Notes Receivable

12 Months Ended

Dec. 31, 2012

Notes Receivable

Notes Receivable

Included in notes receivable, the Company had approximately $32.7 million and $43.4 million, respectively, in Chattel Loans receivable, which require monthly principal and interest payments and are collateralized by homes at certain of the Properties. As of December 31, 2012, the Chattel Loans receivable have a stated per annum average rate of approximately 7.8%, with a yield of 18.3%, and had an average term remaining of approximately 14 years. These notes are recorded net of allowances of approximately $0.4 million as of December 31, 2012 and 2011. During the years ended December 31, 2012 and 2011, approximately $5.5 million and $2.6 million, respectively, was repaid and an additional $0.7 million and $0.3 million, respectively, was loaned to customers and approximately $5.3 million and $2.7 million, respectively, of homes serving as collateral for Chattel Loans were repossessed and converted to rental units. Chattel Loans receivable at December 31, 2012 includes $25.7 million of Chattel Loans acquired in connection with the 2011 Acquisition. During 2012, management reviewed the default and asset recovery performance of these loans and determined that the yield of this portfolio should be increased from 17.0% to 21.0% due to the accelerated timing of cash collections and asset recoveries being experienced in the portfolio. Increases in default rates or declines in recovery rates in the future could, if significant, result in an impairment of the loans. Declines in default rates or increases in recovery rates could, if significant, result in future increases to the yield. 

As of December 31, 2012 and December 31, 2011, the Company had approximately $16.1 million and $16.4 million, respectively, of Contracts Receivable, including allowances of approximately $0.7 million and $1.0 million, respectively. These Contracts Receivable represent loans to customers who have purchased right-to-use contracts. The Contracts Receivable yield interest at a stated per annum average rate of 15.9%, have a weighted average term remaining of approximately four years and require monthly payments of principal and interest. During the years ended December 31, 2012 and 2011, approximately $7.1 million and $7.3 million, respectively, was repaid and an additional $6.6 million was lent to customers in each year. Management periodically reviews the performance of these loans and does not expect to make significant adjustments to assumptions due to the small remaining value of the loans.