Acquisitions

On May 31, 2011, the Company’s operating partnership entered into purchase and other agreements (the “Purchase Agreements”) to acquire a portfolio of 75 manufactured home communities and one RV resort (the “Acquisition Properties”) containing 31,167 sites on approximately 6,500 acres located in 16 states (primarily located in Florida and the northeastern region of the United States) and certain manufactured homes and loans secured by manufactured homes located at the Acquisition Properties which the Company refers to as the “Home Related Assets” for a stated purchase price of $1.43 billion (the “Acquisition”). Revenues for the 75 Acquisition Properties, included in the Consolidated Statements of Income and Comprehensive Income for the Company were approximately $42.4 million and $23.9 million for the three months ended September 30, 2012 and 2011. Revenues for the 75 Acquisition Properties, included in the Consolidated Statements of Income and Comprehensive Income for the Company were approximately $125.9 million and $23.9 million for the nine months ended September 30, 2012 and 2011.

During the year ended December 31, 2011, the Company acquired 75 Acquisition Properties and certain Home Related Assets associated with such 75 Acquisition Properties for a purchase price of approximately $1.5 billion. The Company funded the purchase price of this closing with (i) the issuance of 1,708,276 shares of its common stock, to the seller with an aggregate value of approximately $111 million, (ii) the issuance of 1,740,000 shares of Series B Preferred Stock to the seller with an aggregate value of approximately $113 million, (iii) the assumption of mortgage debt secured by 35 Acquisition Properties with an aggregate value of approximately $548 million, (iv) the net proceeds of approximately $344 million, net of offering costs, from a common stock offering of 6,037,500 shares, (v) approximately $200 million of cash from the Term Loan the Company closed on July 1, 2011, and (vi) approximately $200 million of cash from new secured financings originated during the third quarter of 2011. The assumed mortgage debt had stated interest rates ranging from 4.65% to 8.87% per annum and maturities from dates ranging from 2012 to 2023.

The Company owns both a fee interest and a leasehold interest in a 2,200 site Acquisition Property. The ground lease contains a purchase option on behalf of the lessee and a put option on behalf of the lessor. The options may be exercised by either party upon the death of the fee holder. The Company is the beneficiary of a escrow funded by the seller and denominated in approximately 114,000 shares of common stock of the Company. The escrow was established to protect the Company from future scheduled ground lease payments as well as scheduled increases in the option purchase price over time. In connection with the purchase price allocation associated with the Acquisition Properties, the Company recorded contingent consideration of approximately $6.8 million. Approximately $0.5 million resulting from the increase in fair value of the net asset is included in income from other investments, net in the Consolidated Statements of Income and Comprehensive Income. The Company will revalue the asset as of each reporting date and will recognize in earnings any increase or decrease in fair value of the escrow.

Note 13 – Acquisitions (continued)

The Company engaged a third-party to assist with its purchase price allocation for the Acquisition and is in the process of completing its allocation. The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed in the Acquisition for the period ended September 30, 2012, which we determined using level two and level three inputs (amounts in thousands). The fair value is a preliminary estimate in accordance with FASB ASC 805 and adjustments, if any, are not expected to have a material impact on the consolidated financial statements.



Assets acquired
Land	$	471,500
Depreciable property	855,200
Manufactured homes	24,000
In-place leases	74,000
Net investment in real estate	1,424,700
Notes receivable	40,000
Other assets	18,300
Total Assets acquired	1,483,000
Liabilities assumed
Mortgage notes payable	548,000
Accrued payroll and other operating expenses	3,000
Rents and other customer payments received in advance and security deposits	5,000
Total Liabilities assumed	556,000
Net consideration paid	$	927,000

The allocation of fair values of the assets acquired and liabilities assumed differs from the allocation reported in “Note 13─Acquisitions” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of our Quarterly Report on Form 10-Q for the six months ended June 30, 2012, filed with the SEC on August 3, 2012, due primarily to adjustments to certain of our valuation assumptions based on more complete information concerning the subject assets and liabilities. None of these changes had a material impact on our Consolidated Financial Statements.

The following methods and assumptions were used to estimate the fair value of each class of asset acquired and liability assumed in the Acquisition.

Land – Market approach based on similar, but not identical, transactions in the market. Adjustments to comparable sales based on both the quantitative and qualitative data.

Depreciable property – Cost approach based on market comparable data to replace adjusted for local variations, inflation and other factors.

Manufactured homes – Sales comparison approach based on market prices for similar homes adjusted for differences in age or size. Manufactured homes are included on the Company’s Consolidated Balance Sheets in buildings and other depreciable property.

In-place leases – Lease in place was determined via a combination of estimates of market rental rates and expense reimbursement levels as well as an estimate of the length of time required to replace each lease.

Notes receivable – Income approach based on discounted cash flows discounting contractual cash flows at a market rate adjusted based on particular notes’ or note holders’ down payment, FICO score and delinquency status.

Below-market ground leases – Value of asset (below-market lease) based on contract rent and option price against market rent and land value. Market rent determined applying a reasonable rate of return to the value of the land as if owned. Land value is estimated and then inflated until it is anticipated that the option will be exercised. Below-market ground leases are included on the Company’s Consolidated Balance Sheets in escrow deposits and other assets.

Mortgage notes payable – Income approach based on discounted cash flows comparing contractual cash flows to cash flows of identical debt discounted based on market rates.

Note 13 – Acquisitions (continued)

The following unaudited pro forma consolidated results of operations assumes that the Acquisition for the 75 Acquisition Properties and related debt and equity issuances had occurred on January 1, 2011. The unaudited pro forma results of operations are based upon historical financial statements. The unaudited pro forma results do not purport to represent what the actual results of operations of the Company would have been, nor do they purport to predict the results of operations of future periods.

Unaudited Pro Forma Results of Operations⁽¹⁾

(amounts in thousands, except per share data)



	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Total revenues	$	181,828	$	179,044	$	537,946	$	520,484
Net income available for Common Shares	$	22,909	$	4,143	$	70,957	$	21,398
Earnings per Common Share – Basic	$	0.56	$	0.10	$	1.72	$	0.53
Earnings per Common Share – Fully Diluted⁽²⁾	$	0.55	$	0.10	$	1.71	$	0.53

______________________


1.	The following expenses, except for c. below, are not reflected in the Unaudited Pro Forma Results of Operations for the three and nine months ended September 30, 2011 as they are either short-term in nature or are not reflective of the historical results of the Company or the seller:


a.	Annual incremental property management expenses associated with the Acquisition.


b.	Annual incremental general and administrative expenses associated with the Acquisition, including Chattel Loan servicing.


c.	For the three and nine months ended September 30, 2011, the Company has estimated the amortization expense of an intangible asset for in-place leases to be approximately $18.3 million and $55.1 million, respectively. The estimated useful life for acquired in-place leases is one year.


2.	For the nine months ended September 30, 2011, the Company’s weighted average of approximately 4.6 million common OP units (which were dilutive to the Company’s historical operations) were anti-dilutive, and therefore are excluded from the computation of the Pro Forma Earnings per Common Share – Fully Diluted.