 
Investing Activities
 
Net cash used in investing activities reflects the impact of the following investing activities:
 
Acquisitions
 
2009 Acquisitions
 
On February 13, 2009, the Company acquired the remaining 75% interests in three Diversified Portfolio joint ventures known as (i) Robin Hill, a 270-site property in Lenhartsville, Pennsylvania, (ii) Sun Valley, a 265-site property in Brownsville, Pennsylvania, and (iii) Plymouth Rock, a 609-site property in Elkhart Lake, Wisconsin. The gross purchase price was approximately $19.2 million, and we assumed mortgage loans of approximately $12.9 million with a value of approximately $11.9 million and a weighted average interest rate of 6% per annum.
 
On August 31, 2009, the Company acquired an internet and media based advertising business located in Orlando, Florida for approximately $3.7 million.
 
2008 Acquisitions
 
During the year ended December 31, 2008, we acquired two Properties (see Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-K). The combined investment in real estate for the acquisitions and investments was approximately $3.9 million and was funded with withdrawals of $2.1 million from our tax-deferred exchange account and borrowings from our lines of credit. The Company also acquired substantially all of the assets and certain liabilities of Privileged Access for an unsecured note payable of $2.0 million. Prior to the purchase, Privileged Access had a 12-year lease with the Company for 82 Properties that terminated upon closing. The $2.0 million unsecured note payable accrued interest at 10% per annum and was paid off December 17, 2009.


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2007 Acquisitions
 
During the year ended December 31, 2007, we acquired three Properties and acquired the remaining 75% interest in two joint ventures (see Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-K). The combined investment in real estate for the acquisitions and investments was approximately $36.1 million and was funded with new financing of $8.7 million, withdrawals of $18.1 million from our tax-deferred exchange account, and borrowings from our lines of credit.
 
Dispositions
 
On February 13, 2009, the Company sold its 25% interest in two Diversified Portfolio joint ventures known as (i) Pine Haven, a 625-site property in Ocean View, New Jersey and (ii) Round Top, a 319-site property in Gettysburg, Pennsylvania. A gain on sale of approximately $1.1 million was recognized during the quarter ended March 31, 2009 and is included in Equity in income of unconsolidated joint ventures.
 
On April 17, 2009, we sold Caledonia, a 247-site Property in Caledonia, Wisconsin, for proceeds of approximately $2.2 million. The Company recognized a gain on sale of approximately $0.8 million which is included in Income from other investments, net. In addition, we received approximately $0.3 million of deferred rent due from the previous tenant.
 
On July 20, 2009, we sold Casa Village, a 490-site Property in Billings, Montana for a stated purchase price of approximately $12.4 million. The buyer assumed $10.6 million of mortgage debt that had a stated interest rate of 6.02% and was schedule to mature in 2013. The Company recognized a gain on the sale of approximately $5.1 million. Cash proceeds from the sale, net of closing costs were approximately $1.1 million.
 
During the year ended December 31, 2008, the Company sold its 25% interest in the following properties, Newpoint in New Point, Virginia, Virginia Park in Old Orchard Beach, Maine, Club Naples in Naples, Florida, and Gwynn’s Island in Gwynn, Virginia, four properties held in the Morgan Portfolio, for approximately $2.1 million. A gain on sale of approximately $1.6 million was recognized. The Company also received approximately $0.3 million of escrowed funds related to the purchase of five Morgan Properties in 2005.
 
During year ended December 31, 2007, we sold three Properties for approximately $23.7 million. The Company recognized a gain of approximately $12.1 million. In order to partially defer the taxable gain on the sales, the sales proceeds, net of an eligible distribution of $2.4 million, were deposited in a tax-deferred exchange account. The proceeds from the sales were subsequently used in the like-kind acquisitions of four Properties.
 
We currently have one all-age Property, known as Creekside, held for disposition. On December 29, 2009, a deed-in-lieu of foreclosure agreement, signed by the Company was sent to the loan servicer regarding our nonrecourse mortgage loan of approximately $3.6 million secured by Creekside. See Note 18 in the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
The operating results of all properties sold or held for disposition have been reflected in the discontinued operations of the Consolidated Statements of Operations contained in this Form 10-K.
 
Notes Receivable Activity
 
The notes receivable activity during the year ended December 31, 2009 of $0.4 million in cash inflow reflects net repayments of $0.5 million from our Chattel Loans, net repayments of $1.6 million from our Contract Receivables and a net outflow of $1.7 million on other notes receivable.
 
The notes receivable activity during the year ended December 31, 2008 of $1.3 million in cash outflow reflects net lending of $2.8 million from our Chattel Loans and no net impact from our Contract Receivables. Contracts Receivable purchased in the PA Transaction contributed a net $19.6 million increase in non-cash inflow.


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Investments in and distributions from unconsolidated joint ventures
 
During the year ended December 31, 2009, the Company received approximately $2.9 million in distributions from our joint ventures. Approximately $2.9 million of these distributions were classified as a return on capital and were included in operating activities. Of these distributions, approximately $1.1 million relates to the gain on sale of the Company’s 25% interest in two Diversified joint ventures.
 
During the year ended December 31, 2008, the Company invested approximately $5.7 million in its joint ventures to increase the Company’s ownership interest in Voyager RV Resort to 50% from 25%. The Company also received approximately $0.4 million held for the initial investment in one of the Morgan Properties.
 
During the year ended December 31, 2008, the Company received approximately $4.2 million in distributions from our joint ventures. Approximately $3.7 million of these distributions were classified as return on capital and were included in operating activities. The remaining distributions of approximately $0.5 million were classified as a return of capital and were included in investing activities.
 
During the year ended December 31, 2007, the Company invested approximately $2.7 million in developing one of the Bar Harbor joint venture Properties, which resulted in an increase of the Company’s ownership interest per the joint venture agreement. As of December 31, 2007, the Bar Harbor joint venture was consolidated with the operations of the Company as the Company determined that as of December 31, 2007 we were the primary beneficiary by applying the standards of FIN 46R. This consolidation had decreased the Company’s investment in joint venture approximately $11.1 million, with an offsetting increase in investment in real estate.
 
During the year ended December 31, 2007, the Company received approximately $5.2 million in distributions from our joint ventures. $5.1 million of these distributions were classified as return on capital and were included in operating activities. The remaining distributions of approximately $0.1 million were classified as a return of capital and were included in investing activities and were related to refinancings at three of our joint venture Properties. Approximately $2.5 million of the distributions received exceeded the Company’s basis in its joint venture and as such were recorded in income from unconsolidated joint ventures.
 
In addition, the Company recorded approximately $2.9 million, $3.8 million and $2.7 million of net income from joint ventures, net of $1.3 million, $1.8 million and $1.4 million of depreciation, in the years ended December 31, 2009, 2008 and 2007, respectively.
 
Due to the Company’s inability to control the joint ventures, the Company accounts for its investment in the joint ventures using the equity method of accounting.
 
Capital improvements
 
The table below summarizes capital improvements activity for the years ended December 31, 2009, 2008, and 2007(amounts in thousands).
 
                         
    For the Year Ended December 31,  
    2009     2008     2007  
 
Recurring Cap Ex(1)
  $ 17,415     $ 15,319     $ 14,458  
New construction — expansion
    818       850       2,059  
New construction — upgrades(2)
    2,874       4,869       3,316  
Home site development(3)
    8,185       5,414       7,421  
Hurricane related
          66       1,512  
                         
Total Property
    29,292       26,518       28,766  
Corporate(4)
    1,584       198       618  
                         
Total Capital improvements
  $ 30,876     $ 26,716     $ 29,384  
                         
 
 
(1) Recurring capital expenditures (“Recurring CapEx”) are primarily comprised of common area improvements, furniture, and mechanical improvements.


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(2) New construction — upgrades primarily represents costs to improve and upgrade Property infrastructure or amenities.
 
(3) Home site development includes acquisitions of or improvements to rental units for the year ended December 31, 2009. Acquisitions of or improvements to rental units in the years ended December 31, 2008 and 2007 were included in Inventory changes on our Consolidated Statements of Cash Flow.
 
(4) Includes approximately $1.2 million spent to renovate the corporate headquarters, of which approximately $0.9 million was reimbursed by the landlord as a tenant allowance.
 
Financing Activities
 
Net cash used in financing activities reflects the impact of the following:
 
Mortgages and Credit Facilities
 
Financing, Refinancing and Early Debt Retirement
 
2009 Activity
 
During the year ended December 31, 2009, the Company closed on approximately $107.5 million of new financing, on six manufactured home properties, with a weighted average interest rate of 6.32% that mature in 10 years. We used the proceeds from the financing to pay-off approximately $106.7 million on 20 Properties, with a weighted average interest rate of 7.36%.
 
On February 13, 2009, in connection with the acquisition of the remaining 75% interests in the Diversified Portfolio joint venture, we assumed mortgages of approximately $11.9 million with a weighted average interest rate of 5.95% and weighted average maturity of five years.
 
On December 17, 2009, the Company paid off the $2 million unsecured note payable to Privileged Access.
 
2008 Activity
 
During the year ended December 31, 2008, the Company closed on approximately $231.0 million of new financing on 15 manufactured home Properties, with a weighted average interest rate of 6.01% that mature in 10 years. We used the proceeds from the financing to pay-off approximately $245.8 million on 28 Properties, with a weighted average interest rate of 5.54%.
 
2007 Activity
 
During the year ended December 31, 2007, the Company completed the following transactions:
 
  •  Paid off approximately $19.0 million of mortgage debt on four manufactured home Properties.
 
  •  In connection with the acquisition of Mesa Verde, during the first quarter of 2007, the Company assumed $3.5 million in mortgage debt bearing interest at 4.94% per annum and was repaid in May 2008.
 
  •  In connection with the acquisition of Winter Garden, during the second quarter of 2007, the Company assumed $4.0 million in mortgage debt bearing interest at 4.3% per annum and was repaid in August 2008.
 
  •  In September 2007, we amended our existing unsecured Lines of Credit (“LOC”) to expand our borrowing capacity from $275 million to $370 million. The lines of credit continue to accrue interest at LIBOR plus a maximum of 1.20% per annum, have a 0.15% facility fee, mature on June 30, 2010, and have a one-year extension option. We incurred commitment and arrangement fees of approximately $0.3 million to increase our borrowing capacity.
 
Secured Property Debt
 
As of December 31, 2009, our secured long-term debt balance was approximately $1.6 billion, with a weighted average interest rate in 2009 of approximately 6.1% per annum. The debt bears interest at rates


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between 5.0% and 10.0% per annum and matures on various dates primarily ranging from 2010 to 2019. Excluding scheduled principal amortization, we have approximately $184 million of long-term debt maturing in 2010 and approximately $56 million maturing in 2011. The weighted average term to maturity for the long-term debt is approximately 5.5 years.
 
During the first half of 2010, the Company expects to close on approximately $64.2 million of financing on three manufactured home Properties at a weighted average interest rate of 6.92% per annum, maturing in 10 years. We have locked rate with Fannie Mae on these loans. There can be no assurance such financings will occur or as to the timing and terms of such anticipated financing.
 
The Company expects to satisfy its secured debt maturities of approximately $184 million occurring prior to December 31, 2010 with the proceeds from the financings of the three mortgages noted above and its existing cash balance, which is approximately $145 million as of December 31, 2009. The expected timing and amounts of the most significant payoffs are as follows: i) approximately $100 million in April of 2010 and ii) approximately $75 million in August of 2010.
 
Unsecured Debt
 
We have two unsecured Lines of Credit (“LOC”) with a maximum borrowing capacity of $350 million and $20 million, respectively, which bear interest at a per annum rate of LIBOR plus a maximum of 1.20% per annum, have a 0.15% facility fee, mature on June 30, 2010, and have a one-year extension option. The weighted average interest rate for the year ended December 31, 2009 for our unsecured debt was approximately 1.7% per annum. Throughout the year ended December 31, 2009, we borrowed $50.9 million and paid down $143.9 million on the lines of credit for a net pay down of $93.0 million. As of December 31, 2009, there were no amounts outstanding on the lines of credit.
 
Other Loans
 
During 2007, we borrowed $4.3 million to finance our insurance premium payments. As of December 31, 2007, this loan had been paid off.
 
During December 2009, we borrowed approximately $1.5 million which is secured by individual manufactured homes. This financing provided by the dealer requires monthly payments, bears interest at 8.5% and matures on the earlier of: 1) the date the home is sold, or 2) November 20, 2016.
 
Certain of the Company’s mortgages and credit agreements contain covenants and restrictions including restrictions as to the ratio of secured or unsecured debt versus encumbered or unencumbered assets, the ratio of fixed charges-to-earnings before interest, taxes, depreciation and amortization (“EBITDA”), limitations on certain holdings and other restrictions.
 
Contractual Obligations
 
As of December 31, 2009, we were subject to certain contractual payment obligations as described in the table below (dollars in thousands):
 
                                                                 
Contractual Obligations
  Total   2010   2011   2012   2013   2014   2015   Thereafter
 
Long Term Borrowings(1)
  $ 1,548,692     $ 203,663     $ 75,719     $ 21,806     $ 121,685     $ 200,829     $ 533,392     $ 391,598  
Weighted average interest rates
    6.12 %     5.91 %     5.82 %     5.78 %     5.78 %     5.79 %     5.82 %     6.14 %
 
 
(1) Balance excludes net premiums and discounts of $0.8 million. Balances include debt maturing and scheduled periodic principal payments.
 
The Company does not include Preferred OP Unit distributions, interest expense, insurance, property taxes and cancelable contracts in the contractual obligations table above.
 
The Company leases land under non-cancelable operating leases at certain of the Properties expiring in various years from 2013 to 2054, with terms which require twelve equal payments per year plus additional rents


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calculated as a percentage of gross revenues. For the years ended December 31, 2009, 2008, and 2007, ground lease rent was approximately $1.9 million, $1.8 million, and $1.6 million, respectively. Minimum future rental payments under the ground leases are approximately $1.9 million for each of the next five years and approximately $18.7 million thereafter.
 
With respect to maturing debt, the Company has staggered the maturities of its long-term mortgage debt over an average of approximately six years, with no more than $533 million (which is due in 2015) in principal maturities coming due in any single year. The Company believes that it will be able to refinance its maturing debt obligations on a secured or unsecured basis; however, to the extent the Company is unable to refinance its debt as it matures, it believes that it will be able to repay such maturing debt from operating cash flow, asset sales and/or the proceeds from equity issuances. With respect to any refinancing of maturing debt, the Company’s future cash flow requirements could be impacted by significant changes in interest rates or other debt terms, including required amortization payments.
 
Equity Transactions
 
In order to qualify as a REIT for federal income tax purposes, the Company must distribute 90% or more of its taxable income (excluding capital gains) to its stockholders. The following regular quarterly distributions have been declared and paid to common stockholders and non-controlling interests since January 1, 2007.
 
                         
    For the Quarter
    Stockholder Record
       
Distribution Amount Per Share
  Ending     Date     Payment Date  
 
$0.1500
    March 31, 2007       March 30, 2007       April 13, 2007  
$0.1500
    June 30, 2007       June 29, 2007       July 13, 2007  
$0.1500
    September 30, 2007       September 28, 2007       October 12, 2007  
$0.1500
    December 31, 2007       December 28, 2007       January 11, 2008  
                         
$0.2000
    March 31, 2008       March 28, 2008       April 11, 2008  
$0.2000
    June 30, 2008       June 27, 2008       July 11, 2008  
$0.2000
    September 30, 2008       September 26, 2008       October 10, 2008  
$0.2000
    December 31, 2008       December 26, 2008       January 9, 2009  
                         
$0.2500
    March 31, 2009       March 27, 2009       April 10, 2009  
$0.2500
    June 30, 2009       June 26, 2009       July 10, 2009  
$0.3000
    September 30, 2009       September 25, 2009       October 9, 2009  
$0.3000
    December 31, 2009       December 24, 2009       January 8, 2010  
 
2009 Activity
 
On November 10, 2009, the Company announced that in 2010 the annual distribution per common share will be $1.20 per share up from $1.10 per share in 2009 and $0.80 per share in 2008. This decision recognizes the Company’s investment opportunities and the importance of its dividend to its stockholders.
 
On June 29, 2009, the Company issued 4.6 million shares of common stock in an equity offering for approximately $146.4 million in proceeds, net of offering costs.
 
On December 31, 2009, September 30, 2009, June 30, 2009 and March 31, 2009, the Operating Partnership paid distributions of 8.0625% per annum on the $150 million Series D 8% Units and 7.95% per annum on the $50 million of Series F 7.95% Units.
 
During the year ended December 31, 2009, we received approximately $4.9 million in proceeds from the issuance of shares of common stock, through stock option exercises and the Company’s Employee Stock Purchase Plan (“ESPP”).


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2008 Activity
 
On December 31, 2008, September 30, 2008, June 30, 2008 and March 31, 2008, the Operating Partnership paid distributions of 8.0625% per annum on the $150 million Series D 8% Units and 7.95% per annum on the $50 million of Series F 7.95% Units.
 
During the year ended December 31, 2008, we received approximately $4.7 million in proceeds from the issuance of shares of common stock through stock option exercises and the Company’s ESPP.
 
2007 Activity
 
On December 28, 2007, September 28, 2007, June 29, 2007 and March 30, 2007, the Operating Partnership paid distributions of 8.0625% per annum on the $150 million Series D 8% Units and 7.95% per annum on the $50 million of Series F 7.95% Units.
 
During the year ended December 31, 2007, we received approximately $3.7 million in proceeds from the issuance of shares of common stock through stock option exercises and the Company’s ESPP.
 
Inflation
 
Substantially all of the leases at the Properties allow for monthly or annual rent increases which provide us with the opportunity to achieve increases, where justified by the market, as each lease matures. Such types of leases generally minimize the risks of inflation to the Company. In addition, our resort Properties are not generally subject to leases and rents are established for these sites on an annual basis. Our right-to-use contracts generally provide for an annual dues increase, but dues may be frozen under the terms of certain contracts if the customer is over 61 years old.
 
Funds From Operations
 
Funds from Operations (“FFO”) is a non-GAAP financial measure. We believe 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. We receive 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, we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO. We believe that FFO is helpful to investors as one of several measures of the performance of an equity REIT. We further believe 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. We believe 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. We compute 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. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and


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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.
 
The following table presents a calculation of FFO for the years ended December 31, 2009, 2008 and 2007 (amounts in thousands):
 
                         
    2009     2008     2007  
 
Computation of funds from operations:
                       
Net income available for common shares
  $ 34,005     $ 18,303     $ 32,102  
Income allocated to common OP Units
    6,113       4,297       7,705  
Right-to-use contract sales, deferred, net
    18,882       10,611        
Right-to-use contract commissions, deferred, net
    (5,729 )     (3,644 )      
Depreciation on real estate assets and other
    69,049       66,193       63,554  
Depreciation on unconsolidated joint ventures
    1,250       1,776       1,427  
(Gain) loss on real estate
    (5,488 )     79       (12,036 )
                         
Funds from operations available for common shares
  $ 118,082     $ 97,615     $ 92,752  
                         
Weighted average common shares outstanding — fully diluted
    32,944       30,498       30,414  
                         
 
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk
 
Market risk is the risk of loss from adverse changes in market prices and interest rates. Our earnings, cash flows and fair values relevant to financial instruments are dependent on prevailing market interest rates. The primary market risk we face is long-term indebtedness, which bears interest at fixed and variable rates. The fair value of our long-term debt obligations is affected by changes in market interest rates. At December 31, 2009, approximately 100% or approximately $1.5 billion of our outstanding debt had fixed interest rates, which minimizes the market risk until the debt matures. For each increase in interest rates of 1% (or 100 basis points), the fair value of the total outstanding debt would decrease by approximately $83.2 million. For each decrease in interest rates of 1% (or 100 basis points), the fair value of the total outstanding debt would increase by approximately $88.0 million.
 
At December 31, 2009, none of our outstanding debt was short-term and at variable rates.
 
FORWARD-LOOKING STATEMENTS
 
This report includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as “anticipate,” “expect,” “believe,” “project,” “intend,” “may be” and “will be” and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements. 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;


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  •  results from home sales and occupancy will continue to be impacted by local economic conditions, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing;
 
  •  impact of government intervention to stabilize site-built single family housing and not manufactured housing;
 
  •  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 under the 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.
 
Item 8.   Financial Statements and Supplementary Data
 
See Index to Consolidated Financial Statements on page F-1 of this Form 10-K.
 
Item 9.   Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.
 
Item 9A.   Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
The Company’s management, with the participation of the Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal accounting officer), maintains a system of disclosure controls and procedures, designed to provide reasonable assurance that information the Company is required to disclose in the reports that the Company files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.
 
The Company’s management with the participation of the Chief Executive Officer and the Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2009. Based on that evaluation as of the end of the period covered by this annual report, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated there under as of December 31, 2009.
 
Changes in Internal Control Over Financial Reporting
 
There were no material changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2009.


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Report of Management on Internal Control Over Financial Reporting
 
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Based on management’s assessment, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.”
 
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 has been audited by the Company’s independent registered public accounting firm, as stated in their report on Page F-2 of the Consolidated Financial Statements.
 
Item 9B.   Other Information
 
Pursuant to the authority granted in the Stock Option and Award Plan, in November 2009 the Compensation Committee approved the annual award of stock options to be granted to the Chairman of the Board, the Compensation Committee Chairperson and Lead Director, the Executive Committee Chairperson, and the Audit Committee Chairperson and Audit Committee Financial Expert on February 1, 2010 for their services rendered in 2009. On February 1, 2010, Mr. Samuel Zell was awarded options to purchase 100,000 shares of common stock, which he elected to receive as 20,000 shares of restricted common stock, for services rendered as Chairman of the Board; Mrs. Sheli Rosenberg was awarded options to purchase 25,000 shares of common stock, which she elected to receive as 5,000 shares of restricted common stock, for services rendered as Lead Director and Chairperson of the Compensation Committee; Mr. Howard Walker was awarded options to purchase 15,000 shares of common stock, which he elected to receive as 3,000 shares of restricted common stock, for services rendered as Chairperson of the Executive Committee; and Mr. Philip Calian was awarded options to purchase 15,000 shares of common stock, which he elected to receive as 3,000 shares of restricted common stock, for services rendered as Audit Committee Financial Expert and Audit Committee Chairperson. One-third of the options to purchase common stock and the shares of restricted common stock covered by these awards vests on each of December 31, 2010, December 31, 2011 and December 31, 2012.


55


Table of Contents

 
PART III
 
Item 10 and 11.   Directors, Executive Officers and Corporate Governance, and Executive Compensation
 
The information required by Item 10 and 11 will be contained in the 2009 Proxy Statement and is therefore incorporated by reference, and thus Item 10 and 11 has been omitted in accordance with General Instruction G(3) to Form 10-K.
 
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The information regarding securities authorized for issuance under equity compensation plans required by Item 12 follows:
 
                         
                Number of
 
                Securities
 
    Number of
          Remaining Available
 
    Securities to be
          for Future Issuance
 
    Issued Upon
    Weighted-Average
    Under Equity
 
    Exercise of
    Exercise Price of
    Compensation Plans
 
    Outstanding
    Outstanding
    (Excluding Securities
 
    Options, Warrants
    Options, Warrants
    Reflected in Column
 
    and Rights
    and Rights
    (a))
 
Plan Category
  (a)     (b)     (c)  
 
Equity compensation plans approved by security holders(1)
    841,851       39.86       970,442  
Equity compensation plans not approved by security holders(2)
    N/A       N/A       323,259  
                         
Total
    841,851       39.86       1,293,701  
 
 
(1) Includes shares of common stock under the Company’s Stock Option and Award Plan adopted in December 1992, and amended and restated from time to time, most recently amended effective March 23, 2001. The Stock Option and Award Plan and certain amendments thereto were approved by the Company’s stockholders.
 
(2) Represents shares of common stock under the Company’s Employee Stock Purchase Plan, which was adopted by the Board of Directors in July 1997, as amended in May 2006. Under the Employee Stock Purchase Plan, eligible employees make monthly contributions which are used to purchase shares of common stock at a purchase price equal to 85% of the lesser of the closing price of a share of common stock on the first or last trading day of the purchase period. Purchases of common stock under the Employee Stock Purchase Plan are made on the first business day of the next month after the close of the purchase period. Under New York Stock Exchange rules then in effect, stockholder approval was not required for the Employee Stock Purchase Plan because it is a broad-based plan available generally to all employees.
 
The information required by Item 403 of Regulation S-K “Security Ownership of Certain Beneficial Owners and Management” required by Item 12 will be contained in the 2009 Proxy Statement and is therefore incorporated by reference, and thus has been omitted in accordance with General Instruction G(3) to Form 10-K.
 
Items 13 and 14.   Certain Relationships and Related Transactions, and Director Independence, and Principal Accountant Fees and Services
 
The information required by Item 13 and Item 14 will be contained in the 2009 Proxy Statement and is therefore incorporated by reference, and thus Item 13 and 14 has been omitted in accordance with General Instruction G(3) to Form 10-K.


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Table of Contents

 
PART IV
 
Item 15.   Exhibits and Financial Statements Schedules
 
1. Financial Statement
 
See Index to Financial Statements and Schedules on page F-1 of this Form 10-K.
 
2. Financial Statement Schedules
 
See Index to Financial Statements and Schedules on page F-1 of this Form 10-K.
 
3. Exhibits:
 
In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about us or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
 
  •  should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
 
  •  have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
 
  •  may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
 
  •  were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
 
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about us may be found elsewhere in this Annual Report on Form 10-K and our other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
 
         
  2 (a)   Admission Agreement between Equity Financial and Management Co., Manufactured Home Communities, Inc. and MHC Operating Partnership
  3 .1(p)   Amended and Restated Articles of Incorporation of Equity Lifestyle Properties, Inc. effective May 15, 2007
  3 .4(r)   Second Amended and Restated Bylaws effective August 8, 2007
  3 .5(k)   Amended and Restated Articles Supplementary of Equity LifeStyle Properties, Inc. effective March 16, 2005
  3 .6(k)   Articles Supplementary of Equity LifeStyle Properties, Inc. effective June 23, 2005
  4 .1(w)   Amended and Restated 8.0625% Series D Cumulative Redeemable Perpetual Preference Units Term Sheet and Joinder to Second Amended and Restated Agreement of Limited Partnership
  4 .2(w)   7.95% Series F Cumulative Redeemable Perpetual Preference Units Term Sheet and Joinder to Second Amended and Restated Agreement of Limited Partnership
  4 .3(w)   Form of Specimen Stock Certificate Evidencing the Common Stock of Equity LifeStyle Properties, Inc., par value $0.01 per share
  9     Not applicable


57


Table of Contents

         
  10 .3(b)   Agreement of Limited Partnership of MHC-De Anza Financing Limited Partnership
  10 .4(c)   Second Amended and Restated MHC Operating Limited Partnership Agreement of Limited Partnership, dated March 15, 1996
  10 .5(l)   Amendment to Second Amended and Restated Agreement of Limited Partnership for MHC Operating Limited Partnership, dated February 27, 2004
  10 .10(d)   Form of Manufactured Home Communities, Inc. 1997 Non-Qualified Employee Stock Purchase Plan
  10 .11(g)   Amended and Restated Manufactured Home Communities, Inc. 1992 Stock Option and Stock Award Plan effective March 23, 2001
  10 .12(f)   $110,000,000 Amended, Restated and Consolidated Promissory Note (DeAnza Mortgage) dated June 28, 2000
  10 .19(h)   Agreement of Plan of Merger (Thousand Trails), dated August 2, 2004
  10 .20(h)   Amendment No. 1 to Agreement of Plan of Merger (Thousand Trails), dated September 30, 2004
  10 .21(h)   Amendment No. 2 to Agreement of Plan of Merger (Thousand Trails), dated November 9, 2004
  10 .27(n)   Credit Agreement ($225 million Revolving Facility) dated June 29, 2006
  10 .28(n)   Second Amended and Restated Loan Agreement ($50 million Revolving Facility) dated July 14, 2006
  10 .29(m)   Amended and Restated Thousand Trails Lease Agreement dated April 14, 2006
  10 .31(m)   Amendment No. 3 to Agreement and Plan of Merger (Thousand Trails) dated April 14, 2006
  10 .33(o)   Amendment of Non-Qualified Employee Stock Purchase Plan dated May 3, 2006
  10 .34(o)   Form of Indemnification Agreement
  10 .35(q)   Equity LifeStyle Properties, Inc. Long-Term Cash Incentive Plan dated May 15, 2007
  10 .36(q)   Equity LifeStyle Properties, Inc. Long-Term Cash Incentive Plan -- Form of 2007 Award Agreement dated May 15, 2007
  10 .37(s)   First Amendment to Credit Agreement ($400 million Revolving Facility) dated September 21, 2007
  10 .38(s)   First Amendment to Second Amended and Restated Loan Agreement ($20 million Revolving Facility) dated September 21, 2007
  10 .39(t)   Second Amended and Restated Lease Agreement dated as of January 1, 2008 by and between Thousand Trails Operations Holding Company, L.P. and MHC TT Leasing Company, Inc.
  10 .41(t)   Employment Agreement dated as of January 1, 2008 by and between Joe McAdams and Equity LifeStyle Properties, Inc.
  10 .42(u)   First Amendment to Second Amended and Restated Lease Agreement dated as of March 1, 2008 between MHC TT Leasing Company, Inc. and Thousand Trails Operations Holding Company, L.P.
  10 .43(v)   Form of Trust Agreement Establishing Howard Walker Deferred Compensation Trust, dated December 8, 2000
  10 .44(x)   Underwriting Agreement, dated June 23, 2009 by and among Equity LifeStyle Properties, Inc., MHC Operating Limited Partnership, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wachovia Capital Markets, LLC
  11     Not applicable
  12 (y)   Computation of Ratio of Earnings to Fixed Charges
  13     Not applicable
  14 (o)   Equity LifeStyle Properties, Inc. Business Ethics and Conduct Policy, dated July 2006
  16     Not applicable
  18     Not applicable
  21 (y)   Subsidiaries of the registrant
  22     Not applicable
  23 (y)   Consent of Independent Registered Public Accounting Firm

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Table of Contents

         
  24 .1(y)   Power of Attorney for Philip C. Calian dated February 16, 2010
  24 .2(y)   Power of Attorney for David J. Contis dated February 17, 2010
  24 .3(y)   Power of Attorney for Thomas E. Dobrowski dated February 17, 2010
  24 .4(y)   Power of Attorney for Sheli Z. Rosenberg dated February 17, 2010
  24 .5(y)   Power of Attorney for Howard Walker dated February 17, 2010
  24 .6(y)   Power of Attorney for Gary Waterman dated February 18, 2010
  24 .7(y)   Power of Attorney for Samuel Zell dated February 17, 2010
  31 .1(y)   Certification of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act Of 2002
  31 .2(y)   Certification of Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act Of 2002
  32 .1(y)   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
  32 .2(y)   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
 
The following documents are incorporated herein by reference.
 
 
         
  (a)     Included as an exhibit to the Company’s Form S-11 Registration Statement, File No. 33-55994
  (b)     Included as an exhibit to the Company’s Report on Form 10-K dated December 31, 1994
  (c)     Included as an exhibit to the Company’s Report on Form 10-Q for the quarter ended June 30, 1996
  (d)     Included as Exhibit A to the Company’s definitive Proxy Statement dated March 28, 1997, relating to Annual Meeting of Stockholders held on May 13, 1997
  (e)     Included as an exhibit to the Company’s Form S-3 Registration Statement, filed November 12, 1999 (SEC File No. 333-90813)
  (f)     Included as an exhibit to the Company’s Report on Form 10-K dated December 31, 2000
  (g)     Included as Appendix A to the Company’s Definitive Proxy Statement dated March 30, 2001
  (h)     Included as an exhibit to the Company’s Report on Form 8-K dated November 16, 2004
  (i)     Included as an exhibit to the Company’s Report on Form 8-K dated November 22, 2004
  (j)     Included as an exhibit to the Company’s Report on Form 10-K dated December 31, 2004
  (k)     Included as an exhibit to the Company’s Report on Form 10-Q dated June 30, 2005
  (l)     Included as an exhibit to the Company’s Report on Form 10-K dated December 31, 2005
  (m)     Included as an exhibit to the Company’s Report on Form 8-K dated April 14, 2006
  (n)     Included as an exhibit to the Company’s Report on Form 10-Q dated June 30, 2006
  (o)     Included as an exhibit to the Company’s Report on Form 10-K dated December 31, 2006
  (p)     Included as an exhibit to the Company’s Report on Form 8-K dated May 18, 2007
  (q)     Included as an exhibit to the Company’s Report on Form 8-K dated May 15, 2007
  (r)     Included as an exhibit to the Company’s Report on Form 8-K dated August 8, 2007
  (s)     Included as an exhibit to the Company’s Report on Form 8-K dated September 21, 2007
  (t)     Included as an exhibit to the Company’s Report on Form 8-K dated January 4, 2008
  (u)     Included as an exhibit to the Company’s Report on Form 10-Q dated March 31, 2008
  (v)     Included as an exhibit to the Company’s Report on Form 8-K dated December 8, 2000, filed on September 25, 2008
  (w)     Included as an exhibit to the Company’s Report on Form S-3 ASR dated May 6, 2009
  (x)     Included as an exhibit to the Company’s Report on Form 8-K dated June 23, 2009
  (y)     Filed herewith

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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
EQUITY LIFESTYLE PROPERTIES, INC.,
a Maryland corporation
 
     
Date: February 25, 2010
 
By: 
/s/  Thomas P. Heneghan

Thomas P. Heneghan
Chief Executive Officer
(Principal Executive Officer)
     
Date: February 25, 2010
 
By: 
/s/  Michael B. Berman

Michael B. Berman
Executive Vice President
  and Chief Financial Officer
(Principal Financial Officer
  and Principal Accounting Officer)


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Equity LifeStyle Properties, Inc. — Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
             
Name
 
Title
 
Date
 
         
/s/  Thomas P. Heneghan

Thomas P. Heneghan
  Chief Executive Officer (Principal Executive Officer), and Director *Attorney-in-Fact   February 25, 2010
         
/s/  Michael B. Berman

Michael B. Berman
  Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) *Attorney-in-Fact   February 25, 2010
         
*Samuel Zell

Samuel Zell
  Chairman of the Board   February 25, 2010
         
*Howard Walker

Howard Walker
  Vice-Chairman of the Board   February 25, 2010
         
*Philip C. Calian

Philip C. Calian
  Director   February 25, 2010
         
*David J. Contis

David J. Contis
  Director   February 25, 2010
         
*Thomas E. Dobrowski

Thomas E. Dobrowski
  Director   February 25, 2010
         
*Sheli Z. Rosenberg

Sheli Z. Rosenberg
  Director   February 25, 2010
         
*Gary Waterman

Gary Waterman
  Director   February 25, 2010


61


 

INDEX TO FINANCIAL STATEMENTS
 
EQUITY LIFESTYLE PROPERTIES, INC.
 
         
   
Page
 
    F-2  
    F-3  
    F-4  
    F-5 and F-6  
    F-7  
    F-8 and F-9  
    F-10  
    S-1  
    S-2  
 
Note that certain schedules have been omitted, as they are not applicable to the Company.


F-1


Table of Contents

 
Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Stockholders of Equity Lifestyle Properties, Inc.
 
We have audited Equity Lifestyle Properties, Inc’s (Equity Lifestyle Properties or the Company) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Equity Lifestyle Properties’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In our opinion, Equity Lifestyle Properties, Inc., maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2009 and 2008, and the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2009, and the financial statement schedules listed in the Index at Item 15, of Equity Lifestyle Properties, Inc., and our report dated February 25, 2010, expressed an unqualified opinion thereon.
 
/s/  
Ernst & Young LLP
ERNST & YOUNG LLP
 
Chicago, Illinois
February 25, 2010


F-2


Table of Contents

 
Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Stockholders of Equity Lifestyle Properties, Inc.
 
We have audited the accompanying consolidated balance sheets of Equity Lifestyle Properties, Inc. (Equity Lifestyle Properties or the Company), as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and the schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the schedules based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equity Lifestyle Properties at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
 
As discussed in Note 2(o) to the consolidated financial statements, the Company changed its method of accounting for non-controlling interests upon the adoption of new accounting pronouncements effective January 1, 2009, and applied retrospectively.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Equity Lifestyle Properties’ internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2010 expressed an unqualified opinion thereon.
 
/s/  
Ernst & Young LLP
ERNST & YOUNG LLP
 
Chicago, Illinois
February 25, 2010


F-3


Table of Contents

Equity LifeStyle Properties, Inc.
 
Consolidated Balance Sheets
As of December 31, 2009 and 2008
 
                 
    December 31,
    December 31,
 
    2009     2008  
    (Amounts in thousands, except for share data)  
 
ASSETS
Investment in real estate:
               
Land
  $ 544,722     $ 541,979  
Land improvements
    1,744,443       1,725,752  
Buildings and other depreciable property
    249,050       223,290  
                 
      2,538,215       2,491,021  
Accumulated depreciation
    (629,768 )     (561,104 )
                 
Net investment in real estate
    1,908,447       1,929,917  
Cash and cash equivalents
    145,128       45,312  
Notes receivable, net
    29,952       31,799  
Investment in joint ventures
    9,442       9,676  
Rents and other customer receivables, net
    421       1,040  
Deferred financing costs, net
    11,382       12,408  
Inventory, net
    2,964       12,934  
Deferred commission expense
    9,373       3,644  
Escrow deposits and other assets
    49,210       44,917  
                 
Total Assets
  $ 2,166,319     $ 2,091,647  
                 
 
LIABILITIES AND EQUITY
Liabilities:
               
Mortgage notes payable
  $ 1,547,901     $ 1,569,403  
Unsecured lines of credit
          93,000  
Accrued payroll and other operating expenses
    71,508       66,656  
Deferred revenue — sale of right-to-use contracts
    29,493       10,611  
Accrued interest payable
    8,036       8,335  
Rents and other customer payments received in advance and security deposits
    44,368       41,302  
Distributions payable
    10,586       6,106  
                 
Total Liabilities
    1,711,892       1,795,413  
Commitments and contingencies
               
Non-controlling interests — Perpetual Preferred OP Units
    200,000       200,000  
Equity:
               
Stockholders’ Equity:
               
Preferred stock, $.01 par value 10,000,000 shares authorized; none issued
           
Common stock, $.01 par value 100,000,000 shares authorized for 2009 and 2008; 30,350,745 and 25,051,322 shares issued and outstanding for 2009 and 2008, respectively
    301       238  
Paid-in capital
    456,696       320,084  
Distributions in excess of accumulated earnings
    (238,467 )     (241,609 )
                 
Total Stockholders’ Equity
    218,530       78,713  
                 
Non-controlling interests — Common OP Units
    35,897       17,521  
                 
Total Equity
    254,427       96,234  
                 
Total Liabilities and Equity
  $ 2,166,319     $ 2,091,647  
                 
 
The accompanying notes are an integral part of the financial statements.


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Table of Contents

Equity LifeStyle Properties, Inc.
 
Consolidated Statements of Operations
For the Years Ended December 31, 2009, 2008 and 2007
 
                         
    2009     2008     2007  
    (Amounts in thousands,
 
    except per share data)  
 
Property Operations:
                       
Community base rental income
  $ 253,379     $ 245,833     $ 236,933  
Resort base rental income
    124,822       111,876       102,372  
Right-to-use annual payments
    50,765       19,667        
Right-to-use contracts current period, gross
    21,526       10,951        
Right-to-use contracts, deferred, net of prior period amortization
    (18,882 )     (10,611 )      
Utility and other income
    47,685       41,633       36,849  
                         
Property operating revenues
    479,295       419,349       376,154  
Property operating and maintenance
    180,870       152,363       127,342  
Real estate taxes
    31,674       29,457       27,429  
Sales and marketing, gross
    13,536       7,116        
Sales and marketing, deferred commissions, net
    (5,729 )     (3,644 )      
Property management
    33,383       25,451       18,385  
                         
Property operating expenses (exclusive of depreciation shown separately below)
    253,734       210,743       173,156  
                         
Income from property operations
    225,561       208,606       202,998  
Home Sales Operations:
                       
Gross revenues from home sales
    7,136       21,845       33,333  
Cost of home sales
    (7,471 )     (24,069 )     (30,713 )
                         
Gross (loss) profit from home sales
    (335 )     (2,224 )     2,620  
Brokered resale revenues, net
    758       1,094       1,528  
Home selling expenses
    (2,383 )     (5,776 )     (7,555 )
Ancillary services revenues, net
    2,745       1,197       2,436  
                         
Income (loss) from home sales and other
    785       (5,709 )     (971 )
Other Income and Expenses:
                       
Interest income
    5,119       3,095       1,732  
Income from other investments, net
    8,168       17,006       22,476  
General and administrative
    (22,279 )     (20,617 )     (15,591 )
Rent control initiatives
    (456 )     (1,555 )     (2,657 )
Interest and related amortization
    (98,311 )     (99,430 )     (103,070 )
Depreciation on corporate assets
    (1,039 )     (390 )     (437 )
Depreciation on real estate and other costs
    (69,049 )     (66,193 )     (63,554 )
                         
Total other expenses, net
    (177,847 )     (168,084 )     (161,101 )
                         
Equity in income of unconsolidated joint ventures
    2,896       3,753       2,696  
                         
Consolidated income from continuing operations
    51,395       38,566       43,622  
                         
Discontinued Operations:
                       
Discontinued operations
    181       257       289  
Gain (loss) from discontinued real estate
    4,685       (79 )     12,036  
                         
Income from discontinued operations
    4,866       178       12,325  
                         
Consolidated net income
    56,261       38,744       55,947  
Income allocated to non-controlling interests:
                       
Common OP Units
    (6,113 )     (4,297 )     (7,705 )
Perpetual Preferred OP Units
    (16,143 )     (16,144 )     (16,140 )
                         
Net income available for Common Shares
  $ 34,005     $ 18,303     $ 32,102  
                         
 
The accompanying notes are an integral part of the financial statements


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Table of Contents

Equity LifeStyle Properties, Inc.

Consolidated Statements of Operations
For the Years Ended December 31, 2009, 2008 and 2007
 
                         
    2009     2008     2007  
    (Amounts in thousands,
 
    except per share data)  
 
Earnings per Common Share — Basic:
                       
Income from continuing operations
  $ 1.08     $ 0.74     $ 0.92  
                         
Income from discontinued operations
  $ 0.15     $ 0.01     $ 0.41  
                         
Net income available for Common Shares
  $ 1.23     $ 0.75     $ 1.33  
                         
Earnings per Common Share — Fully Diluted:
                       
Income from continuing operations
  $ 1.07     $ 0.74     $ 0.90  
                         
Income from discontinued operations
  $ 0.15     $ 0.01     $ 0.41  
                         
Net income available for Common Shares
  $ 1.22     $ 0.75     $ 1.31  
                         
Distributions declared per Common Share outstanding
  $ 1.10     $ 0.80     $ 0.60  
                         
Tax status of Common Shares distributions deemed paid during the year:
                       
Ordinary income
  $ 0.72     $ 0.80     $ 0.60  
                         
Long-term capital gain
  $ 0.24     $     $  
                         
Unrecaptured section 1250 gain
  $ 0.14     $     $  
                         
Weighted average Common Shares outstanding — basic
    27,582       24,466       24,089  
                         
Weighted average Common Shares outstanding — fully diluted
    32,944       30,498       30,414  
                         
 
The accompanying notes are an integral part of the financial statements


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Equity LifeStyle Properties, Inc.

Consolidated Statements of Changes In Equity
For The Years Ended December 31, 2009, 2008 and 2007
 
                                         
                Distributions in
             
                Excess of
    Non-controlling
       
                Accumulated
    interests-
       
    Common
          Comprehensive
    Common OP
       
    Stock     Paid-in Capital     Earnings     Units     Total Equity  
    (Amounts in thousands)  
 
Balance, December 31, 2006
  $ 229     $ 304,483     $ (257,594 )   $ 12,794     $ 59,912  
Conversion of OP Units to common stock
    4       655               (659 )      
Issuance of common stock through exercise of options
    3       2,577                       2,580  
Issuance of common stock through employee stock purchase plan
            1,183                       1,183  
Compensation expenses related to stock options and restricted stock
            4,268                       4,268  
Repurchase of common stock
            (883 )                     (883 )
Adjustment for Common OP Unitholders in the Operating Partnership
            (1,480 )             1,480        
Net income
                    32,102       7,705       39,807  
Distributions
                    (14,606 )     (3,544 )     (18,150 )
                                         
Balance, December 31, 2007
    236       310,803       (240,098 )     17,776       88,717  
Conversion of OP Units to common stock
            1,463               (1,463 )      
Issuance of common stock through exercise of options
    2       3,205                       3,207  
Issuance of common stock through employee stock purchase plan
            1,501                       1,501  
Compensation expenses related to stock options and restricted stock
            5,162                       5,162  
Repurchase of common stock
            (600 )                     (600 )
Adjustment for Common OP Unitholders in the Operating Partnership
            (1,450 )             1,450        
Net income
                    18,303       4,297       22,600  
Distributions
                    (19,814 )     (4,539 )     (24,353 )
                                         
Balance, December 31, 2008
    238       320,084       (241,609 )     17,521       96,234  
Conversion of OP Units to common stock
            2,516               (2,516 )      
Issuance of common stock through exercise of options
    2       3,537                       3,539  
Issuance of common stock through employee stock purchase plan
            1,344                       1,344  
Issuance of common stock through stock offering
    46       146,317                       146,363  
Compensation expenses related to stock options and restricted stock
    15       4,640                       4,655  
Repurchase of common stock or Common OP Units
            (1,193 )             (188 )     (1,381 )
Adjustment for Common OP Unitholders in the Operating Partnership
            (20,549 )             20,549        
Net income
                    34,005       6,113       40,118  
Distributions
                    (30,863 )     (5,582 )     (36,445 )
                                         
Balance, December 31, 2009
  $ 301     $ 456,696     $ (238,467 )   $ 35,897     $ 254,427  
                                         
 
The accompanying notes are an integral part of the financial statements


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Table of Contents

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows
For the years ended December 31, 2009, 2008 and 2007
 
                         
    2009     2008     2007  
    (Amounts in thousands)  
 
Cash Flows From Operating Activities:
                       
Consolidated net income
  $ 56,261     $ 38,672     $ 55,946  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
(Gain) Loss on sale of discontinued real estate and other
    (5,483 )     79       (12,036 )
Depreciation expense
    73,670       68,700       65,419  
Amortization expense
    3,090       2,956       2,894  
Debt premium amortization
    (1,232 )     (632 )     (1,608 )
Equity in income of unconsolidated joint ventures
    (4,146 )     (5,528 )     (4,123 )
Distributions from unconsolidated joint ventures
    2,936       3,717       5,052  
Amortization of stock-related compensation
    4,655       5,162       4,268  
Revenue recognized from right-to-use contract sales
    (2,644 )     (340 )      
Commission expense recognized related to right-to-use contract sales
    821       112        
Accrued long term incentive plan compensation
    1,053       1,098       685  
Increase in provision for uncollectible rents receivable
    654       353       269  
Increase in provision for inventory reserve
    839       63       250  
Changes in assets and liabilities:
                       
Rent and other customer receivables, net
    (40 )     (236 )     (152 )
Inventory
    2,060       (5,129 )     4,516  
Deferred commission expense
    (6,550 )     (3,756 )      
Escrow deposits and other assets
    7,825       (1,208 )     (1,244 )
Accrued payroll and other operating expenses
    (3,504 )     1,564       82  
Deferred revenue — sales of right-to-use contracts
    21,526       10,951        
Rents received in advance and security deposits
    (1,402 )     (2,708 )     2,573  
                         
Net cash provided by operating activities
    150,389       113,890       122,791  
                         
Cash Flows From Investing Activities:
                       
Acquisition of real estate and other
    (8,219 )     (2,217 )     (24,774 )
Proceeds from disposition of rental properties
    3,278             23,261  
Net tax-deferred exchange (deposit) withdrawal
    (786 )     2,124       (2,294 )
Joint Ventures:
                       
Investments in
          (5,545 )     (3,656 )
Distributions from
          524       152  
Net repayments (borrowings) of notes receivable
    1,847       (1,274 )     11,091  
Capital improvements
    (30,876 )     (26,716 )     (29,384 )
                         
Net cash used in investing activities
    (34,756 )     (33,104 )     (25,604 )
                         


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Table of Contents

                         
    2009     2008     2007  
    (Amounts in thousands)  
 
Cash Flows From Financing Activities:
                       
Net proceeds from stock options and employee stock purchase plan
    4,883       4,708       3,734  
Distributions to Common Stockholders, Common OP Unitholders, and Perpetual Preferred OP Unitholders
    (48,109 )     (38,849 )     (32,013 )
Stock repurchase and Unit redemption
    (1,381 )     (600 )     (883 )
Proceeds from issuance of common stock
    146,363              
Lines of credit:
                       
Proceeds
    50,900       201,200       126,200  
Repayments
    (143,900 )     (211,200 )     (154,400 )
Principal repayments on disposition
                (1,992 )
Principal payments and mortgage debt payoff
    (130,235 )     (224,442 )     (16,169 )
New financing proceeds
    107,264       231,047        
Early debt retirement
                (17,174 )
Debt issuance costs
    (1,602 )     (3,123 )     (310 )
                         
Net cash used in financing activities
    (15,817 )     (41,259 )     (93,007 )
                         
Net increase in cash and cash equivalents
    99,816       39,527       4,180  
Cash and cash equivalents, beginning of year
    45,312       5,785       1,605  
                         
Cash and cash equivalents, end of year
  $ 145,128     $ 45,312     $ 5,785  
                         
Supplemental Information:
                       
Cash paid during the period for interest
  $ 96,030     $ 96,668     $ 101,206  
Non-cash activities:
                       
Proceeds from loan to pay insurance premiums
                4,344  
Inventory reclassified to Buildings and other depreciable property
    6,727       57,797        
Manufactured homes acquired with dealer financing
    1,389                  
Dealer financing
    1,389                  
Acquisitions
                       
Assumption of assets and liabilities:
                       
Inventory
    185       2,139       22  
Escrow deposits and other assets
    11,267       12,361       560  
Accrued payroll and other operating expenses
    5,195       15,413       313  
Rents and other customer payments received in advance and security deposits
    3,933       19,821       1,158  
Notes receivable
          19,571        
Investment in real estate
    18,116       10,417       45,532  
Debt assumed and financed on acquisition
    11,851       7,037       8,528  
Mezzanine and joint venture investments applied to real estate acquisition
                11,297  
Dispositions
                       
Disposition of assets and liabilities, net
    (14 )           28  
Investment in real estate
    13,831             23,289  
Debt assumed by buyer on disposition
    10,539              
 
The accompanying notes are an integral part of the financial statements

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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 1 —  Organization of the Company and Basis of Presentation
 
Equity LifeStyle Properties, Inc., a Maryland corporation, together with MHC Operating Limited Partnership (the “Operating Partnership”) and other consolidated subsidiaries (“Subsidiaries”), is referred to herein as the “Company,” “ELS,” “we,” “us,” and “our.” The Company is a fully integrated owner and operator of lifestyle-oriented properties (“Properties”). The Company leases individual developed areas (“sites”) with access to utilities for placement of factory built homes, cottages, cabins or recreational vehicles (“RVs”). At certain Properties, the Company provides access to its sites through right-to-use or membership contracts. We believe that we have qualified for taxation as a real estate investment trust (“REIT”) for U.S. federal income tax purposes since our taxable year ended December 31, 1993. We plan to continue to meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. We cannot, therefore, guarantee that we have qualified or will qualify in the future as a REIT. The determination that we are a REIT requires an analysis of various factual matters that may not be totally within our control and we cannot provide any assurance that the IRS will agree with our analysis. For example, to qualify as a REIT, at least 95% of our gross income must come from sources that are itemized in the REIT tax laws. We are also required to distribute to stockholders at least 90% of our REIT taxable income computed without regard to our deduction for dividends paid and our net capital gain. As of December 31, 2009, the Company has net operating loss carryforwards of approximately $88 million that can be utilized to offset future distribution requirements. The fact that we hold our assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT qualification. Furthermore, Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for us to remain qualified as a REIT. We do not believe, however, that any pending or proposed tax law changes would jeopardize our REIT qualification.
 
If we fail to qualify as a REIT, we would be subject to U.S. federal income tax at regular corporate rates. Also, unless the IRS granted us relief under certain statutory provisions, we would remain disqualified as a REIT for four years following the year we first failed to qualify. Even if the Company qualifies for taxation as a REIT, the Company is subject to certain foreign, state and local taxes on its income and property and U.S. federal income and excise taxes on its undistributed income.
 
The operations of the Company are conducted primarily through the Operating Partnership. The Company contributed the proceeds from its initial public offering and subsequent offerings to the Operating Partnership for a general partnership interest. In 2004, the general partnership interest was contributed to MHC Trust, a private REIT subsidiary owned by the Company. The financial results of the Operating Partnership and the Subsidiaries are consolidated in the Company’s consolidated financial statements. In addition, since certain activities, if performed by the Company, may cause us to earn income which is not qualifying for the REIT gross income tests, the Company has formed taxable REIT subsidiaries, as defined in the Code, to engage in such activities.
 
Several Properties are wholly owned by taxable REIT subsidiaries of the Company. In addition, Realty Systems, Inc. (“RSI”) is a wholly owned taxable REIT subsidiary of the Company that is engaged in the business of purchasing and selling or leasing Site Set homes that are located in Properties owned and managed by the Company. RSI also provides brokerage services to residents at such Properties for those residents who move from a Property but do not relocate their homes. RSI may provide brokerage services, in competition with other local brokers, by seeking buyers for the Site Set homes. Subsidiaries of RSI also operate ancillary activities at certain Properties consisting of operations such as golf courses, pro shops, stores and restaurants.
 
The limited partners of the Operating Partnership (the “Common OP Unitholders”) receive an allocation of net income that is based on their respective ownership percentage of the Operating Partnership that is shown on the Consolidated Financial Statements as Non-controlling interests — Common OP Units. As of December 31, 2009, the Non-Controlling Interests — Common OP Units represented 4,914,040 units of limited partnership interest (“OP Units”) which are convertible into an equivalent number of shares of the Company’s common


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 1 —  Organization of the Company and Basis of Presentation (continued)
 
stock. The issuance of additional shares of common stock or Common OP Units changes the respective ownership of the Operating Partnership for both the Non-controlling interests — Common OP Units.
 
Note 2 —  Summary of Significant Accounting Policies
 
(a)   Basis of Consolidation
 
The Company consolidates its majority-owned subsidiaries in which it has the ability to control the operations of the subsidiaries and all variable interest entities with respect to which the Company is the primary beneficiary. The Company also consolidates entities in which it has a controlling direct or indirect voting interest. All inter-company transactions have been eliminated in consolidation. The Company’s acquisitions on or prior to December 31, 2008 were all accounted for as purchases in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”). For business combinations for which the acquisition date is on or after January 1, 2009, the purchase price of Properties will be accounted for in accordance with the Codification Topic “Business Combinations” (“FASB ASC 805”) (prior authoritative guidance: Statement of Financial Accounting Standard No. 141R, “Business Combinations”).
 
The Company has applied the Codification Sub-Topic “Variable Interest Entities” (“FASB ASC 810-10-15”) (prior authoritative guidance: Interpretation No. 46R, “Consolidation of Variable Interest Entities an interpretation of ARB 51”). The objective of FASB ASC 810-10-15 is to provide guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, non-controlling interests, and results of operations of a VIE need to be included in a company’s consolidated financial statements. A company that holds variable interests in an entity will need to consolidate such entity if the company absorbs a majority of the entity’s expected losses or receives a majority of the entity’s expected residual returns if they occur, or both (i.e., the primary beneficiary). The Company has also applied the Codification Sub-Topic “Control of Partnerships and Similar Entities” (“FASB ASC 810-20”) (prior authoritative guidance: Emerging Issues Task Force 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights”), which determines whether a general partner or the general partners as a group controls a limited partnership or similar entity and therefore should consolidate the entity. The Company will apply FASB ASC 810-10-15 and FASB ASC 810-20 to all types of entity ownership (general and limited partnerships and corporate interests).
 
The Company applies the equity method of accounting to entities in which the Company does not have a controlling direct or indirect voting interest or is not considered the primary beneficiary, but can exercise influence over the entity with respect to its operations and major decisions. The cost method is applied when (i) the investment is minimal (typically less than 5%) and (ii) the Company’s investment is passive.
 
(b)   Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All property and site counts are unaudited.
 
(c)   Markets
 
We manage all our operations on a property-by-property basis. Since each Property has similar economic and operational characteristics, the Company has one reportable segment, which is the operation of land lease Properties. The distribution of the Properties throughout the United States reflects our belief that geographic diversification helps insulate the portfolio from regional economic influences. We intend to target new


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 2 —  Summary of Significant Accounting Policies (continued)
 
acquisitions in or near markets where the Properties are located and will also consider acquisitions of Properties outside such markets.
 
(d)   Inventory
 
As of December 31, 2009, inventory primarily consists of merchandise inventory as almost all Site Set inventory has been reclassified to buildings and other depreciable property. (See Note 7 in the Notes to Consolidated Financial Statements contained in this Form 10-K). Inventory as of December 31, 2008, primarily consisted of new and used Site Set Resort Cottages and is stated at the lower of cost or market. Home sales revenues and resale revenues are recognized when the home sale is closed. The expense for home inventory reserve is included in the cost of home sales in our Consolidated Statements of Operations.
 
(e)   Real Estate
 
In accordance with FASB ASC 805, which is effective for acquisitions on or after January 1, 2009, we recognize all the assets acquired and all the liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. We also expense transaction costs as they are incurred.
 
Acquisitions prior to December 31, 2008 were accounted for in accordance with SFAS No. 141. We allocated the purchase price of Properties we acquire to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be available in connection with the acquisition or financing of the respective Property and other market data. We also consider information obtained about each Property as a result of our due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.
 
Real estate is recorded at cost less accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. We generally use a 30-year estimated life for buildings acquired and structural and land improvements (including site development), a ten-year estimated life for building upgrades and a five-year estimated life for furniture, fixtures and equipment. New rental units are generally depreciated using a 20-year estimated life from each model year down to a salvage value of 40% of the original costs. Used rental units are generally depreciated based on the estimated life of the unit with no estimated salvage value.
 
The values of above-and below-market leases are amortized and recorded as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income over the remaining term of the associated lease. The value associated with in-place leases is amortized over the expected term, which includes an estimated probability of lease renewal. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve the asset and extend the useful life of the asset are capitalized over their estimated useful life.
 
We periodically evaluate our long-lived assets, including our investments in real estate, for impairment indicators. Our judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal factors. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted.
 
For Properties to be disposed of, an impairment loss is recognized when the fair value of the Property, less the estimated cost to sell, is less than the carrying amount of the Property measured at the time the Company has a commitment to sell the Property and/or is actively marketing the Property for sale. A Property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less costs to sell. Subsequent to the date that a Property is held for disposition, depreciation expense is not recorded. The Company accounts for its Properties held for disposition in accordance with the Codification Sub-Topic “Impairment or Disposal of Long


F-12


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 2 —  Summary of Significant Accounting Policies (continued)
 
Lived Assets” (“FASB ASC 360- 10-35”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”). Accordingly, the results of operations for all assets sold or held for sale have been classified as discontinued operations in all periods presented.
 
(f)   Identified Intangibles and Goodwill
 
We record acquired intangible assets and acquired intangible liabilities 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. 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. 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 December 31, 2009 and 2008, the carrying amounts of identified intangible assets and goodwill, a component of “Escrow deposits and other assets” on our consolidated balance sheets, were approximately $19.6 million and $12.0 million, respectively. Accumulated amortization of identified intangibles assets was approximately $0.6 million and $0.1 million as of December 31, 2009 and 2008, respectively.
 
(g)   Cash and Cash Equivalents
 
We consider all demand and money market accounts and certificates of deposit with a maturity date, when purchased, of three months or less to be cash equivalents. The cash and cash equivalents as of December 31, 2009 and 2008 include approximately $0.4 million of restricted cash.
 
(h)   Notes Receivable
 
Notes receivable generally are stated at their outstanding unpaid principal balances net of any deferred fees or costs on originated loans, unamortized discounts or premiums, and an allowance. Interest income is accrued on the unpaid principal balance. Discounts or premiums are amortized to income using the interest method. In certain cases we finance the sales of homes to our customers (referred to as “Chattel Loans”) which loans are secured by the homes. The allowance for the Chattel Loans is calculated based on a review of loan agings and a comparison of the outstanding principal balance of the Chattel Loans compared to the current estimated market value of the underlying manufactured home collateral.
 
The Company also provides financing for nonrefundable upfront payments on sales of right-to-use contracts (“Contracts Receivable”). Based upon historical collection rates and current economic trends, when a sale is financed, a reserve is established for a portion of the Contracts Receivable balance estimated to be uncollectible. The allowance and the rate at which the Company provides for losses on its Contracts Receivable could be increased or decreased in the future based on the Company’s actual collection experience. (See Note 8 in the Notes to Consolidated Financial Statements contained in this Form 10-K).
 
On August 14, 2008, we purchased Contract Receivables that were recorded at fair value at the time of acquisition of approximately $19.6 million under the Codification Topic “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“FASB ASC 310-30”) (prior authoritative guidance: American Institute of Certified Public Accountants Statement of Position (SOP) 03-3, “Accounting for Certain Loans or Debt


F-13


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 2 —  Summary of Significant Accounting Policies (continued)
 
Securities Acquired in a Transfer”). The fair value of these Contracts Receivable includes an estimate of losses that are expected to be incurred over the estimated remaining lives of the receivables, and therefore no allowance for losses was recorded for these receivables as of the transaction date. Through December 31, 2009, the credit performance of these receivables has generally been consistent with the assumptions used in determining the initial fair value of these loans, and our original expectations regarding the amounts and timing of future cash flows has not changed. A probable decrease in management’s expectation of future cash collections related to these receivables could result in the need to record an allowance for credit losses related to these loans in the future. A significant and probable increase in expected cash flows would generally result in an increase in interest income recognized over the remaining life of the underlying pool of receivables.
 
(i)   Investments in Joint Ventures
 
Investments in joint ventures in which the Company does not have a controlling direct or indirect voting interest, but can exercise significant influence over the entity with respect to its operations and major decisions, are accounted for using the equity method of accounting whereby the cost of an investment is adjusted for the Company’s share of the equity in net income or loss from the date of acquisition and reduced by distributions received. The income or loss of each entity is allocated in accordance with the provisions of the applicable operating agreements. The allocation provisions in these agreements may differ from the ownership interests held by each investor. Differences between the carrying amount of the Company’s investment in the respective entities and the Company’s share of the underlying equity of such unconsolidated entities are amortized over the respective lives of the underlying assets, as applicable. See Note 6 in the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
(j)   Income from Other Investments, net
 
On August 14, 2008, the Company acquired substantially all of the assets and certain liabilities of Privileged Access, LP (“Privileged Access”) for an unsecured note payable of $2.0 million (the “PA Transaction”). Prior to August 14, 2008, income from other investments, net, primarily included revenue relating to the Company’s former ground leases with Privileged Access. The ground leases were terminated on August 14, 2008 due to the PA Transaction. The ground leases with Privileged Access were for approximately 24,300 sites at 82 of the Company’s Properties and were accounted for in accordance with Codification Topic “Leases” (“FASB ASC 840”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 13, “Accounting for Leases”). The Company recognized income related to these ground leases of approximately $15.8 million and $20.6 million for the years ended December 31, 2008 and 2007, respectively.
 
(k)   Insurance Claims
 
The Properties are covered against losses caused by various events including fire, flood, property damage, earthquake, windstorm and business interruption by insurance policies containing various deductible requirements and coverage limits. Recoverable costs are classified in other assets as incurred. Insurance proceeds are applied against the asset when received. Recoverable costs relating to capital items are treated in accordance with the Company’s capitalization policy. The book value of the original capital item is written off once the value of the impaired asset has been determined. Insurance proceeds relating to the capital costs are recorded as income in the period they are received.
 
Approximately 70 Florida Properties suffered damage from five hurricanes that struck the state during 2004 and 2005. The Company estimates its total claim to be approximately $21.0 million and has made claims for full recovery of these amounts, subject to deductibles.
 
The Company has received proceeds from insurance carriers of approximately $10.7 million through December 31, 2009. The proceeds were accounted for in accordance with the Codification Topic


F-14


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 2 —  Summary of Significant Accounting Policies (continued)
 
“Contingencies” (“FASB ASC 450”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies”). During the year ended December 31, 2009, 2008 and 2007, approximately $1.6 million, $0.6 million and $0.6 million, respectively, has been recognized as a gain on insurance recovery, which is net of approximately $0.3 million, $0.3 million and $0.2 million, respectively, of contingent legal fees and included in income from other investments, net.
 
On June 22, 2007, the Company filed a lawsuit related to some of the unpaid claims against certain insurance carriers and its insurance broker. See Note 18 in the Notes to Consolidated Financial Statements contained in this Form 10-K for further discussion of this lawsuit.
 
(l)   Fair Value of Financial Instruments
 
The Company’s financial instruments include short-term investments, notes receivable, accounts receivable, accounts payable, other accrued expenses, and mortgage notes payable. The fair values of all financial instruments, including notes receivable, were not materially different from their carrying values at December 31, 2009 and 2008.
 
The valuation of financial instruments under the Codification Topic “Financial Instruments” (“FASB ASC 825”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 107, “Disclosures About Fair Value of Financial Instruments”) and the Codification Topic “Derivatives and Hedging” (“FASB ASC 815”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”) requires us to make estimates and judgments that affect the fair value of the instruments. Where possible, we base the fair values of our financial instruments on listed market prices and third party quotes. Where these are not available, we base our estimates on other factors relevant to the financial instrument.
 
(m)   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 level yield basis. Unamortized deferred financing fees are written-off when debt is retired before the maturity date. Upon amendment of the lines of credit, unamortized deferred financing fees are accounted for in accordance with, Codification Sub-Topic “Modifications and Extinguishments” (“FASB ASC 470-50-40”) (prior authoritative guidance: Emerging Issues Task Force No. 98-14, “Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements”). Accumulated amortization for such costs was $12.5 million and $13.1 million at December 31, 2009 and 2008, respectively.
 
(n)   Revenue Recognition
 
The Company accounts for leases with its customers as operating leases. Rental income is recognized over the term of the respective lease or the length of a customer’s stay, the majority of which are for a term of not greater than one year. We will reserve for receivables when we believe the ultimate collection is less than probable. Our provision for uncollectible rents receivable was approximately $2.2 million and $1.5 million as of December 31, 2009 and 2008, respectively.
 
The Company accounts for the sales of right-to-use contracts in accordance with the Codification Topic “Revenue Recognition” (“FASB ASC 605”) (prior authoritative guidance: Staff Accounting Bulletin 104, “Revenue Recognition in Consolidated Financial Statements, Corrected”). A right-to-use contract gives the customer the right to a set schedule of usage at a specified group of Properties. Customers may choose to upgrade their contracts to increase their usage and the number of Properties they may access. A contract requires the customer to make an upfront nonrefundable payment and annual payments during the term of the


F-15


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 2 —  Summary of Significant Accounting Policies (continued)
 
contract. The stated term of a right-to-use contract is generally three years and the customer may renew his contract by continuing to make the annual payments. The Company will recognize the upfront non-refundable payments over the estimated customer life which, based on historical attrition rates, the Company has estimated to be from one to 31 years. For example, we have currently estimated that 7.9% of customers who purchase a new right-to-use contract will terminate their contract after five years. Therefore, the upfront nonrefundable payments from 7.9% of the contracts sold in any particular period are amortized on a straight-line basis over a period of five years as the estimated customer life for 7.9% of our customers who purchase a contract is five years. The historical attrition rates for upgrade contracts are lower than for new contacts, and therefore, the nonrefundable upfront payments for upgrade contracts are amortized at a different rate than for new contracts. The decision to recognize this revenue in accordance with FASB ASC 605 was made after corresponding with the Office of the Chief Accountant at the SEC during September and October of 2008.
 
Right-to-use annual payments paid by customers under the terms of the right-to-use contracts are deferred and recognized ratably over the one-year period in which the services are provided.
 
Income from home sales is recognized when the earnings process is complete. The earnings process is complete when the home has been delivered, the purchaser has accepted the home and title has transferred.
 
(o)   Non-Controlling Interests
 
Net income is allocated to Common OP Unitholders based on their respective ownership percentage of the Operating Partnership. Such ownership percentage is calculated by dividing the number of Common OP Units held by the Common OP Unitholders (4,914,040 and 5,366,741 at December 31, 2009 and 2008, respectively) by the total OP Units held the Common OP Unitholders and the Company. Issuance of additional shares of common stock or Common OP Units changes the percentage ownership of both the Non-controlling interests — Common OP Units and the Company.
 
Due in part to the exchange rights (which provide for the conversion of Common OP Units into shares of common stock on a one-for-one basis), such transactions and the proceeds there from are treated as capital transactions and result in an allocation between stockholders’ equity and Non-controlling Interests to account for the change in the respective percentage ownership of the underlying equity of the Operating Partnership.
 
In accordance with the Codification Topic “Consolidation” (“FASB ASC 810”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements”), effective January 1, 2009, the Company, for all periods presented, has reclassified the non-controlling interest for Common OP Units, approximately $17.5 million as of December 31, 2008, from the mezzanine section under Total Liabilities to the Equity section of the consolidated balance sheets. The caption Common OP Units on the consolidated balance sheets also includes $0.5 million of private REIT Subsidiaries preferred stock. Based on the Company’s analysis, Perpetual Preferred OP Units remain in the mezzanine section. The presentation of income allocated to Common OP Units, approximately $4.3 million and $7.7 million for the years ended December 31, 2008 and 2007, respectively, and Perpetual Preferred OP Units, approximately $16.1 million for the years ended December 31, 2008 and 2007, on the consolidated statements of operations has been moved to the bottom of the statement prior to Net income available to Common Shares.
 
(p)   Income Taxes
 
Due to the structure of the Company as a REIT, the results of operations contain no provision for U.S. federal income taxes for the REIT, but the Company is still subject to certain foreign, state and local income, excise or franchise taxes. In addition, the Company has several taxable REIT subsidiaries which are subject to federal and state income taxes at regular corporate tax rates.


F-16


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 2 —  Summary of Significant Accounting Policies (continued)
 
The Company expensed federal, foreign, state and local taxes of approximately $0.6 million, $0.4 million and $0.4 million for the years ended December 31, 2009, 2008, and 2007, respectively, which includes taxes payable from activities managed through taxable REIT subsidiaries (“TRSs”). Overall, the TRSs have federal net operating loss carryforwards. No net tax benefits have been recorded by the TRSs since it is not considered more likely than not that the deferred tax asset related to the TRSs net operating loss carryforwards will be utilized.
 
The Company adopted the provisions of Codification Topic “Income Taxes” (“FASB 740”) (prior authoritative guidance: Interpretation No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 “Accounting for Income Taxes”) on January 1, 2007. The adoption of FASB 740 resulted in no impact to the Company’s consolidated financial statements. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and Canada. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2006.
 
As of December 31, 2009, net investment in real estate and notes receivable had a U.S. federal tax basis of approximately $1.4 billion (unaudited) and $24.5 million (unaudited), respectively.
 
(q)   Derivative Instruments and Hedging Activities
 
The Company recognizes all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The Company currently does not have any derivative instruments.
 
(r)   Stock Compensation
 
The Company adopted the fair-value-based method of accounting for share-based payments pursuant to Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS No. 148”) and FASB ASC 718. The Company uses the Black-Scholes-Merton formula to estimate the value of stock options granted to employees (see Note 14 in the Notes to Consolidated Financial Statements contained in this Form 10-K).
 
(s)   Recent Accounting Pronouncements
 
In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events,” the current authoritative guidance of which is the Codification Sub-Topic “Subsequent Events” (“FASB ASC 855-10”). FASB ASC 855-10 seeks to establish general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. The Statement sets forth the period and circumstances after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. The Statement introduces the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The Statement applies to interim or annual financial periods ending after June 15, 2009. The adoption of FASB ASC 855-10 has had no material effect on the Company’s financial statements. Our management evaluated for subsequent events through the time of our filing on February 25, 2010.
 
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R),” the current authoritative guidance of which is the Codification Topic “Consolidation” (“FASB ASC 810”). FASB ASC 810 seeks to improve financial reporting by enterprises involved


F-17


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 2 —  Summary of Significant Accounting Policies (continued)
 
with variable interest entities. The Statement addresses the effects on certain provisions of FASB ASC 810-10-15, Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in FASB Statement No. 166, Accounting for Transfers of Financial Assets. It also discusses the application of certain key provisions of FASB ASC 810-10-15, including those in which the accounting and disclosures under FASB ASC 810-10-15 do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This Statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The Company does not believe that the adoption of FASB ASC 810 will have a material impact on its consolidated financial statements.
 
In June 2008, the FASB issued FASB Staff Position on Emerging Issues Task Force Issue 03-6, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”), the current authoritative guidance of which is the Codification Sub-Topic “Earnings Per Share” (“FASB ASC 260-10”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. Early application was not permitted. Adoption on January 1, 2009 did not materially impact our earnings per share calculation.
 
In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). The Statement identifies the sources of accounting principles and framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. The purpose is to remove the focus of setting the GAAP hierarchy from the auditor and giving the entity the responsibility of setting the GAAP hierarchy. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The adoption of SFAS No. 162 did not have a material impact on the Company’s consolidated financial statements.
 
(t)   Reclassifications
 
Certain 2007 and 2008 amounts have been reclassified to conform to the 2009 presentation. This reclassification had no material effect on the consolidated balance sheets or statement of operations of the Company.
 
Note 3 —  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”) (prior authoritative guidance: Statement of Financial Accounting Standards No. 128, “Earnings Per Share”) 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, warrants and convertible securities. The conversion of OP Units has been excluded from the basic earnings per share calculation. The conversion of an OP Unit to a share of common stock has no material effect on earnings per common share.


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 3 —  Earnings Per Common Share (continued)
 
The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2009, 2008 and 2007 (amounts in thousands):
 
                         
    Years Ended December 31,  
    2009     2008     2007  
 
Numerators:
                       
Income from Continuing Operations:
                       
Income from continuing operations — basic
  $ 29,819     $ 18,157     $ 22,160  
Amounts allocated to dilutive securities
    5,433       4,265       5,322  
                         
Income from continuing operations — fully diluted
  $ 35,252     $ 22,422     $ 27,482  
                         
Income from Discontinued Operations:
                       
Income from discontinued operations — basic
  $ 4,186     $ 146     $ 9,942  
Amounts allocated to dilutive securities
    680       32       2,383  
                         
Income from discontinued operations — fully diluted
  $ 4,866     $ 178     $ 12,325  
                         
Net Income Available for Common Shares:
                       
Net income available for Common Shares — basic
  $ 34,005     $ 18,303     $ 32,102  
Amounts allocated to dilutive securities
    6,113       4,297       7,705  
                         
Net income available for Common Shares — fully diluted
  $ 40,118     $ 22,600     $ 39,807  
                         
Denominator:
                       
Weighted average Common Shares outstanding — basic
    27,583       24,466       24,089  
Effect of dilutive securities:
                       
Redemption of Common OP Units for Common Shares Shares
    5,075       5,674       5,870  
Employee stock options and restricted shares
    286       358       455  
                         
Weighted average Common Shares outstanding — fully diluted
    32,944       30,498       30,414  
                         
 
Note 4 —  Common Stock and Other Equity Related Transactions
 
On May 18, 2007 the stockholders approved the increase of authorized common stock from 50,000,000 to 100,000,000.


F-19


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 4 —  Common Stock and Other Equity Related Transactions (continued)
 
The following table presents the changes in the Company’s outstanding common stock for the years ended December 31, 2009, 2008 and 2007 (excluding OP Units of 4,914,040, 5,366,741, and 5,836,043 outstanding at December 31, 2009, 2008, and 2007, respectively):
 
                         
    2009     2008     2007  
 
Shares outstanding at January 1,
    25,051,322       24,348,517       23,928,652  
Common stock issued through conversion of OP Units
    448,501       469,302       254,025  
Common stock issued through exercise of options
    213,721       169,367       143,841  
Common stock issued through stock grants
    27,000       50,000       18,000  
Common stock issued through ESPP and DRIP
    34,769       32,184       22,820  
Common stock repurchased and retired
    (24,568 )     (18,048 )     (18,821 )
Common stock issued through stock offering
    4,600,000              
                         
Shares outstanding at December 31,
    30,350,745       25,051,322       24,348,517  
                         
 
As of December 31, 2009 and 2008, the Company’s percentage ownership of the Operating Partnership was approximately 86.1% and 82.4%, respectively. The remaining approximately 13.9% and 17.6%, respectively, was owned by the Common OP Unitholders.
 
The following regular quarterly distributions have been declared and paid to common stockholders and non-controlling interests since January 1, 2007:
 
             
    For the Quarter
  Stockholder
   
Distribution Amount Per Share
  Ending   Record Date   Payment Date
 
$0.1500
  March 31, 2007   March 30, 2007   April 13, 2007
$0.1500
  June 30, 2007   June 29, 2007   July 13, 2007
$0.1500
  September 30, 2007   September 28, 2007   October 12, 2007
$0.1500
  December 31, 2007   December 28, 2007   January 11, 2008
 
 
$0.2000
  March 31, 2008   March 28, 2008   April 11, 2008
$0.2000
  June 30, 2008   June 27, 2008   July 11, 2008
$0.2000
  September 30, 2008   September 26, 2008   October 10, 2008
$0.2000
  December 31, 2008   December 26, 2008   January 9, 2009
 
 
$0.2500
  March 31, 2009   March 27, 2009   April 10, 2009
$0.2500
  June 30, 2009   June 26, 2009   July 10, 2009
$0.3000
  September 30, 2009   September 25, 2009   October 9, 2009
$0.3000
  December 31, 2009   December 24, 2009   January 8, 2010
 
The Company adopted the 1997 Non-Qualified Employee Stock Purchase Plan (“ESPP”) in July 1997. Pursuant to the ESPP, as amended on May 3, 2006, certain employees and directors of the Company may each annually acquire up to $250,000 of common stock of the Company. The aggregate number of shares of common stock available under the ESPP shall not exceed 1,000,000, subject to adjustment by the Company’s Board of Directors. The common stock may be purchased monthly at a price equal to 85% of the lesser of: (a) the closing price for a share of common stock on the last day of the offering period; and (b) the closing price for a share of common stock on the first day of the offering period. Shares of common stock issued through the ESPP for the years ended December 31, 2009 and 2008 were 34,450 and 31,770, respectively.


F-20


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 4 —  Common Stock and Other Equity Related Transactions (continued)
 
On June 29, 2009, the Company issued 4.6 million shares of common stock in an equity offering for proceeds of approximately $146.4 million, net of offering costs.
 
Note 5 — Investment in Real Estate
 
Investment in Real Estate is comprised of (amounts in thousands):
 
Properties Held for Long Term
 
                 
    December 31,
    December 31,
 
    2009     2008  
 
Investment in real estate:
               
Land
  $ 543,613     $ 539,702  
Land improvements
    1,741,142       1,715,627  
Buildings and other depreciable property
    248,907       222,699  
                 
      2,533,662       2,478,028  
Accumulated depreciation
    (628,839 )     (557,001 )
                 
Net investment in real estate
  $ 1,904,823     $ 1,921,027  
                 
 
Properties Held for Sale
 
                 
    December 31,
    December 31,
 
    2009     2008  
 
Investment in real estate:
               
Land
  $ 1,109     $ 2,277  
Land improvements
    3,301       10,125  
Buildings and other depreciable property
    143       591  
                 
      4,553       12,993  
Accumulated depreciation
    (929 )     (4,103 )
                 
Net investment in real estate
  $ 3,624     $ 8,890  
                 
 
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 and equipment. See Note 7 in the Notes to the Consolidated Financial Statements contained in this Form 10-K for disclosure regarding the reclassification of resort cottage inventory to Buildings and other depreciable property during the year ended December 31, 2009.
 
All acquisitions have been accounted for utilizing the purchase method of accounting and, accordingly, the results of operations of acquired assets are included in the statements of operations from the dates of acquisition. Certain purchase price adjustments may be made within one year following the acquisitions. We acquired all of


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 5 — Investment in Real Estate (continued)
 
these Properties from unaffiliated third parties. During the years ended December 31, 2009, 2008 and 2007, the Company acquired the following Properties (dollars in millions):
 
1) During the year ended December 31, 2009, we acquired the remaining 75% interests in the following three Diversified Portfolio joint ventures known as:
 
                                         
                  Real
    Debt
    Net
 
Closing Date
 
Property
 
Location
  Total Sites     Estate     Assumed     Equity  
 
February 13, 2009
  Plymouth Rock   Elkhart Lake, WI     609     $ 10.7     $ 6.4 (a)   $ 4.3  
February 13, 2009
  Robin Hill   Lenhartsville, PA     270       5.0       3.5       1.5  
February 13, 2009
  Sun Valley   Brownsville, PA     265       3.5       1.9       1.6  
 
 
(a) Net of approximately $1.1 million of mark-to-market discount.
 
2) During the year ended December 31, 2008, we acquired the following Properties:
 
                                         
                Real
      Net
Closing Date
 
Property
 
Location
  Total Sites   Estate   Debt   Equity
 
January 14, 2008
  Grandy Creek   Concrete, WA     179     $ 1.8     $     $ 1.8  
January 23, 2008
  Lake George Schroon Valley   Warrensburg, NY     151       2.1             2.1  
 
3) During the year ended December 31, 2007, we acquired the following Properties:
 
                                         
                  Real
          Net
 
Closing Date
 
Property
 
Location
  Total Sites     Estate     Debt     Equity  
 
January 29, 2007
  Mesa Verde (a)   Yuma, AZ     345     $ 5.9     $ 3.5     $ 2.4  
June 27, 2007
  Winter Garden (a)   Winter Garden, FL     350       10.9       4.0       6.9  
August 3, 2007
  Pine Island   St. James City, FL     363       6.5             6.5  
September 26, 2007
  Santa Cruz RV Ranch   Scotts Valley, CA     106       5.5             5.5  
October 11, 2007
  Tuxbury Resort   Amesbury, MA     305       7.3       1.1 (b)     6.1  
 
 
(a) Purchased remaining 75% interest in the two Diversified Investments joint venture Properties above, in which we had an existing 25% joint venture ownership interest of $0.7 million. The gross purchase price for Mesa Verde includes $0.3 million in prepaid rent.
 
(b) Net of approximately $0.1 million of mark-to-market adjustment.
 
Investment in real estate also increased due to the consolidation of the Bar Harbor joint venture as of December 31, 2007. See Note 6 in the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
We actively seek to acquire additional Properties and currently are engaged in negotiations relating to the possible acquisition of a number of Properties. At any time these negotiations are at varying stages, which may include contracts outstanding, to acquire certain Properties, which are subject to satisfactory completion of our due diligence review.
 
As of December 31, 2009, the Company has one Property designated as held for disposition pursuant to FASB ASC 360-10-35. The Company determined that this Property no longer met its investment criteria. As such, the results from operations of this Property is classified as income from discontinued operations. The Property classified as held for disposition is listed in the table below.
 
             
Property
  Location   Sites
 
Creekside
  Wyoming, MI     165  


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 5 — Investment in Real Estate (continued)
 
On December 29, 2009, a deed-in-lieu of foreclosure agreement, signed by the Company was sent to the loan servicer regarding our nonrecourse mortgage loan of approximately $3.6 million secured by Creekside. See Note 18 in the Notes to Consolidated Financial Statements contained in this Form 10-K.
 
During the three years ended December 31, 2009, the Company sold the following Properties. Except for Caledonia, the operating results have been reflected in discontinued operations.
 
  1)  On July 20, 2009, we sold Casa Village, a 490-site manufactured home Property in Billings, Montana for a stated purchase price of approximately $12.4 million. The buyer assumed $10.6 million of mortgage debt that had a stated interest rate of 6.02% and was schedule to mature in 2013. The Company recognized a gain on the sale of approximately $5.1 million. Cash proceeds from the sale, net of closing costs, were approximately $1.1 million.
 
  2)  On April 17, 2009, we sold Caledonia, a 247-site resort Property in Caledonia, Wisconsin, for proceeds of approximately $2.2 million. The Company recognized a gain on sale of approximately $0.8 million which is included in Income from other investments, net. In addition, we received approximately $0.3 million of deferred rent due from the previous tenant.
 
  3)  On November 30, 2007, we sold Holiday Village, a 519-site all-age manufactured home Property in Sioux City, Iowa for approximately $2.6 million and a gain of approximately $0.6 million.
 
  4)  On July 6, 2007, the Company sold Del Rey, a 407-site manufactured home Property in Albuquerque, New Mexico, for proceeds of approximately $13.0 million and recognized a gain on sale of approximately $6.9 million. The proceeds were deposited in a tax-deferred exchange account and the proceeds were subsequently used for the acquisition of Pine Island and Tuxbury Resort discussed above.
 
  5)  On January 10, 2007, the Company sold, Lazy Lakes, a 100-site resort Property in the Florida Keys for proceeds of approximately $7.7 million and recognized a gain on sale of approximately $4.6 million. The proceeds were deposited in a tax-deferred exchange account and were subsequently used for the acquisitions of Winter Garden and Mesa Verde discussed above.
 
The following table summarizes the combined results of operations of Properties held for sale or sold during the years ended December 31, 2009, 2008 and 2007 (amounts in thousands):
 
                         
    2009     2008     2007  
 
Rental income
  $ 1,424     $ 2,121     $ 3,020  
Utility and other income
    96       155       243  
                         
Property operating revenues
    1,520       2,276       3,263  
Property operating expenses
    (758 )     (1,101 )     (1,972 )
                         
Income from property operations
    762       1,175       1,291  
Income (loss) from home sales operations
    22       8       (65 )
Interest and amortization
    (604 )     (926 )     (937 )
Gain (loss) on real estate
    4,686       (79 )     12,036  
                         
Income from discontinued operations
  $ 4,866     $ 178     $ 12,325  
                         
 
Note 6 —  Investment in Joint Ventures
 
The Company recorded approximately $2.9 million and $3.8 million of equity in income from unconsolidated joint ventures, net of approximately $1.3 million and $1.8 million of depreciation expense for the years ended December 31, 2009 and 2008, respectively. The Company received approximately $2.9 million and


F-23


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 6 —  Investment in Joint Ventures (continued)
 
$4.2 million in distributions from such joint ventures for the years ended December 31, 2009 and 2008, respectively. Approximately $2.9 million and $3.7 million of such distributions were classified as a return on capital and were included in operating activities on the Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008, respectively. The remaining distributions were classified as a return of capital and classified as investing activities on the Consolidated Statements of Cash Flows. Approximately $1.3 million and $2.7 million of the distributions received in the years ended December 31, 2009 and 2008, respectively, exceeded the Company’s basis in its joint venture and as such were recorded in income from unconsolidated joint ventures. Distributions include amounts received from the sale or liquidation of equity in joint venture investments.
 
On February 13, 2009, the Company purchased the remaining 75% interest in the Diversified Portfolio joint venture Properties in which we had an existing 25% joint venture interest. The Properties are known as Robin Hill in Lenhartsville, Pennsylvania, Sun Valley in Bowmansville, Pennsylvania and Plymouth Rock in Elkhart Lake, Wisconsin. Also on February 13, 2009, the Company sold its 25% interest in the Diversified Portfolio joint ventures known as Round Top, in Gettysburg, Pennsylvania and Pine Haven in Ocean View, New Jersey. A gain on sale of approximately $1.1 million was recognized and is included in equity in income from unconsolidated joint ventures.
 
During the year ended December 31, 2008, the Company invested approximately $5.7 million to acquire an additional 25% interest in Voyager RV Resort, increasing the Company’s ownership interest to 50%. The additional investment was determined on a total purchase price of $50.5 million and mortgage debt of $22.5 million. The Company exercised its option to acquire the remaining percentage of Bar Harbor joint venture from its joint venture partner. Under the formula provided for in the call option section of the joint venture agreement, no additional consideration was required to be paid to exercise the option and the Company now owns 100% of the three Bar Harbor Properties. The Company sold its 25% interest in the four Morgan Portfolio joint ventures known as New Point in New Point, Virginia, Virginia Park in Old Orchard Beach, Maine, Club Naples in Naples, Florida and Gwynn’s Island in Gwynn, Virginia, for a sales price of approximately $2.1 million. The sales price for the four Morgan Portfolio joint ventures was based on a total sales price of approximately $25.7 million net of mortgage debt of approximately $17.2 million. A gain on the sale of approximately $1.6 million was recognized. The Company also received approximately $0.4 million held for the initial investment in one of the Morgan Properties.
 
During the year ended December 31, 2008, the Company received approximately $4.2 million in distributions from our joint ventures. $3.7 million of these distributions were classified as return on capital and were included in operating activities. The remaining distributions of approximately $0.5 million were classified as a return of capital and were included in investing activities and were related to the sale of the Company’s 25% interest in four of our joint venture Properties. Approximately $2.7 million of the distributions received exceeded the Company’s basis in its joint venture and as such were recorded in income from unconsolidated joint ventures. Of these distributions, $0.6 million relates to the gain on the payoff of our share of seller financing in excess of our joint venture basis on one Lakeshore investment.
 
During the year ended December 31, 2007, the Company invested approximately $2.7 million in developing one of the Bar Harbor joint venture Properties, which resulted in an increase of the Company’s ownership interest per the joint venture agreement. As of December 31, 2007, the Bar Harbor joint venture had been consolidated with the operations of the Company as the Company had determined that as of December 31, 2007 we are the primary beneficiary by applying the standards of FASB ASC 810-10-15. This consolidation had decreased the Company’s investment in joint venture by approximately $11.1 million, with an offsetting increase in investment in real estate.


F-24


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 6 —  Investment in Joint Ventures (continued)
 
During the year ended December 31, 2007, the Company received approximately $5.2 million in distributions from our joint ventures. $5.1 million of these distributions were classified as return on capital and were included in operating activities. The remaining distributions of approximately $0.1 million were classified as a return of capital and were included in investing activities and were related to refinancings at three of our joint venture Properties. Approximately $2.5 million of the distributions received exceeded the Company’s basis in its joint venture and as such were recorded in income from unconsolidated joint ventures.
 
The following table summarizes the Company’s investment in unconsolidated joint ventures (with the number of Properties shown parenthetically for the years ended December 31, 2009 and 2008, respectively):
 
                                                             
                    Investment as of     JV Income For Year Ended  
        Number
    Economic
    December 31,
    December 31,
    December 31,
    December 31,
    December 31,
 
Investment
  Location   of Sites     Interest(a)     2009     2008     2009     2008     2007  
 
Meadows Investments
  Various (2,2)     1,027       50 %   $ 245     $ 406     $ 877     $ 838     $ 698  
Lakeshore Investments
  Florida (2,2)     342       65 %     133       110       277       890       276  
Voyager
  Arizona (1,1)     1,706       50 %(b)     8,732       8,953       550       470       313  
Other Investments
  Various (0,5)(c)           25 %     332       207       1,192       1,555       1,409  
                                                             
          3,075             $ 9,442     $ 9,676     $ 2,896     $ 3,753     $ 2,696  
                                                             
 
 
(a) The percentages shown approximate the Company’s economic interest as of December 31, 2009. The Company’s legal ownership interest may differ.
 
(b) Voyager joint venture primarily consists of a 50% interest in Voyager RV Resort. A 25% interest in the utility plant servicing the Property is included in Other Investments.
 
(c) In February 2009, the Company sold its 25% interest in two Diversified Portfolio joint ventures.
 
 
Note 7 — Inventory
 
The following table sets forth Inventory as of the years ended December 31, 2009 and 2008 (amounts in thousands):
 
                 
    December 31, 2009     December 31, 2008  
 
New homes(1)
  $ 174     $ 8,436  
Used homes(2)
          312  
Other (3)
    2,790       4,651  
                 
Total inventory (4)
    2,964       13,399  
Inventory reserve
          (465 )
                 
Inventory, net of reserves
  $ 2,964     $ 12,934  
                 
 
 
(1) Includes 18 and 261 new units for the years ended December 31, 2009 and 2008, respectively.
 
(2) Includes zero and 27 used units for the years ended December 31, 2009 and 2008, respectively.
 
(3) Other inventory primarily consists of merchandise inventory.
 
(4) Includes zero and $0.3 million in discontinued operations as of December 31, 2009 and 2008, respectively.
 
During the year ended December 31, 2009, $6.7 million of new and used resort cottage inventory and related reserves were reclassified to fixed assets. During the year ended December 31, 2008, $57.8 million of manufactured home inventory, including reserves of approximately $0.8 million, was reclassified to Buildings


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 7 — Inventory (continued)
 
and other depreciable property. The inventory reclassified is primarily rented to customers on an annual basis. The reclassification was made to reflect the current use of the resources as rental units.
 
 
Note 8 — Notes Receivable
 
As of December 31, 2009 and December 31, 2008, the Company had approximately $30.0 million and $31.8 million in notes receivable, respectively. As of December 31, 2009 and 2008, the Company has approximately $10.4 million and $12.0 million, respectively, in Chattel Loans receivable, which yield interest at a per annum average rate of approximately 8.8%, have an average term and amortization of 3 to 20 years, require monthly principal and interest payments and are collateralized by homes at certain of the Properties. These notes are recorded net of allowances of approximately $0.3 million and $0.2 million as of December 31, 2009 and December 31, 2008, respectively. During the year ended December 31, 2009 and 2008, approximately $1.0 million and $1.5 million, respectively, was repaid and an additional $0.5 million and $4.3 million, respectively, was loaned to customers.
 
As of December 31, 2009 and December 31, 2008, the Company had approximately $17.4 million and $19.5 million, respectively, of Contracts Receivables, including allowances of approximately $1.2 million and $0.3 million, respectively. These Contracts Receivables represent loans to customers who have purchased right-to-use contracts. The Contracts Receivable yield interest at a per annum average rate of 16.5%, have a weighted average term remaining of approximately four years and require monthly payments of principal and interest. During the period ended December 31, 2009 and 2008, approximately $9.6 million and $4.0 million, respectively, was repaid and an additional $8.0 million and $4.0 million, respectively, was loaned to customers.
 
As of December 31, 2009 and 2008, the Company had approximately $0.2 million and $0.4 million respectively, in notes, which bear interest at a per annum rate of prime plus 0.5% and mature on December 31, 2011. The notes are collateralized with partnership interests in certain joint ventures.
 
As of December 31, 2009 and 2008, the Company had approximately $2.0 million and zero, respectively, in notes, which bear interest at a per annum rate of 11.0% and matures on July 6, 2010. The note is collateralized by first priority mortgages on four resort properties.
 
 
Note 9 — Long-Term Borrowings
 
Secured Debt
 
As of December 31, 2009 and December 31, 2008, the Company had outstanding mortgage indebtedness on Properties held for long term of approximately $1,542.5 million and $1,555 million, respectively, and approximately $4 million and $14 million of mortgage indebtedness as of December 31, 2009 and December 31, 2008, respectively, on Properties held for sale. The weighted average interest rate on this mortgage indebtedness for the years ended December 31, 2009 and December 31, 2008 was approximately 6.1% per annum and 5.9% per annum, respectively. The debt bears interest at rates of 5.0% to 10.0% per annum and matures on various dates ranging from 2010 to 2019. Included in our December 31, 2008 debt balance are three capital leases with balances of approximately $6.7 million with imputed interest rates of 13.1% per annum. The outstanding balances on these capital leases were paid off on July 1, 2009. The debt encumbered a total of 140 and 151 of the Company’s Properties as of December 31, 2009 and December 31, 2008, and the carrying value of such Properties was approximately $1,680 million and $1,694 million, respectively, as of such dates.
 
As of December 31, 2009 and 2008, the Company has outstanding debt secured by certain manufactured homes of $1.5 million and $0 million, respectively. This financing provided by the manufactured home dealer requires monthly payments, bears interest at 8.5% and matures on the earlier of: 1) the date the home is sold, or 2) November 20, 2016.


F-26


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 9 — Long-Term Borrowings (continued)
 
Financing, Refinancing and Early Debt Retirement
 
2009 activity
 
During the year ended December 31, 2009, the Company closed on approximately $107.5 million of new financing, on six manufactured home properties, with a weighted average interest rate of 6.32%. We used the proceeds from the financing to pay-off approximately $106.7 million on 20 Properties, with a weighted average interest rate of 7.36%. During December 2009, we borrowed approximately $1.5 million which is secured by individual manufactured homes.
 
On February 13, 2009, in connection with the acquisition of the remaining 75% interests in the Diversified Portfolio joint venture, we assumed mortgages of approximately $12.9 million with a value of approximately $11.9 million.
 
On December 17, 2009, the Company paid off the $2 million unsecured note payable to Privileged Access.
 
2008 activity
 
During the year ended December 31, 2008, the Company closed on approximately $231.0 million of new financing, on 15 manufactured home properties, with a weighted average interest rate of 6.01%. We used the proceeds from the financing to pay-off approximately $245.8 million of mortgage debt on 28 manufactured home properties, with a weighted average interest rate of 5.54%. The proceeds were also used to pay down amounts outstanding on our lines of credit.
 
Unsecured Loans
 
We have two unsecured Lines of Credit (“LOC”) of $350 million and $20 million that bear interest at a rate of LIBOR plus a maximum of 1.20% per annum, have a 0.15% facility fee, mature on June 30, 2010, and have a one-year extension option. The weighted average interest rate for the year ended December 31, 2009 for our unsecured debt was approximately 1.7% per annum. During the year ended December 31, 2009, we borrowed $50.9 million and paid down $143.9 million on the lines of credit for a net pay-down of $93.0 million. As of December 31, 2009, there were no amounts outstanding on the line of credit.
 
Other Loans
 
Aggregate payments of principal on long-term borrowings for each of the next six years and thereafter are as follows (amounts in thousands):
 
         
Year
  Amount  
 
2010
  $ 203,663  
2011
    75,719  
2012
    21,806  
2013
    121,685  
2014
    200,829  
2015
    533,392  
Thereafter
    391,598  
Net unamortized premiums
    (791 )
         
Total
  $ 1,547,901  
         


F-27


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 9 — Long-Term Borrowings (continued)
 
 
Note 10 — Deferred Revenue-sale of right-to-use contracts and Deferred Commission Expense
 
The sales of right-to-use contracts are recognized in accordance with FASB ASC 605. The Company will recognize the upfront non-refundable payments over the estimated customer life which, based on historical attrition rates, the Company has estimated to be between one to 31 years. The commissions paid on the sale of right-to-use contracts will be deferred and amortized over the same period as the related sales revenue.
 
Components of the change in deferred revenue-sale of right-to-use contracts and deferred commission expense are as follows (amounts in thousands):
 
                 
    2009     2008  
 
Deferred revenue — sale of right-to-use contracts, as of January 1,
  $ 10,611     $  
Deferral of new right-to-use contracts
    21,526       10,951  
Deferred revenue recognized
    (2,644 )     (340 )
                 
Net increase in deferred revenue
    18,882       10,611  
                 
Deferred revenue — sale of right-to-use contracts, as of December 31,
  $ 29,493     $ 10,611  
                 
Deferred commission expense, as of January 1,
  $ 3,644     $  
Costs deferred
    6,550       3,756  
Amortization of deferred costs
    (821 )     (112 )
                 
Net increase in deferred commission expense
    5,729       3,644  
                 
Deferred commission expense, December 31,
  $ 9,373     $ 3,644  
                 
 
 
Note 11 — Lease Agreements
 
The leases entered into between the customer and the Company for the rental of a site are generally month-to-month or for a period of one to ten years, renewable upon the consent of the parties or, in some instances, as provided by statute. Non-cancelable long-term leases are in effect at certain sites within approximately 31 of the Properties. Rental rate increases at these Properties are primarily a function of increases in the Consumer Price Index, taking into consideration certain conditions. Additionally, periodic market rate adjustments are made as deemed appropriate. Future minimum rents are scheduled to be received under non-cancelable tenant leases at December 31, 2009 as follows (amounts in thousands):
 
         
Year
  Amount  
 
2010
  $ 68,068  
2011
    70,232  
2012
    49,950  
2013
    26,867  
2014
    16,363  
Thereafter
    36,744  
         
Total
  $ 268,224  
         
 
Note 12 — Ground Leases
 
The Company leases land under non-cancelable operating leases at certain of the Properties expiring in various years from 2013 to 2054, with terms which require twelve equal payments per year plus additional rents calculated as a percentage of gross revenues. For the year ended December 31, 2009, ground lease rent was approximately $1.9 million and for the years ended December 31, 2008 and 2007, ground lease rent was


F-28


Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 12 — Ground Leases (continued)
 
approximately $1.8 million and $1.6 million, respectively. Minimum future rental payments under the ground leases as of December 31, 2009 as follows (amounts in thousands):
 
         
Year
  Amount  
 
2010
  $ 1,917  
2011
    1,910  
2012
    1,917  
2013
    1,914  
2014
    1,915  
Thereafter
    18,660  
         
Total
  $ 28,233  
         
 
Note 13 — Transactions with Related Parties
 
Privileged Access
 
On August 14, 2008, the Company closed on the PA Transaction by acquiring substantially all of the assets and assumed certain liabilities of Privileged Access for an unsecured note payable of $2.0 million which was paid off during the year ended December 31, 2009. Prior to the purchase, Privileged Access had a 12-year lease with the Company for 82 Properties that terminated upon closing. At closing, approximately $4.8 million of Privileged Access cash was deposited into an escrow account for liabilities that Privileged Access has retained. The balance in the escrow account as of December 31, 2009 was approximately $1.9 million.
 
Mr. McAdams, the Company’s President effective January 1, 2008, owns 100% of Privileged Access. The Company has entered into an employment agreement effective as of January 1, 2008 (the “Employment Agreement”) with Mr. McAdams which provides for an initial term of three years, but such Employment Agreement can be terminated at any time. The Employment Agreement provides for a minimum annual base salary of $0.3 million, with the option to receive an annual bonus in an amount up to three times his base salary. Mr. McAdams is also subject to a non-compete clause and to mitigate potential conflicts of interest shall have no authority, on behalf of the Company and its affiliates, to enter into any agreement with any entity controlling, controlled by or affiliated with Privileged Access. Prior to forming Privileged Access, Mr. McAdams was a member of our Board of Directors from January 2004 to October 2005. Simultaneous with his appointment as president of Equity Lifestyle Properties, Inc., Mr. McAdams resigned as Privileged Access’s Chairman, President and CEO. However, he was on the board of PATT Holding Company, LLC (“PATT”), until the entity was dissolved in 2008.
 
Mr. Heneghan, the Company’s CEO, was a member of the board of PATT, pursuant to the Company’s rights under its resort Property leases with Privileged Access to represent the Company’s interests from April 14, 2006 to August 13, 2008. Mr. Heneghan did not receive compensation in his capacity as a member of such board.
 
In connection with the PA Transaction, the Company hired most of the property employees and certain property management and corporate employees of Privileged Access. Subsequent to the PA Transaction, the Company reimbursed Privileged Access for services provided in 2008 by Privileged Access employees retained by Privileged Access, which were necessary for the transition of the former Privileged Access operations to the Company.
 
Privileged Access had the following substantial business relationships with the Company, which were all terminated with the closing of the PA Transaction on August 14, 2008. As of both December 31, 2009 and


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 13 — Transactions with Related Parties (continued)
 
December 31, 2008, there were no payments owed to the Company or by the Company with respect to the relationships described below.
 
  •  Prior to August 14, 2008, the Company was leasing approximately 24,300 sites at 82 resort Properties (which includes 60 Properties operated by a subsidiary of Privileged Access known as the “TT Portfolio”) to Privileged Access or its subsidiaries. For the years ended December 31, 2009, 2008, and 2007 we recognized zero, $15.8 million, and $20.5 million, respectively, in rent from these leasing arrangements. The lease income is included in Income from other investments, net in the Company’s Consolidated Statements of Operations. During the years ended December 31, 2009 and December 31, 2008, the Company reimbursed zero and approximately $2.7 million, respectively, to Privileged Access for capital improvements.
 
  •  Effective January 1, 2008, the leases for these Properties provided for the following significant terms: a) annual fixed rent of approximately $25.5 million, b) annual rent increases at the higher of Consumer Price Index (“CPI”) or a renegotiated amount based upon the fair market value of the Properties, c) expiration date of January 15, 2020, and d) two 5-year extension terms at the option of Privileged Access. The January 1, 2008 lease for the TT Portfolio also included provisions where the Company paid Privileged Access $1 million for entering into the amended lease. The $1 million payment was being amortized on a pro-rata basis over the remaining term of the lease as an offset to the annual lease payments and the remaining balance at August 14, 2008 of $0.9 million was expensed and is included in Income from other investments, net during the year ended December 31, 2008.
 
The Company had subordinated its lease payment for the TT Portfolio to a bank that loaned Privileged Access $5 million. The Company acquired this loan as part of the PA Transaction and paid off the loan during the year ended December 31, 2008.
 
  •  From June 12, 2006 through July 14, 2008, Privileged Access had leased 130 cottage sites at Tropical Palms, a resort Property located near Orlando, Florida. For the years ended December 31, 2009 and 2008, we earned no rent and approximately $0.8 million, respectively, in rent from this leasing arrangement. The lease income is included in the Resort base rental income in the Company’s Consolidated Statements of Operations. The Tropical Palms lease expired on July 15, 2008, and the entire property was leased to a new independent operator for 12 years.
 
  •  On April 14, 2006, the Company loaned Privileged Access approximately $12.3 million at a per annum interest rate of prime plus 1.5%, maturing in one year and secured by Thousand Trails membership sales contract receivables. The loan was fully paid off during the quarter ended September 30, 2007.
 
  •  The Company previously leased 40 to 160 sites at three resort Properties in Florida, to a subsidiary of Privileged Access from October 1, 2007 until August 14, 2008. The sites varied during each month of the lease term due to the seasonality of the resort business in Florida. For the year ended December 31, 2008, we recognized less than $0.2 million in rent from this leasing arrangement. The lease income is included in the Resort base rental income in the Company’s Consolidated Statements of Operations.
 
  •  The Company previously leased 40 to 160 sites at Lake Magic, a resort Property in Clermont, Florida, to a subsidiary of Privileged Access from December 15, 2006 until September 30, 2007. The sites varied during each month of the lease term due to the seasonality of the resort business in Florida. For the years ended December 31, 2009 and December 31, 2008, we recognized zero and approximately $0.2 million, respectively, in rent from this leasing arrangement. The lease income is included in the Resort base rental income in the Company’s Consolidated Statements of Operations.
 
  •  The Company had an option to purchase the subsidiaries of Privileged Access, including TT, beginning on April 14, 2009, at the then fair market value, subject to the satisfaction of a number of significant


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 13 — Transactions with Related Parties (continued)
 
  contingencies (“ELS Option”). The ELS Option terminated with the closing of the PA Transaction on August 14, 2008. The Company had consented to a fixed price option where the Chairman of PATT could acquire the subsidiaries of Privileged Access anytime before December 31, 2011. The fixed price option also terminated on August 14, 2008.
 
  •  Privileged Access and the Company previously agreed to certain arrangements in which we utilized each other’s services. Privileged Access assisted the Company with functions such as: call center management, property management, information technology, legal, sales and marketing. During the years ended December 31, 2009 and December 31, 2008, the Company incurred no expense and approximately $0.6 million, respectively, for the use of Privileged Access employees. The Company received approximately $0.1 million from Privileged Access for Privileged Access use of certain Company information technology resources during the year ended December 31, 2008. The Company and Privileged Access engaged a third party to evaluate the fair market value of such employee services.
 
In addition to the arrangements described above, the Company had the following smaller arrangements with Privileged Access. In each arrangement, the amount of income or expense, as applicable, recognized by the Company for the year ended December 31, 2009 is zero and were less than $0.2 million for the year ended December 31, 2008. There are no amounts due under these arrangements as of December 31, 2009 or December 31, 2008.
 
  •  Since November 1, 2006, the Company leased 41 to 44 sites at 22 resort Properties to Privileged Access (the “Park Pass Lease”). The Park Pass Lease terminated with the closing of the PA Transaction on August 14, 2008.
 
  •  The Company and Privileged Access entered into a Site Exchange Agreement beginning September 1, 2007 and ending May 31, 2008. Under the Site Exchange Agreement, the Company allowed Privileged Access to use 20 sites at an Arizona resort Property known as Countryside. In return, Privileged Access allowed the Company to use 20 sites at an Arizona resort Property known as Verde Valley Resort (a property in the TT Portfolio).
 
  •  The Company and Privileged Access entered into a Site Exchange Agreement for a one-year period beginning June 1, 2008 and ending May 31, 2009. Under the Site Exchange Agreement, the Company allowed Privileged Access to use 90 sites at six resort Properties. In return, Privileged Access allowed the Company to use 90 sites at six resort Properties leased to Privileged Access. The Site Exchange Agreement was terminated with the closing of the PA Transaction on August 14, 2008.
 
  •  On September 15, 2006, the Company and Privileged Access entered into a Park Model Sales Agreement related to a Texas resort Property in the TT Portfolio known as Lake Conroe. Under the Park Model Sales Agreement, Privileged Access was allowed to sell up to 26 park models at Lake Conroe. Privileged Access was obligated to pay the Company 90% of the site rent collected from the park model buyer. All 26 homes have been sold as of December 31, 2007. The Park Model Sales Agreement terminated with the closing of the PA Transaction on August 14, 2008.
 
  •  The Company advertises in Trailblazer magazine that was published by a subsidiary of Privileged Access prior to August 14, 2008. Trailblazer is an award-winning recreational lifestyle magazine for active campers, which is read by more than 65,000 paid subscribers. Beginning on August 14, 2008, the Company began publishing Trailblazer in accordance with the terms of the PA Transaction.
 
  •  On July 1, 2008, the Company and Privileged Access entered into an agreement, where Privileged Access sold the Company’s used resort cottages at certain Properties leased to Privileged Access. The Company paid Privileged Access a commission for selling the inventory and the agreement was terminated on August 14, 2008.


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 13 — Transactions with Related Parties (continued)
 
 
  •  On April 1, 2008, the Company entered into a lease for a corporate apartment located in Chicago, Illinois for use by Mr. McAdams and other employees of the Company and Privileged Access. The Company paid monthly rent payments, plus utilities and housekeeping expenses and Mr. McAdams reimbursed the Company for a portion of the rent. Prior to August 14, 2008, Privileged Access reimbursed the Company for a portion of the rent and utilities and housekeeping expenses. Such lease terminated on December 31, 2008.
 
Corporate headquarters
 
The Company leases office space from Two North Riverside Plaza Joint Venture Limited Partnership, an entity affiliated with Mr. Zell, the Company’s Chairman of the Board. Payments made in accordance with the lease agreement to this entity amounted to approximately $1.0 million, $0.6 million, and $0.7 million for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009 and 2008, approximately $60,000 and $62,000, respectively, were accrued with respect to this office lease.
 
Other
 
In January 2009, the Company entered into a consulting agreement with the son of Mr. Howard Walker, to provide assistance with the Company’s internet web marketing strategy. Mr. Walker is Vice-Chairman of the Company’s Board of Directors. The consulting agreement was for a term of six months at a total cost of no more than $48,000 and expired on June 30, 2009.
 
Note 14 — Stock Option Plan and Stock Grants
 
The Company’s Stock Option and Stock Award Plan (the “Plan”) was adopted in December 1992 and amended and restated from time to time, most recently effective March 23, 2001. Pursuant to the Plan, officers, directors, employees and consultants of the Company are offered the opportunity (i) to acquire shares of common stock through the grant of stock options (“Options”), including non-qualified stock options and, for key employees, incentive stock options within the meaning of Section 422 of the Internal Revenue Code; and (ii) to be awarded shares of common stock (“Restricted Stock Grants”), subject to conditions and restrictions determined by the Compensation, Nominating, and Corporate Governance Committee of the Company’s Board of Directors (the “Compensation Committee”). The Compensation Committee will determine the vesting schedule, if any, of each Option and the term, which term shall not exceed ten years from the date of grant. As to the Options that have been granted through December 31, 2009 to officers, employees and consultants, generally, one-third are exercisable one year after the initial grant, one-third are exercisable two years following the date such Options were granted and the remaining one-third are exercisable three years following the date such Options were granted. Stock Options are awarded at the New York Stock Exchange closing price of the Company’s common stock on the grant date. A maximum of 6,000,000 shares of common stock are available for grant under the Plan and no more than 250,000 shares may be subject to grants to any one individual in any calendar year.
 
Grants under the Plan are made by the Compensation Committee, which determines the individuals eligible to receive awards, the types of awards, and the terms, conditions and restrictions applicable to any award. In addition, the terms of two specific types of awards are contemplated under the Plan:
 
  •  The first type of award is a grant of Options or Restricted Stock Grants of common stock made to each member of the Board at the meeting held immediately after each annual meeting of the Company’s stockholders. Generally, if the director elects to receive Options, the grant will cover 10,000 shares of common stock at an exercise price equal to the fair market value on the date of grant. If the director elects to receive a Restricted Stock Grant of common stock, he or she will receive an award of 2,000 shares of


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 14 — Stock Option Plan and Stock Grants (continued)
 
  common stock. Exercisability or vesting with respect to either type of award will be one-third of the award after six months, two-thirds of the award after one year, and the full award after two years.
 
  •  The second type of award is a grant of common stock in lieu of 50% of their bonus otherwise payable to individuals with a title of Vice President or above. A recipient can request that the Compensation Committee pay a greater or lesser portion of the bonus in shares of common stock.
 
The Company adopted FASB ASC 718 on July 1, 2005, which replaced SFAS 123. Since the Company had chosen to use the modified-prospective method for recognizing stock-based compensation and uses the Black-Scholes-Merton Model for valuing the options, the result of the adoption had no material impact of the Company’s results of operations or financial position.
 
Restricted Stock Grants
 
On February 1, 2010, the Company awarded Restricted Stock Grants for 74,665 shares of common stock to certain members of senior management of the Company. These Restricted Stock Grants vest on December 31, 2010. The fair market value of these Restricted Stock Grants was approximately $3.7 million as of the date of grant and is recorded as a compensation expense and paid in capital over the vesting period.
 
In 2008, the Company awarded Restricted Stock Grants for 30,000 shares of common stock to Joe McAdams in accordance with the terms of his Employment Agreement. These Restricted Stock Grants vest over two years with one-third vesting on January 4, 2008, one-third vesting on January 1, 2009 and one-third vesting on January 1, 2010. The fair market value of these Restricted Stock Grants was approximately $1.3 million as of the date of grant and is recorded as compensation expense and paid in capital over the two-year vesting period.
 
In 2006, the Company awarded Restricted Stock Grants for 147,500 shares of common stock to certain members of senior management of the Company. These Restricted Stock Grants vest over three years. The fair market value of these Restricted Stock Grants was approximately $8.1 million as of the date of grant and is recorded as compensation expense and paid in capital over the three-year vesting period.
 
In 2009, 2008 and 2007, the Company awarded Restricted Stock Grants for 27,000, 20,000, and 18,000 shares of common stock, respectively, to directors with a fair market value of approximately $1,025,000, $929,000, and $984,000 in 2009, 2008 and 2007, respectively.
 
The Company recognized compensation expense of approximately $4.1 million, $4.6 million and $3.7 million related to Restricted Stock Grants in 2009, 2008 and 2007, respectively. Compensation expense to be recognized subsequent to December 31, 2009 for Restricted Stock Grants not yet vested was approximately $0.8 million, which is expected to be recognized over a weighted average term of 0.7 years.
 
Stock Options
 
The fair value of each grant is estimated on the grant date using the Black-Scholes-Merton model. The following table includes the assumptions that were made and the estimated fair values:
 
                         
Assumption   2009     2008     2007  
 
Dividend yield
    2.5 %     5.5 %     5.8 %
Risk-free interest rate
    2.8 %     3.7 %     4.7 %
Expected life
    7 years       4 years       4 years  
Expected volatility
    21.0 %     16.9 %     15.6 %
                         
Estimated Fair Value of Options Granted
  $ 410,972     $ 516,904     $ 705,554  


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 14 — Stock Option Plan and Stock Grants (continued)
 
A summary of the Company’s stock option activity, and related information for the years ended December 31, 2009, 2008 and 2007 follows:
 
                         
                Weighted
 
          Weighted
    Average
 
          Average
    Outstanding
 
    Shares Subject
    Exercise Price
    Contractual
 
    to Options     Per Share     Life (in years)  
 
Balance at December 31, 2006
    968,593     $ 24.85          
Options granted
    165,000       54.86          
Options exercised
    (143,854 )     57.86          
Options canceled
    (1,200 )     17.60          
                         
Balance at December 31, 2007
    988,539       30.88       5.1  
Options granted
    135,000       44.36          
Options exercised
    (169,367 )     45.24          
Options canceled
    (400 )     16.38       5.4  
                         
Balance at December 31, 2008
    953,772       34.92          
Options granted
    102,800       37.70          
Options exercised
    (213,721 )     43.34          
Options canceled
    (1,000 )     15.69          
                         
Balance at December 31, 2009
    841,851       39.94       6.0  
                         
Exercisable at December 31, 2009
    728,315       39.88       5.6  
                         
 
As of December 31, 2009, 2008 and 2007, 970,442 shares, 1,099,242 shares and 1,283,842 shares remained available for grant, respectively; of these 573,525 shares, 600,525 shares and 650,525 shares, respectively, remained available for Restricted Stock Grants.
 
Note 15 — Preferred Stock
 
The Company’s Board of Directors is authorized under the Company’s charter, without further stockholder approval, to issue, from time to time, in one or more series, 10,000,000 shares of $.01 par value preferred stock (the “Preferred Stock”), with specific rights, preferences and other attributes as the Board may determine, which may include preferences, powers and rights that are senior to the rights of holders of the Company’s common stock. However, under certain circumstances, the issuance of preferred stock may require stockholder approval pursuant to the rules and regulations of The New York Stock Exchange. As of December 31, 2009 and 2008, the Company issued no Preferred Stock.
 
Note 16 — Long-Term Cash Incentive Plan
 
On May 15, 2007, the Company’s Board of Directors approved a Long-Term Cash Incentive Plan (the “LTIP”) to provide a long-term cash bonus opportunity to certain members of the Company’s management and executive officers. Such Board approval was upon recommendation by the Company’s Compensation, Nominating and Corporate Governance Committee (the “Committee”). On January 18, 2010, the Committee approved payments under the LTIP of approximately $2.8 million.


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 16 — Long-Term Cash Incentive Plan (continued)
 
The Company’s Chief Executive Officer and President were not participants in the LTIP. The approved payments are expected to be paid in cash upon completion of the Company’s annual audit for the 2009 fiscal year, which is expected to be completed on or before March 1, 2010.
 
The Company accounted for the LTIP in accordance with FASB ASC 718. As of December 31, 2009 and 2008, the Company had accrued compensation expense of approximately $2.8 million and $1.8 million, respectively, related to the LTIP, including approximately $1.1 million and $1.0 million in the year ended December 31, 2009 and 2008, respectively.
 
 
Note 17 — Savings Plan
 
The Company has a qualified retirement plan, with a salary deferral feature designed to qualify under Section 401 of the Code (the “401(k) Plan”), to cover its employees and those of its Subsidiaries, if any. The 401(k) Plan permits eligible employees of the Company and those of any Subsidiary to defer up to 60% of their eligible compensation on a pre-tax basis subject to certain maximum amounts. In addition, the Company will match 100% of the participant’s contribution up to the first 3% and then 50% of the next 2% for a maximum potential match of 4%.
 
In addition, amounts contributed by the Company will vest, on a prorated basis, according to the participant’s vesting schedule. After five years of employment with the Company, the participants will be 100% vested for all amounts contributed by the Company. Additionally, a discretionary profit sharing component of the 401(k) Plan provides for a contribution to be made annually for each participant in an amount, if any, as determined by the Company. All employee contributions are 100% vested. The Company’s contribution to the 401(k) Plan was $840,000, $465,000, and $399,000, for the years ended December 31, 2009, 2008, and 2007, respectively.
 
Note 18 — Commitments and Contingencies
 
California Rent Control Litigation
 
As part of the Company’s effort to realize the value of its Properties subject to rent control, the Company has initiated lawsuits against several municipalities in California. The Company’s goal is to achieve a level of regulatory fairness in California’s rent control jurisdictions, and in particular those jurisdictions that prohibit increasing rents to market upon turnover. Regulations in California allow tenants to sell their homes for a premium representing the value of the future discounted rent-controlled rents. In the Company’s view, such regulation results in a transfer of the value of the Company’s stockholders’ land, which would otherwise be reflected in market rents, to tenants upon the sales of their homes in the form of an inflated purchase price that cannot be attributed to the value of the home being sold. As a result, in the Company’s view, the Company loses the value of its asset and the selling tenant leaves the Property with a windfall premium. The Company has discovered through the litigation process that certain municipalities considered condemning the Company’s Properties at values well below the value of the underlying land. In the Company’s view, a failure to articulate market rents for sites governed by restrictive rent control would put the Company at risk for condemnation or eminent domain proceedings based on artificially reduced rents. Such a physical taking, should it occur, could represent substantial lost value to stockholders. The Company is cognizant of the need for affordable housing in the jurisdictions, but asserts that restrictive rent regulation does not promote this purpose because the benefits of such regulation are fully capitalized into the prices of the homes sold. The Company estimates that the annual rent subsidy to tenants in these jurisdictions may be in excess of $15 million. In a more well balanced regulatory environment, the Company would receive market rents that would eliminate the subsidy and homes would trade at or near their intrinsic value.


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 18 — Commitments and Contingencies (continued)
 
In connection with such efforts, the Company entered into a settlement agreement with the City of Santa Cruz, California and that, pursuant to the settlement agreement, the City amended its rent control ordinance to exempt the Company’s Property from rent control as long as the Company offers a long term lease which gives the Company the ability to increase rents to market upon turnover and bases annual rent increases on the CPI. The settlement agreement benefits the Company’s stockholders by allowing them to receive the value of their investment in this Property through vacancy decontrol while preserving annual CPI based rent increases in this age-restricted Property.
 
The Company has filed two lawsuits in federal court against the City of San Rafael, challenging its rent control ordinance on constitutional grounds. The Company believes that one of those lawsuits was settled by the City agreeing to amend the ordinance to permit adjustments to market rent upon turnover. The City subsequently rejected the settlement agreement. The Court initially found the settlement agreement was binding on the City, but then reconsidered and determined to submit the claim of breach of the settlement agreement to a jury. In October 2002, a jury found no breach of the settlement agreement.
 
Based on the United States Supreme Court’s 2005 property rights rulings, in 2006 the Court hearing the San Rafael cases allowed the Company to assert alternative takings theories challenging the City’s ordinance as violating the takings clause and substantive due process. The Company’s constitutional claims against the City were tried in a bench trial during April 2007. On January 29, 2008, the Court issued its Findings of Facts, Conclusions of Law and Order Thereon (the “Order”). The Company filed the Order on Form 8-K on January 31, 2008.
 
On April 17, 2009, the United States District Court for the Northern District of California issued its Order for Entry of Judgment (“April 2009 Order”), and its “Order” relating to the parties’ requests for attorneys’ fees (the “Fee Order”). The Company filed the April 2009 Order and the Fee Order on Form 8-K on April 20, 2009. In the April 2009 Order, the Court stated that the judgment to be entered will gradually phase out the City’s site rent regulation scheme that the Court has found unconstitutional. Existing residents of the Company’s Property in San Rafael will be able to continue to pay site rent as if the Ordinance were to remain in effect for a period of ten years. Enforcement of the Ordinance will be immediately enjoined with respect to new residents of the Property and expire entirely ten years from the date of judgment. When a current site lessee at the Property transfers his leasehold to a new resident upon the sale of the accompanying mobilehome, the Ordinance shall be enjoined as to the next resident and any future resident. The Ordinance shall be enjoined as to all residents ten years from the entry of judgment.
 
The Fee Order awarded certain amounts of attorneys’ fees to the Company with respect to its constitutional claims, certain amounts to the City with respect to the Company’s contract claims, the net effect of which was that the City must pay the Company approximately $1.8 million for attorneys’ fees. On June 10, 2009, the Court entered an order on fees and costs which, in addition to the net attorneys’ fees of approximately $1.8 million the Court previously ordered the City to pay the Company, orders the City to pay to the Company net costs of approximately $0.3 million. On June 30, 2009, the Court entered final judgment as anticipated by the April 2009 Order. The City filed a notice of appeal, and posted a bond of approximately $2.1 million securing a stay pending appeal of the enforcement of the order awarding attorneys’ fees and costs to the Company. The residents’ association, which intervened in the case, filed a motion in the Court of Appeals, which the City joined, seeking a stay of the injunctions, which the Court of Appeals denied. The Company filed a notice of cross-appeal. On February 2, 2010, the City and the Association filed their opening brief on appeal.
 
The Company’s efforts to achieve a balanced regulatory environment incentivize tenant groups to file lawsuits against the Company seeking large damage awards. The homeowners association at Contempo Marin (“CMHOA”), a 396-site Property in San Rafael, California, sued the Company in December 2000 over a prior settlement agreement on a capital expenditure pass-through after the Company sued the City of San Rafael in


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 18 — Commitments and Contingencies (continued)
 
October 2000 alleging its rent control ordinance is unconstitutional. In the Contempo Marin case, the CMHOA prevailed on a motion for summary judgment on an issue that permits the Company to collect only $3.72 out of a monthly pass-through amount of $7.50 that the Company believed had been agreed to by the CMHOA in a settlement agreement. The CMHOA continued to seek damages from the Company in this matter. The Company reached a settlement with the CMHOA in this matter which allows the Company to recover $3.72 of the requested monthly pass-through and does not provide for the payment of any damages to the CMHOA. On January 12, 2007, the Court granted CMHOA’s motion for attorneys’ fees in the amount of approximately $0.3 million and denied the Company’s motion for attorneys’ fees. The Company appealed both decisions, which were affirmed. Accordingly, the Company paid the CMHOA’s attorneys’ fees as previously ordered by the trial court and, pursuant to an agreement of the parties, incurred on appeal. The Company believes that such lawsuits will be a consequence of the Company’s efforts to change rent control since tenant groups actively desire to preserve the premium value of their homes in addition to the discounted rents provided by rent control. The Company has determined that its efforts to rebalance the regulatory environment despite the risk of litigation from tenant groups are necessary not only because of the $15 million annual subsidy to tenants, but also because of the condemnation risk.
 
In June 2003, the Company won a judgment against the City of Santee in California Superior Court (case no. 777094). The effect of the judgment was to invalidate, on state law grounds, two (2) rent control ordinances the City of Santee had enforced against the Company and other property owners. However, the Court allowed the City to continue to enforce a rent control ordinance that predated the two invalid ordinances (the “prior ordinance”). As a result of the judgment the Company was entitled to collect a one-time rent increase based upon the difference in annual adjustments between the invalid ordinance(s) and the prior ordinance and to adjust its base rents to reflect what the Company could have charged had the prior ordinance been continually in effect. The City of Santee appealed the judgment. The Court of Appeal and California Supreme Court refused to stay enforcement of these rent adjustments pending appeal. After the City was unable to obtain a stay, the City and the tenant association each sued the Company in separate actions alleging the rent adjustments pursuant to the judgment violate the prior ordinance (Case Nos. GIE 020887 and GIE 020524). They seek to rescind the rent adjustments, refunds of amounts paid, and penalties and damages in these separate actions. On January 25, 2005, the California Court of Appeal reversed the judgment in part and affirmed it in part with a remand. The Court of Appeal affirmed that one ordinance was unlawfully adopted and therefore void and that the second ordinance contained unconstitutional provisions. However, the Court ruled the City had the authority to cure the issues with the first ordinance retroactively and that the City could sever the unconstitutional provisions in the second ordinance. On remand, the trial court was directed to decide the issue of damages to the Company from these ordinances, which the Company believes is consistent not only with the Company receiving the economic benefit of invalidating one of the ordinances, but also consistent with the Company’s position that it is entitled to market rent and not merely a higher amount of regulated rent. In the remand action, the trial court granted a motion for restitution filed by the City in Case No. GIE 020524. The Company filed a notice of appeal on July 2, 2008. In order to avoid further trial and the related expenses, the Company agreed to a stipulated judgment, which requires the Company to put into escrow after entry of the judgment, pending appeal, funds sufficient to pay the judgment with prejudgment interest while preserving the Company’s appellate rights. Subsequently, the trial court also awarded the City some but not all of the prejudgment interest it sought. The stipulated judgment was entered on November 5, 2008, and the Company deposited into the escrow the amounts required by the judgment and continues to deposit monthly disputed amounts until the disputes are resolved on appeal. The appeal has been fully briefed and is set for oral argument on March 11, 2010. The tenant association continued to seek damages, penalties and fees in their separate action based on the same claims made on the tenants’ behalf by the City in the City’s case. The Company moved for judgment on the pleadings in the tenant association’s case on the ground that the tenant association’s case is moot in light of the stipulated judgment in the City’s case. On November 6, 2008, the Court granted the Company’s motion for judgment on the


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Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 18 — Commitments and Contingencies (continued)
 
pleadings without leave to amend. The tenant association sought reconsideration of that ruling, which was denied. The tenant association filed a notice of appeal, has filed its Opening Brief, and the Company has filed its Response Brief.
 
In addition, the Company has sued the City of Santee in federal court alleging all three of the ordinances are unconstitutional under the Fifth and Fourteenth Amendments to the United States Constitution. Thus, it is the Company’s position that the ordinances are subject to invalidation as a matter of law in the federal court action. Separately, the Federal District Court granted the City’s Motion for Summary Judgment in the Company’s federal court lawsuit. This decision was based not on the merits, but on procedural grounds, including that the Company’s claims were moot given its success in the state court case. The Company appealed the decision, and on May 3, 2007 the United States Court of Appeals for the Ninth Circuit affirmed the District Court’s decision on procedural grounds. The Company intends to continue to pursue an adjudication of its rights on the merits in Federal Court through claims that are not subject to such procedural defenses.
 
The Company believes that the severity of the economic impact on its Properties caused by rent control will enable it to continue to challenge the rent regulations under the Fifth Amendment and the due process clause.
 
Colony Park
 
On December 1, 2006, a group of tenants at the Company’s Colony Park Property in Ceres, California filed a complaint in the California Superior Court for Stanislaus County alleging that the Company has failed to properly maintain the Property and has improperly reduced the services provided to the tenants, among other allegations. The Company has answered the complaint by denying all material allegations and filed a counterclaim for declaratory relief and damages. The case will proceed in Superior Court because the Company’s motion to compel arbitration was denied and the denial was upheld on appeal. Discovery has commenced. The Company filed a motion for summary adjudication of various of the plaintiffs’ claims and allegations, which was denied. The Court has set a trial date for July 20, 2010. The Company believes that the allegations in the first amended complaint are without merit, and intends to vigorously defend the lawsuit.
 
California’s Department of Housing and Community Development (“HCD”) issued a Notice of Violation dated August 21, 2006 regarding the sewer system at Colony Park. The notice ordered the Company to replace the Property’s sewer system or show justification from a third party explaining why the sewer system does not need to be replaced. The Company has provided such third party report to HCD and believes that the sewer system does not need to be replaced. Based upon information provided by the Company to HCD to date, HCD has indicated that it agrees that the entire system does not need to be replaced.
 
California Hawaiian
 
On April 30, 2009, a group of tenants at the Company’s California Hawaiian Property in San Jose, California filed a complaint in the California Superior Court for Santa Clara County alleging that the Company has failed to properly maintain the Property and has improperly reduced the services provided to the tenants, among other allegations. The Company 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 the Company’s motion to compel arbitration and stayed the court proceedings pending the outcome of the arbitration. The plaintiffs filed with the Court of Appeal a petition for writ seeking to overturn the trial court’s arbitration and stay orders. The Company submitted a preliminary opposition and the Court of Appeal has issued an order allowing further written submissions and requests for oral argument. The Company believes that the allegations in the complaint are without merit, and intends to vigorously defend the litigation.


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Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 18 — Commitments and Contingencies (continued)
 
Hurricane Claim Litigation
 
On June 22, 2007 the Company filed suit, in the Circuit Court of Cook County, Illinois (Case No. 07CH16548), against its insurance carriers, Hartford Fire Insurance Company, Essex Insurance Company, Lexington Insurance Company, and Westchester Surplus Lines Insurance Company, regarding a coverage dispute arising from losses suffered by the Company as a result of hurricanes that occurred in Florida in 2004 and 2005. The Company also brought claims against Aon Risk Services, Inc. of Illinois, the Company’s former insurance broker, regarding the procurement of appropriate insurance coverage for the Company. The Company is seeking declaratory relief establishing the coverage obligations of its 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 exceed $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, the Company filed its Second Amended Complaint. Aon filed a motion to dismiss the Second Amended Complaint in its entirety as against Aon, and the insurers moved to dismiss portions of the Second Amended Complaint as against them. The insurers’ motion was denied and they have now answered the Second Amended Complaint. Aon’s motion was granted, with leave granted to the Company to file an amended pleading containing greater factual specificity. The Company did so by adding to the Second Amended Complaint a new Count VII against Aon, which the Company filed on August 15, 2008. Aon then answered the new Count VII in part and moved to strike certain of its allegations. The Court left Count VII undisturbed, except for ruling that the Company’s alternative claim that Aon was negligent in carrying out its duty to give notice to certain of the insurance carriers on the Company’s behalf should be re-pleaded in the form of a breach of contract theory. On February 2, 2009, the Company filed such a claim in the form of a new Count VIII against Aon. Aon has answered Count VIII. Discovery is proceeding.
 
Since filing the lawsuit, the Company has received additional payments from Essex Insurance Company, Lexington Insurance Company, and Westchester Surplus Lines Insurance Company, of approximately $2.6 million. In January 2008 the Company entered a settlement with Hartford Fire Insurance Company pursuant to which Hartford paid the Company the remaining disputed limits of Hartford’s insurance policy, in the amount of approximately $0.5 million, and the Company dismissed and released Hartford from additional claims for interest and bad faith claims handling.
 
California and Washington Wage Claim Class Actions
 
On October 16, 2008, the Company was served with a class action lawsuit in California state court filed by a single named plaintiff. The suit alleges that, at the time of the PA Transaction, the Company and other named defendants willfully failed to pay former California employees of Privileged Access and its affiliates (“PA”) who became employees of the Company all of the wages they earned during their employment with PA, including accrued vacation time. The suit also alleges that the Company improperly “stripped” those employees of their seniority. The suit asserts claims for alleged violation of the California Labor Code; alleged violation of the California Business & Professions Code and for alleged unfair business practices; alleged breach of contract; alleged breach of the duty of good faith and fair dealing; and for alleged unjust enrichment. The complaint seeks, among other relief, compensatory and statutory damages; restitution; pre-judgment and post-judgment interest; attorney’s fees, expenses and costs; penalties; and exemplary and punitive damages. The complaint does not specify a dollar amount sought. On December 18, 2008, the Company filed a demurrer seeking dismissal of the complaint in its entirety without leave to amend. On May 14, 2009, the Court granted the Company’s demurrer and dismissed the complaint, in part without leave to amend and in part with leave to amend. On June 2, 2009, the plaintiff filed an amended complaint. On July 6, 2009, the Company filed a demurrer seeking dismissal of the amended complaint in its entirety without leave to amend. On October 20, 2009, the Court granted the


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Table of Contents

 
Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 18 — Commitments and Contingencies (continued)
 
Company’s demurrer and dismissed the amended complaint, in part without leave to amend and in part with leave to amend. On November 9, 2009, the plaintiff filed a third amended complaint. On December 11, 2009, the Company filed a demurrer seeking dismissal of the third amended complaint in its entirety without leave to amend. On February 23, 2010, the court dismissed without leave to amend the claim for breach of the duty of good faith and fair dealings, and otherwise denied the Company’s demurrer. The Company will vigorously defend the lawsuit.
 
On December 16, 2008, the Company was served with a class action lawsuit in Washington state court filed by a single named plaintiff, represented by the same counsel as the plaintiff in the California class action. The complaint asserts on behalf of a putative class of Washington employees of PA who became employees of the Company substantially similar allegations as are alleged in the California class action. The Company moved to dismiss the complaint. On April 3, 2009, the court dismissed: (1) the first cause of action, which alleged a claim under the Washington Labor Code for failure to pay accrued vacation time; (2) the second cause of action, which alleged a claim under the Washington Labor Code for unpaid wages on termination; (3) the third cause of action, which alleged a claim under the Washington Labor Code for payment of wages less than entitled; and (4) the fourth cause of action, which alleged a claim under the Washington Consumer Protection Act. The court did not dismiss the fifth cause of action for breach of contract, the sixth cause of action of the breach of the duty of good faith and fair dealing; and the seventh cause of action for unjust enrichment. On May 22, 2009, the Company filed a motion for summary judgment on the causes of action not previously dismissed, which was denied. With leave of court, the plaintiff filed an amended complaint, the material allegations of which the Company denied in an answer filed on September 11, 2009. The Company will vigorously defend the lawsuit.
 
Cascade
 
On December 10, 2008, the King County Hospital District No. 4 (the “Hospital District”) filed suit against the Company seeking a declaratory judgment that it had properly rescinded an agreement to acquire the Company’s Thousand Trails — Cascade Property (“Cascade”) located 20 miles east of Seattle, Washington. The agreement was entered into after the Hospital District had passed a resolution authorizing the condemnation of Cascade. Under the agreement, in lieu of a formal condemnation proceeding, the Company agreed to accept from the Hospital District $12.5 million for the Property with an earnest money deposit of approximately $0.4 million. The Company has not included in income the earnest money deposit received. The closing of the transaction was originally scheduled in January 2008, and was extended to April 2009. The Company has filed an answer to the Hospital District’s suit and a counterclaim seeking recovery of the amounts owed under the agreement. On February 27, 2009, the Hospital District filed a summary judgment motion arguing that it was entitled to rescind the agreement because the Property is zoned residential and the Company did not provide the Hospital District a residential real estate disclosure form. On April 2, 2009, the Court denied the Hospital District’s summary judgment motion, ruling that a real property owner who is compelled to transfer land under the power of eminent domain is not legally required to provide a disclosure form. The Hospital District filed a motion for reconsideration of the summary judgment ruling. On April 22, 2009, the Court reaffirmed its ruling that a real property owner that is compelled to transfer land under eminent domain is not legally required to provide a disclosure form. On May 22, 2009, the Court denied the Hospital District’s motion for reconsideration in its entirety, reaffirmed its ruling that condemnation was the reason for the transaction between the Company and the Hospital District, and ruled that the Hospital District is not entitled to take discovery in an effort to establish otherwise. Discovery is proceeding. The Company will vigorously pursue its rights under the agreement. Due to the anticipated transfer of the Property, the Company closed Cascade in October 2007.


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Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 18 — Commitments and Contingencies (continued)
 
Brennan Beach
 
The Law Enforcement Division of the New York Department of Environmental Compliance (“DEC”) has investigated certain allegations relating to the operation of the onsite wastewater treatment plant and the use of adjacent wetlands at Brennan Beach, which is located in Pulaski, New York. The allegations included assertions of unlawful point source discharges, permit discharge exceedances, and placing material in a wetland buffer area without a permit. Representatives of the Company attended meetings with the DEC in November 2007, April 2008, May 2008 and June 2008, at which the alleged violations were discussed, and the Company has cooperated with the DEC investigation. No formal notices have been issued to the Company asserting specific violations, but the DEC has indicated that it believes the Company is responsible for certain of the alleged violations. As a result of discussions with the DEC, the Company has agreed to enter into a civil consent order pursuant to which the Company will pay a penalty and undertake an environmental benefit project at a total cost of approximately $0.2 million in connection with the alleged violations. Based on that agreement the DEC has prepared a proposed consent order on which the Company has submitted comments. The amounts expected to be paid under the consent order were accrued as property operating expenses during the quarter ended June 30, 2008.
 
Gulf View in Punta Gorda
 
In 2004, the Company acquired ownership of various property owning entities, including an entity owning a property called Gulf View, in Punta Gorda, Florida. Gulf View continues to be held in a special purpose entity. At the time of acquisition of the entity owning Gulf View, it was financed with a secured loan that was cross-collateralized and cross-defaulted with a loan on another property whose ownership entity was not acquired. At the time of acquisition, the Operating Partnership guaranteed certain obligations relating to exceptions from the non-recourse nature of the loans. Because of certain penalties associated with repayment of these loans, the loans have not been restructured and the terms and conditions remain the same today. The approximate outstanding amount of the loan secured by Gulf View is $1.4 million and of the crossed loan secured by the other property is $5.5 million. The Company is not aware of any notice of default regarding either of the loans; however, should the owner of the cross-collateralized property default, the special purpose entity owning Gulf View and the Operating Partnership may be impacted to the extent of their obligations.
 
Creekside
 
We currently have one all-age property, called Creekside, in Wyoming, Michigan, held for disposition. On December 29, 2009, the Company sent to the loan servicer a deed-in-lieu of foreclosure agreement executed by the Company (the “Proposed DIL Agreement”) regarding our nonrecourse mortgage loan of approximately $3.6 million secured by the Property. On January 25, 2010, the lender gave notice of default and declared payment of the entire loan balance to be immediately due and payable, and has demanded payment from the Company to the extent of any liability under personal recourse exceptions to the non-recourse provisions of the loan agreement without specifying whether or to what extent it claims any amounts are owed under such exceptions. The Company denies that any such amounts are owed or that there is any personal liability to which the lender has recourse.
 
On February 2, 2010, the lender filed a complaint in the Kent County, Michigan, Circuit Court (the “Complaint”) seeking appointment of a receiver for the Property. A receiver was appointed by agreed order on February 5, 2010. The Complaint also alleged, among other things, on information and belief that the borrower has misappropriated rents from the Property subsequent to its defaults under the loan agreement. The lender has also subsequently stated that payment of accrued and unpaid management fees to the Company’s affiliate that managed the Property may constitute an unauthorized transfer in violation of Michigan’s Uniform Fraudulent Transfer Act. The Company disputes and will vigorously defend against any allegation that there has been any misappropriation of rents, any unauthorized or improper transfers, or that there is any personal liability for any amounts claimed to be due and owing. By letter dated February 9, 2010, the lender acknowledged receipt of our Proposed DIL


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Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 18 — Commitments and Contingencies (continued)
 
Agreement but has not accepted it at this time, and instead indicated that a “Prenegotiation Agreement” in a form acceptable to the lender must first be entered by the parties, after which discussions may begin on possible alternatives to foreclosure.
 
Other
 
The Company is involved in various other legal proceedings arising in the ordinary course of business. Such proceedings include, but are not limited to, notices, consent decrees, additional permit requirements and other similar enforcement actions by governmental agencies relating to the Company’s water and wastewater treatment plants and other waste treatment facilities. Additionally, in the ordinary course of business, the Company’s operations are subject to audit by various taxing authorities. Management believes that all proceedings herein described or referred to, taken together, are not expected to have a material adverse impact on the Company. In addition, to the extent any such proceedings or audits relate to newly acquired Properties, the Company considers any potential indemnification obligations of sellers in favor of the Company.
 
 
Note 19 — Quarterly Financial Data (unaudited)
 
The following is unaudited quarterly data for 2009 and 2008 (amounts in thousands, except for per share amounts):
 
                                 
    First
    Second
    Third
    Fourth
 
    Quarter
    Quarter
    Quarter
    Quarter
 
2009
  3/31     6/30     9/30     12/31  
 
Total revenues (a)
  $ 133,043     $ 122,317     $ 131,519     $ 120,488  
Income from continuing operations(a)
  $ 13,556     $ 2,830     $ 7,093     $ 6,341  
Income (loss) from discontinued operations (a)
  $ 88     $ 74     $ 4,038     $ (14 )
Net income available for Common Shares
  $ 13,644     $ 2,904     $ 11,131     $ 6,327  
Weighted average Common Shares outstanding — Basic
    24,945       25,163       29,993       30,145  
Weighted average Common Shares outstanding — Diluted
    30,523       30,693       35,242       35,248  
Net income per Common Share outstanding — Basic
  $ 0.55     $ 0.12     $ 0.37     $ 0.21  
Net income per Common Share outstanding — Diluted
  $ 0.54     $ 0.11     $ 0.37     $ 0.21  
 


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Equity LifeStyle Properties, Inc.
 
Notes To Consolidated Financial Statements
 
Note 19 — Quarterly Financial Data (unaudited) — (Continued)
 
                                 
    First
    Second
    Third
    Fourth
 
    Quarter
    Quarter
    Quarter
    Quarter
 
2008
  3/31     6/30     9/30     12/31  
 
Total revenues (a)
  $ 123,205     $ 110,909     $ 118,578     $ 116,449  
Income (loss) from continuing operations(a)
  $ 12,712     $ 4,069     $ 1,456     $ (80 )
Income from discontinued operations (a)
  $ 13     $ 40     $ 26     $ 67  
Net income (loss) available for Common Shares
  $ 12,725     $ 4,109     $ 1,482     $ (13 )
Weighted average Common Shares outstanding — Basic
    24,200       24,370       24,527       24,765  
Weighted average Common Shares outstanding — Diluted
    30,386       30,540       30,572       30,505  
Net income per Common Share outstanding — Basic
  $ 0.53     $ 0.17     $ 0.06     $ 0.00  
Net income per Common Share outstanding — Diluted
  $ 0.52     $ 0.17     $ 0.06     $ 0.00  
 
 
(a) Amounts may differ from previously disclosed amounts due to reclassification of discontinued operations.
 

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Schedule II

Equity LifeStyle Properties, Inc.
Valuation and Qualifying Accounts
December 31, 2009
 
                                         
          Additions              
    Balance at
    Charged to
    Charged
          Balance at
 
    Beginning
    Costs and
    to Other
          End of
 
    of Period     Expenses     Accounts     Deductions(1)     Period  
 
For the year ended December 31, 2007: Allowance for doubtful accounts
  $ 885,000     $ 1,865,000           $ (1,596,000 )   $ 1,154,000  
For the year ended December 31, 2008: Allowance for doubtful accounts
  $ 1,154,000     $ 1,951,000           $ (1,977,000 )   $ 1,128,000  
For the year ended December 31, 2009: Allowance for doubtful accounts
  $ 1,128,000     $ 2,513,400           $ (1,914,900 )   $ 1,726,500  
 
 
(1) Deductions represent tenant receivables deemed uncollectible.


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Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Properties Held for Long Term
                                                                                       
Hidden Cove
  Arley   AL           212       610                   212       610       822       (80 )     2006  
Apollo Village
  Phoenix   AZ     (4,775 )     932       3,219             1,225       932       4,444       5,376       (2,034 )     1994  
Araby
  Yuma   AZ     (3,020 )     1,440       4,345             289       1,440       4,634       6,074       (924 )     2003  
Cactus Gardens
  Yuma   AZ     (4,485 )     1,992       5,984             261       1,992       6,245       8,237       (1,132 )     2004  
Capri RV
  Yuma   AZ     (4,897 )     1,595       4,774             149       1,595       4,923       6,518       (617 )     2006  
Carefree Manor
  Phoenix   AZ     (3,161 )     706       3,040             728       706       3,768       4,474       (1,432 )     1998  
Casa del Sol East II
  Glendale   AZ     (4,634 )     2,103       6,283             2,222       2,103       8,505       10,608       (2,661 )     1996  
Casa del Sol East III
  Glendale   AZ     (5,991 )     2,450       7,452             646       2,450       8,098       10,548       (3,085 )     1998  
Casa del Sol West I
  Peoria   AZ     (9,953 )     2,215       6,467             1,951       2,215       8,418       10,633       (2,863 )     1996  
Casita Verde RV
  Casa Grande   AZ     (2,204 )     719       2,179             55       719       2,234       2,953       (285 )     2006  
Central Park
  Phoenix   AZ     (12,259 )     1,612       3,784             1,363       1,612       5,147       6,759       (3,862 )     1983  
Countryside RV
  Apache Junction   AZ           2,056       6,241             503       2,056       6,744       8,800       (1,657 )     2002  
Desert Paradise
  Yuma   AZ     (1,350 )     666       2,011             88       666       2,099       2,765       (430 )     2004  
Desert Skies
  Phoenix   AZ     (4,869 )     792       3,126             606       792       3,732       4,524       (1,447 )     1998  
Fairview Manor
  Tucson   AZ           1,674       4,708             1,502       1,674       6,210       7,884       (2,519 )     1998  
Fiesta Grande RV
  Casa Grande   AZ     (9,305 )     2,869       8,653             302       2,869       8,955       11,824       (1,131 )     2006  
Foothill
  Yuma   AZ     (1,350 )     459       1,402             119       459       1,521       1,980       (313 )     2003  
Foothills West RV
  Casa Grande   AZ     (2,277 )     747       2,261             51       747       2,312       3,059       (290 )     2006  
Golden Sun RV
  Apache Junction   AZ           1,678       5,049             126       1,678       5,175       6,853       (1,306 )     2002  
Hacienda De Valencia
  Mesa   AZ     (14,478 )     833       2,701             4,367       833       7,068       7,901       (3,859 )     1984  
Monte Vista
  Mesa   AZ     (23,857 )     11,402       34,355             3,210       11,402       37,565       48,967       (6,839 )     2004  
Mesa Verde
  Cottonwood   AZ           1,387       4,148             289       1,387       4,437       5,824       (447 )     2007  
Palm Shadows
  Glendale   AZ     (7,890 )     1,400       4,218             984       1,400       5,202       6,602       (2,723 )     1993  
Paradise
  Sun City   AZ           6,414       19,263       11       1,371       6,425       20,634       27,059       (4,161 )     2004  
Sedona Shadows
  Sedona   AZ     (11,093 )     1,096       3,431             1,273       1,096       4,704       5,800       (1,782 )     1997  
Seyenna Vistas
  Mesa   AZ           1,360       4,660             2,080       1,360       6,740       8,100       (3,114 )     1994  
Suni Sands
  Yuma   AZ     (2,949 )     1,249       3,759             245       1,249       4,004       5,253       (786 )     2004  
Sunrise Heights
  Phoenix   AZ     (5,348 )     1,000       3,016             1,361       1,000       4,377       5,377       (1,913 )     1994  
The Highlands at Brentwood
  Mesa   AZ     (10,527 )     1,997       6,024             1,742       1,997       7,766       9,763       (3,909 )     1993  
The Meadows
  Tempe   AZ           2,613       7,887             3,422       2,613       11,309       13,922       (5,158 )     1994  
Verde Valley
  Cottonwood   AZ           1,437       3,390       19       692       1,456       4,081       5,537       (645 )     2004  
Venture In
  Show Low   AZ     (6,561 )     2,050       6,188             252       2,050       6,440       8,490       (826 )     2006  
Viewpoint
  Mesa   AZ     (42,989 )     24,890       56,340       15       3,461       24,905       59,801       84,706       (11,494 )     2004  
Whispering Palms
  Phoenix   AZ     (3,106 )     670       2,141             268       670       2,409       3,079       (1,018 )     1998  


S-2


Table of Contents

                                                                                         
Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Cultus Lake
  Lindell Beach   BC           410       968       5       129       416       1,097       1,513       (175 )     2004  
California Hawaiian
  San Jose   CA     (32,749 )     5,825       17,755             2,726       5,825       20,481       26,306       (8,316 )     1997  
Colony Park
  Ceres   CA     (5,528 )     890       2,837             557       890       3,394       4,284       (1,507 )     1998  
Concord Cascade
  Pacheco   CA           985       3,016             1,710       985       4,726       5,711       (3,342 )     1983  
Contempo Marin
  San Rafael   CA           4,787       16,379             3,013       4,787       19,392       24,179       (10,001 )     1994  
Coralwood
  Modesto   CA     (5,983 )           5,047             430             5,477       5,477       (2,332 )     1997  
Date Palm Country Club
  Cathedral City   CA     (14,230 )     4,138       14,064       (23 )     4,240       4,115       18,304       22,419       (9,384 )     1994  
Date Palm RV
  Cathedral City   CA                 216             313             529       529       (284 )     1994  
DeAnza Santa Cruz
  Santa Cruz   CA     (5,529 )     2,103       7,201             1,661       2,103       8,862       10,965       (4,294 )     1994  
Four Seasons
  Fresno   CA           756       2,348             326       756       2,674       3,430       (1,158 )     1997  
Idyllwild
  Pine Cove   CA           313       737       4       536       317       1,273       1,590       (162 )     2004  
Laguna Lake
  San Luis Obispo   CA           2,845       6,520             441       2,845       6,961       9,806       (2,886 )     1998  
Lake Minden
  Nicolaus   CA           961       2,267       13       631       974       2,898       3,872       (452 )     2004  
Lake of the Springs
  Oregon House   CA           1,062       2,504       14       351       1,076       2,855       3,931       (452 )     2004  
Lamplighter
  Spring Valley   CA     (23,632 )     633       2,201             1,135       633       3,336       3,969       (2,466 )     1983  
Las Palmas
  Rialto   CA     (3,536 )     1,295       3,866             258       1,295       4,124       5,419       (798 )     2004  
Meadowbrook
  Santee   CA           4,345       12,528             1,854       4,345       14,382       18,727       (5,546 )     1998  
Monte del Lago
  Castroville   CA     (21,400 )     3,150       9,469             2,355       3,150       11,824       14,974       (4,713 )     1997  
Morgan Hill
  Morgan Hill   CA           1,856       4,378       25       364       1,881       4,742       6,623       (780 )     2004  
Nicholson Plaza
  San Jose   CA                 4,512             251             4,763       4,763       (1,946 )     1997  
Oakzanita Springs
  Descanso   CA           396       934       5       763       401       1,696       2,097       (221 )     2004  
Pacific Dunes Ranch
  Oceana   CA     (5,584 )     1,940       5,632             123       1,940       5,755       7,695       (1,072 )     2004  
Palm Springs
  Palm Desert   CA           1,811       4,271       24       301       1,835       4,572       6,407       (751 )     2004  
Parque La Quinta
  Rialto   CA     (4,742 )     1,799       5,450             117       1,799       5,567       7,366       (1,137 )     2004  
Pio Pico
  Jamul   CA           2,626       6,194       35       1,009       2,661       7,202       9,863       (1,138 )     2004  
Ponderosa
  Lotus   CA           900       2,100             215       900       2,315       3,215       (285 )     2006  
Quail Meadows
  Riverbank   CA     (5,010 )     1,155       3,469             386       1,155       3,855       5,010       (1,513 )     1998  
Rancho Mesa
  El Cajon   CA     (9,264 )     2,130       6,389             629       2,130       7,018       9,148       (2,665 )     1998  
Rancho Oso
  Santa Barbara   CA           860       2,029       11       482       872       2,511       3,383       (383 )     2004  
Rancho Valley
  El Cajon   CA           685       1,902             1,100       685       3,002       3,687       (2,171 )     1983  
Royal Holiday
  Hemet   CA           778       2,643             2,147       778       4,790       5,568       (1,414 )     1998  
Royal Oaks
  Visalia   CA           602       1,921             530       602       2,451       3,053       (997 )     1997  
Russian River
  Cloverdale   CA           368       868       5       129       373       997       1,370       (159 )     2004  
San Benito
  Paicines   CA           1,411       3,328       19       495       1,430       3,822       5,252       (604 )     2004  
San Francisco RV
  Pacifica   CA           1,660       4,973             270       1,660       5,243       6,903       (792 )     2005  

S-3


Table of Contents

                                                                                         
Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Santa Cruz Ranch RV
  Scotts Valley   CA           1,183       3,549             186       1,183       3,735       4,918       (290 )     2007  
Santa Cruz Ranch Warehouse
  Scotts Valley   CA           412       388                   412       388       800       (30 )     2007  
Santiago Estates
  Sylmar   CA     (15,377 )     3,562       10,767             1,135       3,562       11,902       15,464       (4,703 )     1998  
Sea Oaks
  Los Osos   CA           871       2,703             418       871       3,121       3,992       (1,253 )     1997  
Snowflower
  Emigrant Gap   CA           308       727       4       275       312       1,001       1,313       (137 )     2004  
Soledad Canyon
  Acton   CA           2,933       6,917       39       1,042       2,972       7,959       10,931       (1,273 )     2004  
Sunshadow
  San Jose   CA                 5,707             249             5,956       5,956       (2,473 )     1997  
Tahoe Valley
  Lake Tahoe   CA           1,357       4,071             144       1,357       4,215       5,572       (837 )     2004  
Turtle Beach
  Manteca   CA           268       633       4       35       272       668       940       (114 )     2004  
Village of the Four Seasons
  San Jose   CA     (14,241 )     5,229       15,714             458       5,229       16,172       21,401       (3,025 )     2004  
Westwinds (4 properties)
  San Jose   CA                 17,616             6,360             23,976       23,976       (10,361 )     1997  
Wilderness Lake
  Menifee   CA           2,157       5,088       29       588       2,186       5,676       7,862       (938 )     2004  
Yosemite Lakes
  Groveland   CA           2,045       4,823       27       1,075       2,072       5,897       7,969       (903 )     2004  
Bear Creek
  Denver   CO     (4,709 )     1,100       3,359             412       1,100       3,771       4,871       (1,476 )     1998  
Cimarron
  Broomfield   CO     (15,567 )     863       2,790             776       863       3,566       4,429       (2,866 )     1983  
Golden Terrace
  Golden   CO     (14,011 )     826       2,415             1,389       826       3,804       4,630       (2,467 )     1983  
Golden Terrace South
  Golden   CO           750       2,265             724       750       2,989       3,739       (1,248 )     1997  
Golden Terrace West
  Golden   CO     (16,579 )     1,694       5,065             1,054       1,694       6,119       7,813       (4,450 )     1986  
Hillcrest Village
  Aurora   CO     (26,464 )     1,912       5,202       289       2,696       2,201       7,898       10,099       (6,299 )     1983  
Holiday Hills
  Denver   CO     (36,585 )     2,159       7,780             4,566       2,159       12,346       14,505       (9,515 )     1983  
Holiday Village
  Co. Springs   CO     (11,447 )     567       1,759             1,165       567       2,924       3,491       (2,171 )     1983  
Pueblo Grande
  Pueblo   CO     (7,590 )     241       1,069             649       241       1,718       1,959       (1,277 )     1983  
Woodland Hills
  Thornton   CO     (10,631 )     1,928       4,408             2,614       1,928       7,022       8,950       (3,731 )     1994  
Aspen Meadows
  Rehoboth   DE     (5,423 )     1,148       3,460             467       1,148       3,927       5,075       (1,589 )     1998  
Camelot Meadows
  Rehoboth   DE     (12,518 )     527       2,058       1,251       4,270       1,778       6,328       8,106       (2,388 )     1998  
Mariners Cove
  Millsboro   DE     (15,876 )     990       2,971             5,552       990       8,523       9,513       (4,417 )     1987  
McNicol
  Rehoboth   DE     (2,615 )     562       1,710             168       562       1,878       2,440       (715 )     1998  
Sweetbriar
  Rehoboth   DE     (2,933 )     498       1,527             412       498       1,939       2,437       (855 )     1998  
Waterford
  Bear   DE     (29,869 )     5,250       16,202             1,281       5,250       17,483       22,733       (4,917 )     1996  
Whispering Pines
  Lewes   DE     (9,525 )     1,536       4,609             1,253       1,536       5,862       7,398       (3,864 )     1998  
Barrington Hills
  Hudson   FL           1,145       3,437             417       1,145       3,854       4,999       (772 )     2004  
Bay Indies
  Venice   FL     (38,504 )     10,483       31,559       10       4,867       10,493       36,426       46,919       (18,325 )     1994  
Bay Lake Estates
  Nokomis   FL     (4,299 )     990       3,390             1,572       990       4,962       5,952       (2,314 )     1994  
Breezy Hill RV
  Pompano Beach   FL           5,424       16,555             1,144       5,424       17,699       23,123       (4,238 )     2002  
Buccaneer
  N. Ft. Myers   FL     (17,324 )     4,207       14,410             2,418       4,207       16,828       21,035       (8,253 )     1994  

S-4


Table of Contents

                                                                                         
Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Bulow Village RV
  Flagler Beach   FL                 228             632             860       860       (174 )     2001  
Bulow Plantation
  Flagler Beach   FL           3,637       949             5,993       3,637       6,942       10,579       (2,610 )     1994  
Carefree Cove
  Fort Lauderdale   FL     (4,439 )     1,741       5,170             496       1,741       5,666       7,407       (1,046 )     2004  
Carriage Cove
  Daytona Beach   FL     (12,032 )     2,914       8,682             1,093       2,914       9,775       12,689       (3,982 )     1998  
Clerbrook
  Clermont   FL     (11,080 )     3,883       11,700             619       3,883       12,319       16,202       (1,577 )     2006  
Coachwood
  Leesburg   FL     (3,939 )     1,602       4,822             178       1,602       5,000       6,602       (988 )     2004  
Coquina Crossing
  Elkton   FL           5,286       5,545       (12 )     16,656       5,274       22,201       27,475       (5,087 )     1999  
Coral Cay
  Margate   FL     (18,401 )     5,890       20,211             7,022       5,890       27,233       33,123       (12,480 )     1994  
Country Place
  New Port Richey   FL     (15,687 )     663             18       7,282       681       7,282       7,963       (4,160 )     1986  
Countryside
  Vero Beach   FL     (16,139 )     3,711       11,133             5,584       3,711       16,717       20,428       (6,002 )     1998  
Crystal Isles
  Crystal River   FL     (2,630 )     926       2,787             328       926       3,115       4,041       (589 )     2004  
Down Yonder
  Largo   FL     (13,357 )     2,652       7,981             236       2,652       8,217       10,869       (2,039 )     1998  
East Bay Oaks
  Largo   FL     (11,745 )     1,240       3,322             925       1,240       4,247       5,487       (3,317 )     1983  
Eldorado Village
  Largo   FL     (8,083 )     778       2,341             765       778       3,106       3,884       (2,397 )     1983  
Fort Myers Beach Resort
  Fort Myers Beach   FL           1,188       3,548                   1,188       3,548       4,736       (823 )     2004  
Glen Ellen
  Clearwater   FL           619       1,882             64       619       1,946       2,565       (469 )     2002  
Grand Island
  Grand Island   FL           1,723       5,208       125       3,708       1,848       8,916       10,764       (2,388 )     2001  
Gulf Air Resort
  Fort Myers Beach   FL           1,609       4,746                   1,609       4,746       6,355       (951 )     2004  
Gulf View
  Punta Gorda   FL     (1,421 )     717       2,158             833       717       2,991       3,708       (561 )     2004  
Hacienda Village
  New Port Richey   FL           4,297       13,088             1,807       4,297       14,895       19,192       (3,341 )     2002  
Harbor Lakes
  Port Charlotte   FL           3,384       10,154             328       3,384       10,482       13,866       (2,064 )     2004  
Harbor View
  New Port Richey   FL     (7,270 )     4,045       12,146       (15 )     98       4,030       12,244       16,274       (3,022 )     2002  
Heritage Plantation
  Vero Beach   FL     (12,829 )     2,403       7,259             1,859       2,403       9,118       11,521       (4,378 )     1994  
Highland Wood RV
  Pompano Beach   FL     (2,086 )     1,043       3,130       (13 )     125       1,030       3,255       4,285       (797 )     2002  
Hillcrest
  Clearwater   FL     (7,566 )     1,278       3,928             999       1,278       4,927       6,205       (2,080 )     1998  
Holiday Ranch
  Clearwater   FL     (4,753 )     925       2,866             292       925       3,158       4,083       (1,296 )     1998  
Holiday Village
  Vero Beach   FL           350       1,374             210       350       1,584       1,934       (652 )     1998  
Holiday Village
  Ormond Beach   FL     (10,138 )     2,610       7,837             196       2,610       8,033       10,643       (1,969 )     2002  
Indian Oaks
  Rockledge   FL     (2,793 )     1,089       3,376             881       1,089       4,257       5,346       (1,778 )     1998  
Island Vista
  North Ft. Myers   FL     (14,800 )     5,004       15,066             149       5,004       15,215       20,219       (1,893 )     2006  
Lake Fairways
  N. Ft. Myers   FL     (29,393 )     6,075       18,134       35       1,946       6,110       20,080       26,190       (9,999 )     1994  
Lake Haven
  Dunedin   FL     (11,187 )     1,135       4,047             2,936       1,135       6,983       8,118       (4,527 )     1983  
Lake Magic
  Clermont   FL           1,595       4,793             149       1,595       4,942       6,537       (964 )     2004  
Lakes at Countrywood
  Plant City   FL     (9,046 )     2,377       7,085             1,543       2,377       8,628       11,005       (2,496 )     2001  
Lakewood Village
  Melbourne   FL     (9,474 )     1,862       5,627             1,481       1,862       7,108       8,970       (3,487 )     1994  

S-5


Table of Contents

                                                                                         
Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Lighthouse Pointe
  Port Orange   FL     (13,863 )     2,446       7,483       23       1,157       2,469       8,640       11,109       (3,543 )     1998  
Manatee
  Bradenton   FL           2,300       6,903             278       2,300       7,181       9,481       (1,416 )     2004  
Maralago Cay
  Lantana   FL     (20,497 )     5,325       15,420             4,783       5,325       20,203       25,528       (7,783 )     1997  
Meadows at Countrywood
  Plant City   FL     (17,020 )     4,514       13,175             3,904       4,514       17,079       21,593       (6,591 )     1998  
Mid-Florida Lakes
  Leesburg   FL     (21,543 )     5,997       20,635             8,202       5,997       28,837       34,834       (13,212 )     1994  
Oak Bend
  Ocala   FL     (5,570 )     850       2,572             1,077       850       3,649       4,499       (1,948 )     1993  
Oaks at Countrywood
  Plant City   FL           1,111       2,513       (265 )     4,309       846       6,822       7,668       (1,867 )     1998  
Orlando
  Clermon   FL           2,975       7,017       40       1,112       3,015       8,129       11,144       (1,299 )     2004  
Park City West
  Fort Lauderdale   FL     (15,199 )     4,184       12,561             464       4,184       13,025       17,209       (2,533 )     2004  
Pasco
  Lutz   FL           1,494       4,484             289       1,494       4,773       6,267       (928 )     2004  
Peace River
  Wauchula   FL           900       2,100             105       900       2,205       3,105       (244 )     2006  
Pickwick
  Port Orange   FL     (7,568 )     2,803       8,870             1,083       2,803       9,953       12,756       (3,886 )     1998  
Pine Lakes
  N. Ft. Myers   FL     (37,800 )     6,306       14,579       21       6,816       6,327       21,395       27,722       (10,290 )     1994  
Pioneer Village
  N. Ft. Myers   FL     (9,635 )     4,116       12,353             1,246       4,116       13,599       17,715       (2,665 )     2004  
Ramblers Rest
  Venice   FL     (15,328 )     4,646       14,201             1,955       4,646       16,156       20,802       (1,917 )     2006  
Royal Coachman
  Nokomis   FL           5,321       15,978             802       5,321       16,780       22,101       (3,303 )     2004  
Shangri La
  Largo   FL     (4,179 )     1,722       5,200             43       1,722       5,243       6,965       (1,036 )     2004  
Sherwood Forest
  Kissimmee   FL     (30,738 )     4,852       14,596             5,016       4,852       19,612       24,464       (7,444 )     1998  
Sherwood Forest RV
  Kissimmee   FL           2,870       3,621       568       1,997       3,438       5,618       9,056       (2,227 )     1998  
Silk Oak
  Clearwater   FL           1,649       5,028             64       1,649       5,092       6,741       (1,230 )     2002  
Silver Dollar
  Odessa   FL     (8,498 )     4,107       12,431             1,180       4,107       13,611       17,718       (2,653 )     2004  
Sixth Ave
  Zephryhills   FL     (2,101 )     837       2,518             21       837       2,539       3,376       (519 )     2004  
Southern Palms
  Eustis   FL           2,169       5,884             2,770       2,169       8,654       10,823       (3,284 )     1998  
Southernaire
  Mt. Dora   FL     (1,944 )     796       2,395             63       796       2,458       3,254       (488 )     2004  
Sunshine Holiday
  Ormond Beach   FL           2,001       6,004             490       2,001       6,494       8,495       (1,255 )     2004  
Sunshine Holiday RV
  Fort Lauderdale   FL     (7,903 )     3,099       9,286             348       3,099       9,634       12,733       (1,800 )     2004  
Sunshine Key
  Big Pine Key   FL     (15,337 )     5,273       15,822             1,541       5,273       17,363       22,636       (3,346 )     2004  
Sunshine Travel
  Vero Beach   FL           1,603       4,813             154       1,603       4,967       6,570       (973 )     2004  
Terra Ceia
  Palmetto   FL     (2,350 )     965       2,905             81       965       2,986       3,951       (595 )     2004  
The Heritage
  N. Ft. Myers   FL     (12,381 )     1,438       4,371       346       3,998       1,784       8,369       10,153       (3,950 )     1993  
The Meadows
  Palm Beach Gardens   FL     (5,684 )     3,229       9,870             2,131       3,229       12,001       15,230       (4,113 )     1999  
Three Flags RV Resort
  Wildwood   FL           228       684             19       228       703       931       (93 )     2006  
Toby’s
  Arcadia   FL           1,093       3,280             5       1,093       3,285       4,378       (701 )     2003  
Topics
  Spring Hill   FL     (2,078 )     844       2,568             329       844       2,897       3,741       (579 )     2004  
Tropical Palms
  Kissimmee   FL           5,677       17,116             5,583       5,677       22,699       28,376       (4,769 )     2004  

S-6


Table of Contents

                                                                                         
Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Tropical Palms
  Punta Gorda   FL     (7,346 )     2,365       7,286             251       2,365       7,537       9,902       (942 )     2006  
Vacation Village
  Largo   FL           1,315       3,946             152       1,315       4,098       5,413       (790 )     2004  
Villas at Spanish Oaks
  Ocala   FL     (12,600 )     2,250       6,922             1,133       2,250       8,055       10,305       (4,250 )     1993  
Windmill Manor
  Bradenton   FL     (5,676 )     2,153       6,125             1,453       2,153       7,578       9,731       (2,892 )     1998  
Windmill Village
  N. Ft. Myers   FL     (16,689 )     1,417       5,440             1,879       1,417       7,319       8,736       (5,751 )     1983  
Winds of St. Armands North
  Sarasota   FL     (19,653 )     1,523       5,063             2,807       1,523       7,870       9,393       (5,436 )     1983  
Winds of St. Armands South
  Sarasota   FL     (12,647 )     1,106       3,162             993       1,106       4,155       5,261       (3,217 )     1983  
Winter Garden
  Winter Garden   FL           2,321       6,962             77       2,321       7,039       9,360       (612 )     2007  
Pine Island Resort
  St. James City   FL           1,678       5,044             88       1,678       5,132       6,810       (412 )     2007  
Golf Vistas Estates
  Monee   IL     (13,577 )     2,843       4,719             6,513       2,843       11,232       14,075       (4,108 )     1997  
O’Connell’s
  Amboy   IL     (4,596 )     1,648       4,974             393       1,648       5,367       7,015       (1,186 )     2004  
Pine Country
  Belvidere   IL           53       166             66       53       232       285       (25 )     2006  
Willow Lake Estates
  Elgin   IL     (17,503 )     6,138       21,033             5,200       6,138       26,233       32,371       (12,508 )     1994  
Indian Lakes
  Batesville   IN           450       1,061       6       528       456       1,589       2,045       (212 )     2004  
Horseshoe Lake
  Clinton   IN           155       365       2       136       157       501       658       (68 )     2004  
Lakeside
  New Carlisle   IN           426       1,281             50       426       1,331       1,757       (275 )     2004  
Oak Tree Village
  Portage   IN     (9,552 )                 569       3,811       569       3,811       4,380       (2,477 )     1987  
Twin Mills RV
  Howe   IN     (2,480 )     1,399       4,186             157       1,399       4,343       5,742       (449 )     2006  
Diamond Caverns Resort & Golf Club
  Park City   KY           530       1,512                   530       1,512       2,042       (198 )     2006  
Gateway to Cape Cod
  Rochester   MA           91       288             72       91       360       451       (36 )     2006  
Old Chatham RV
  South Dennis   MA           1,760       5,293             19       1,760       5,312       7,072       (782 )     2005  
Sturbridge
  Sturbridge   MA           110       347             177       110       524       634       (50 )     2006  
Moody Beach
  Moody   ME           93       292             105       93       397       490       (39 )     2006  
Pinehirst RV Park
  Old Orchard Beach   ME     (5,655 )     1,942       5,827             123       1,942       5,950       7,892       (872 )     2005  
Mt. Desert Narrows
  Bar Harbor   ME           1,037       3,127             30       1,037       3,157       4,194       (220 )     2007  
Narrows Too
  Trenton   ME           1,463       4,408             5       1,463       4,413       5,876       (309 )     2007  
Patton Pond
  Ellsworth   ME           267       802             60       267       862       1,129       (60 )     2007  
Bear Cave Resort
  Buchanan   MI           176       516                   176       516       692       (90 )     2006  
St Clair
  St Clair   MI           453       1,068       6       214       459       1,282       1,741       (200 )     2004  
Forest Lake
  Advance   NC           986       2,325       13       381       999       2,706       3,705       (434 )     2004  
Goose Creek
  Newport   NC     (11,610 )     4,612       13,848       750       1,312       5,362       15,160       20,522       (2,931 )     2004  
Green Mountain Park
  Lenoir   NC           1,037       3,075                   1,037       3,075       4,112       (381 )     2006  
Lake Gaston
  Littleton   NC           130       409             51       130       460       590       (50 )     2006  
Lake Myers RV
  Mocksville   NC           1,504       4,587             13       1,504       4,600       6,104       (503 )     2006  

S-7


Table of Contents

                                                                                         
Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Scenic
  Asheville   NC     (3,698 )     1,183       3,511             6       1,183       3,517       4,700       (442 )     2006  
Twin Lakes
  Chocowinity   NC     (3,518 )     1,719       3,361       (10 )     228       1,709       3,589       5,298       (702 )     2004  
Waterway RV
  Cedar Point   NC     (5,786 )     2,392       7,185             88       2,392       7,273       9,665       (1,441 )     2004  
Sandy Beach RV
  Contoocook   NH     (5,025 )     1,755       5,265             71       1,755       5,336       7,091       (789 )     2005  
Tuxbury Resort
  South Hampton   NH     (586 )     3,557       3,910             126       3,557       4,036       7,593       (299 )     2007  
Chestnut Lake
  Port Republic   NJ           337       796       4       54       342       849       1,191       (144 )     2004  
Lake & Shore
  Ocean View   NJ           397       1,192       (19 )     403       378       1,595       1,973       (158 )     2006  
Sea Pines
  Swainton   NJ           208       625       (10 )     76       198       701       899       (74 )     2006  
Bonanza
  Las Vegas   NV     (8,936 )     908       2,643             1,560       908       4,203       5,111       (2,976 )     1983  
Boulder Cascade
  Las Vegas   NV     (8,262 )     2,995       9,020             2,292       2,995       11,312       14,307       (4,267 )     1998  
Cabana
  Las Vegas   NV     (7,613 )     2,648       7,989             525       2,648       8,514       11,162       (4,375 )     1994  
Flamingo West
  Las Vegas   NV     (14,186 )     1,730       5,266             1,439       1,730       6,705       8,435       (3,295 )     1994  
Las Vegas
  Las Vegas   NV           1,049       2,473       14       221       1,063       2,694       3,757       (442 )     2004  
Villa Borega
  Las Vegas   NV     (9,967 )     2,896       8,774             1,011       2,896       9,785       12,681       (3,972 )     1997  
Alpine Lake
  Corinth   NY     (13,772 )     4,783       14,125       153       177       4,936       14,302       19,238       (2,122 )     2005  
Brennan Beach
  Pulaski   NY     (20,357 )     7,325       21,141       0       1,311       7,325       22,452       29,777       (3,270 )     2005  
Greenwood Village
  Manorville   NY     (25,413 )     3,667       9,414       484       4,273       4,151       13,687       17,838       (4,954 )     1998  
Lake George Escape
  Lake George   NY           3,562       10,708             420       3,562       11,128       14,690       (1,728 )     2005  
Lake George Schroon Valley
  Warrensburg   NY           540       1,626             2       540       1,628       2,168       (104 )     2008  
Rondout Valley Resort
  Accord   NY           1,115       3,240                   1,115       3,240       4,355       (404 )     2006  
Kenisee Lake
  Jefferson   OH           295       696       4       56       299       751       1,050       (124 )     2004  
Wilmington
  Wilmington   OH           235       555       3       59       238       614       852       (101 )     2004  
Bend
  Bend   OR           733       1,729       10       224       743       1,953       2,696       (314 )     2004  
Falcon Wood Village
  Eugene   OR     (5,018 )     1,112       3,426             448       1,112       3,874       4,986       (1,571 )     1997  
Mt. Hood
  Welches   OR           1,817       5,733             83       1,817       5,816       7,633       (1,550 )     2002  
Pacific City
  Cloverdale   OR           1,076       2,539       14       659       1,091       3,198       4,289       (498 )     2004  
Quail Hollow
  Fairview   OR                 3,249             415             3,664       3,664       (1,501 )     1997  
Seaside
  Seaside   OR           891       2,101       12       353       903       2,454       3,357       (389 )     2004  
Shadowbrook
  Clackamas   OR     (6,098 )     1,197       3,693             366       1,197       4,059       5,256       (1,714 )     1997  
South Jetty
  Florence   OR           678       1,598       9       65       687       1,663       2,350       (280 )     2004  
Whalers Rest
  South Beach   OR           754       1,777       10       373       764       2,150       2,914       (332 )     2004  
Appalachian
  Shartlesville   PA           1,666       5,044             338       1,666       5,382       7,048       (534 )     2006  
Circle M
  Lancaster   PA           347       1,041             174       330       1,215       1,545       (124 )     2006  
Dutch County
  Manheim   PA           93       278             48       88       326       414       (35 )     2006  
Gettysburg Farm
  Dover   PA           117       350             35       111       385       496       (41 )     2006  

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Table of Contents

                                                                                         
Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Green Acres
  Breinigsville   PA     (29,747 )     2,680       7,479             3,834       2,680       11,313       13,993       (7,001 )     1988  
Hershey
  Lebanon   PA           1,284       3,028       17       528       1,301       3,556       4,857       (585 )     2004  
Robin Hill
  Lenhartsville   PA           1,263       3,786                   1,263       3,786       5,049       (116 )     2009  
Scotrun
  Scotrun   PA           161       483             39       153       522       675       (58 )     2006  
Spring Gulch
  New Holland   PA     (4,405 )     1,593       4,795             119       1,593       4,914       6,507       (999 )     2004  
Sun Valley
  Bowmansville   PA           866       2,601             24       866       2,625       3,491       (80 )     2009  
Timothy Lake North
  East Stroudsburg   PA           311       933             111       296       1,044       1,340       (158 )     2006  
Timothy Lake South
  East Stroudsburg   PA           216       649             5       206       654       860       (70 )     2006  
Carolina Landing
  Fair Play   SC           457       1,078       6       128       463       1,206       1,669       (194 )     2004  
Inlet Oaks
  Murrells Inlet   SC     (4,775 )     1,546       4,642             37       1,546       4,679       6,225       (584 )     2006  
The Oaks at Point South
  Yemassee   SC           267       810                   267       810       1,077       (107 )     2006  
Natchez Trace
  Hohenwald   TN           533       1,257       7       160       540       1,417       1,957       (220 )     2004  
Cherokee Landing
  Middleton   TN           118       279       2       10       120       289       409       (50 )     2004  
Bay Landing
  Bridgeport   TX           438       1,033       6       40       444       1,074       1,518       (181 )     2004  
Colorado River
  Columbus   TX           466       1,099       6       67       472       1,165       1,637       (197 )     2004  
Country Sunshine
  Weslaco   TX           627       1,881             753       627       2,634       3,261       (487 )     2004  
Fun n Sun RV
  San Benito   TX           2,533             412       10,970       2,945       10,970       13,915       (4,270 )     1998  
Lake Conroe
  Willis   TX           1,363       3,214       18       1,152       1,381       4,366       5,747       (649 )     2004  
Lake Tawakoni
  Point   TX           691       1,629       9       98       700       1,728       2,428       (273 )     2004  
Lake Texoma
  Gordonville   TX           488       1,151       6       443       494       1,594       2,088       (239 )     2004  
Lake Whitney
  Whitney   TX           679       1,602       9       221       688       1,823       2,511       (294 )     2004  
Lakewood
  Harlingen   TX           325       979             98       325       1,077       1,402       (232 )     2004  
Medina Lake
  Lakehills   TX           936       2,208       12       644       949       2,852       3,801       (442 )     2004  
Paradise Park RV
  Harlingen   TX           1,568       4,705             228       1,568       4,933       6,501       (967 )     2004  
Paradise South
  Mercedes   TX           448       1,345             207       448       1,552       2,000       (293 )     2004  
Southern Comfort
  Weslaco   TX           1,108       3,323             187       1,108       3,510       4,618       (684 )     2004  
Sunshine RV
  Harlingen   TX           1,494       4,484             798       1,494       5,282       6,776       (921 )     2004  
Tropic Winds
  Harlingen   TX           1,221       3,809             267       1,221       4,076       5,297       (1,077 )     2002  
All Seasons
  Salt Lake City   UT     (3,368 )     510       1,623             344       510       1,967       2,477       (835 )     1997  
Westwood Village
  Farr West   UT     (10,794 )     1,346       4,179             1,571       1,346       5,750       7,096       (2,402 )     1997  
Chesapeake Bay
  Cloucester   VA           1,230       2,900       16       444       1,246       3,345       4,591       (538 )     2004  
Harbor View
  Colonial Beach   VA           67       202             295       64       497       561       (48 )     2006  
Lynchburg
  Gladys   VA           266       627       4       81       269       708       977       (113 )     2004  
Meadows of Chantilly
  Chantilly   VA     (33,857 )     5,430       16,440             5,846       5,430       22,286       27,716       (10,596 )     1994  
Virginia Landing
  Quinby   VA           602       1,419       8       93       610       1,512       2,122       (254 )     2004  

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Schedule III
 

Equity LifeStyle Properties, Inc.
 
Real Estate and Accumulated Depreciation
 
December 31, 2009
 
(Amounts in thousands)
 
                        Costs Capitalized
                   
                        Subsequent to
    Gross Amount Carried
             
                  Initial Cost to
    Acquisition
    at Close of
             
                  Company     (Improvements)     Period 12/31/09              
                        Depreciable
          Depreciable
          Depreciable
          Accumulated
    Date of
 
Real Estate
  Location       Encumbrances     Land     Property     Land     Property     Land     Property     Total     Depreciation     Acquisition  
Williamsburg
  Williamsburg   VA           117       350             34       111       384       495       (43 )     2006  
Birch Bay
  Blaine   WA           502       1,185       7       28       509       1,213       1,722       (208 )     2004  
Cascade
  Snoqualmie   WA           822       1,939       11       253       833       2,192       3,025       (354 )     2004  
Chehalis
  Chehalis   WA           590       1,392       8       194       598       1,585       2,183       (255 )     2004  
Crescent Bar
  Quincy   WA           314       741       4       32       318       772       1,090       (121 )     2004  
Grandy Creek
  Concrete   WA                       475       1,456       475       1,456       1,931       (93 )     2004  
Kloshe Illahee
  Federal Way   WA     (17,383 )     2,408       7,286             493       2,408       7,779       10,187       (3,195 )     1997  
La Conner
  La Conner   WA           600       1,416       8       438       608       1,854       2,462       (282 )     2004  
Leavenworth
  Leavenworth   WA           786       1,853       10       302       796       2,156       2,952       (338 )     2004  
Little Diamond
  Newport   WA           353       834       5       70       358       904       1,262       (146 )     2004  
Long Beach
  Seaview   WA           321       758       4       111       326       869       1,195       (136 )     2004  
Mount Vernon
  Bow   WA           621       1,464       8       430       629       1,894       2,523       (290 )     2004  
Oceana
  Oceana City   WA           283       668       4       32       287       701       988       (115 )     2004  
Paradise
  Silver Creek   WA           466       1,099       6       128       472       1,226       1,699       (199 )     2004  
Thunderbird
  Monroe   WA           500       1,178       7       99       506       1,277       1,783       (210 )     2004  
Arrowhead
  Wisconsin Dells   WI           522       1,616             7       522       1,623       2,145       (189 )     2006  
Fremont
  Fremont   WI     (4,012 )     1,437       4,296             244       1,437       4,540       5,976       (803 )     2004  
Plymouth Rock
  Elkhart Lake   WI     (6,524 )     2,293       6,879                   2,293       6,879       9,172       (214 )     2009  
Tranquil Timbers
  Sturgeon Bay   WI           714       2,152             75       714       2,227       2,941       (269 )     2006  
Yukon Trails
  Lyndon Station   WI           556       1,629             112       556       1,741       2,297       (314 )     2004  
                                                                                         
Subtotal of Properties Held for Long Term
            (1,542,791 )     537,852       1,564,224       5,828       331,993       543,613       1,896,661       2,440,274       (610,200 )        
Properties Held for Sale
                                                                                       
Creekside
  Wyoming   MI     (3,628 )     1,109       3,444                   1,109       3,444       4,553       (929 )     1998  
                                                                                         
Subtotal of Properties Held for Sale
            (3,628 )     1,109       3,444             (202 )     1,109       3,444       4,553       (929 )        
Realty Systems, Inc. 
            (1,482 )                       77,815             77,815       77,815       (6,344 )     2002  
Management Business and other
            (1 )     (67 )     436       3       15,783             15,568       15,572       (12,291 )     1990  
                                                                                         
              (1,547,901 )     538,894       1,568,104       5,828       425,389       544,722       1,993,493       2,538,215       (629,768 )        
                                                                                         
 
 
NOTES:
 
(1) For depreciable property, the Company uses a 30-year estimated life for buildings acquired and structural and land improvements, a ten-to-fifteen year estimated life for building upgrades and a three-to-seven year estimated life for furniture and fixtures.

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(2) The schedule excludes Properties in which the Company has a non-controlling joint venture interest and accounts for using the equity method of accounting.
 
(3) The balance of furniture and fixtures included in the total amounts was approximately $42.8 million as of December 31, 2009.
 
(4) The aggregate cost of land and depreciable property for federal income tax purposes was approximately $2.5 billion, as of December 31, 2009.
 
(5) All Properties were acquired, except for Country Place Village, which was constructed.
 
(6) Creekside was held for sale as of December 31, 2009, pursuant to FASB ASC 360-10-35.


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Schedule III

Equity LifeStyle Properties, Inc.
Real Estate and Accumulated Depreciation
December 31, 2009
(amounts in thousands)
 
The changes in total real estate for the years ended December 31, 2009, 2008, and 2007 were as follows:
 
                         
    2009     2008     2007  
 
Balance, beginning of year
  $ 2,491,021     $ 2,396,115     $ 2,337,460  
Acquisitions
    18,116       10,393       45,646  
Improvements
    30,876       26,716       29,384  
Dispositions and other
    (8,525 )           (16,375 )
Inventory reclassification
    6,727       57,797        
                         
Balance, end of year
  $ 2,538,215     $ 2,491,021     $ 2,396,115  
                         
 
The changes in accumulated depreciation for the years ended December 31, 2009, 2008, and 2007 were as follows:
 
                         
    2009(a)     2008(b)     2007  
 
Balance, beginning of year
  $ 561,104     $ 494,211     $ 435,809  
Depreciation expense
    72,419       66,893       63,991  
Dispositions and other
    (3,755 )           (5,589 )
                         
Balance, end of year
  $ 629,768     $ 561,104     $ 494,211  
                         
 
 
(a) Includes approximately $2.4 million of depreciation from rental operations included in Ancillary services revenues, net.
 
(b) Depreciation expense excludes approximately $0.8 million of unamortized lease costs expenses related to the termination of the Privileged Access lease and includes approximately $1.2 million of depreciation from rental operations included in Ancillary services revenues, net.


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