Investment in Real Estate

6 Months Ended

Jun. 30, 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.

During the six months ended June 30, 2013, we recorded an additional $3.4 millionin accumulated depreciation to correct amounts recorded in prior periods related to certain assets.

Acquisitions

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 six months ended June 30, 2013, we recognized approximately $1.0 million of gain on the sale of property as a result of a new U.S. Federal tax law that eliminated a previously accrued built-in-gain tax liability related to the disposition of the Cascade property during 2012.

On July 19, 2013, our Operating Partnership entered into a Purchase and Sale Agreement with certain affiliates of Riverside Communities to acquire three manufactured home communities located in the Chicago metropolitan area collectively containing approximately 1,207 sites for a stated purchase price of $102.0 million (the “Acquisition”). We closed on the Acquisition on August 1, 2013 and funded the purchase price with available cash and limited partnership interests in our Operating Partnership. Patrick Waite, our Senior Vice President of Operations, was formerly employed by an affiliate of Riverside Communities, as a result of which he has financial interests in the sale that will result in his receiving approximately $3.4 million in cash upon the closing of the Acquisition. Mr. Waite did not participate in our management’s analysis, decision-making or recommendation to the Board of Directors with respect to the Acquisition. In addition, David Helfand, the founder and CEO of Riverside Communities, served before 2005 in various positions with us, including at various times as our Chief Financial Officer, Chief Executive Officer, and as a member of our Board of Directors. Mr. Helfand is currently Co-President of Equity Group Investments, L.L.C., an entity affiliated with Sam Zell, Chairman of our Board of Directors.

We are the beneficiary of an escrow funded by the seller of the Properties acquired in 2011 with approximately 227,586 shares of our common stock. 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 29,918 shares of our common stock which resulted in a balance at June 30, 2013 of 197,668 shares. We reflected the shares received as a redemption in paid-in capital in the Consolidated Statements of Changes in Equity. The returned shares were canceled and treated as authorized, but not issued and outstanding. In addition, on July 1, 2013, we received a distribution of 30,268 shares of our common stock from the escrow. We revalue the contingent consideration asset as of each reporting date and recognize in earnings any increase or decrease in fair value of the contingent consideration asset. The fair value estimate of the contingent consideration asset at June 30, 2013 is $6.7 million.

Note 4 – Investment in Real Estate (continued)

Dispositions and real estate held for disposition

On May 8, 2013, we entered into a purchase and sale agreement to sell 11 manufactured home communities located in Michigan (the “Michigan Properties”) collectively containing approximately 5,344 sites for a net purchase price of approximately $165.0 million. We closed on ten of the Michigan Properties on July 23, 2013, and expect to close on the eleventh Michigan Property during the third quarter of 2013. We expect to recognize a gain on sale of real estate assets of approximately $41.0 million in the third quarter of 2013. The closing of the disposition of the remaining Michigan Property is subject to customary closing conditions and no assurances can be given that the disposition will be completed in accordance with the anticipated timing or at all.

Pursuant to ASC 360-10-35 we classified the real estate assets and liabilities associated with the Michigan Properties as held for disposition in the Consolidated Balance Sheets as of June 30, 2013.

The following table sets forth the Properties held for disposition as of June 30, 2013:

Property	Location	Sites
Avon on the Lake	Rochester Hills, MI	616
Cranberry Lake	White Lake, MI	328
Fairchild Lake	Chesterfield, MI	344
Ferrand Estates (a)	Wyoming, MI	419
Grand Blanc Crossing	Grand Blanc, MI	478
Holly Hills	Holly, MI	241
Oakland Glens	Novi, MI	724
Old Orchard	Davison, MI	200
Royal Estates	Kalamazoo, MI	183
Westbrook	Macomb, MI	387
Westbridge Manor	Macomb, MI	1,424
Total		5,344

______________________

(a) We expect to close on this Property during the third quarter of 2013.

Note 4 – Investment in Real Estate (continued)

The major classes of assets and liabilities associated with the real estate held for disposition included in the Consolidated Balance Sheets are as follows (amounts in thousands):

	June 30,			December 31,
	2013			2012
Assets
Investment in real estate
Land	$	28,611		$	28,611
Building and improvements	101,048			98,255
Accumulated depreciation	(16,609		)	(15,077		)
Other assets	6,999			8,063
Total assets held for disposition	$	120,049		$	119,852
Liabilities
Mortgage payable (a)	$	8,163		$	8,256
Other liabilities	2,652			1,802
Total liabilities held for disposition	$	10,815		$	10,058

______________________

(a) Includes approximately $0.4 million debt premium adjustment as of June 30, 2013 and December 31, 2012.

FASB ASC 360 requires that assets classified as held for disposition be carried at the lesser of their carrying amount or estimated fair value, less estimated selling costs. Since these assets were under contract for more than their carrying amount, as of June 30, 2013, we carry them at the carrying amount.

Results of operations for Properties held for disposition have been presented separately as discontinued operations for all periods presented in the Consolidated Statements of Income and Comprehensive Income. The following table summarizes the components of income and expense relating to discontinued operations for the quarters and six months ended June 30, 2013 and 2012 (amounts in thousands):

	Quarters Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Community base rental home income	$	5,080		$	4,861		$	10,117		$	9,718
Rental income	849			572			1,620			1,034
Utility and other income	515			485			997			932
Discontinued property operating revenues	6,444			5,918			12,734			11,684
Property operating expenses	2,473			2,148			4,923			4,479
Income from discontinued property operations	3,971			3,770			7,811			7,205
Loss from home sales operations	(40		)	(46		)	(75		)	(40		)
Other income and expenses	(635		)	(3,238		)	(1,243		)	(6,386		)
Interest and amortization	(131		)	(133		)	(260		)	(266		)
Discontinued operations, net	$	3,165		$	353		$	6,233		$	513