Notes Receivable

6 Months Ended

Jun. 30, 2013

Notes Receivable

Notes Receivable

In certain cases, we make loans to finance the sale of homes to our customers or purchase loans made by others to finance the sale of homes to our customers (referred to as “Chattel Loans”). The Chattel Loans receivable require monthly principal and interest payments and are collateralized by homes at certain of the Properties. As of June 30, 2013 and December 31, 2012, we had approximately $23.1 million and $25.0 million, respectively, of these Chattel Loans included in notes receivable for Properties held for long term investment. In addition, as of June 30, 2013 and December 31, 2012, we had approximately $6.5 million and $7.7 million, respectively, of these Chattel Loans included in notes receivable for Properties held for disposition. As of June 30, 2013, the Chattel Loans receivable had a stated per annum average rate of approximately 7.8%, with a yield of 18.6%, and had an average term remaining of approximately 13 years. These Chattel Loans are recorded net of allowances of approximately $0.4 million as of June 30, 2013 and December 31, 2012. During the six months endedJune 30, 2013 and June 30, 2012, approximately $2.6 million and $2.9 million, respectively, were repaid, and we issued an additional $1.1 million and $0.3 million of loans, respectively. In addition, during the six months ended June 30, 2013 and June 30, 2012 approximately $1.2 million and $4.0 million, respectively, of homes serving as collateral for Chattel Loans were repossessed and converted to rental units. Chattel Loans receivable at June 30, 2013 includes $22.1 million of Chattel Loans with deteriorated credit quality at Properties acquired in 2011. No significant changes in the yield were noted during the six months ended June 30, 2013. Increases in default rates or declines in recovery rates in the future could, if significant, result in an impairment of the loans. Changes in default rates or recovery rates in the future could, if significant, result in future changes to the yield. 

We also provide financing for nonrefundable upgrades of new or existing right to use contracts (“Contracts Receivable”). As of June 30, 2013 and December 31, 2012, we had approximately $16.1 million of Contracts Receivable, including allowances of approximately $0.6 million and $0.7 million, respectively. These Contracts Receivable represent loans to customers who have entered into right-to-use contracts. The Contracts Receivable yield interest at a stated per annum average rate of 16%, have a weighted average term remaining of approximately four years and require monthly payments of principal and interest. During the six months endedJune 30, 2013 and June 30, 2012, approximately $3.8 million and $3.7 million, respectively, were repaid and an additional $3.3 million and $2.6 million, respectively, were lent to customers. We periodically review the performance of these loans and do not expect to make significant adjustments to income recognition assumptions due to the small remaining value of the loans.