Investment in Real Estate

9 Months Ended

Sep. 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 nine months ended September 30, 2013, we recorded an additional $3.5 millionin depreciation expense and accumulated depreciation to correct immaterial amounts recorded in prior periods related to certain assets.

Acquisitions

All acquisitions have been accounted for utilizing the acquisition method of accounting in accordance with ASC 805 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.

On September 16, 2013, we acquired Fiesta Key RV Resort, a premier 324-site RV resort and marina in the Florida Keys, for a stated purchase price of approximately $24.6 million funded with available cash.

On August 1, 2013, we acquired from certain affiliates of Riverside Communities 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 purchase price was funded 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 had financial interests in the sale that resulted in him receiving his share 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 in various positions with us before 2005, 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 engaged a third-party to assist with our purchase price allocation for the acquisitions. The allocation of the fair values of the assets acquired and liabilities assumed is subject to further adjustment due primarily to information not readily available at the acquisition date and final purchase price settlement with the sellers in accordance with the terms of the purchase agreement. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in the acquisitions for the quarter ended September 30, 2013, which we determined using level two and level three inputs (amounts in thousands):

	As of September 30, 2013
Assets acquired
Land	$	39,232
Depreciable property	82,333
Manufactured homes	1,155
In-place leases	3,910
Total Assets acquired	$	126,630

Ground lease escrow

We are the beneficiary of an escrow, funded by the seller, related to one 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 and on July 1, 2013, we received a distribution of 29,918 and 30,268 shares of our common stock, respectively, which resulted in a balance at September 30, 2013 of 167,400 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 October 1, 2013, we received a distribution of 30,619 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 September 30, 2013 is approximately $4.5 million.

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 the sale of ten of the Michigan Properties on July 23, 2013, and closed on the sale of the eleventh Michigan Property on September 25, 2013. We recognized a gain on sale of real estate assets of approximately $40.6 million in the third quarter of 2013.

Results of operations for the Michigan Properties 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 nine months ended September 30, 2013 and 2012 (amounts in thousands):

	Quarters Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Community base rental home income	$	1,448		$	4,915		$	11,565		$	14,633
Rental income	328			656			1,948			1,690
Utility and other income	378			536			1,375			1,460
Discontinued property operating revenues	2,154			6,107			14,888			17,783
Property operating expenses	1,116			2,552			6,039			7,018
Income from discontinued property operations	1,038			3,555			8,849			10,765
Income (loss) from home sales operations	2			(42		)	(77		)	(83		)
Other income and expenses	37			(672		)	(1,202		)	(7,056		)
Interest and amortization	(95		)	(134		)	(355		)	(400		)
Discontinued operations, net	$	982		$	2,707		$	7,215		$	3,226

For the Michigan Properties, the investment in real estate, net of accumulated depreciation, at December 31, 2012 was $111.8 million.

During the nine months ended September 30, 2013, we recognized approximately $1.0 million of gain on the sale of a 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.

As of September 30, 2013, we have no properties designated as held for disposition pursuant to FASB ASC 360-10-35.