Investment in Real Estate

3 Months Ended

Mar. 31, 2013

Investment in Real Estate

Investment in Real Estate

Land improvements consist primarily of improvements such as grading, landscaping and infrastructure items such as streets, sidewalks or water mains. Buildings and other depreciable property consist of permanent buildings in the Properties such as clubhouses, laundry facilities, maintenance storage facilities, rental units and furniture, fixtures, equipment, and in-place leases.

All acquisitions have been accounted for utilizing the acquisition method of accounting and, accordingly, the results of operations of acquired assets are included in the statements of operations from the dates of acquisition. Certain purchase price adjustments may be made within one year following the acquisition and applied retroactively to the date of acquisition.

During the year ended December 31, 2012, we closed on the acquisition of Victoria Palms Resort, a 1,122-site property, and Alamo Palms Resort, a 643-site property, for a purchase price of $25.0 million. We acquired both of these Properties from unaffiliated third parties.

During the quarter ended March 31, 2013, we recognized a $1.0 million gain on the sale of property as a result of new tax law that eliminated a previously accrued built-in-gain tax liability related to the disposition of the Cascade property during 2012.

As of March 31, 2013, we had no Properties designated as held for disposition pursuant to FASB ASC 360-10-35.

During the year ended December 31, 2011, we acquired a portfolio of 74 manufactured home communities and one RV resort (the “2011 Acquisition Properties.”) At one 2011 Acquisition Property we own both a fee interest and a leasehold interest. 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

Note 4 – Investment in Real Estate (continued)

exercised by either party upon the death of the fee holder. We are the beneficiary of an escrow funded by the seller with approximately 113,793 shares of our common stock. The fair value estimate of the contingent consideration asset at March 31, 2013 is $7.7 million representing an increase of $1.0 million from December 31, 2012. We will revalue the contingent consideration asset as of each reporting date and will recognize in earnings any increase or decrease in fair value of the contingent consideration asset. The escrow provides for distributions of the escrowed stock on a quarterly basis to protect us from future scheduled ground lease payments as well as scheduled increases in the option purchase price over time. On April 1, 2013, we received a distribution of 14,959 shares from the escrow resulting in a share balance of 98,834.