e10vk
 

 
 
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, 2007
or
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-11718
EQUITY LIFESTYLE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
     
Maryland   36-3857664
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
Two North Riverside Plaza, Suite 800, Chicago, Illinois   60606
(Address of principal executive offices)   (Zip Code)
(312) 279-1400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
     
Common Stock, $.01 Par Value   New York Stock Exchange
(Title of Class)   (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K 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   Smaller reporting company o
    (Do not check if a smaller reporting company)
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 $1,155.8 million as of June 29, 2007 based upon the closing price of $52.19 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 22, 2008, 24,391,282 shares of the Registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates by reference the Registrant’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 8, 2008.
 
 

 


 

Equity LifeStyle Properties, Inc.
TABLE OF CONTENTS
             
        Page  
 
           
PART I.
           
 
           
Item 1.
  Business     3  
Item 1A.
  Risk Factors     8  
Item 1B.
  Unresolved Staff Comments     13  
Item 2.
  Properties     14  
Item 3.
  Legal Proceedings     22  
Item 4.
  Submission of Matters to a Vote of Security Holders     27  
 
           
 
           
PART II.
           
 
           
Item 5.
  Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     28  
Item 6.
  Selected Financial Data     29  
Item 7.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     32  
Item 7A.
  Quantitative and Qualitative Disclosures About Market Risk     51  
 
  Forward-Looking Statements     51  
Item 8.
  Financial Statements and Supplementary Data     52  
Item 9.
  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     52  
Item 9A.
  Controls and Procedures     52  
Item 9B.
  Other Information     53  
 
           
PART III.
           
 
           
Item 10.
  Directors and Executive Officers of the Registrant     53  
Item 11.
  Executive Compensation     53  
Item 12.
  Security Ownership of Certain Beneficial Owners and Management     53  
Item 13.
  Certain Relationships and Related Transactions     53  
Item 14.
  Principal Accountant Fees and Services     53  
 
           
PART IV.
           
 
           
Item 15.
  Exhibits and Financial Statement Schedules     54  

2


 

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”), is 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”). 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, 2007, we owned or had an ownership interest in a portfolio of 311 Properties located throughout the United States and Canada containing 112,779 residential sites. These Properties are located in 28 states and British Columbia (with the number of Properties in each state or province shown parenthetically) — Florida (87), California (48), Arizona (35), Texas (15), Pennsylvania (13), Washington (13), Colorado (10), Oregon (9), North Carolina (8), Virginia (8), Delaware (7), Maine (6), Nevada (6), Wisconsin (6), Indiana (5), New York (5), Illinois (4), Massachusetts (4), New Jersey (4), Michigan (3), South Carolina (3), New Hampshire (2), Ohio (2), Tennessee (2), Utah (2), Alabama (1), Kentucky (1), Montana (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 the 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 1,600 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 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 100 full-time corporate employees who assist on-site management in all property functions.
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 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.
     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 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. RSI also leases

3


 

inventory homes to prospective residents with the expectation that the tenant eventually will purchase the home. Subsidiaries of RSI also lease from the Operating Partnership certain real property within or adjacent to certain Properties consisting of golf courses, pro shops, stores and restaurants.
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 organized 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.
Acquisitions and Dispositions
     Over the last decade our portfolio of Properties has grown significantly from owning or having an interest in 121 Properties with over 44,000 sites to owning or having an interest in 311 Properties with over 112,000 sites. We continually review the Properties in our portfolio to ensure that they fit our business objectives. Over the last five years we sold 13 Properties, and we redeployed capital to markets we believe have greater long-term potential. In that same time period we acquired 181 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.

4


 

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.
     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. On January 16, 2004, we paid a special dividend of $8.00 per share using proceeds from a recapitalization.
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 29 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 right to use 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.
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 the necessary permits and approvals 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

5


 

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 with the interests of our customers (see Item 3 — Legal Proceedings).
     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 the capital costs are recorded as income in the period they are received.
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 65,000 properties in the United States, and approximately 10% or approximately 6,000 of the properties have more than 200 sites and would be considered investment-grade. 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. The 78 million people born from 1946 to 1964 or “baby boomers” make up the fastest growing segment of this market. Every 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 a Fannie Mae survey, the baby-boom generation will constitute 18% of the U.S. population within the next 30 years and more than 32 million people will reach age 55 within the next ten years. Among those individuals who are nearing retirement (age 40 to 54), 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.

6


 

    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 2007 National Association of Realtors (“NAR”) reports, sales of second homes in 2006 accounted for 36% of residential transactions, or 2.72 million second-home sales in 2006. There were approximately 6.8 million vacation homes in 2006. The typical vacation-home buyer is 44 years old and earned $102,200 in 2006. 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.
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. 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@mhchomes.com

7


 

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 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.
  availability and price of gasoline, especially for our transient customers.
  our ability to collect rent from customers and pay 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; and
  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.
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. There are 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, as well as the anticipated future revenue from the Property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the Property.

8


 

     Our current property and casualty insurance policies expire March 31, 2008. We have a $100 million property insurance program. The program limits coverage to $10 million annually for losses associated with earthquakes and floods. In addition, losses resulting from hurricanes are limited to $10 million per occurrence. The deductibles related to named windstorms, earthquakes, and floods are five percent of insurable value (property values plus 25 percent of business interruption) per occurrence. The deductibles expose us to potential uninsured losses.
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 $1.7 billion as of December 31, 2007. 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.
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) is approximately 55% as of December 31, 2007. 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.

9


 

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 ten percent 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 ten percent 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 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 fifteen 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, 2007, Mr. Samuel Zell and certain affiliated holders beneficially owned approximately 14.2% 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.

10


 

Agreements with Privileged Access May Not Have Been and May Not Be in the Future, Negotiated at Arm’s Length. Privileged Access is the largest tenant of the Company. Privileged Access leases approximately 24,100 sites at 81 of our resort Properties. These leases will provide for annual lease payments to us of approximately $25.5 million in the year ended December 31, 2008. Privileged Access operates the 81 Properties, which represented approximately 92 % of Privileged Access gross revenues for the year ended December 31, 2007. Privileged Access also leases 130 sites at Tropical Palms RV Resort for an annual lease payment of approximately $1.4 million. See Note 12 in the Notes to Consolidated Financial Statements contained in this Form 10-K for a discussion of all agreements between us and Privileged Access.
Mr. McAdams is our President and is also a director and 100% owner of Privileged Access. While the contracts with Privileged Access for the 81 Properties discussed above were reviewed and approved by a special committee of our board of directors, which is comprised of three independent directors, they may not be the result of arm’s length negotiations and, therefore, there can be no assurance that the terms and conditions are not less favorable than those which could be obtained from third parties providing comparable services. In addition, 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.
Members of Management May Have a Conflict of Interest Over Whether To Enforce Terms of Mr. McAdams’s Employment and Noncompetition Agreement. Mr. McAdams entered into 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 12 in the Notes to Consolidated Financial Statements contained in this Form 10-K.
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.

11


 

     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, 2007, we owned or had an ownership interest in 311 Properties located in 28 states and British Columbia, including 87 Properties located in Florida and 48 Properties located in California. Florida accounted for approximately 44% and California accounted for approximately 17% of property operating revenues for the year ended December 31, 2007. 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 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. 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. 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

12


 

net taxable income and we would be subject to U.S. federal income tax on our net 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.
One policy that will be critical to the presentation of our financial condition and results of operations in 2008 and beyond is our policy related to Privileged Access. Since April 14, 2006, Privileged Access has been our largest tenant leasing 81 resort Properties from us. Effective January 1, 2008, the 100 percent owner of Privileged Access, Mr. Joe McAdams, became our President and we amended and restated the leases for the 81 Properties. Under generally accepted accounting principles, effective January 1, 2008, Mr. McAdams, Privileged Access and the Company are considered related parties. Due to the materiality of the leasing arrangement and the related party nature of the arrangement, the Company has analyzed whether the operations of Privileged Access should be consolidated with ours. We have determined under FIN 46 that it would not be appropriate to consolidate Privileged Access as we do not control Privileged Access and are not the primary beneficiary of Privileged Access. This conclusion required management to make certain judgments. As a result of the complex nature of the arrangements, on February 15, 2008, we submitted a letter to the Office of the Chief Accountant at the SEC describing the relationship and asking for the SEC’s concurrence with our conclusions that we should not consolidate the operations of Privileged Access. As of the date of filing this Form 10-K, we do not have a response from the SEC. If the SEC disagrees with our conclusions and requires us to consolidate the operations of Privileged Access beginning January 1, 2008, such consolidation may significantly impact the presentation of our financial condition and results of operations. Additionally, the SEC may choose not to review our submission at this time. If they do not and we do not consolidate, the SEC may choose to review our position at a later time and may require us to consolidate the operations of Privileged Access beginning January 1, 2008.
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.
Item 1B. Unresolved Staff Comments
     None.

13


 

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, 2007, we owned or had an ownership interest in a portfolio of 311 Properties located throughout the United States and British Columbia containing 112,779 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 Westwinds located in San Jose, California accounted for approximately 2.4% and 2.2%, respectively, of our total property operating revenues for the year ended December 31, 2007.
     The following table sets forth certain information relating to the Properties we owned as of December 31, 2007, categorized by our major markets (excluding membership campground Properties leased to Privileged Access and Properties owned through joint ventures).

14


 

                                                                                             
                                                      Total                          
                                                Total     Number     Annual     Annual              
                                                Number     of Annual     Site     Site     Annual     Annual  
                                Develo-     Expan-     of Sites     Sites     Occupancy     Occupancy     Rent     Rent  
                                pable     sion     as of     as of     as of     as of     as of     as of  
Property   Address   City   State   ZIP   MH/RV   Acres (c)     Acres (d)     Sites (e)     12/31/07     12/31/07     12/31/07     12/31/06     12/31/07     12/31/06  
Florida
                                                                                           
East Coast:
                                                                                           
Sunshine Key
  38801 Overseas Hwy   Big Pine Key   FL   33043   RV     54                       409       11       100.0 %         $ 4,505        
Carriage Cove
  Five Carriage Cove Way   Daytona Beach   FL   32119   MH     59                       418       418       92.6 %     93.5 %   $ 5,342     $ 5,138  
Coquina Crossing
  4536 Coquina Crossing Dr.   Elkton   FL   32033   MH     316       26       145       597       562       88.1 %     86.7 %(b)   $ 5,268     $ 4,931  
Bulow Plantation
  3165 Old Kings Road South   Flagler Beach   FL   32136   MH     323       180       722       276       276       98.6 %     98.9 %(b)   $ 5,034     $ 4,673  
Bulow RV
  3345 Old Kings Road South   Flagler Beach   FL   32136   RV                             352       107       100.0 %     100.0 %(f)   $ 4,779     $ 4,496  
Carefree Cove
  3273 N.W. 37th St   Ft. Lauderdale   FL   33309   MH     20                       163       163       92.0 %     90.2 %   $ 6,047     $ 5,772  
Park City West
  10550 W. State Road 84   Ft. Lauderdale   FL   33324   MH     60                       363       363       89.5 %     89.5 %   $ 5,367     $ 5,155  
Sunshine Holiday
  2802 W. Oakland Park Blvd.   Ft. Lauderdale   FL   33311   MH     32                       269       269       91.8 %     90.0 %   $ 5,590     $ 5,343  
Sunshine Holiday RV
  2802 W. Oakland Park Blvd.   Ft. Lauderdale   FL   33311   RV                             131       58       100.0 %     100.0 %(f)   $ 5,280     $ 5,143  
Maralago Cay
  6280 S. Ash Lane   Lantana   FL   33462   MH     102       5               602       602       90.9 %     92.9 %   $ 6,284     $ 5,973  
Coral Cay
  2801 NW 62nd Avenue   Margate   FL   33063   MH     121                       819       819       82.2 %     82.7 %   $ 5,818     $ 5,854  
Lakewood Village
  3171 Hanson Avenue   Melbourne   FL   32901   MH     68                       349       349       86.8 %     87.7 %   $ 5,488     $ 5,292  
Holiday Village
  1335 Fleming Ave Box 228   Ormond Beach   FL   32174   MH     43                       301       301       86.7 %     87.0 %   $ 4,666     $ 4,446  
Sunshine Holiday
  1701 North US Hwy 1   Ormond Beach   FL   32174   RV     69                       349       132       100.0 %     100.0 %   $ 4,069     $ 3,744  
The Meadows
  2555 PGA Boulevard   Palm Beach Gardens   FL   33410   MH     55                       379       379       83.9 %     85.2 %(b)   $ 5,936     $ 5,615  
Breezy Hill RV
  800 NE 48th Street   Pompano Beach   FL   33064   RV     52                       762       363       100.0 %     100.0 %   $ 5,557     $ 5,230  
Highland Wood RV
  900 NE 48th Street   Pompano Beach   FL   33064   RV     15                       148       3       100.0 %     100.0 %   $ 5,583     $ 5,820  
Lighthouse Pointe
  155 Spring Drive   Port Orange   FL   32129   MH     64                       433       433       86.8 %     86.8 %(b)   $ 4,613     $ 4,446  
Pickwick
  4500 S. Clyde Morris Blvd   Port Orange   FL   32119   MH     84       4               432       432       99.5 %     99.1 %   $ 4,686     $ 4,606  
Indian Oaks
  780 Barnes Boulevard   Rockledge   FL   32955   MH     38                       208       208       100.0 %     100.0 %   $ 4,014     $ 3,827  
Countryside
  8775 20th Street   Vero Beach   FL   32966   MH     125                       643       645       89.3 %     89.3 %(b)   $ 5,117     $ 4,929  
Heritage Plantation
  1101 Ranch Road   Vero Beach   FL   32966   MH     64                       435       436       82.6 %     84.4 %   $ 5,185     $ 4,901  
Holiday Village
  1000 S.W. 27th Avenue   Vero Beach   FL   32968   MH     20                       128       128       35.2 %     39.8 %   $ 4,233     $ 4,190  
Sunshine Travel
  9455 108th Avenue   Vero Beach   FL   32967   RV     30       6       48       300       195       100.0 %     100.0 %   $ 4,058     $ 3,787  
Central:
                                                                                           
Clerbook
  20005 U.S. Highway 27   Clermont   FL   34711   RV     288                       1,255       506       100.0 %     98.1 %   $ 3,574     $ 3,194  
Lake Magic
  9600 Hwy 192 West   Clermont   FL   34714   RV     69                       471       146       100.0 %     100.0 %   $ 3,933     $ 3,411  
Southern Palms
  One Avocado Lane   Eustis   FL   32726   RV     120                       950       385       100.0 %     100.0 %   $ 3,933     $ 3,269  
Grand Island
  13310 Sea Breeze Lane   Grand Island   FL   32735   MH     35                       359       359       61.6 %     59.1 %(b)   $ 4,527     $ 4,378  
Sherwood Forest
  5302 W. Irlo Bronson Hwy   Kissimmee   FL   34746   MH     124                       767       754       95.0 %     94.2 %(b)   $ 4,613     $ 5,004  
Sherwood Forest RV
  5300 W. Irlo Bronson Hwy   Kissimmee   FL   34746   RV     107       43       149       513       153       100.0 %     100.0 %   $ 4,574     $ 4,403  
Tropical Palms
  2650 Holiday Trail   Kissimmee   FL   34746   RV     59                       541       53       100.0 %     50.0 %   $ 5,514     $ 4,096  
Coachwood Colony
  2610 Dogwood Place   Leesburg   FL   34748   MH     29                       202       202       92.1 %     92.6 %   $ 3,687     $ 3,460  
Mid-Florida Lakes
  199 Forest Dr.   Leesburg   FL   34788   MH     290                       1,225       1,225       81.9 %     82.5 %(b)   $ 5,204     $ 4,996  
Southernaire
  1700 Sanford Road   Mt. Dora   FL   32757   MH     14                       108       108       86.1 %     86.1 %   $ 4,051     $ 3,945  
Oak Bend
  10620 S.W. 27th Ave.   Ocala   FL   34476   MH     62       3               262       262       88.9 %     89.3 %(b)   $ 4,227     $ 4,023  
Villas at Spanish Oaks
  3150 N.E. 36th Avenue   Ocala   FL   34479   MH     69                       459       459       86.5 %     87.6 %   $ 4,176     $ 4,327  
Winter Garden
  13905 W. Colonial Dr.   Winter Garden   FL   34787   RV     27                       350       232       100.0 %     (a)   $ 3,827        

15


 

                                                                                             
                                                      Total                          
                                                Total     Number     Annual     Annual              
                                                Number     of Annual     Site     Site     Annual     Annual  
                                Develo-     Expan-     of Sites     Sites     Occupancy     Occupancy     Rent     Rent  
                                pable     sion     as of     as of     as of     as of     as of     as of  
Property   Address   City   State   ZIP   MH/RV   Acres (c)     Acres (d)     Sites (e)     12/31/07     12/31/07     12/31/07     12/31/06     12/31/07     12/31/06  
Gulf Coast (Tampa/Naples):
                                                                                           
Toby’s RV
  3550 N.E. Hwy 70   Arcadia   FL   34266   RV     44                       379       318       100.0 %     100.0 %   $ 2,333     $ 2,026  
Manatee
  800 Kay Road NE   Bradenton   FL   34212   RV     42                       415       240       100.0 %     100.0 %   $ 4,549     $ 4,092  
Windmill Manor
  5320 53rd Ave. East   Bradenton   FL   34203   MH     49                       292       292       95.5 %     93.8 %   $ 5,241     $ 5,034  
Glen Ellen
  2882 Gulf to Bay Blvd   Clearwater   FL   33759   MH     12                       106       106       94.3 %     95.3 %   $ 4,431     $ 4,239  
Hillcrest
  2346 Druid Road East   Clearwater   FL   33764   MH     25                       278       278       93.9 %     87.8 %   $ 5,103     $ 4,838  
Holiday Ranch
  4300 East Bay Drive   Clearwater   FL   33764   MH     12                       150       150       92.7 %     91.3 %   $ 4,125     $ 4,800  
Silk Oak
  28488 US Highway 19 N   Clearwater   FL   33761   MH     19                       181       181       92.3 %     91.7 %   $ 4,455     $ 5,124  
Crystal Isles
  11419 W. Ft. Island Drive   Crystal River   FL   34429   RV     32                       260       38       100.0 %     100.0 %   $ 4,385     $ 3,502  
Lake Haven
  1415 Main Street   Dunedin   FL   34698   MH     48                       379       379       91.3 %     89.2 %   $ 6,194     $ 5,756  
Fort Myers Beach Resort
  16299 San Carlos Blvd.   Fort Myers   FL   33908   RV     31                       306       102       100.0 %     100.0 %   $ 5,520     $ 5,054  
Gulf Air Resort
  17279 San Carlos Blvd. SW   Fort Myers   FL   33931   RV     25                       246       156       100.0 %     100.0 %   $ 4,515     $ 4,283  
Barrington Hills
  9412 New York Avenue   Hudson   FL   34667   RV     28                       392       267       100.0 %     100.0 %   $ 2,678     $ 2,464  
Down Yonder
  7001 N. 142nd Avenue   Largo   FL   33771   MH     50                       361       361       99.4 %     99.2 %   $ 5,734     $ 5,515  
East Bay Oaks
  601 Starkey Road   Largo   FL   33771   MH     40                       328       328       97.9 %     97.9 %   $ 5,470     $ 5,247  
Eldorado Village
  2505 East Bay Drive   Largo   FL   33771   MH     25                       227       227       99.6 %     98.2 %   $ 4,442     $ 5,208  
Shangri La
  249 Jasper Street N.W.   Largo   FL   33770   MH     14                       160       160       91.9 %     96.9 %   $ 5,056     $ 4,809  
Vacation Village
  6900 Ulmerton Road   Largo   FL   33771   RV     29                       293       191       100.0 %     100.0 %   $ 3,942     $ 3,760  
Pasco
  21632 State Road 54   Lutz   FL   33549   RV     27                       255       167       100.0 %     100.0 %   $ 3,356     $ 3,182  
Buccaneer
  2210 N. Tamiami Trail N.E.   N. Ft. Myers   FL   33903   MH     223       39       162       971       971       98.2 %     98.2 %   $ 5,490     $ 5,269  
Island Vista MHC
  3000 N. Tamiami Trail   N. Ft. Myers   FL   33903   MH     121                       616       542       100.4 %     100.0 %   $ 3,834     $ 3,809  
Lake Fairways
  19371 Tamiami Trail   N. Ft. Myers   FL   33903   MH     259                       896       896       99.6 %     99.7 %   $ 5,559     $ 5,295  
Pine Lakes
  10200 Pine Lakes Blvd.   N. Ft. Myers   FL   33903   MH     314                       584       584       100.0 %     100.0 %   $ 6,595     $ 6,282  
Pioneer Village
  7974 Samville Rd.   N. Ft. Myers   FL   33917   RV     90                       733       408       100.0 %     100.0 %   $ 3,675     $ 3,521  
The Heritage
  3000 Heritage Lakes Blvd.   N. Ft. Myers   FL   33917   MH     214       22       132       455       455       98.0 %     98.0 %(b)   $ 4,930     $ 4,734  
Country Place
  2601 Country Place Blvd.   New Port Richey   FL   34655   MH     82                       515       515       99.8 %     100.0 %   $ 3,844     $ 3,672  
Hacienda Village
  7107 Gibraltar Ave   New Port Richey   FL   34653   MH     66                       505       505       97.6 %     97.4 %   $ 4,564     $ 4,319  
Harbor View
  6617 Louisna Ave   New Port Richey   FL   34653   MH     69                       471       471       97.5 %     98.5 %   $ 3,823     $ 3,462  
Bay Lake Estates
  1200 East Colonia Lane   Nokomis   FL   34275   MH     34                       228       228       95.2 %     95.6 %   $ 5,963     $ 5,692  
Royal Coachman
  1070 Laurel Road East   Nokomis   FL   34275   RV     111                       546       414       100.0 %     100.0 %   $ 5,804     $ 5,531  
Windmill Village
  16131 N. Cleveland Ave.   N. Ft. Myers   FL   33903   MH     69                       491       491       93.1 %     92.9 %   $ 4,889     $ 4,294  
Silver Dollar
  12515 Silver Dollar Drive   Odessa   FL   33556   RV     412                       385       389       100.0 %     100.0 %   $ 4,420     $ 3,953  
Terra Ceia
  9303 Bayshore Road   Palmetto   FL   34221   RV     18                       203       131       100.0 %     100.0 %   $ 3,449     $ 2,951  
Lakes at Countrywood
  745 Arbor Estates Way   Plant City   FL   33565   MH     122                       424       424       92.0 %     91.3 %(b)   $ 3,785     $ 3,596  
Meadows at Countrywood
  745 Arbor Estates Way   Plant City   FL   33565   MH     140       13       110       737       799       94.9 %     94.6 %(b)   $ 4,510     $ 4,261  
Oaks at Countrywood
  745 Arbor Estates Way   Plant City   FL   33565   MH     44                     168       168       76.8 %     75.0 %(b)   $ 3,804     $ 3,710  
Harbor Lakes
  3737 El Jobean Road #294   Port Charlotte   FL   33953   RV     80                       528       292       100.0 %     100.0 %   $ 4,221     $ 3,905  
Gulf View
  10205 Burnt Store Road   Punta Gorda   FL   33950   RV     78                       206       44       100.0 %     100.0 %   $ 3,950     $ 3,872  
Tropical Palms MHC
  17100 Tamiami Trail   Punta Gorda   FL   33955   MH     50                       297       297       85.2 %     85.9 %   $ 3,167     $ 3,053  
Winds of St. Armands No
  4000 N. Tuttle Ave.   Sarasota   FL   34234   MH     74                       471       471       94.7 %     95.1 %   $ 5,364     $ 5,121  
Winds of St. Armands So
  3000 N. Tuttle Ave.   Sarasota   FL   34234   MH     61                       306       306       99.3 %     99.0 %   $ 5,610     $ 5,090  
Topics
  13063 County Line Road   Spring Hill   FL   34609   RV     35                       230       197       100.0 %     100.0 %   $ 2,739     $ 2,576  
Pine Island
  5120 Stringfellow Road   St. James City   FL   33956   RV     31                       363       65       100.0 %     (a)   $ 4,701        
Bay Indies
  950 Ridgewood Ave   Venice   FL   34285   MH     210                       1,309       1,309       95.8 %     96.2 %   $ 6,419     $ 6,054  
Ramblers Rest
  1300 North River Rd.   Venice   FL   34293   RV     117                       647       470       100.0 %     100.0 %   $ 4,350     $ 4,008  
Sixth Avenue
  39345 6th Avenue   Zephyrhills   FL   33542   MH     14                       134       134       90.3 %     91.0 %   $ 2,343     $ 2,271  
Total Florida Market:
                        6,797       341       1,468       35,155       28,413       94.2 %     93.8 %   $ 4,655     $ 4,444  

16


 

                                                                                             
                                                      Total                          
                                                Total     Number     Annual     Annual              
                                                Number     of Annual     Site     Site     Annual     Annual  
                                Develo-     Expan-     of Sites     Sites     Occupancy     Occupancy     Rent     Rent  
                                pable     sion     as of     as of     as of     as of     as of     as of  
Property   Address   City   State   ZIP   MH/RV   Acres (c)     Acres (d)     Sites (e)     12/31/07     12/31/07     12/31/07     12/31/06     12/31/07     12/31/06  
California
                                                                                           
Northern California:
                                                                                           
Monte del Lago
  13100 Monte del Lago   Castroville   CA   95012   MH     54                       310       310       93.2 %     96.1 %(b)   $ 11,759     $ 10,892  
Colony Park
  3939 Central Avenue   Ceres   CA   95307   MH     20                       186       186       89.8 %     90.9 %   $ 6,881     $ 6,494  
Four Seasons
  3138 West Dakota   Fresno   CA   93722   MH     40                       242       242       88.0 %     89.7 %   $ 4,065     $ 3,967  
Tahoe Valley
  1175 Melba Drive   Lake Tahoe   CA   96150   RV     86       20       200       413       5       100                  
Sea Oaks
  1675 Los Osos Valley Rd., #221   Los Osos   CA   93402   MH     18                       125       125       98.4 %     99.2 %   $ 5,861     $ 5,793  
Coralwood
  331 Coralwood   Modesto   CA   95356   MH     22                       194       194       85.1 %     95.9 %   $ 8,083     $ 7,596  
Concord Cascade
  245 Aria Drive   Pacheco   CA   94553   MH     31                       283       283       100.0 %     99.3 %   $ 7,495     $ 7,258  
San Francisco RV
  700 Palmetto Ave   Pacifica   CA   94044   RV     12                       182                                
Quail Meadows
  5901 Newbrook Drive   Riverbank   CA   95367   MH     20                       146       146       98.6 %     100.0 %   $ 8,039     $ 7,706  
California Hawaiian
  3637 Snell Avenue   San Jose   CA   95136   MH     50                       418       418       99.0 %     92.8 %   $ 9,920     $ 9,120  
Sunshadow
  1350 Panoche Avenue   San Jose   CA   95122   MH     30                       121       121       97.5 %     95.9 %   $ 9,444     $ 8,903  
Village of the Four Seasons
  200 Ford Road   San Jose   CA   95138   MH     30                       271       271       92.6 %     90.4 %   $ 8,847     $ 8,414  
Westwinds (4 Properties)
  500 Nicholson Lane   San Jose   CA   95134   MH     88                       723       723       92.3 %     89.2 %   $ 10,584     $ 9,945  
Laguna Lake
  1801 Perfumo Canyon Road   San Luis Obispo   CA   93405   MH     100                       290       290       99.7 %     99.7 %   $ 5,406     $ 5,219  
Contempo Marin
  400 Yosemite Road   San Rafael   CA   94903   MH     63                       396       396       98.2 %     98.5 %   $ 8,311     $ 8,082  
DeAnza Santa Cruz
  2395 Delaware Avenue   Santa Cruz   CA   95060   MH     30                       198       198       94.9 %     95.5 %   $ 9,676     $ 9,004  
Santa Cruz Ranch RV Resort
  917 Disc Drive   Scotts Valley   CA   95066   RV     6.65                       106                   (a)            
Royal Oaks
  415 Akers Drive N.   Visalia   CA   93291   MH     20                       149       149       92.6 %     88.6 %   $ 4,953     $ 4,456  
Southern California:
                                                                                           
Date Palm Country Club
  36-200 Date Palm Drive   Cathedral City   CA   92234   MH     232       3       24       538       538       98.1 %     97.8 %   $ 10,240     $ 9,932  
Date Palm RV
  36-100 Date Palm Drive   Cathedral City   CA   92234   RV                         140                   (f)             
Pacific Dunes Ranch
  1205 Silver Spur Place   Oceana   CA   93445   RV     48                       215       1       100.0 %     100.0 %         $ 5,355  
Rancho Mesa
  450 East Bradley Ave.   El Cajon   CA   92021   MH     20                       158       158       70.3 %     81.0 %   $ 10,839     $ 10,529  
Rancho Valley
  12970 Hwy 8 Business   El Cajon   CA   92021   MH     19                       140       140       95.0 %     97.1 %   $ 10,922     $ 10,843  
Royal Holiday
  4400 W Florida Ave   Hemet   CA   92545   MH     22                       179       179       57.5 %     58.1 %   $ 4,770     $ 4,503  
Las Palmas
  1025 S. Riverside Ave.   Rialto   CA   92376   MH     18                       136       136       100.0 %     100.0 %   $ 5,175     $ 4,796  
Parque La Quinta
  350 S. Willow Ave. #120   Rialto   CA   92376   MH     19                       166       166       100.0 %     100.0 %   $ 5,172     $ 4,922  
Meadowbrook
  8301 Mission Gorge Rd.   Santee   CA   92071   MH     43                       338       338       98.2 %     97.9 %   $ 9,065     $ 8,918  
Lamplighter
  10767 Jamacha Blvd.   Spring Valley   CA   91978   MH     32                       270       270       94.8 %     98.1 %   $ 11,213     $ 11,104  
Santiago Estates
  13691 Gavina Ave. #632   Sylmar   CA   91342   MH     113       9               300       300       100.0 %     100.0 %   $ 10,067     $ 9,601  
Total California Market
                        1,287       32       224       7,333       6,283       93.1 %     94.1 %   $ 8,199     $ 7,734  
 
                                                                                           
Arizona
                                                                                           
Countryside RV
  2701 S. Idaho Rd   Apache Junction   AZ   85219   RV     53                       560       330       100.0 %     100.0 %   $ 2,843     $ 2,748  
Golden Sun RV
  999 W Broadway Ave   Apache Junction   AZ   85220   RV     33                       329       209       100.0 %     100.0 %   $ 2,738     $ 2,711  
Casita Verde RV
  2200 N. Trekell Rd.   Casa Grande   AZ   85222   RV     14                       192       110       100.0 %     100.0 %   $ 2,148     $ 2,086  
Fiesta Grande RV
  1511 East Florence Blvd.   Casa Grande   AZ   85222   RV     77                       767       507       100.0 %     100.0 %   $ 2,546     $ 2,451  
Foothills West RV
  10167 N. Encore Dr.   Casa Grande   AZ   85222   RV     16                       188       132       100.0 %     100.0 %   $ 2,106     $ 1,998  
Monte Vista
  8865 E. Baseline Road   Mesa   AZ   85209   RV     142       56       515       832       774       100.0 %     100.0 %   $ 5,456     $ 5,296  
Viewpoint
  8700 E. University   Mesa   AZ   85207   RV     332       55       467       1,952       1,486       100.0 %     100.0 %   $ 4,528     $ 4,278  
Venture In
  270 N. Clark Rd.   Show Low   AZ   85901   RV     26                       389       271       100.0 %     100.0 %   $ 2,561     $ 2,511  
Paradise
  10950 W. Union Hill Drive   Sun City   AZ   85373   RV     80                       950       847       100.0 %     100.0 %   $ 3,823     $ 3,623  
Araby
  6649 E. 32nd. St.   Yuma   AZ   85365   RV     25                       337       299       100.0 %     100.0 %   $ 2,850     $ 2,686  
Cactus Gardens
  10657 S. Ave. 9-E   Yuma   AZ   85365   RV     43                       430       269       100.0 %     100.0 %   $ 1,962     $ 1,798  
Capri RV
  3380 South 4th Ave   Yuma   AZ   85365   RV     20                       303       229       100.0 %     100.0 %   $ 2,668     $ 2,560  

17


 

                                                                                             
                                                      Total                          
                                                Total     Number     Annual     Annual              
                                                Number     of Annual     Site     Site     Annual     Annual  
                                Develo-     Expan-     of Sites     Sites     Occupancy     Occupancy     Rent     Rent  
                                pable     sion     as of     as of     as of     as of     as of     as of  
Property   Address   City   State   ZIP   MH/RV   Acres (c)     Acres (d)     Sites (e)     12/31/07     12/31/07     12/31/07     12/31/06     12/31/07     12/31/06  
Desert Paradise
  10537 South Ave., 9E   Yuma   AZ   85365   RV     26                       260       126       100.0 %     100.0 %   $ 1,980     $ 1,859  
Foothill
  12705 E. South Frontage Rd.   Yuma   AZ   85367   RV     18                       180       68       100.0 %     100.0 %   $ 2,011     $ 1,908  
Mesa Verde
  3649 & 3749 South 4th Ave.   Yuma   AZ   85365   RV     28                       345       318       100.0 %     (a)   $ 2,272        
Suni Sands
  1960 East 32nd Street   Yuma   AZ   85365   RV     34                       336       185       100.0 %     100.0 %   $ 2,426     $ 2,217  
Casa del Sol East II
  10960 N. 67th Avenue   Glendale   AZ   85304   MH     29                       239       239       78.7 %     80.3 %   $ 6,864     $ 6,697  
Casa del Sol East III
  10960 N. 67th Avenue   Glendale   AZ   85304   MH     28                       236       236       82.6 %     84.3 %   $ 6,832     $ 6,696  
Palm Shadows
  7300 N. 51st. Avenue   Glendale   AZ   85301   MH     33                       294       294       81.3 %     80.3 %   $ 5,473     $ 5,293  
Hacienda de Valencia
  201 S. Greenfield Rd.   Mesa   AZ   85206   MH     51                       365       365       93.7 %     90.4 %   $ 5,659     $ 5,497  
The Highlands at Brentwood
  120 North Val Vista Drive   Mesa   AZ   85213   MH     45                       273       273       96.3 %     97.8 %   $ 6,842     $ 6,559  
The Mark
  625 West McKellips   Mesa   AZ   85201   MH     60       4               410       410       57.6 %     56.1 %   $ 5,146     $ 5,084  
Apollo Village
  10701 N. 99th Ave.   Peoria   AZ   85345   MH     29       3               236       236       91.5 %     85.6 %(b)   $ 5,535     $ 5,369  
Casa del Sol West I
  11411 N. 91st Avenue   Peoria   AZ   85345   MH     31                       245       245       93.5 %     87.8 %   $ 6,403     $ 6,309  
Carefree Manor
  19602 N. 32nd Street   Phoenix   AZ   85050   MH     16                       130       130       80.8 %     78.9 %   $ 4,868     $ 4,601  
Central Park
  205 West Bell Road   Phoenix   AZ   85023   MH     37                       293       293       95.6 %     88.1 %   $ 5,810     $ 5,623  
Desert Skies
  19802 N. 32 Street   Phoenix   AZ   85024   MH     24                       165       165       98.8 %     98.2 %   $ 4,999     $ 4,864  
Sunrise Heights
  17801 North 16th Street   Phoenix   AZ   85022   MH     28                       199       199       91.0 %     84.4 %   $ 5,720     $ 5,532  
Whispering Palms
  19225 N. Cave Creek Rd.   Phoenix   AZ   85024   MH     15                       116       116       95.7 %     94.0 %   $ 4,368     $ 4,234  
Sedona Shadows
  6770 W. U.S. Hwy 89A   Sedona   AZ   86336   MH     48       6       10       198       197       99.5 %     100.0 %   $ 6,702     $ 6,316  
The Meadows
  2401 W. Southern Ave.   Tempe   AZ   85282   MH     60                       391       391       90.0 %     85.2 %   $ 6,242     $ 5,989  
Fairview Manor
  3115 N. Fairview Avenue   Tucson   AZ   85705   MH     28                       235       235       80.0 %     75.7 %   $ 4,533     $ 4,506  
Total Arizona Market
                        1,529       124       992       12,375       10,184       94.0 %     92.5 %   $ 4,279     $ 4,190  
 
                                                                                           
Colorado
                                                                                           
Golden Terrace South RV
  17801 West Colfax Ave.   Golden   CO   80401   RV                             80                                
Hillcrest Village
  1600 Sable Boulevard   Aurora   CO   80011   MH     72                       601       601       76.9 %     74.2 %   $ 6,540     $ 6,477  
Cimarron
  12205 North Perry   Broomfield   CO   80020   MH     50                       327       327       84.1 %     85.3 %   $ 6,351     $ 6,142  
Holiday Village
  3405 Sinton Road   Co. Springs   CO   80907   MH     38                       240       240       78.3 %     78.8 %   $ 6,697     $ 6,468  
Bear Creek
  3500 South King Street   Denver   CO   80236   MH     12                       122       122       92.6 %     94.3 %   $ 6,212     $ 6,173  
Holiday Hills
  2000 West 92nd Avenue   Denver   CO   80260   MH     99                       736       736       83.8 %     86.1 %   $ 6,397     $ 6,145  
Golden Terrace
  17601 West Colfax Ave.   Golden   CO   80401   MH     32                       265       265       84.2 %     84.9 %   $ 6,949     $ 6,667  
Golden Terrace South
  17601 West Colfax Ave.   Golden   CO   80401   MH     15                       80       80       72.5 %     70.0 %   $ 6,864     $ 6,506  
Golden Terrace West
  17601 West Colfax Ave.   Golden   CO   80401   MH     39       7               316       316       81.0 %     82.9 %   $ 6,776     $ 6,556  
Pueblo Grande
  999 Fortino Blvd. West   Pueblo   CO   81008   MH     33                       251       251       88.0 %     90.0 %   $ 4,141     $ 3,899  
Woodland Hills
  1500 W. Thornton Pkwy.   Thorton   CO   80260   MH     55                       434       434       82.7 %     82.9 %   $ 5,902     $ 5,523  
Total Colorado Market
                        445       7       0       3,452       3,372       82.4 %     82.9 %   $ 6,283     $ 6,056  
 
                                                                                           
Northeast
                                                                                           
Waterford
  205 Joan Drive   Bear   DE   19701   MH     159                       731       731       95.2 %     94.7 %(b)   $ 5,915     $ 5,663  
Whispering Pines
  32045 Janice Road   Lewes   DE   19958   MH     67       2               393       393       85.8 %     86.7 %   $ 4,343     $ 4,205  
Mariners Cove
  35356 Sussex Lane #1   Millsboro   DE   19966   MH     101                       375       375       94.9 %     94.7 %(b)   $ 6,734     $ 6,534  
Aspen Meadows
  303 Palace Lane   Rehoboth   DE   19971   MH     46                       200       200       100.0 %     100.0 %   $ 4,921     $ 4,757  
Camelot Meadows
  303 Palace Lane   Rehoboth   DE   19971   MH     61                       301       302       99.0 %     98.7 %   $ 4,598     $ 4,412  
McNicol
  303 Palace Lane   Rehoboth   DE   19971   MH     25                       93       93       98.9 %     100.0 %   $ 4,434     $ 4,215  
Sweetbriar
  83 Big Burn Lane   Rehoboth   DE   19958   MH     38                       146       146       98.6 %     97.3 %   $ 4,485     $ 4,335  
Old Chatham RV
  310 Old Chatham Road   South Dennis   MA   02660   RV     47       11               312       274       100.0 %     100.0 %   $ 3,434     $ 3,055  
Mount Desert Narrows
  1219 State Highway 3   Bar Harbor   ME   04609   RV     42       12               206                   (a)            
Patten Pond
  1470 Bucksport Road   Ellsworth   ME   04605   RV     90       60               137                   (a)            

18


 

                                                                                             
                                                      Total                          
                                                Total     Number     Annual     Annual              
                                                Number     of Annual     Site     Site     Annual     Annual  
                                Develo-     Expan-     of Sites     Sites     Occupancy     Occupancy     Rent     Rent  
                                pable     sion     as of     as of     as of     as of     as of     as of  
Property   Address   City   State   ZIP   MH/RV   Acres (c)     Acres (d)     Sites (e)     12/31/07     12/31/07     12/31/07     12/31/06     12/31/07     12/31/06  
Pinehurst RV Park
  7 Oregon Avenue, P.O. Box 174   Old Orchard Beach   ME   04064   RV     58                       550       519       100.0 %     100.0 %   $ 2,501     $ 2,403  
Narrows Too
  1150 Bar Harbor Road   Trenton   ME   04605   RV     43                       207                   (a)            
Scenic
  1314 Tunnel Rd.   Asheville   NC   28805   MH     28                       205       205       78.0 %     79.5 %   $ 3,435     $ 3,261  
Waterway RV
  850 Cedar Point Blvd.   Cedar Point   NC   28584   RV     27                       336       334       100.0 %     100.0 %   $ 2,969     $ 2,755  
Twin Lakes
  1618 Memory Lane   Chocowinity   NC   27817   RV     132       14       54       400       291       100.0 %     100.0 %   $ 2,439     $ 2,255  
Lake Myers RV
  2862 US Highway 64 West   Mocksville   NC   27028   RV     74                       425       283       100.0 %     100.0 %   $ 1,993     $ 2,004  
Goose Creek
  350 Red Barn Road   Newport   NC   28570   RV     92       10       92       598       585       100.0 %     100.0 %   $ 3,039     $ 2,842  
Sandy Beach RV
  677 Clement Hill Road   Contoocook   NH   03229   RV     40                       190       123       100.0 %     100.0 %   $ 3,050     $ 2,870  
Tuxbury Resort
  88 Whitehall Road   South Hampton   NH   03827   RV     193       100               305       223       100.0 %     (a)   $ 2,969        
Alpine Lake
  78 Heath Road   Corinth   NY   12822   RV     200       54               500       235       100.0 %     100.0 %   $ 2,608     $ 2,391  
Lake George Escape
  175 E. Schroon River Road, P.O. Box 431   Lake George   NY   12845   RV     178       30               576                   100.0 %            
Greenwood Village
  370 Chapman Boulevard   Manorville   NY   11949   MH     79       14       7       512       512       100.0 %     99.8 %   $ 6,516     $ 6,189  
Brennan Beach
  80 Brennan Beach   Pulaski   NY   13142   RV     201                       1,377       1,164       100.0 %     100.0 %   $ 1,714     $ 1,605  
Green Acres
  8785 Turkey Ridge Road   Breinigsville   PA   18031   MH     149                       595       595       93.3 %     93.6 %   $ 6,315     $ 5,871  
Spring Gulch
  475 Lynch Road   New Holland   PA   17557   RV     114                       420       83       100.0 %     100.0 %   $ 3,711     $ 3,571  
Appalachian
  60 Motel Drive   Shartlesville   PA   19554   RV     86       30       200       357       190       100.0 %     100.0 %   $ 2,693     $ 2,561  
Inlet Oaks
  5350 Highway 17   Murrells Inlet   SC   29576   MH     35                       178       178       94.9 %     94.4 %   $ 3,354     $ 3,348  
Meadows of Chantilly
  4200 Airline Parkway   Chantilly   VA   22021   MH     82                       500       500       90.8 %     91.4 %   $ 9,381     $ 8,850  
Total Northeast Market
                        2,487       337       353       11,125       8,534       97.1 %     97.1 %   $ 4,065     $ 3,911  
 
                                                                                           
Midwest
                                                                                           
O’Connell’s
  970 Green Wing Road   Amboy   IL   61310   RV     286       100       600       668       349       100.0 %     100.0 %   $ 2,497     $ 2,375  
Willow Lake Estates
  161 West River Road   Elgin   IL   60123   MH     111                       617       617       71.3 %     75.4 %   $ 9,223     $ 9,082  
Golf Vista Estates
  25807 Firestone Drive   Monee   IL   60449   MH     144       4               408       408       98.0 %     99.0 %(b)   $ 6,713     $ 6,309  
Twin Mills RV
  1675 W SR 120   Howe   IN   46746   RV     137       5       50       501       241       100.0 %     100.0 %   $ 1,922     $ 1,812  
Windsong
  3050 S Lynhurst Dr   Indianapolis   IN   46241   MH                                                            
Lakeside
  7089 N. Chicago Road   New Carlisle   IN   46552   RV     13                       91       67       100.0 %     100.0 %   $ 2,069     $ 1,958  
Oak Tree Village
  254 Sandalwood Ave.   Portage   IN   46368   MH     76                       361       361       73.4 %     74.2 %   $ 4,836     $ 4,616  
Creekside
  5100 Clyde Pk. Ave. SW   Wyoming   MI   49509   MH     29                       165       165       67.3 %     67.3 %   $ 5,582     $ 5,219  
Caledonia
  8425 Hwy 38   Caledonia   WI   53108   RV     76                       247                                
Fremont
  E. 6506 Highway 110   Fremont   WI   54940   RV     98       5               325       58       100.0 %     100.0 %   $ 2,595     $ 2,495  
Yukon Trails
  N2330 Co Rd. HH   Lyndon Station   WI   53944   RV     150       30               214       118       100.0 %     100.0 %   $ 1,520     $ 1,448  
Tranquil Timbers
  3668 Grondin Road   Sturgeon Bay   WI   54235   RV     125                       270       110       100.0 %     100.0 %   $ 1,649     $ 1,569  
Arrowhead
  W1530 Arrowhead Road   Wisconsin Dells   WI   53965   RV     166       40       200       377       136       100.0 %     100.0 %   $ 1,512     $ 1,415  
Total Midwest Market
                        1,411       184       850       4,244       2,630       91.8 %     88.8 %   $ 3,647     $ 3,461  

19


 

                                                                                             
                                                      Total                          
                                                Total     Number     Annual     Annual              
                                                Number     of Annual     Site     Site     Annual     Annual  
                                Develo-     Expan-     of Sites     Sites     Occupancy     Occupancy     Rent     Rent  
                                pable     sion     as of     as of     as of     as of     as of     as of  
Property   Address   City   State   ZIP   MH/RV   Acres (c)     Acres (d)     Sites (e)     12/31/07     12/31/07     12/31/07     12/31/06     12/31/07     12/31/06  
Nevada, Utah, New Mexico
                                                                                           
Bonanza
  3700 East Stewart Ave   Las Vegas   NV   89110   MH     43                       353       353       62.3 %     65.2 %   $ 6,545     $ 6,310  
Boulder Cascade
  1601 South Sandhill Rd   Las Vegas   NV   89104   MH     39                       299       299       78.3 %     80.6 %   $ 6,396     $ 5,975  
Cabana
  5303 East Twain   Las Vegas   NV   89122   MH     37                       263       263       98.9 %     99.2 %   $ 6,404     $ 6,107  
Flamingo West
  8122 West Flamingo Rd.   Las Vegas   NV   89147   MH     37                       258       258       99.2 %     100.0 %   $ 6,887     $ 6,654  
Villa Borega
  1111 N. Lamb Boulevard   Las Vegas   NV   89110   MH     40                       293       293       86.0 %     86.0 %   $ 6,405     $ 6,171  
Westwood Village
  1111 N. 2000 West   Farr West   UT   84404   MH     46                       314       314       94.3 %     93.3 %(b)   $ 4,191     $ 3,874  
All Seasons
  290 N. Redwood Rd   Salt Lake City   UT   84116   MH     19                       121       121       84.3 %     83.5 %   $ 5,173     $ 4,949  
Total Nevada, Utah, New Mexico Market
                        261       0       0       1,901       1,901       86.2 %     77.4 %   $ 6,000     $ 5,606  
 
                                                                                           
Northwest
                                                                                           
Casa Village
  14 Goldust Dr   Billings   MT   59102   MH     63                       490       490       73.3 %     74.7 %   $ 4,102     $ 3,934  
Mt. Hood
  65000 E Highway 26   Welches   OR   97067   RV     115       30       202       436       80       100.0 %     100.0 %   $ 4,830     $ 4,570  
Shadowbrook
  13640 S.E. Hwy 212   Clackamas   OR   97015   MH     21                       156       156       96.2 %     97.4 %   $ 7,242     $ 6,789  
Falcon Wood Village
  1475 Green Acres Road   Eugene   OR   97408   MH     23                       183       183       86.3 %     84.2 %   $ 5,605     $ 5,371  
Quail Hollow
  2100 N.E. Sandy Blvd.   Fairview   OR   97024   MH     21                       137       137       94.2 %     94.2 %   $ 7,083     $ 6,668  
Kloshe Illahee
  2500 S. 370th Street   Federal Way   WA   98003   MH     50                       258       258       98.8 %     97.7 %   $ 8,509     $ 8,112  
Total Northwest Market
                        293       30       202       1,660       1,304       91.5 %     91.4 %   $ 6,229     $ 5,907  
 
                                                                                           
Texas
                                                                                           
Lakewood
  4525 Graham Road   Harlingen   TX   78552   RV     30                       301       105       100.0 %     100.0 %   $ 1,886     $ 1,821  
Paradise Park RV
  1201 N. Expressway 77   Harlingen   TX   78552   RV     60                       563       304       100.0 %     100.0 %   $ 2,858     $ 2,728  
Sunshine RV
  1900 Grace Avenue   Harlingen   TX   78550   RV     84                       1,027       411       100.0 %     100.0 %   $ 2,257     $ 2,160  
Paradise South
  9909 N. Mile 2 West Rd.   Mercedes   TX   78570   RV     49                       493       172       100.0 %     100.0 %   $ 1,999     $ 1,904  
Fun n Sun RV
  1400 Zillock Rd   San Benito   TX   78586   RV     135       40               1,435       632       100.0 %     100.0 %   $ 2,780     $ 2,633  
Southern Comfort
  1501 South Airport Drive   Weslaco   TX   78596   RV     40                       403       336       100.0 %     100.0 %   $ 2,539     $ 2,403  
Tropic Winds
  1501 N Loop 499   Harlingen   TX   78550   RV     112       74               531       105       100.0 %     100.0 %   $ 2,644     $ 2,635  
Country Sunshine
  1601 South Airport Road   Weslaco   TX   78596   RV     37                       390       194       100.0 %     100.0 %   $ 2,499     $ 2,365  
Total Texas Market
                        547       114       0       5,143       2,259       100.0 %     100.0 %   $ 2,433     $ 2,331  
 
                                                                                           
Grand Total All Markets
                        15,057       1,169       4,089       82,388       64,880       92.2 %     90.9 %   $ 5,088     $ 5,001  
 
(a)   Represents Properties acquired in 2007.
 
(b)   The process of filling Expansion Sites at these Properties is ongoing. A decrease in occupancy may reflect development of additional Expansion Sites.
 
(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.

20


 

     The following table sets forth certain information relating to membership campground Properties owned as of December 31, 2007 and leased to Privileged Access.
                                                                 
                                                            Total
                                                            Number
                                                            of Sites as
                                    Acres   Developable   Expansion   of
Property   Address   City   State   ZIP   (a)   Acres (b)   Sites (c)   12/31/07
 
 
                                                               
Hidden Cove Outdoor Resort
  687 Country Road 3916   Arley   AL     35541       81       60       200       79  
Verde Valley
  6400 Thousand Trails Rd, SP # 16   Cottonwood   AZ     86326       273       129       515       352  
Cultus Lake (Canada)
  1855 Columbia Valley Hwy   Lindell Beach   BC     V2R 4W6       15                       178  
Idyllwild
  24400 Canyon Trail Drive   Idyllwild   CA     92549       191       52       120       287  
Lake Minden
  1256 Marcum Rd   Nicolaus   CA     95659       165       82       540       323  
Lake of the Springs
  14152 French Town Rd   Oregon House   CA     95962       954       507       1,014       541  
Morgan Hill
  12895 Uvas Rd   Morgan Hill   CA     95037       62                       339  
Oakzanita
  11053 Highway 79   Descanso   CA     91916       145       5               146  
Palm Springs
  77500 Varner Rd   Palm Desert   CA     92211       35                       401  
Pio Pico
  14615 Otay Lakes Rd   Jamul   CA     91935       176       10               512  
Ponderosa
  7291 Highway 49   Lotus   CA     95651       22                       170  
Rancho Oso
  3750 Paradise Rd   Santa Barbara   CA     93105       310       40               187  
Russian River
  33655 Geysers Rd   Cloverdale   CA     95425       41                       135  
San Benito
  16225 Cienega Rd   Paicines   CA     95043       199       23               523  
Snowflower
  41776 Yuba Gap Dr   Emigrant Gap   CA     95715       551       200               268  
Soledad Canyon
  4700 Crown Valley Rd   Acton   CA     93510       273       45       182       1,251  
Turtle Beach
  703 E Williamson Rd   Manteca   CA     95337       39                       79  
Wilderness Lakes
  30605 Briggs Rd   Menifee   CA     92584       73                       529  
Yosemite Lakes
  31191 Harden Flat Rd   Groveland   CA     95321       403       30       111       299  
Orlando
  2110 US Highway 27 S   Clermont   FL     34714       270       30       136       850  
Peace
  2555 US Highway 17   South Wauchula   FL     33873       72       38               454  
Three Flags RV Resort
  1755 E State Rd 44   Wildwood   FL     34785       23                       221  
Pine Country
  5710 Shattuck Road   Belvidere   IL     61008       131                       126  
Horsehoe Lakes
    12962 S. 225 W.     Clinton   IN     47842       289       96       96       123  
Indian Lakes
  7234 E. SR Highway 46   Batesville   IN     47006       545       159       318       1,000  
Diamond Caverns Resort
  1878 Mammoth Cave Pkwy   Park City   KY     42160       714       350       469       220  
Gateway to Cape Cod
  90 Stevens Rd PO Box 217   Rochester   MA     02770       80                       194  
Sturbridge
  19 Mashapaug Rd   Sturbridge   MA     01566       223                       155  
Moody Beach
  266 Post Road   Moody   ME     04054       48                       203  
Bear Cave Resort
  4085 N. Red Bud Trail   Buchanan   MI     49107       26       10               136  
Saint Claire
  1299 Wadhams Rd   Saint Claire   MI     48079       210       100               229  
Forest Lake
  192 Thousand Trails Dr   Advance   NC     27006       306       81               305  
Green Mountain Park
  2495 Dimmette Rd   Lenoir   NC     28645       1077       400       360       447  
Lake Gaston
  561 Fleming Dairy Road   Littleton   NC     27850       69                       235  
Chestnut Lake
  631 Chestnut Neck Rd   Port Republic   NJ     08241       32                       185  
Lake & Shore
  545 Corson Tavern Rd   Ocean View   NJ     08230       162                       401  
Sea Pines
  US Route #9 Box 1535   Swainton   NJ     08210       75                       549  
Las Vegas
  4295 Boulder Highway   Las Vegas   NV     89121       11                       217  
Rondout Valley Resort
  105 Mettachonts Rd   Accord   NY     12404       184       94               398  
Kenisee Lake
  2021 Mill creek Rd   Jefferson   OH     44047       143       50               119  
Wilmington
    1786 S.R. 380     Wilmington   OH     45177       109       41               169  
Pacific City
  30000 Sandlake Rd   Cloverdale   OR     97112       105                       307  
Seaside Resort
  1703 12th Ave   Seaside   OR     97138       80                       251  
South Jetty
  05010 South Jetty Rd   Florence   OR     97439       57                       204  
Thousand Trails Bend
  17480 S Century Dr   Bend   OR     97707       289       100       145       351  
Whaler’s Rest Resort
  50 SE 123rd St   South Beach   OR     97366       39                       170  
Circle M
  2111 Millersville Road   Lancaster   PA     17603       103                       380  
Gettysburg Farm
  6200 Big Mountain Rd   Dover   PA     17315       124                       265  
Hershey Preserve
  493 S. Mt. Pleasant Rd   Lebanon   PA     17042       196       20               297  
PA Dutch County
  185 Lehman Road   Manheim   PA     17545       102                       269  
Scotrun
  PO Box 428 Route 611   Scotrun   PA     18355       66                       178  
Timothy Lake South
  RR #6,Box 6627 Timothy Lake Rd   East Stroudsburg   PA     18301       65                       327  
Timothy Lake North
  RR #6,Box 6627 Timothy Lake Rd   East Stroudsburg   PA     18301       98                       323  

21


 

                                                                 
                                                            Total
                                                            Number of
                                    Acres   Developable   Expansion   Sites as of
Property   Address   City   State   ZIP   (a)   Acres (b)   Sites (c)   12/31/07
 
Carolina Landing
  120 Carolina Landing Dr   Fair Play   SC     29643       73                       192  
The Oaks at Point South
  1292 Campground Rd   Yemassee   SC     29945       10                       93  
Cherokee Landing
  PO Box 37   Middleton   TN     38052       254       124               339  
Natchez Trace
  1363 Napier Rd   Hohenwald   TN     38462       672       140               531  
Bay Landing
  2305 Highway 380 W   Bridgeport   TX     76426       443       235               293  
Colorado River
  1062 Thousand Trails Lane   Columbus   TX     78934       218       51               132  
Lake Conroe
  11720 Old Montgomery Rd   Willis   TX     77318       129       30       300       363  
Lake Tawakoni
  1246 Rains Co. Rd 1470   Point   TX     75472       480       11               320  
Lake Texoma
  209 Thousand Trails Dr   Gordonville   TX     76245       201       79               301  
Lake Whitney
  417 Thousand Trails Dr   Whitney   TX     76692       403       158               261  
Medina Lake
  215 Spettle Rd   Lakehills   TX     78063       208       50               387  
Chesapeake Bay
  12014 Trails Lane   Gloucester   VA     23061       282       80               392  
Harbor View
  15 Harbor View Circle   Colonial Beach   VA     22443       76                       146  
Lynchburg
  405 Mollies Creek Rd   Gladys   VA     24554       170       59               222  
Virginia Landing
  40226 Upshur Neck Rd   Quinby   VA     23423       839       178               233  
Williamsburg
  4301 Rochambeau Drive   Williamsburg   VA     23188       65                       211  
Birch Bay
  8418 Harborview Rd   Blaine   WA     98230       31                       246  
Cascade Resort
  34500 SE 99th St   Snoqualmie   WA     98065       20                       163  
Chehalis
  2228 Centralia-Alpha Rd   Chehalis   WA     98532       309       85               360  
Crescent Bar Resort
  9252 Crescent Bar Rd NW   Quincy   WA     98848       14                       115  
La Conner
  16362 Snee Oosh Rd   La Conner   WA     98257       106       5               319  
Leavenworth
  20752-4 Chiwawa Loop Rd   Leavenworth   WA     98826       300       50               266  
Little Diamond
  1002 McGowen Rd   Newport   WA     99156       360       119               520  
Long Beach
  2215 Willows Rd   Seaview   WA     98644       17                       144  
Mt. Vernon
  5409 N. Darrk Ln   Bow   WA     98232       311       200       600       251  
Oceana Resort
  2733 State Route 109   Oceana City   WA     98569       16                       84  
Paradise Resort
  173 Salem Plant Rd   Silver Creek   WA     98585       60                       214  
Thunderbird Resort
  26702 Ben Howard Rd   Monroe   WA     98272       45       2               136  
                                     
 
                                    16,243       4,408       5,106       24,091  
                                     
 
(a)   Acres are approximate.
 
(b)   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.
 
(c)   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.
Item 3. Legal Proceedings
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.
     In connection with such efforts, the Company announced it has entered into a settlement agreement with the City of Santa Cruz, California and that, pursuant to the settlement agreement, the City amended its rent control ordinance to exempt the Company’s Property from rent control as long as the Company offers a long term lease which gives the Company the

22


 

ability to increase rents to market upon turnover and bases annual rent increases on the CPI. The settlement agreement benefits the Company’s stockholders by allowing them to receive the value of their investment in this Property through vacancy decontrol while preserving annual CPI based rent increases in this age-restricted Property.
     The Company has filed two lawsuits in federal court against the City of San Rafael, challenging its rent control ordinance on constitutional grounds. The Company believes that one of those lawsuits was settled by the City agreeing to amend the ordinance to permit adjustments to market rent upon turnover. The City subsequently rejected the settlement agreement. The Court initially found the settlement agreement was binding on the City, but then reconsidered and determined to submit the claim of breach of the settlement agreement to a jury. In October 2002, the first case against the City went to trial, based on both breach of the settlement agreement and the constitutional claims. A jury found no breach of the settlement agreement; the Company then filed motions asking the Court to rule in its favor on that claim, notwithstanding the jury verdict. The Court postponed decision on those motions and on the constitutional claims, pending a ruling on certain property rights issues by the United States Supreme Court.
     The Company also had pending a claim seeking a declaration that the Company could close the Property and convert it to another use which claim was not tried in 2002. The United States Supreme Court issued the property rights rulings in 2005 and subsequently on January 27, 2006, the Court hearing the San Rafael cases issued a ruling that granted the Company’s motion for leave to amend to assert alternative takings theories in light of the United States Supreme Court’s decisions. The Court’s ruling also denied the Company’s post trial motions related to the settlement agreement and dismissed the park closure claim without prejudice to the Company’s ability to reassert such claim in the future. As a result, the Company filed a new complaint challenging the City’s ordinance as violating the takings clause and substantive due process. The City of San Rafael filed a motion to dismiss the amended complaint. On December 5, 2006, the Court denied portions of the City’s motion to dismiss that had sought to eliminate certain of the Company’s taking claims and substantive due process claims. The Company’s claims against the City were tried in a bench trial during April 2007. On July 26, 2007, the United States District Court for the Northern District of California issued Preliminary Findings of Facts and Legal Standards, Preliminary Conclusions of Law and Request for Further Briefing (“Preliminary Findings”) in this matter. The Company has filed the Preliminary Findings on Form 8-K on August 2, 2007. In August 2007, the Company and the City filed the further briefs requested by the Court. 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.
     The Company’s efforts to achieve a balanced regulatory environment incentivize tenant groups to file lawsuits against the Company seeking large damage awards. The homeowners association at Contempo Marin (“CMHOA”), a 396 site Property in San Rafael, California, sued the Company in December 2000 over a prior settlement agreement on a capital expenditure pass-through after the Company sued the City of San Rafael in October 2000 alleging its rent control ordinance is unconstitutional. In the Contempo Marin case, the CMHOA prevailed on a motion for summary judgment on an issue that permits the Company to collect only $3.72 out of a monthly pass-through amount of $7.50 that the Company 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. Both the CMHOA and the Company brought motions to recover their respective attorneys’ fees in the matter, which motions were heard by the Court in January 2007. On January 12, 2007, the Court granted CMHOA’s motion for attorneys’ fees in the amount of $347,000 and denied the Company’s motion for attorneys’ fees. These fees have been fully accrued by the Company as of December 31, 2006. The Company has appealed both decisions. 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 ordinances and to adjust its base rents to reflect what the Company could have charged had the prior ordinance been continually in effect. The City of Santee appealed the judgment. The court of appeal and California Supreme Court refused to stay enforcement of these rent adjustments pending appeal. After the City was unable to obtain a 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

23


 

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 is 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. The remand action was tried to the court in the third quarter of 2007. On January 25, 2008, the trial court issued a preliminary ruling determining that the Company had not incurred any damages from these ordinances and actions primarily on the grounds that the ordinances afforded the Company a fair rate of return. The Company has sought clarification of this ruling and will appeal.
     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.
     In October 2004, the United States Supreme Court granted certiorari in State of Hawaii vs. Chevron USA, Inc., a Ninth Circuit Court of Appeal case that upheld the standard that a regulation must substantially advance a legitimate state purpose in order to be constitutionally viable under the Fifth Amendment. On May 24, 2005 the United States Supreme Court reversed the Ninth Circuit Court of Appeal in an opinion that clarified the standard of review for regulatory takings brought under the Fifth Amendment. The Supreme Court held that the heightened scrutiny applied by the Ninth Circuit is not the applicable standard in a regulatory takings analysis, but is an appropriate factor for determining if a due process violation has occurred. The Court further clarified that regulatory takings would be determined in significant part by an analysis of the economic impact of the regulation. 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.
     As a result of the Company’s efforts to achieve a level of regulatory fairness in California, a commercial lending company, 21st Mortgage Corporation, a Delaware corporation, sued MHC Financing Limited Partnership. Such lawsuit asserts that certain rent increases implemented by the partnership pursuant to the rights afforded to the property owners under the City of San Jose’s rent control ordinance were invalid or unlawful. 21st Mortgage has asserted that it should benefit from the vacancy control provisions of the City’s ordinance as if 21st Mortgage were a “homeowner” and contrary to the ordinance’s provision that rents may be increased without restriction upon termination of the homeowners’ tenancy. In each of the disputed cases, the Company believes it had terminated the tenancy of the homeowner (21st Mortgage’s borrower) through the legal process. The Court, in granting 21st Mortgage’s motion for summary judgment, has indicated that 21st Mortgage may be a “homeowner” within the meaning of the ordinance. The Company does not believe that 21st Mortgage can show that it has ever applied for tenancy, entered into a rental agreement or been accepted as a homeowner in the communities. A bench trial in this matter concluded in January 2008 with the trial court determining that the Company had validly exercised its rights under the rent control ordinance, that the Company had not violated the ordinance and that 21st Mortgage was not entitled to the benefit of rent control protection in the circumstances presented.
Dispute with Las Gallinas Valley Sanitary District
     In November 2004, the Company received a Compliance Order (the “Compliance Order”) from the Las Gallinas Valley Sanitary District (the “District”), relating to the Company’s Contempo Marin Property in San Rafael, California. The Compliance Order directed the Company to submit and implement a plan to bring the Property’s domestic wastewater discharges into compliance with the applicable District ordinance (the “Ordinance”), and to ensure continued compliance with the Ordinance in the future.
     Without admitting any violation of the Ordinance, the Company promptly engaged a consultant to review the Property’s sewage collection system and prepare a compliance plan to be submitted to the District. The District approved the compliance plan in January 2005, and the Company promptly took all necessary actions to implement same.
     Thereafter, the Company received a letter dated June 2, 2005 from the District’s attorney (the “June 2 Letter”), acknowledging that the Company has “taken measures to bring the Property’s private sanitary system into compliance” with the Ordinance, but claiming that prior discharges from the Property had damaged the District’s sewers and pump stations in the amount of approximately $368,000. The letter threatened legal action if necessary to recover the cost of repairing such damage. By letter dated June 23, 2005, counsel for the Company denied the District’s claims set forth in the June 2 Letter.

24


 

     On July 1, 2005, the District filed a Complaint for Enforcement of Sanitation Ordinance, Damages, Penalties and Injunctive Relief in the California Superior Court for Marin County, and on August 17, 2005, the District filed its First Amended Complaint (the “Complaint”). On September 26, 2005, the Company filed its Answer to the Complaint, denying each and every allegation of the Complaint and further denying that the District is entitled to any of the relief requested therein.
     The District subsequently issued a Notice of Violation dated December 12, 2005 (the “NOV”), alleging additional violations of the Ordinance. By letter dated December 23, 2005, the Company denied the allegations in the NOV.
     The Company settled this matter in May 2007 by agreeing to make certain improvements to the operation of the Property’s sanitary collection system and without the payment of any monetary damages to the District.
Countryside at Vero Beach
     The Company previously received letters dated June 17, 2002 and August 26, 2002 from Indian River County (“County”), claiming that the Company owed sewer impact fees in the amount of approximately $518,000 with respect to the Property known as Countryside at Vero Beach, located in Vero Beach, Florida, purportedly under the terms of an agreement between the County and a prior owner of the Property. In response, the Company advised the County that these fees are no longer due and owing as a result of a 1996 settlement agreement between the County and the prior owner of the Property, providing for the payment of $150,000 to the County to discharge any further obligation for the payment of impact or connection fees for sewer service at the Property. The Company paid this settlement amount (with interest) to the County in connection with the Company’s acquisition of the Property. In February 2006, the Company was served with a complaint filed by the County in Indian River County Circuit Court, requesting a judgment declaring a lien against the Property for allegedly unpaid impact fees, and foreclosing said lien. On March 30, 2006, the Company served its answer and affirmative defenses, and the case is now in the discovery stage. In the fourth quarter of 2007 the Company settled this matter by agreeing to pay impact fees in the amount of approximately $360,000 to Indian River County. The $360,000 was capitalized in land improvements on the Company’s Consolidated Balance Sheet and will be depreciated over the useful life of the asset. All legal fees incurred to settle this matter will be expensed.
     On January 12, 2006, the Company was served with a complaint filed in Indian River County Circuit Court on behalf of a purported class of homeowners at Countryside at Vero Beach. The complaint includes counts for alleged violations of the Florida Mobile Home Act and the Florida Deceptive and Unfair Trade Practices Act, and claims that the Company required homeowners to pay water and sewer impact fees, either to the Company or to the County, “as a condition of initial or continued occupancy in the Park”, without properly disclosing the fees in advance and notwithstanding the Company’s position that all such fees were fully paid in connection with the settlement agreement described above. On February 8, 2006, the Company served its motion to dismiss the complaint. In May 2007, the Court granted the Company’s motion to dismiss, but also allowed the plaintiff to amend their complaint. The plaintiff filed an amended complaint, which the Company has also moved to dismiss. The Company will vigorously defend the lawsuit.
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. On March 2, 2007, the Company filed a demurrer to the complaint, along with a motion to strike portions of the complaint (“motion to strike”) and a motion to compel arbitration and stay action (“motion to compel”). After a hearing on March 28, 2007, the Court issued a ruling on April 5, 2007, which overruled the demurrer, took the motion to compel under submission, and granted the motion to strike in part and denied it in part. The Court subsequently issued a ruling on April 6, 2007, denying the motion to compel. The Company has filed an interlocutory appeal, which is pending, of the denial of the motion to compel. On April 11, 2007, the plaintiff tenant group filed their first amended complaint in the case. On September 19, 2007, the Company filed an answer denying all material allegations of the first amended complaint and filed a counterclaim for declaratory relief and damages. Discovery has commenced. The Court has set a trial date for October 21, 2008. 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.

25


 

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 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. Written discovery proceedings have commenced.
     Since filing the lawsuit, the Company has received additional payments from Essex Insurance Company and Lexington Insurance Company of approximately $2.2 million. In addition, 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 $516,499, and the Company dismissed and released Hartford from additional claims for interest and bad faith claims handling.
Brennan Beach
     The Company has learned that the Law Enforcement Division of the New York Department of Environmental Compliance (“DEC”) is investigating 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 Company attended a meeting with the DEC in November 2007 at which certain alleged violations were discussed. No formal notices have been issued to the Company asserting specific violations and the Company is cooperating with the DEC investigation.
Appalachian RV
     The Company has learned that the U.S. Environmental Protection Agency (“EPA”) is investigating potential soil contamination at Appalachian RV, which is located in Shartlesville, Pennsylvania, reportedly stemming from observations of remnants of old auto battery parts at the Property. In late November and early December 2007, the EPA conducted an assessment by soil sampling at the Property. The laboratory results of that soil sampling have not yet been made available to the Company. The Company is cooperating with the EPA investigation.
Florida Utility Operations
     The Company received notice from the Florida Department of Environmental Protection (“DEP”) that as a result of a compliance inspection it is alleging violations of Florida law relating to the operation of onsite water plants and wastewater treatment plants at seven properties in Florida. The alleged violations relate to record keeping and reporting requirements, physical and operating deficiencies and permit compliance. The Company has investigated each of the alleged violations, including a review of a third party operator hired to oversee such operations. The Company met with the DEP in November 2007 to respond to the alleged violations and as a follow-up to such meeting provided a written response to the DEP in December 2007. In light of the Company’s written response, in late January 2008 the DEP conducted a follow-up compliance inspection at each of the seven properties. While the outcome of this investigation remains uncertain, the Company expects to resolve the issues raised by the DEP by entering into a consent decree in which the Company will agree to make certain improvements in its facilities and operations to resolve the issues and pay certain costs and penalties associated with the violations. While the outcome is still uncertain, the amount of the costs and penalties to be paid to the DEP is not expected to be material. The Company has also replaced its third party operator hired to oversee onsite water and wastewater operations at each of the seven properties. The Company is evaluating the costs of any improvements to its facilities, which would be capital expenditures depreciated over the estimated useful life of the improvement.
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 and other similar enforcement actions by governmental agencies relating to the Company’s water and wastewater treatment plants. Additionally, in the ordinary course of business,

26


 

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.
Item 4. Submission of Matters to a Vote of Security Holders
     None.

27


 

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 22, 2008, the reported closing price per share of ELS common stock on the NYSE was $46.75 and there were approximately 6,349 beneficial holders of record. The high and low sales prices and closing sales prices on the NYSE and distributions for our common stock during 2007 and 2006 are set forth in the table below:
                                 
                            Distributions
    Close   High   Low   Declared
2007
                               
1st Quarter
  $ 54.01     $ 59.67     $ 51.00     $ 0.150  
2nd Quarter
    52.19       56.47       49.60       0.150  
3rd Quarter
    51.80       54.25       43.79       0.150  
4th Quarter
    45.67       55.65       43.72       0.150  
 
                               
2006
                               
1st Quarter
  $ 49.75     $ 51.81     $ 44.30     $ 0.075  
2nd Quarter
    43.83       50.00       40.91       0.075  
3rd Quarter
    45.71       47.27       41.45       0.075  
4th Quarter
    54.43       56.00       44.90       0.075  
Issuer Purchases of Equity Securities
                                 
                    Total Number of Shares   Maximum Number of
                    Purchased as Part of   Shares that May Yet
    Total Number of   Average Price Paid   Publicly Announced   be Purchased Under
Period   Shares Purchased(a)   per Share(a)   Plans or Programs   the Plans or Programs
 
 
                               
12/1/07-12/31/07
    18,821     $ 45.25     None   None
 
(a)   Of the common stock repurchased on December 31, 2007, 18,821 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.

28


 

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

(Amounts in thousands, except for per share and property data)
                                         
    (1) Years ended December 31,  
    2007     2006     2005     2004     2003  
Property Operations:
                                       
Community base rental income
  $ 236,933     $ 225,815     $ 213,280     $ 204,190     $ 189,915  
Resort base rental income
    102,372       89,925       74,371       54,661       11,551  
Utility and other income
    36,849       30,643       27,367       24,496       19,666  
 
                             
Property operating revenues
    376,154       346,383       315,018       283,347       221,132  
 
Property operating and maintenance
    127,342       116,179       103,832       91,812       61,945  
Real estate taxes
    27,429       26,246       24,671       22,723       18,011  
Property management
    18,385       17,079       15,919       12,852       9,373  
 
                             
Property operating expenses (exclusive of depreciation shown separately below)
    173,156       159,504       144,422       127,387       89,329  
 
                             
Income from property operations
    202,998       186,879       170,596       155,960       131,803  
 
                                       
Home Sales Operations:
                                       
Gross revenues from inventory home sales
    33,333       61,247       66,014       47,404       36,472  
Cost of inventory home sales
    (30,713 )     (54,498 )     (57,471 )     (41,577 )     (31,615 )
 
                             
Gross profit from inventory home sales
    2,620       6,749       8,543       5,827       4,857  
Brokered resale revenues, net
    1,528       2,129       2,714       2,176       1,714  
Home selling expenses
    (7,555 )     (9,836 )     (8,838 )     (8,630 )     (7,287 )
Ancillary services revenues, net
    2,436       3,027       2,227       2,280       135  
 
                             
(Loss) income from home sales operations & other
    (971 )     2,069       4,646       1,653       (581 )
 
                                       
Other Income (Expenses):
                                       
Interest income
    1,732       1,975       1,406       1,391       1,695  
Income from other investments, net (2)
    22,476       20,102       16,609       3,475       956  
General and administrative
    (15,591 )     (12,760 )     (13,624 )     (9,243 )     (8,060 )
Rent control initiatives
    (2,657 )     (1,157 )     (1,081 )     (2,412 )     (2,352 )
Interest and related amortization (3)
    (103,070 )     (103,161 )     (100,712 )     (91,154 )     (58,206 )
Loss on early debt retirement (4)
                (20,630 )            
Depreciation on corporate assets
    (437 )     (410 )     (804 )     (1,657 )     (1,240 )
Depreciation on real estate assets and other costs
    (63,554 )     (60,276 )     (55,608 )     (47,467 )     (35,924 )
 
                             
Total other expenses, net
    (161,101 )     (155,687 )     (174,444 )     (147,067 )     (103,131 )
 
                                       
Income before minority interests, equity in income of unconsolidated joint ventures, loss on extinguishment of debt, gain on sale of property and discontinued operations
    40,926       33,261       798       10,546       28,091  
 
                                       
(Income) loss allocated to Common OP Units
    (5,322 )     (4,267 )     1,329       (565 )     (3,431 )
Income allocated to Perpetual Preferred OP Units (5)
    (16,140 )     (16,138 )     (13,974 )     (11,284 )     (11,252 )
Equity in income of unconsolidated joint ventures
    2,696       3,583       6,508       3,739       340  
 
                             
 
                                       
Income (loss) before gain on sale of properties and other, and discontinued operations
    22,160       16,439       (5,339 )     2,436       13,748  
 
                             
 
                                       
Gain on sale of properties and other
                      2        
 
                             
Income (loss) from continuing operations
    22,160       16,439       (5,339 )     2,438       13,748  
 
                             
 
                                       
Discontinued Operations:
                                       
Discontinued operations
    289       520       1,927       2,750       4,607  
Depreciation on discontinued operations
          (84 )     (410 )     (1,427 )     (1,476 )
Gain (loss) on sale of discontinued properties and other
    12,036       (192 )     2,279       636       10,826  
Minority interests on discontinued operations
    (2,383 )     (51 )     (790 )     (371 )     (2,573 )
 
                             
Income from discontinued operations
    9,942       193       3,006       1,588       11,384  
 
                                       
 
                             
Net income (loss) available for Common Shares
  $ 32,102     $ 16,632     $ (2,333 )   $ 4,026     $ 25,132  
 
                             

29


 

Equity LifeStyle Properties, Inc.
Consolidated Historical Financial Information

(continued)
(Amounts in thousands, except for per share and property data)
                                         
    (1) As of December 31,
    2007   2006   2005   2004   2003
Earnings per Common Share — Basic:
                                       
Income (loss) from continuing operations
  $ 0.92     $ 0.70     $ (0.23 )   $ 0.11     $ 0.62  
Income from discontinued operations
  $ 0.41     $ 0.01     $ 0.13     $ 0.07     $ 0.52  
Net income (loss) available for Common Shares
  $ 1.33     $ 0.71     $ (0.10 )   $ 0.18     $ 1.14  
 
                                       
Earnings per Common Share — Fully Diluted:
                                       
Income (loss) from continuing operations
  $ 0.90     $ 0.68     $ (0.23 )   $ 0.10     $ 0.61  
Income from discontinued operations
  $ 0.41     $ 0.01     $ 0.13     $ 0.07     $ 0.50  
Net income (loss) available for Common Shares
  $ 1.31     $ 0.69     $ (0.10 )   $ 0.17     $ 1.11  
 
                                       
Distributions declared per Common Share outstanding (3)
  $ 0.60     $ 0.30     $ 0.10     $ 0.05     $ 9.485  
 
                                       
Weighted average Common Shares outstanding — basic
    24,089       23,444       23,081       22,849       22,077  
Weighted average Common OP Units outstanding
    5,870       6,165       6,285       6,067       5,342  
Weighted average Common Shares outstanding — fully diluted
    30,414       30,241       29,366       29,465       28,002  
 
                                       
Balance Sheet Data:
                                       
Real estate, before accumulated depreciation (6)
  $ 2,396,115     $ 2,337,460     $ 2,152,567     $ 2,035,790     $ 1,309,705  
Total assets
    2,033,695       2,055,831       1,948,874       1,886,289       1,463,507  
Total mortgages and loans (3)
    1,659,392       1,717,212       1,638,281       1,653,051       1,076,183  
Minority interests (5)
    217,776       212,794       209,379       134,771       124,634  
Stockholders’ equity (3)
    70,941       47,118       32,516       31,844       (2,528 )
 
                                       
Other Data:
                                       
Funds from operations (7)
  $ 92,752     $ 82,367     $ 52,827     $ 54,448     $ 58,479  
 
Total Properties (at end of period)
    311       311       285       275       142  
Total sites (at end of period)
    112,779       112,956       106,337       102,178       53,429  
 
(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 and home sale operations are discussed in Item 7 contained in this Form 10-K.
(2)   Since November 2004, Income from other investments, net included rental income from the lease of membership Properties to Thousand Trails or its current owner, Privileged Access. See Note 2(i) in the Notes to Consolidated Financial Statements contained in this Form 10-K.

30


 

Equity LifeStyle Properties, Inc.
Consolidated Historical Financial Information

(continued)
(3)   On October 17, 2003, we closed 49 mortgage loans collateralized by 51 Properties (the “Recap”) providing total proceeds of approximately $501 million at a weighted average interest rate of 5.84% per annum and with a weighted average maturity at that time of approximately 9 years. Approximately $170 million of the proceeds were used to repay amounts outstanding on our lines of credit and term loan. Approximately $225 million was used to pay a special distribution of $8.00 per share on January 16, 2004. The remaining funds were used for investment purposes in 2004. The Recap resulted in increased interest and amortization expense and the special distribution resulted in decreased stockholders’ equity.
 
(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 (see Note 4 in the Notes to Consolidated Financial Statements contained in this Form 10-K).
 
(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.
 
(7)   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.

31


 

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.
2007 Accomplishments
    Raised annual dividend to $0.80 per share in 2008, up from $0.60 per share in 2007.
 
    Successfully amended our existing unsecured Lines of Credit to expand our borrowing capacity from $275 million to $370 million.
 
    Acquired five Properties containing over 1,400 sites, including our outside joint venture partners’ interest in two Properties.
 
    Second year in row since 2000 that our manufactured home Properties owned year over year finished the year with a higher number of occupied sites than the number we started the year.
 
    Launched a new benefit program, RvontheGo Club, for members. Members receive discounts on entertainment and purchases at retailers, in addition to exclusive member-only discounts and advanced invitations to resort events.
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 64,900 annual sites, approximately 8,700 seasonal sites, which are leased to customers generally for three to six months, and approximately 8,800 transient sites, occupied by customers who lease sites on a short-term basis. We expect to service over 100,000 customers with these transient sites. However, 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 24,100 membership sites for which we will receive annual ground rent in 2008 of approximately $25.5 million. This rent is classified in Income from other investments, net in the Consolidated Statements of Operations. (See also Privileged Access discussion below) We also have interests in Properties containing approximately 6,300 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,
    (rounded to 000s)
    2007   2006
Community sites (1)
    44,800       45,700  
Resort sites (2):
               
Annual
    20,100       18,900  
Seasonal
    8,700       8,000  
Transient
    8,800       8,800  
Membership (3)
    24,100       24,100  
Joint Ventures (4)
    6,300       7,500  
 
               
 
    112,800       113,000  
 
               
 
(1)   Includes 655 and 1,581 sites from discontinued operations as of December 31, 2007 and 2006, respectively.
 
(2)   Includes 100 sites from discontinued operations as of December 31, 2006, subsequently sold in January 2007.
 
(3)   All sites are currently leased to Privileged Access.
 
(4)   Joint Venture income is included in Equity in income of unconsolidated joint ventures.
     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. A number of factors have contributed to this disruption. In the last few years, many site-built home sales were for speculative or investment purposes. Innovative financing techniques, such as loan securitizations, provided increased credit access and resulted in overbuilding and excess site-built home supply. Bad lending practices, like no money down, diminshed underwriting, longer amortization periods and aggressive appraisals have contributed to loan defaults, repossessions and capital meltdowns. The disruption has not impacted our maufactured home occupancy, however, the anticipated continuation of the decline in our sales volumes may negatively impact occupancy in the future. In order to maintain and improve existing occupancy, ELS is focusing on new customer acquisition projects. During 2007, we have formed an occupancy task force (“OTF”) to review our portfolio for opportunities to increase occupancy. Programs being evaluated by the OTF include: purchasing homes for a rental program, renting existing inventory homes and providing additional financing options to home buyers.

32


 

Privileged Access
     Privileged Access has been the owner of Thousand Trails (“TT”) since April 14, 2006. TT’s primary business consists of entering into agreements with individuals to use its properties (the “Agreements”) and has been engaged in such business for almost 40 years. The properties are primarily campgrounds with designated sites for the placement of recreational vehicles to service its membership base of over 100,000 families. The campgrounds are owned by the Company and leased to Privileged Access. Privileged Access is headquartered in Frisco, Texas, and has more than 2,000 employees and is owned 100 percent by Mr. Joe McAdams, the Company’s President effective January 1, 2008.
     As of December 31, 2007, we are leasing approximately 24,100 sites at 81 resort Properties to Privileged Access or its subsidiaries so that Privileged Access may meet its obligations under the Agreements. For the years ended December 31, 2007 and 2006 we recognized approximately $20.5 million and $17.8 million, respectively, in rent from these leasing arrangements. The lease income is included in Income from other investments, net in the Company’s Consolidated Statement of Operations.
     The Company has recently evaluated a possible purchase of Privileged Access and/or its subsidiaries. However, there continues to be lack of definitive guidance regarding the tax treatment of gross income from membership contracts for REIT gross income test purposes. As a result, the Company believes that the best strategic option available at this time was to bring Mr. McAdams to the Company and continue to work with Privileged Access on initiatives such as fractional sales, whole ownership and potentially combining certain overhead functions while maintaining the landlord — tenant relationship.
     Effective January 1, 2008, the leases for these Properties were amended and restated and provide for the following significant terms: a) annual fixed rent of approximately $25.5 million, b) annual rent increases at the higher of 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 59 of the Properties known as the “TT Portfolio” also included provisions where the Company paid Privileged Access $1 million for entering into the amended lease. The $1 million payment will be amortized on a pro-rata basis over the remaining term of the lease as an offset to the annual lease payments. Additionally, the Company also agreed to reimburse Privileged Access up to $5 million for the cost of any improvements made to the TT Portfolio. The Company shall reimburse Privileged Access only if the improvement has been pre-approved, is a depreciable fixed asset and supporting documentation is provided. The assets purchased with the capital improvement fund will be the assets of the Company and will be amortized in accordance with the Company’s depreciation policies.
     The Company has subordinated its lease payment for the TT Portfolio to a bank that has loaned Privileged Access $10 million. The Company guaranteed $2.5 million of that loan in September 2007 and that guarantee was extinguished in December 2007. Privileged Access is obligated to pay back $5 million of the loan in 2008, $2.5 million in 2009 and the final $2.5 million in 2010. The Company believes that the possibility that Privileged Access would not make its lease payment on the TT Portfolio as a result of the subordination is remote.
     Since June 12, 2006, Privileged Access has leased 130 cottage sites at Tropical Palms, a resort Property located near Orlando, Florida from the Company. For the years ended December 31, 2007 and 2006 we earned approximately $1.5 million and $0.6 million, respectively, in rent from this leasing arrangement. The lease income is included in the Resort base rental income in the Company’s Consolidated Statement of Operations. The Tropical Palms lease currently provides for the following significant terms: a) annual fixed rent of approximately $1.4 million, paid quarterly, b) percentage rent of 50% of the tenants gross revenues in excess of the fixed rent, and c) expiration date of June 30, 2008. The Company expects to extend the Tropical Palms lease when it expires.
     Refer to Note 12 — Transactions with Related Parties included in the Notes to Consolidated Financial Statements in this Form 10-K for a description of all agreements between the Company and Privileged Access.
Supplemental Property Disclosure
     We provide the following disclosures with respect to certain assets:
    Monte Vista — Monte Vista is a lifestyle-oriented resort Property located in Mesa, Arizona containing approximately 56 acres of vacant land. We have obtained approval to develop 275 manufactured home and 240 resort sites on this land. In connection with evaluating the development of Monte Vista, we evaluated selling the land and subsequently decided to list 26 acres of the land for sale. With respect to the land not listed for sale, we intend to develop additional resort sites and may consider other alternative uses for the land or sale of the acreage.
 
    Bulow Plantation — Bulow Plantation is a 628-site mixed lifestyle-oriented resort and manufactured home Property located in Flagler Beach, Florida, which contains approximately 180 acres of adjacent vacant land. We have obtained approval from Flagler County for an additional manufactured home community development of approximately 700

33


 

      sites on this land. In connection with evaluating the possible development and based on inquiries from single-family home developers, we evaluated a sale of the land. Subsequently, we listed the land for sale for a purchase price of $28 million. We anticipate that we will proceed with the development if we determine that any offers or the terms thereof are unacceptable. ELS recently obtained an amendment to the Board of Flagler County Commissioners resolution approving the planned unit development classification of the Property to clarify that resort cottages may be installed and set forth standards for the installation of resort cottages. This amendment may impact the plans for the future development.
    Holiday Village, Florida — Holiday Village is a 128-site manufactured home community located in Vero Beach, Florida, on approximately 20 acres of land. As a result of the 2004 hurricanes, this Property is less than 50% occupied. The residents have been notified that the Property was listed for sale for a purchase price of $6 million.
Insurance
     Approximately 70 Florida Properties suffered damage from the four hurricanes that struck the state during August and September 2004. As of February 19, 2008, the Company estimates its total claim to be $21.8 million, of which approximately $21.5 million of claims, including business interruption, have been submitted to its insurance companies for reimbursement. Through December 31, 2007, the Company has made total expenditures of approximately $17.4 million and expects to incur additional expenditures to complete the work necessary to restore the Properties to their pre-hurricanes condition. The Company has reserved approximately $2.0 million related to these expenditures ($0.7 million in 2005 and $1.3 million in 2004). Approximately $6.8 million of these expenditures have been capitalized per the Company’s capitalization policy through December 31, 2007.
     The Company has received proceeds from insurance carriers of approximately $7.9 million through December 31, 2007. The proceeds were accounted for in accordance with the Statement of Financial Accounting Standards No.5, “Accounting for Contingencies” (“SFAS No. 5”). Approximately $0.6 million has been recognized as a gain on insurance recovery, which is net of approximately $0.2 million of legal fees and included in income from other investments, net, as of December 31, 2007. The receivable from insurance providers included in other assets of approximately $1.5 million as of December 31, 2006, was collected in full during 2007.

34


 

Property Acquisitions, Joint Ventures and Dispositions
     The following chart lists the Properties or portfolios acquired, invested in, or sold since January 1, 2006:
             
Property   Transaction Date   Sites
Total Sites as of January 1, 2006
        106,337  
 
           
Property or Portfolio (# of Properties in parentheses):
           
Thousand Trails (2)
  April 14, 2006     624  
Mid-Atlantic Portfolio (7)
  April 25, 2006     1,594  
Tranquil Timbers (1)
  June 13, 2006     270  
Outdoor World Portfolio (15)
  December 15, 2006     3,962  
Pine Island RV Resort (1)
  August 3, 2007     363  
Santa Cruz Ranch RV (1)
  September 26, 2007     106  
Tuxbury Pond RV Resort (1)
  October 11, 2007     305  
 
           
Joint Ventures:
           
Morgan Portfolio (5)
  Various, 2006     1,134  
 
           
Expansion Site Development and other:
           
Sites added (reconfigured) in 2006
        134  
Sites added (reconfigured) in 2007
        75  
 
           
Dispositions:
           
Indian Wells (Joint Venture) (1)
  April 18, 2006     (350 )
Forest Oaks (1)
  April 25, 2006     (227 )
Windsong (1)
  April 25, 2006     (268 )
Blazing Star (Joint Venture) (1)
  June 29, 2006     (254 )
Lazy Lakes (1)
  January 10, 2007     (100 )
Del Rey (1)
  July 6, 2007     (407 )
Holiday Village-Iowa (1)
  November 30, 2007     (519 )
 
           
Total Sites as of December 31, 2007
        112,779  
 
           
     Since December 31, 2005, the gross investment in real estate increased from $2,153 million to $2,396 million as of December 31, 2007, 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 (excludes membership campground Properties leased to Privileged Access and Properties owned through Joint Ventures).
                                 
                            Percent of Total
Major   Number of           Percent of   Property Operating
Market   Properties   Total Sites   Total Sites   Revenues
Florida
    81       35,182       42.7 %     43.8 %
Arizona
    32       12,375       15.0 %     12.6 %
California
    31       7,333       8.9 %     17.1 %
Texas
    8       5,143       6.2 %     2.3 %
Colorado
    10       3,452       4.2 %     4.9 %
Other
    53       18,930       23.0 %     19.3 %
 
                               
Total
    215       82,415       100.0 %     100.0 %
 
                               
     Critical Accounting Policies and Estimates
     Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“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.

35


 

Long-Lived Assets
     In accordance with the Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”), we allocate the purchase price of Properties we acquire to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be available in connection with the acquisition or financing of the respective Property and other market data. We also consider information obtained about each Property as a result of our due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.
     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 use a 30-year estimated life for buildings acquired and structural and land improvements, a ten-to-fifteen-year estimated life for building upgrades and a three-to-seven-year estimated life for furniture, fixtures and equipment. 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.
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 rents receivable on our consolidated balance sheets. Our provision for uncollectible rents receivable was approximately $1.2 million and $0.9 million as of December 31, 2007 and December 31, 2006, 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 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, 2007 and December 31, 2006 was $160,000 and $110,000, respectively.
Inventory
     Inventory consists of new and used Site Set homes and is stated at the lower of cost or market after consideration of the N.A.D.A. Manufactured Housing Appraisal Guide and the current market value of each home included in the home inventory. Inventory sales revenues and resale revenues are recognized when the home sale is closed. Inventory is recorded net of an inventory reserve as of December 31, 2007 and December 31, 2006 of $0.8 million and $0.6 million, respectively. The expense for the inventory reserve is included in the cost of home sales in our Consolidated Statements of Operations.
Variable Interest Entities
     In December 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46R, Consolidation of Variable Interest Entities (“FIN 46R”) — an interpretation of ARB 51. The objective of FIN 46R is to provide guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, non-controlling interests, and results of operations of a VIE need to be included in a company’s consolidated financial statements. A company that holds variable interests in an entity will need to consolidate such entity if the company absorbs a majority of the entity’s expected losses or receives a majority of the entity’s expected residual returns if they occur, or both (i.e., the primary beneficiary). The Company will apply FIN 46R to all types of entity ownership (general and limited partnerships and corporate interests).
     The Company will re-evaluate and apply the provisions of FIN 46R to existing entities if certain events occur which warrant re-evaluation of such entities. In addition, the Company will apply the provisions of FIN 46R to all new entities in the future. The Company also consolidates entities in which it has a controlling direct or indirect voting interest. The equity method of accounting is applied to entities in which the Company does not have a controlling direct or indirect voting interest,

36


 

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.
     Effective January 1, 2008, the 100 percent owner of Privileged Access, Mr. Joe McAdams, became our President and we amended and restated the leases for the 81 Properties. Under generally accepted accounting principles, effective January 1, 2008, Mr. McAdams, Privileged Access and the Company are considered related parties. Due to the materiality of the leasing arrangement and the related party nature of the arrangement, the Company has analyzed whether the operations of Privileged Access should be consolidated with ours. We have determined under FIN 46 that it would not be appropriate to consolidate Privileged Access as we do not control Privileged Access and are not the primary beneficiary of Privileged Access. This conclusion required management to make complex judgments. As a result of the complex nature of the arrangements, on February 15, 2008, we submitted a letter to the Office of the Chief Accountant at the SEC describing the relationship and asking for the SEC’s concurrence with our conclusions that we should not consolidate the operations of Privileged Access. As of the date of filing this Form 10-K, we do not a response from the SEC.
Valuation of Financial Instruments
     The valuation of financial instruments under Statement of Financial Accounting Standards No. 107, “Disclosures About Fair Value of Financial Instruments” (“SFAS No. 107”) and Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) 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.
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 Statement of Financial Accounting Standards No. 123(R) (“SFAS 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.
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 December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS No. 160”), an amendment of Accounting Research Bulletin No. 51. The Statement 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 Sheet and Consolidated Income Statement. SFAS No. 160 is effective January 1, 2009 with early adoption prohibited. The Company does not expect the adoption of SFAS No. 160 will have a material effect on the financial position of the Company.
     In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141R, “Business Combinations”, (“SFAS No. 141R”). SFAS No. 141R replaces FASB Statement No. 141 but retains the fundamental requirements 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. SFAS No. 141R also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired entity; (b) improves the completeness of the information reported about a business combination by changing the requirements for recognizing assets acquired and liabilities assumed arising from contingencies; (c) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (d) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R replaces, with limited exceptions as specified in the Statement, the cost allocation process in SFAS No. 141with a fair value based allocation process. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning

37


 

on or after December 15, 2008. Early application is not permitted. The Company has not yet determined the impact, if any, that SFAS No. 141R will have on its consolidated financial statements.
     In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Companies are not allowed to adopt SFAS No. 159 on a retrospective basis unless they choose early adoption. The adoption of SFAS No. 159 is optional and the Company plans to evaluate the potential adoption in 2008.
     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for the Company beginning January 1, 2008. The Company does not expect the adoption of SFAS No. 157 will have a material effect on its financial statements.
     In June 2006, FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for Income Taxes” (“FIN 48”), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. As required, the Company adopted FIN 48 as of January 1, 2007. The adoption of FIN 48 did not have any significant impact on the Company’s financial position and results of operations.
Results of Operations
Comparison of Year Ended December 31, 2007 to Year Ended December 31, 2006
     The following table summarizes certain financial and statistical data for the Property Operations for all Properties owned throughout both periods (“Core Portfolio”) and the Total Portfolio for the years ended December 31, 2007 and 2006 (amounts in thousands).
                                                                 
    Core Portfolio     Total Portfolio  
                    Increase /                             Increase /        
    2007     2006     (Decrease)     % Change     2007     2006     (Decrease)     % Change  
Community base rental income
  $ 232,917     $ 222,766     $ 10,151       4.6 %   $ 236,933     $ 225,815     $ 11,118       4.9 %
Resort base rental income
    88,654       83,876       4,778       5.7 %     102,372       89,925       12,447       13.8 %
Utility and other income
    34,572       29,751       4,821       16.2 %     36,849       30,643       6,206       20.3 %
 
                                               
Property operating revenues
    356,143       336,393       19,750       5.9 %     376,154       346,383       29,771       8.6 %
 
                                                               
Property operating and maintenance
    118,418       112,054       6,364       5.7 %     127,342       116,179       11,163       9.6 %
Real estate taxes
    26,301       25,522       779       3.1 %     27,429       26,246       1,183       4.5 %
Property management
    17,466       16,560       906       5.5 %     18,385       17,079       1,306       7.6 %
 
                                               
Property operating expenses
    162,185       154,136       8,049       5.2 %     173,156       159,504       13,652       8.6 %
 
                                                               
 
                                               
Income from property operations
  $ 193,958     $ 182,257     $ 11,701       6.4 %   $ 202,998     $ 186,879     $ 16,119       8.6 %
 
                                               
Property Operating Revenues
     The 5.9% increase in the Core Portfolio property operating revenues reflects (i) a 4.2% increase in rates for our community base rental income combined with a 0.4% increase in occupancy, (ii) a 5.7% increase in revenues for our core resort base income, and (iii) an increase in utility income and other fees primarily due to the pass-through of higher utility rates, as well as an increase in the properties passing through utility costs as a separate line item to customers. Total Portfolio operating revenues increased due to site rental rate increases and our 2006 and 2007 acquisitions (see Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-K).

38


 

Results of Operations (continued)
Property Operating Expenses
     The 5.2% increase in property operating expenses for the Core Portfolio reflects a 5.7% increase in property operating and maintenance due primarily to increases in utilities, repair and maintenance, payroll and insurance expenses. The increase in real estate taxes is in the Core Portfolio is generally due to higher property assessments on certain Properties. Property management expense for the Core Portfolio reflects costs of managing the Properties and is estimated based on a percentage of Property operating revenues. Total Portfolio operating expenses increased due to our 2006 and 2007 acquisitions, as well as increases in utilities and legal expenses. Property management expense for the Total Portfolio increased primarily due to 2006 and 2007 acquisitions and payroll increases.
Home Sales Operations
     The following table summarizes certain financial and statistical data for the Home Sales Operations for the years ended December 31, 2007 and 2006 (amounts in thousands, except sales volumes).
                                 
    2007     2006     Variance     % Change  
Gross revenues from new home sales
  $ 31,116     $ 58,799     $ (27,683 )     (47.1 %)
Cost of new home sales
    (28,067 )     (52,394 )     24,327       46.4 %
 
                       
Gross profit from new home sales
    3,049       6,405       (3,356 )     (52.4 %)
 
                               
Gross revenues from used home sales
    2,217       2,448       (231 )     (9.4 %)
Cost of used home sales
    (2,646 )     (2,104 )     (542 )     (25.8 %)
 
                       
Gross (loss) profit from used home sales
    (429 )     344       (773 )     (224.7 %)
 
                               
Brokered resale revenues, net
    1,528       2,129       (601 )     (28.2 %)
Home selling expenses
    (7,555 )     (9,836 )     2,281       23.2 %
Ancillary services revenues, net
    2,436       3,027       (591 )     (19.5 %)
 
                       
(Loss) income from home sales operations and other
  $ (971 )   $ 2,069     $ (3,040 )     (146.9 %)
 
                       
Home sales volumes:
                               
New home sales (1)
    440       783       (343 )     (43.8 %)
Used home sales (2)
    296       370       (74 )     (20.0 %)
Brokered home resales
    967       1,255       (288 )     (22.9 %)
 
(1)   Includes third party home sales of 45 and 79 for the years ended December 31, 2007 and 2006, respectively.
 
(2)   Includes third party home sales of nine and 13 for the years ended December 31, 2007 and 2006, respectively.
     Income from home sales operations decreased as a result of lower new, used and brokered resale volumes and lower gross profits per home sold. The decrease in home selling expenses is primarily due to lower sales volumes and decreased advertising costs. The decrease in ancillary service revenue relates primarily to an increase in community activity expenses and store expenses.
Other Income and Expenses
     The following table summarizes other income and expenses for the years ended December 31, 2007 and 2006 (amounts in thousands).
                                 
    2007     2006     Variance     % Change  
Interest income
  $ 1,732     $ 1,975     $ (243 )     (12.3 %)
Income from other investments, net
    22,476       20,102       2,374       11.8 %
General and administrative
    (15,591 )     (12,760 )     (2,831 )     (22.2 %)
Rent control initiatives
    (2,657 )     (1,157 )     (1,500 )     (129.6 %)
Interest and related amortization
    (103,070 )     (103,161 )     91       0.1 %
Depreciation on corporate assets
    (437 )     (410 )     (27 )     (6.6 %)
Depreciation on real estate assets
    (63,554 )     (60,276 )     (3,278 )     (5.4 %)
 
                       
Total other expenses, net
  $ (161,101 )   $ (155,687 )   $ (5,414 )     (3.5 %)
 
                       

39


 

Results of Operations (continued)
     Interest income decreased due to a $0.4 million decrease in interest income related to a loan to Privileged Access that was paid off, a decrease in lower home loan balances, offset by an increase in interest earned on an our tax-deferred exchange escrow accounts.
     Income from other investments, net increased due to: a gain on insurance recovery of approximately $0.6 million, a one-time gain related to a defeasance transaction of approximately $1.1 million, the previously discussed increase in ground lease activity with Privileged Access, offset by one-time gains recognized in 2006 including a $1.0 million non-refundable deposit received upon termination of the contract for the sale of Del Rey and a $0.9 million gain on sale of our preferred partnership interest in College Heights, which was previously classified as other assets.
     General and administrative expense increased primarily due to an increase in payroll costs due to increased salaries and bonuses and accrued expense related to the Long-Term Incentive Plan. Rent control initiatives increased primarily as a result of activity regarding the Contempo Marin and City of Santee trials (see Note 18 in the Notes to Consolidated Financial Statements contained in this Form 10-K).
     Depreciation on real estate increased $3.3 million primarily relating to acquisitions.
Equity in Income of Unconsolidated Joint Ventures
     For the year ended December 31, 2007, equity in income of unconsolidated joint ventures decreased $0.9 million primarily due to the distributions received 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. This was offset by the purchase of the remaining interest in Mezzanine Properties and the gain on sale of the property owned by Indian Wells joint venture in 2006.
Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005
     The following table summarizes certain financial and statistical data for the Property Operations for all Properties owned throughout both periods (“Core Portfolio”) and the Total Portfolio for the years ended December 31, 2006 and 2005 (amounts in thousands).
                                                                 
    Core Portfolio     Total Portfolio  
                    Increase /     %                     Increase /     %  
    2006     2005     (Decrease)     Change     2006     2005     (Decrease)     Change  
Community base rental income
  $ 222,767     $ 213,280     $ 9,487       4.4 %   $ 225,815     $ 213,280     $ 12,535       5.9 %
Resort base rental income
    74,063       71,015       3,048       4.3 %     89,925       74,371       15,554       20.9 %
Utility and other income
    28,831       27,202       1,629       6.0 %     30,643       27,367       3,276       12.0 %
 
                                               
Property operating revenues
    325,661       311,497       14,164       4.5 %     346,383       315,018       31,365       10.0 %
 
                                                               
Property operating and maintenance
    106,382       102,158       4,224       4.1 %     116,179       103,832       12,347       11.9 %
Real estate taxes
    24,736       24,490       246       1.0 %     26,246       24,671       1,575       6.4 %
Property management
    15,995       15,392       603       3.9 %     17,079       15,919       1,160       7.3 %
 
                                               
Property operating expenses
    147,113       142,040       5,073       3.6 %     159,504       144,422       15,082       10.4 %
 
                                               
Income from property operations
  $ 178,548     $ 169,457     $ 9,091       5.4 %   $ 186,879     $ 170,596     $ 16,283       9.5 %
 
                                               
Property Operating Revenues
     The 4.5% increase in the Core Portfolio property operating revenues reflects (i) a 4.4% increase in rates for our community base rental income combined with a 0.1% increase in occupancy, (ii) a 4.3% increase in revenues for our core resort base income, and (iii) an increase in utility income and other fees primarily due to the pass-through of higher utility rates. Total Portfolio operating revenues increased due to site rental rate increases and our 2005 and 2006 acquisitions (see Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-K).

40


 

Results of Operations (continued)
Property Operating Expenses
     The 3.6% increase in property operating expenses for the Core Portfolio reflects a 4.1% increase in property operating and maintenance due primarily to increases in utilities and repair and maintenance. Property management expense for the Core Portfolio reflects costs of managing the Properties and is estimated based on a percentage of Property operating revenues. Total Portfolio operating expenses increased due to our 2005 and 2006 acquisitions, as well as increases in utilities and repair and maintenance. Property management expense for the Total Portfolio increased primarily due to 2005 and 2006 acquisitions and payroll increases.
Home Sales Operations
     The following table summarizes certain financial and statistical data for the Home Sales Operations for the years ended December 31, 2006 and 2005 (amounts in thousands, except sales volumes).
                                 
    2006     2005     Variance     % Change  
Gross revenues from new home sales
  $ 58,799     $ 62,664     $ (3,865 )     (6.2 %)
Cost of new home sales
    (52,394 )     (53,899 )     1,505       2.8 %
 
                       
Gross profit from new home sales
    6,405       8,765       (2,360 )     (26.9 %)
 
                               
Gross revenues from used home sales
    2,448       3,350       (902 )     (26.9 %)
Cost of used home sales
    (2,104 )     (3,572 )     1,468       41.1 %
 
                       
Gross profit (loss) from used home sales
    344       (222 )     566       255.0 %
 
                               
Brokered resale revenues, net
    2,129       2,714       (585 )     (21.6 %)
Home selling expenses
    (9,836 )     (8,838 )     (998 )     (11.3 %)
Ancillary services revenues, net
    3,027       2,227       800       35.9 %
 
                       
 
                               
Income from home sales operations and other
  $ 2,069     $ 4,646     $ (2,577 )     (55.5 %)
 
                       
 
                               
Home sales volumes:
                               
New home sales (1)
    783       771       12       1.6 %
Used home sales (2)
    370       271       99       36.5 %
Brokered home resales
    1,255       1,526       (271 )     (17.8 %)
 
(1)   Includes third party home sales of 79 and 84 for the years ended December 31, 2006 and 2005, respectively.
 
(2)   Includes third party home sales of 13 and zero for the years ended December 31, 2006 and 2005, respectively.
     New home sales gross profit reflects a decrease in the gross margin. Used home sales gross profit reflects higher gross margin per home and higher volumes. Brokered resale revenues reflect decreased resale volumes. The increase in home selling expenses relates primarily to advertising. The increase in ancillary service revenue relates primarily to our acquisitions.
Other Income and Expenses
     The following table summarizes other income and expenses for the years ended December 31, 2006 and 2005 (amounts in thousands).
                                 
    2006     2005     Variance     % Change  
Interest income
  $ 1,975     $ 1,406     $ 569       40.5 %
Income from other investments, net
    20,102       16,609       3,493       21.0 %
General and administrative
    (12,760 )     (13,624 )     864       6.3 %
Rent control initiatives
    (1,157 )     (1,081 )     (76 )     (7.0 %)
Interest and related amortization
    (103,161 )     (100,712 )     (2,449 )     (2.4 %)
Loss on early debt retirement
          (20,630 )     20,630       100.0 %
Depreciation on corporate assets
    (410 )     (804 )     394       49.0 %
Depreciation on real estate assets
    (60,276 )     (55,608 )     (4,668 )     (8.4 %)
 
                       
Total other expenses, net
  $ (155,687 )   $ (174,444 )   $ 18,757       10.8 %
 
                       

41


 

Results of Operations (continued)
     Interest income increased due to interest earned on our Privileged Access note as discussed above.
     Income from other investments, net increased due to: the previously discussed increase in ground lease activity with Privileged Access, corporate expense savings of $0.9 million, one-time gains including a $1.0 million non-refundable deposit received upon termination of the contract for the sale of Del Rey and a $0.9 million gain on sale of our preferred partnership interest in College Heights, was previously classified as other assets. These increases were offset by a write-off of costs related to potential transactions no longer being considered of $0.9 million.
     General and administrative expense decreased due to decreased legal costs and banking fees, partially offset by an increase in payroll. Interest and related amortization increased due to acquisitions offset by a decrease in our average interest rates due to refinancings in 2005.
     Loss on early debt retirement decreased due to transaction costs on early debt retirement related to refinancings in 2005.
     Depreciation on corporate assets decreased as a result of assets being fully depreciated. Depreciation on real estate increased $4.7 million primarily relating to acquisitions.
Equity in Income of Unconsolidated Joint Ventures
     For the year ended December 31, 2006, equity in income of unconsolidated joint ventures decreased $2.9 million primarily due to the purchase of the remaining interest in the Mezzanine Properties in the first quarter of 2006 (see Liquidity and Capital Resources — Investing Activities), as well as distributions received in 2005 from three joint ventures relating to debt refinancings by the ventures. Two of these distributions exceeded the Company’s basis and therefore were included in income from unconsolidated joint ventures in 2005. These decreases are partially offset by the net gain on sale of the property owned by the Indian Wells joint venture.
Liquidity and Capital Resources
Liquidity
     As of December 31, 2007, the Company had $5.8 million in cash and cash equivalents and $267 million available on its lines of credit. The Company expects to meet its short-term liquidity requirements, including its distributions, generally through its working capital, net cash provided by operating activities 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 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. The Company has approximately $200 million of scheduled debt maturities in 2008. The Company is currently evaluating refinancing options and expects to be able to satisfy the maturing debt with some combination of refinancing proceeds, net cash provided by operating activities and/or its available lines of credit. The table below summarizes cash flow activity for the years ended December 31, 2007, 2006 and 2005 (amounts in thousands).
                         
    For the twelve months ended  
    December 31,  
    2007     2006     2005  
Cash provided by operating activities
  $ 122,791     $ 99,457     $ 90,326  
Cash used in investing activities
    (25,604 )     (67,086 )     (66,246 )
Cash used in financing activities
    (93,007 )     (31,376 )     (28,775 )
 
                 
 
Net increase (decrease) in cash
  $ 4,180     $ 995     $ (4,695 )
 
                 
Operating Activities
     Net cash provided by operating activities increased $23.3 million for the year ended December 31, 2007 from $99.5 million for the year ended December 31, 2006. As discussed in “Results of Operations” above, this increase reflects increases in property operating income and income from other investments, net, offset by an increase in depreciation expense, general and

42


 

Liquidity and Capital Resources (continued)
administrative expense and a decrease in home sales. Net cash provided by operating activities increased $9.1 million for the year ended December 31, 2006 from $90.3 million for the year ended December 31, 2005. This increase reflects increases in property operating income and income from other investments, net, offset by an increase in interest expense and a decrease in home sales as discussed in “Results of Operations” above.
Investing Activities
     Net cash used in investing activities reflects the impact of the following investing activities:
Acquisitions
During the year ended December 31, 2007, we completed the following transactions:
    On January 29, 2007, the Company acquired the remaining 75% interest in a joint venture Property known as Mesa Verde, which is a 345-site resort Property on approximately 28 acres in Yuma, Arizona. The gross purchase price was approximately $5.9 million. We assumed a first mortgage loan of approximately $3.5 million with an interest rate of 4.94% per annum, maturing in 2008. The remainder of the acquisition price of approximately $1.8 million was funded with a withdrawal from the tax-deferred exchange account established as a result of the disposition of Lazy Lakes, discussed below.
 
    On June 27, 2007, the Company purchased the remaining 75% interest in a Diversified Investments joint venture Property known as Winter Garden, which is a 350-site resort Property on approximately 27 acres in Winter Garden, Florida. The gross purchase price was approximately $10.9 million, and we assumed a second mortgage loan of approximately $4.0 million with an interest rate of 4.3% per annum, maturing in September 2008. The remainder of the acquisition price, net of a credit for our existing 25% interest, was funded with proceeds from the Company’s lines of credit and a withdrawal of approximately $3.7 million from the tax-deferred exchange account established as a result of the disposition of Lazy Lakes discussed below.
 
    On August 3, 2007, the Company acquired a 363-site resort Property known as Pine Island, on approximately 31 acres, located near St. James City, Florida. The purchase price of approximately $6.5 million was funded with a withdrawal from the tax-deferred exchange account established as a result of the sale of Del Rey discussed below.
 
    On September 26, 2007, the Company acquired a 106-site resort Property known as Santa Cruz RV Ranch, on approximately 7 acres, located near Scotts Valley, California. The purchase price was approximately $5.5 million.
 
    On October 11, 2007, we acquired a 305-site resort property known as Tuxbury Resort, on approximately 193 acres in Amesbury, Massachusetts, including approximately 100 acres of potential expansion land. The purchase price was approximately $7.3 million and the seller provided financing of approximately $1.2 million that matures in January 2010. The cash portion of the purchase price was funded with a withdrawal from the tax-deferred exchange account established as a result of the sale of Del Rey discussed below.
     Certain purchase price adjustments may be made within one year following the acquisitions.
2006 Acquisitions
     During the year ended December 31, 2006, we acquired 40 Properties (see Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-K). The combined investment in real estate for these 40 Properties was approximately $162.6 million and was funded with the exchange of two all age properties, new financing of $47.1 million, debt assumed of $38.7 million, and borrowings from our lines of credit. We assumed rents received in advance of approximately $5.0 million, inventory of approximately $1.9 million, escrow deposits of $0.6 million, and other net payables of $0.4 million.
2005 Acquisitions
     During the year ended December 31, 2005, we acquired seven Properties (see Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-K). The combined real estate investment in these Properties was approximately $89.9

43


 

Liquidity and Capital Resources (continued)
million and was funded with money drawn from our lines of credit and debt assumed of $53.5 million. We also assumed approximately $5.4 million in escrow deposits and $4.0 million of rents received in advance as a result of these acquisitions.
Dispositions
     On January 10, 2007, we sold Lazy Lakes, a 100-site resort Property in the Florida Keys, for proceeds of approximately $7.7 million. The Company recognized a gain of approximately $4.6 million. In order to defer the taxable gain on the sale of Lazy Lakes, the sales proceeds, net of an eligible distribution of $2.4 million, were deposited in a tax-deferred exchange account. The funds in the exchange account were used in the Mesa Verde and Winter Garden acquisitions discussed above.
     On July 6, 2007, we sold Del Rey, a 407 site manufactured home site Property in Albuquerque, New Mexico, for proceeds of approximately $13.0 million. The Company recognized a gain of approximately $6.9 million. These proceeds were deposited in a tax-deferred exchange account pending future like-kind exchange acquisitions. Funds were subsequently used for the acquisitions of Pine Island and Tuxbury Resort, discussed above.
     On November 30, 2007, we sold Holiday Village, a 519-site all-age manufactured home Property in Sioux City, Iowa for $3.0 million. The sales price included approximately $0.4 million in proceeds from the sale of inventory homes to the buyer. The Company recognized a gain of sale of approximately $0.6 million. The proceeds from the sale were deposited in a tax-deferred exchange account pending future like-kind acquisitions, which is classified as escrow deposits and other in the balance sheet.
     During the year ended December 31, 2006, we exchanged two Properties located in Indiana as part of the Mid-Atlantic Portfolio acquisition (see Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-K). We recorded a loss on sale for this transaction of $0.2 million.
     During the year ended December 31, 2005, we sold one Property located in Cedar Rapids, Iowa for a selling price of $6.7 million. Net proceeds of $6.3 million were used to repay amounts outstanding on our lines of credit. A gain on sale of approximately $2.3 million was recorded during the fourth quarter of 2005.
     We currently have two all-age Properties held for disposition and are in various stages of negotiations for sale. We plan to reinvest the sale proceeds or reduce outstanding lines of credit.
     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
     As of December 31, 2006, we had a note receivable from Privileged Access of approximately $12.3 million, which was repaid in full during 2007. The remaining notes receivable activity of $1.2 million in cash outflow reflects net lending from our Chattel Loans.
Investments in and distributions from unconsolidated joint ventures
     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 has been consolidated with the operations of the Company as the Company has determined that as of December 31, 2007 we are the primary beneficiary by applying the standards of FIN 46R. This consolidation has 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.
     During the year ended December 31, 2006, the Company invested approximately $1.1 million in five joint ventures owning five Properties located in Florida, Massachusetts, Maine and two in Virginia. The Company also invested approximately $1.6

44


 

Liquidity and Capital Resources (continued)
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.
     During the year ended December 31, 2006, the Company received approximately $5.1 million in distributions from our joint ventures. $3.5 million of these distributions were classified as return on capital and were included in operating activities. The remaining distributions of approximately $1.6 million were classified as a return of capital and were included in investing activities and related to our sale of the Property owned by the Indian Wells joint venture and the sale of our interest in the Blazing Star joint venture.
     During the year ended December 31, 2005, the Company invested approximately $7.0 million for a 50% preferred joint venture interest in three Properties located near Bar Harbor, Maine. The Company also invested approximately $0.6 million for a 40% interest in a Texas Property owned by a joint venture controlled by Diversified Investments, Inc (“Diversified”).
     During the year ended December 31, 2005, the Company received approximately $11.3 million in distributions from our joint ventures. $5.8 million of these distributions were classified as return on capital and were included in operating activities. The remaining distributions of approximately $5.5 million were classified as a return of capital, were included in investing activities, and related to refinancings at three of our joint venture Properties.
     In addition, the Company recorded approximately $2.7 million, $3.6 million and $6.5 million of net income from joint ventures, net of $1.4 million, $1.9 million and $2.0 million of depreciation, in the years ended December 31, 2007, 2006 and 2005, 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.
Proceeds from sale of investment
     During the year ended December 31, 2006, the Company sold its preferred partnership interest in College Heights for approximately $9.0 million. At the time of the sale, College Heights owned a portfolio of 11 Properties with approximately 1,900 sites located in Michigan, Ohio and Florida. The proceeds received represent a per site value of approximately $22,000.
Capital improvements
     Capital expenditures for improvements are identified by the Company as recurring capital expenditures (“Recurring CapEx”), site development costs and corporate costs. Recurring CapEx was approximately $16.0 million, $14.6 million and $15.9 million for the years ended December 31, 2007, 2006 and 2005, respectively. Included in Recurring CapEx for the years ended 2007, 2006 and 2005 is approximately $1.5 million, $2.0 million and $3.4 million of costs incurred to replace hurricane damaged assets. Site development costs were approximately $12.8 million, $17.3 million and $16.2 million for the years ended December 31, 2007, 2006 and 2005, respectively, and represent costs to develop expansion sites at certain of the Company’s Properties and costs for improvements to sites when a smaller used home is replaced with a larger new home. Reduction in site development costs is due to the decrease in new homes sales volume. Corporate costs such as computer hardware, office furniture and office improvements and expansion were $0.6 million, $0.3 million and $0.8 million for the years ended December 31, 2007, 2006 and 2005, respectively.
Financing Activities
     Net cash used in financing activities reflects the impact of the following:
Mortgages and Credit Facilities
Financing, Refinancing and Early Debt Retirement
2007 Activity
     During the year ended December 31, 2007, the Company completed the following transactions:
    The Company repaid approximately $1.9 million of mortgage debt in connection with the sale of Lazy Lakes.

45


 

Liquidity and Capital Resources (continued)
    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 maturing 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 maturing in September 2008.
 
    During the quarter ended September 30, 2007, the Company repaid the outstanding mortgage indebtedness on Ft. Myers Beach RV Resort of approximately $2.9 million.
 
    In September 2007, we amended our existing unsecured Lines of Credit (“LOC”) to expand our borrowing capacity from $275 million to $420 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. Our current group of banks have committed up to $370 million on our $420 million borrowing capacity. We incurred commitment and arrangement fees of approximately $0.3 million to increase our borrowing capacity.
 
    During the quarter ended December 31, 2007, the Company paid off a $6.5 million mortgage that matured on Park City West RV Resort.
 
    The Company paid down $7.7 million of the mortgage debt on Tropical Palms RV Resort during the quarter ended December 31, 2007. The Tropical Palms RV Resort mortgage debt balance as of December 31, 2007 is approximately $12 million and matures in December 2008.
2006 Activity
     During the year ended December 31, 2006, the Company completed the following transactions:
    Assumed $25.9 million in mortgage debt on four of the eleven Properties related to the acquisition of the Mezzanine Portfolio. During the second and third quarters of 2006, this mortgage debt was defeased. Net proceeds of approximately $10.4 million were used to pay down the lines of credit. The four mortgages bear interest at weighted average interest rates ranging from 5.69% to 6.143% per annum and mature in 2016. In addition, we financed $47.1 million of mortgage debt to acquire the remaining seven Properties in the Mezzanine Portfolio. The seven mortgages bear interest at weighted average rates ranging from 5.70% to 5.72% per annum, and mature in April 2016.
 
    Received $3.0 million and $2.9 million in mortgage debt proceeds as a result of meeting certain operational criteria at the Monte Vista Property and the Viewpoint Property, respectively. These proceeds were used to pay down the lines of credit.
 
    Renewed our unsecured debt. We replaced the term loan which had a remaining balance of $100 million maturing in 2007, and a $110 million line of credit maturing in August 2006 with a $225 million line of credit with a four-year maturity and one-year extension option. The new facility bears interest at the London Interbank Offered Rate (“LIBOR”) plus 1.20% per annum with a 0.15% facility fee per annum. The interest rate on the term loan was LIBOR plus 1.75% per annum and the $110 million line of credit had an interest rate of LIBOR plus 1.65% and had a 0.15% unused fee, both per annum. The interest rate on $75 million of the outstanding balance on the new line of credit is fixed at 6.38% per annum through mid-December 2007. We also renewed our $50 million line of credit which bears interest at LIBOR plus 1.20% per annum with a 0.20% facility fee per annum, and matures on June 29, 2010. The renewal increases our financial flexibility and lowers our credit spread.
 
    Acquired for $2.4 million land formerly subject to a ground lease previously classified as mortgage debt relating to the Golden Terrace South Property.
 
    Assumed $12.8 million in mortgage debt in connection with the acquisition of the remaining interests in four Diversified Properties. The four mortgages have a weighted average interest rate of approximately 5.5% per annum and a weighted average maturity of three years.

46


 

Liquidity and Capital Resources (continued)
2005 Activity
     During the third quarter of 2005, the Company refinanced two mortgage loans for proceeds of $34 million at an interest rate of 4.95% per annum. Net proceeds were used to pay down approximately $20 million in other secured financing maturing in 2006.
     On December 2, 2005, the Company refinanced approximately $293 million of secured debt maturing in 2007 with an effective interest rate of 6.8% per annum. This 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 were approximately $20.0 million ($0.67 per fully diluted share) and are classified as loss on early debt retirement on the Consolidated Statements of Operations. The remaining excess proceeds were used to repay outstanding amounts on our lines of credit. This transaction strengthened the Company’s balance sheet by extending the weighted average years to maturity by approximately two years.
     During the third quarter of 2005, in connection with its acquisitions, the Company assumed mortgage debt of approximately $53.5 million at a weighted average interest rate of approximately 5.9% per annum.
Secured Debt
     As of December 31, 2007, our secured long-term debt balance was approximately $1.6 billion, with a weighted average interest rate in 2007 of approximately 5.9% per annum. The debt bears interest at rates between 4.3% and 10.0% per annum and matures on various dates mainly ranging from 2008 to 2016. Included in our debt balance are three capital leases with an imputed interest rate of 13.1% per annum. We have approximately $200 million of long-term debt maturing in 2008 and approximately $80 million in 2009. The weighted average term to maturity for the long-term debt is approximately 5.5 years.
Unsecured Debt
     We have two unsecured lines of credit with maximum borrowing capacity of $350 million and $20 million 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. Throughout the year ended December 31, 2007, we borrowed $126.2 million and paid down $154.5 million on our lines of credit. The weighted average interest rate in 2007 for our unsecured debt was approximately 6.8% per annum. The balance outstanding as of December 31, 2007 was $103 million. As of February 22, 2008, approximately $281.7 million is available to be drawn on these combined 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 has been paid off.
     During 2006, the Company borrowed $3.6 million to finance its insurance premium payments. As of December 31, 2006, $0.3 million remained outstanding. This loan was paid off in January 2007 and beared interest at 5.30% per annum.
     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, 2007, we were subject to certain contractual payment obligations as described in the table below (dollars in thousands):
                                                         
Contractual                            
Obligations   Total   2008(2)   2009   2010(3)   2011   2013   Thereafter
Long Term Borrowings (1)
  $ 1,656,924     $ 212,134     $ 85,807     $ 336,232     $ 65,081     $ 18,076     $ 939,594  
Weighted average interest rates
    6.13 %     5.72 %     7.00 %     7.12 %     7.07 %     5.93 %     5.75 %
 
(1)   Balance excludes net premiums and discounts of $2.5 million.

47


 

Liquidity and Capital Resources (continued)
(2)   The Company is currently evaluating refinancing options and expects to be able to satisfy the maturing debt with some combination of refinancing proceeds, net cash provided by operating activities and/or its available lines of credit.
 
(3)   Includes lines of credit repayments in 2010 of $103 million. We have an option to extend this maturity for one year to 2011.
     Included in the above table are certain capital lease obligations totaling approximately $6.6 million. These agreements expire June 2009 and are paid semi-annually at an imputed interest rate of 13.1% per annum.
     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 2022 to 2054, with terms which require twelve equal payments per year plus additional rents calculated as a percentage of gross revenues. For the years ended December 31, 2007, 2006 and 2005, ground lease rent was approximately $1.6 million. Minimum future rental payments under the ground leases are approximately $1.8 million for each of the next five years and approximately $20.8 million thereafter.
     With respect to maturing debt, the Company has staggered the maturities of its long-term mortgage debt over an average of approximately 6 years, with no more than $600 million 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 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 minority interests since January 1, 2005.
                         
Distribution            
Amount Per   For the Quarter   Stockholder    
Share   Ending   Record Date   Payment Date
$0.0250
  March 31, 2005   March 25, 2005   April 8, 2005
$0.0250
  June 30, 2005   June 24, 2005   July 8, 2005
$0.0250
  September 30, 2005   September 30, 2005   October 14, 2005
$0.0250
  December 31, 2005   December 30, 2005   January 13, 2006
 
$0.0750
  March 31, 2006   March 31, 2006   April 14, 2006
$0.0750
  June 30, 2006   June 30, 2006   July 14, 2006
$0.0750
  September 30, 2006   September 29, 2006   October 13, 2006
$0.0750
  December 31, 2006   December 29, 2006   January 12, 2007
 
$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
2007 Activity
     On November 13, 2007, the Company announced that in 2008 the annual distribution per common share will be $0.80 per share up from $0.60 per share in 2007 and $0.30 per share in 2006. This decision recognizes the Company’s investment opportunities and the importance of its dividend to its stockholders.
     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 Employee Stock Purchase Plan (“ESPP”).

48


 

Liquidity and Capital Resources (continued)
2006 Activity
     On December 29, 2006, September 29, 2006, June 30, 2006 and March 31, 2006, the Operating Partnership paid distributions of 8.0625% per annum on the $150 million of 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, 2006, we received approximately $3.8 million in proceeds from the issuance of shares of common stock through stock option exercises and the ESPP.
2005 Activity
     On March 24, 2005, the Operating Partnership issued $25 million of 8.0625% Series D Cumulative Redeemable Perpetual Preference Units (the “Series D 8% Units”), to institutional investors. The Series D 8% Units are non-callable for five years. In addition, the Operating Partnership had an existing $125 million of 9.0% Series D Cumulative Redeemable Perpetual Preference Units (the “Series D 9% Units”) outstanding that were callable by the Company as of September 2004. In connection with the new issue, the Operating Partnership agreed to extend the non-call provision of the Series D 9% Units to be coterminous with the new issue, and the institutional investors holding the Series D 9% Units agreed to lower the rate on such units to 8.0625%. All of the units have no stated maturity or mandatory redemption. Net proceeds from the offering were used to pay down amounts outstanding under the Company’s lines of credit.
     On June 30, 2005, the Operating Partnership issued $50 million of 7.95% Series F Cumulative Redeemable Perpetual Preference Units (the “Series F Units”), to institutional investors. The Series F Units are non-callable for five years and have no stated maturity or mandatory redemption. Net proceeds from the offering were used to pay down amounts outstanding under the Company’s lines of credit.
     On March 24, 2005, the Operating Partnership paid distributions of 9.0% per annum on the $125 million of Series D 9% Units. For the seven days ended March 31, 2005 and the nine months thereafter, the Operating Partnership paid distributions of 8.0625% per annum on the $150 million of Series D 8% Units. For the six months ended December 31, 2005, the Operating Partnership paid distributions of 7.95% per annum on the $50 million of Series F Units. Distributions on the Units were paid quarterly on the last calendar day of each quarter.
     During the year ended December 31, 2005, we received approximately $4.0 million in proceeds from the issuance of shares of common stock through stock option exercises and the 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.

49


 

Liquidity and Capital Resources (continued)
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”), to be an appropriate measure of performance for an equity REIT. While FFO is a relevant and widely used measure of operating performance for equity REITs, it does not represent cash flow from operations or net income as defined by GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance.
     FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from sales of Properties, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. 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 losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. Investors should review FFO, along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT’s operating performance. We compute FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.
     The following table presents a calculation of FFO for the years ended December 31, 2007, 2006 and 2005 (amounts in thousands):
                         
    2007     2006     2005  
Computation of funds from operations:
                       
Net income (loss) available for Common Shares
  $ 32,102     $ 16,632     $ (2,333 )
Income (loss) allocated to Common OP Units
    7,705       4,318       (539 )
Depreciation on real estate assets
    63,554       60,276       55,608  
Depreciation expense included in discontinued operations
          84        410  
Depreciation expense included in equity in income from joint ventures
    1,427       1,909       1,960  
Gain on sale of Properties
    (12,036 )     (852 )     (2,279 )
 
                 
Funds from operations available for Common Shares
  $ 92,752     $ 82,367     $ 52,827  
 
                 
 
                       
Weighted average Common Shares outstanding — fully diluted
    30,414       30,241       29,927  
 
                 

50


 

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, 2007, approximately 93% 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 $82.7 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 $87.4 million.
     At December 31, 2007, approximately 7% or approximately $114.8 million of our outstanding debt was short-term and at variable rates. Earnings are affected by increases and decreases in market interest rates on this debt. For each increase/decrease in interest rates of 1% (or 100 basis points), our earnings would increase/decrease by approximately $1.1 million annually.
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:
    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 markets volatility;
 
    in the all-age properties, results from home sales and occupancy will continue to be impacted by local economic conditions, lack of affordable manufactured home financing, and competition from alternative housing options including site-built single-family housing;
 
    our ability to maintain rental rates and occupancy with respect to properties currently owned or pending acquisitions;
 
    our assumptions about rental and home sales markets;
 
    the completion of pending acquisitions and timing with respect thereto;
 
    ability to obtain financing or refinance existing debt;
 
    the effect of interest rates;
 
    whether we will consolidate Privileged Access and the effects on our financials if we do so; 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.

51


 

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 and Chief Financial 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, 2007. 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 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.
Changes in Internal Control Over Financial Reporting
     There were no material changes to the Company’s internal controls over financial reporting during the quarter ended December 31, 2007.
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, 2007, 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, 2007 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.

52


 

Item 9B. Other Information
     Pursuant to the authority granted in the Stock Option and Award Plan, in November 2007 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 January 31, 2008 for their services rendered in 2007. On January 31, 2008, Mr. Samuel Zell was awarded options to purchase 100,000 shares of 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, 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, 2008, December 31, 2009 and December 31, 2010.
PART III
Item 10. Directors and Executive Officers of the Registrant
     The information required by Item 10 will be contained in the 2008 Proxy Statement, and thus this Part has been omitted in accordance with General Instruction G(3) to Form 10-K.
Items 11, 12, 13 and 14.
Executive Compensation, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Certain Relationships and Related Transactions, and Director Independence, and Principal Accountant Fees and Services
     The information required by Item 11, Item 12, Item 13 and Item 14 will be contained in the 2008 Proxy Statement, and thus this Part has been omitted in accordance with General Instruction G(3) to Form 10-K.

53


 

PART IV
Item 15. Exhibits and Financial Statements Schedules
     1. Financial Statements
See Index to Financial Statements and Schedules on page F-1 of this Form 10-K.
     2. Financial Statement Schedules
See Index to Financial Statements and Schedules on page F-1 of this Form 10-K.
     3. Exhibits:
     
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
  Not applicable
 
   
9
  Not applicable
 
   
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
 
   
10.22(h)
  Thousand Trails Lease Agreement, dated November 10, 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
 
   
10.30(m)
  Option Agreement (Thousand Trails) 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)
  Credit Agreement ($400 million Revolving Facility) dated September 21, 2007
 
   
10.38(s)
  Second Amendment 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.
 
   
10.40(t)
  Amended and Restated Option Agreement dated as of January 1, 2008, is by and among Privileged Access, LP, a Delaware limited partnership, PATT Holding Company, LLC, a Delaware limited liability company, Outdoor World Resorts, LLC, a Delaware limited liability company, PA-Trails Plus, LLC, a Delaware limited liability company, and Mid-Atlantic Resorts, LLC, a Delaware and MHC T1000 Trust, a Maryland real estate investment trust.
 
   
10.41(t)
  Employment Agreement dated as of January 1, 2008 by and between Joe McAdams and Equity LifeStyle Properties, Inc.
 
   
11
  Not applicable
 
   
12(u)
  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(u)
  Subsidiaries of the registrant
 
   
22
  Not applicable
 
   
23(u)
  Consent of Independent Registered Public Accounting Firm
 
   
24.1(u)
  Power of Attorney for Philip C. Calian dated February 19, 2008
 
   
24.2(u)
  Power of Attorney for Howard Walker dated February 20, 2008
 
   
24.3(u)
  Power of Attorney for Thomas E. Dobrowski dated February 19, 2008
 
   
24.4(u)
  Power of Attorney for Gary Waterman dated February 22, 2008
 
   
24.5(u)
  Power of Attorney for Donald S. Chisholm dated February 18, 2008
 
   
24.6(u)
  Power of Attorney for Sheli Z. Rosenberg dated February 24, 2008
 
   
24.7(u)
  Power of Attorney for Sam Zell dated February 18, 2008
 
   

54


 

     
 
   
31.1(u)
  Certification of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act Of 2002
 
   
31.2(u)
  Certification of Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act Of 2002
 
   
32.1(u)
  Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
 
   
32.2(u)
  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)   Filed herewith

55


 

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 28, 2008  By:   /s/ Thomas P. Heneghan    
    Thomas P. Heneghan   
    Chief Executive Officer
(Principal Executive Officer) 
 
 
     
Date: February 28, 2008  By:   /s/ Michael B. Berman    
    Michael B. Berman   
    Executive Vice President
and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer) 
 

56


 

         
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 and Director  
*Attorney-in-Fact
  February 28, 2008
 
       
/s/ Michael B. Berman
 
  Executive Vice President and Chief Financial Officer   February 28, 2008
Michael B. Berman
  *Attorney-in-Fact    
 
       
* Samuel Zell
 
Samuel Zell
  Chairman of the Board    February 28, 2008
 
       
*Howard Walker
 
  Vice-Chairman of the Board    February 28, 2008
Howard Walker
       
 
       
*Philip C. Calian
 
  Director    February 28, 2008
Philip C. Calian
       
 
       
*Donald S. Chisholm
 
Donald S. Chisholm
  Director    February 28, 2008
 
       
*Thomas E. Dobrowski
 
Thomas E. Dobrowski
  Director    February 28, 2008
 
       
* Sheli Z. Rosenberg
 
Sheli Z. Rosenberg
  Director    February 28, 2008
 
       
*Gary Waterman
 
Gary Waterman
  Director    February 28, 2008

57


 

INDEX TO FINANCIAL STATEMENTS
EQUITY LIFESTYLE PROPERTIES, INC.
     
    Page
 
   
Report of Independent Registered Public Accounting Firm
  F-2
Report of Independent Registered Public Accounting Firm
  F-3
Consolidated Balance Sheets as of December 31, 2007 and 2006
  F-4
Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005
  F-5 and F-6
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2007, 2006 and 2005
  F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
  F-8 and F-9
Notes to Consolidated Financial Statements
  F-10
Schedule II — Valuation and Qualifying Accounts
  S-1
Schedule III — Real Estate and Accumulated Depreciation
  S-2
Certain schedules have been omitted, as they are not applicable to the Company.
   

F-1


 

Report of Independent Registered Public Accounting Firm
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, 2007, 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 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 U.S. 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 accounting principles generally accepted in the United States, 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, 2007, 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, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, other comprehensive (loss) income and cash flows for each of the three years in the period ended December 31, 2007, and the financial statement schedules listed in the Index at Item 15, of Equity Lifestyle Properties, Inc., and our report dated February 25, 2008, expressed an unqualified opinion thereon.
ERNST & YOUNG LLP
Chicago, Illinois
February 25, 2008

F-2


 

Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Equity Lifestyle Properties, Inc.
We have audited the accompanying consolidated balance sheets of Equity Lifestyle Properties, Inc. (“Equity Lifestyle Properties” or the “Company”), as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and 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, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, 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.
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, 2007, 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, 2008 expressed an unqualified opinion thereon.
ERNST & YOUNG LLP
Chicago, Illinois
February 25, 2008

F-3


 

Equity LifeStyle Properties, Inc.
Consolidated Balance Sheets
As of December 31, 2007 and 2006
(amounts in thousands, except for share data)
                 
    December 31,     December 31,  
    2007     2006  
 
               
Assets
               
Investment in real estate:
               
Land
  $ 541,000     $ 531,302  
Land improvements
    1,700,888       1,664,964  
Buildings and other depreciable property
    154,227       141,194  
 
           
 
    2,396,115       2,337,460  
Accumulated depreciation
    (494,211 )     (435,809 )
 
           
Net investment in real estate
    1,901,904       1,901,651  
Cash and cash equivalents
    5,785       1,605  
Notes receivable, net
    10,954       22,045  
Investment in joint ventures
    4,569       14,718  
Rents receivable, net
    1,156       1,294  
Deferred financing costs, net
    12,142       14,799  
Inventory, net
    63,526       70,091  
Escrow deposits and other assets
    33,659       29,628  
 
           
Total Assets
  $ 2,033,695     $ 2,055,831  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Liabilities:
               
Mortgage notes payable
  $ 1,556,392     $ 1,586,012  
Unsecured lines of credit
    103,000       131,200  
Accrued payroll and other operating expenses
    34,617       30,936  
Accrued interest payable
    9,164       9,066  
Rents received in advance and security deposits
    37,274       36,454  
Distributions payable
    4,531       2,251  
 
           
Total Liabilities
    1,744,978       1,795,919  
 
               
Commitments and contingencies
               
 
               
Minority interests — Common OP Units and other
    17,776       12,794  
Minority interests — Perpetual Preferred OP Units
    200,000       200,000  
 
               
Stockholders’ Equity:
               
Preferred stock, $.01 par value 10,000,000 shares authorized; none issued
           
Common stock, $.01 par value 100,000,000 and 50,000,000 shares authorized for 2007 and 2006, respectively; 24,348,517 and 23,928,652 shares issued and outstanding for 2007 and 2006, respectively
    236       229  
Paid-in capital
    310,803       304,483  
Distributions in excess of accumulated earnings
    (240,098 )     (257,594 )
 
           
Total stockholders’ equity
    70,941       47,118  
 
           
 
               
Total Liabilities and Stockholders’ Equity
  $ 2,033,695     $ 2,055,831  
 
           
The accompanying notes are an integral part of the financial statements.

F-4


 

Equity LifeStyle Properties, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2007, 2006 and 2005
(amounts in thousands, except per share data)
                         
    2007     2006     2005  
 
                       
Property Operations:
                       
Community base rental income
  $ 236,933     $ 225,815     $ 213,280  
Resort base rental income
    102,372       89,925       74,371  
Utility and other income
    36,849       30,643       27,367  
 
                 
Property operating revenues
    376,154       346,383       315,018  
Property operating and maintenance
    127,342       116,179       103,832  
Real estate taxes
    27,429       26,246       24,671  
Property management
    18,385       17,079       15,919  
 
                 
Property operating expenses (exclusive of depreciation shown separately below)
    173,156       159,504       144,422  
 
                 
Income from property operations
    202,998       186,879       170,596  
 
Home Sales Operations:
                       
Gross revenues from inventory home sales
    33,333       61,247       66,014  
Cost of inventory home sales
    (30,713 )     (54,498 )     (57,471 )
 
                 
Gross profit from inventory home sales
    2,620       6,749       8,543  
Brokered resale revenues, net
    1,528       2,129       2,714  
Home selling expenses
    (7,555 )     (9,836 )     (8,838 )
Ancillary services revenues, net
    2,436       3,027       2,227  
 
                 
(Loss) income from home sales operations & other
    (971 )     2,069       4,646  
 
Other Income (Expenses):
                       
Interest income
    1,732       1,975       1,406  
Income from other investments, net
    22,476       20,102       16,609  
General and administrative
    (15,591 )     (12,760 )     (13,624 )
Rent control initiatives
    (2,657 )     (1,157 )     (1,081 )
Interest and related amortization
    (103,070 )     (103,161 )     (100,712 )
Loss on early debt retirement
                (20,630 )
Depreciation on corporate assets
    (437 )     (410 )     (804 )
Depreciation on real estate assets
    (63,554 )     (60,276 )     (55,608 )
 
                 
Total other expenses, net
    (161,101 )     (155,687 )     (174,444 )
 
                       
Income before minority interests, equity in income of unconsolidated joint ventures, and discontinued operations
    40,926       33,261       798  
 
                       
(Income) loss allocated to Common OP Units
    (5,322 )     (4,267 )     1,329  
Income allocated to Perpetual Preferred OP Units
    (16,140 )     (16,138 )     (13,974 )
Equity in income of unconsolidated joint ventures
    2,696       3,583       6,508  
 
                 
Income (loss) before discontinued operations
    22,160       16,439       (5,339 )
 
                 
 
                       
Discontinued Operations:
                       
Discontinued operations
    289       520       1,927  
Depreciation on discontinued operations
          (84 )     (410 )
Gain (loss) on sale of discontinued real estate
    12,036       (192 )     2,279  
Minority interests on discontinued operations
    (2,383 )     (51 )     (790 )
 
                 
Income from discontinued operations
    9,942       193       3,006  
 
                 
Net income (loss) available for Common Shares
  $ 32,102     $ 16,632     $ (2,333 )
 
                 
The accompanying notes are an integral part of the financial statements

F-5


 

Equity LifeStyle Properties, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2007, 2006 and 2005
(amounts in thousands, except per share data)
                         
    2007     2006     2005  
 
                       
Earnings per Common Share — Basic:
                       
Income (loss) from continuing operations
  $ 0.92     $ 0.70     $ (0.23 )
 
                 
Income from discontinued operations
  $ 0.41     $ 0.01     $ 0.13  
 
                 
Net income (loss) available for Common Shares
  $ 1.33     $ 0.71     $ (0.10 )
 
                 
 
                       
Earnings per Common Share — Fully Diluted:
                       
Income (loss) from continuing operations
  $ 0.90     $ 0.68     $ (0.23 )
 
                 
Income from discontinued operations
  $ 0.41     $ 0.01     $ 0.13  
 
                 
Net income (loss) available for Common Shares
  $ 1.31     $ 0.69     $ (0.10 )
 
                 
 
                       
Distributions declared per Common Share outstanding
  $ 0.60     $ 0.30     $ 0.10  
 
                 
 
                       
Tax status of Common Shares distributions deemed paid during the year:
                       
Ordinary income
  $ 0.60     $ 0.30     $ 0.10  
 
                 
Long-term capital gain
  $     $     $  
 
                 
Unrecaptured section 1250 gain
  $     $     $  
 
                 
 
                       
Weighted average Common Shares outstanding — basic
    24,089       23,444       23,081  
 
                 
Weighted average Common Shares outstanding — fully diluted
    30,414       30,241       29,366  
 
                 
The accompanying notes are an integral part of the financial statements

F-6


 

Equity LifeStyle Properties, Inc.
Consolidated Statements of Changes In Stockholders’ Equity
For The Years Ended December 31, 2007, 2006 and 2005
(amounts in thousands)
                         
    2007     2006     2005  
Preferred stock, $.01 par value
  $     $     $  
 
                 
 
                       
Common stock, $.01 par value
                       
Balance, beginning of year
  $ 229     $ 226     $ 224  
Issuance of common stock through exercise of options
    7       3     $ 2  
 
                 
Balance, end of year
  $ 236     $ 229     $ 226  
 
                 
 
                       
Paid — in capital
                       
Balance, beginning of year
  $ 304,483     $ 299,444 &