UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2009~~March 31, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-11718

EQUITY LIFESTYLE PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Maryland (State or Other Jurisdiction of Incorporation or Organization)		36-3857664 (I.R.S. Employer Identification No.)

Two North Riverside Plaza, Suite 800, Chicago, Illinois		~~60606~~
(Address of Principal Executive Offices)		60606 (Zip Code)

(312) 279-1400
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filerþ	Accelerated filero	Non-accelerated filero	~~Smaller reporting company~~o
		(Do not check if a smaller reporting company)	Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

~~30,315,919~~30,481,448 shares of Common Stock as of ~~August 6, 2009.~~May 4, 2010.

Equity LifeStyle Properties, Inc.

Consolidated Balance Sheets

As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008~~

2009
(amounts in thousands, except share and per share data)


	June 30,						March 31,
	2009			December 31,			2010			December 31,
	(unaudited)			2008			(unaudited)			2009
Assets
Investment in real estate:
Land	$	546,012		$	541,979		$	543,663		$	544,722
Land improvements		1,742,692			1,725,752			1,743,811			1,744,443
Buildings and other depreciable property		241,391			223,290			254,372			249,050

		2,530,095			2,491,021			2,541,846			2,538,215
Accumulated depreciation		(596,962	)		(561,104	)		(646,695	)		(629,768	)

Net investment in real estate		1,933,133			1,929,917			1,895,151			1,908,447
Cash and cash equivalents		174,151			45,312			172,307			145,128
Notes receivable, net		29,078			31,799			29,240			29,952
Investment in joint ventures		9,405			9,676			9,651			9,442
Rent and other customer receivables, net		488			1,040			352			421
Deferred financing costs, net		12,189			12,408			11,169			11,382
Inventory, net		3,981			12,934
Inventory								3,187			2,964
Deferred commission expense		6,769			3,644			10,785			9,373
Escrow deposits and other assets		56,627			44,917			49,264			49,210

Total Assets	$	2,225,821		$	2,091,647		$	2,181,106		$	2,166,319


Liabilities and Equity
Liabilities:
Mortgage notes payable	$	1,611,021		$	1,569,403		$	1,543,722		$	1,547,901
Unsecured lines of credit		—			93,000			—			—
Accrued payroll and other operating expenses		83,699			66,656			60,981			58,982
Deferred revenue — sale of right-to-use contracts		21,045			10,611			33,441			29,493
Deferred revenue — right-to-use annual payments								19,176			12,526
Accrued interest payable		8,337			8,335			8,064			8,036
Rents and other customer payments received in advance and security deposits		43,405			41,302			44,275			44,368
Distributions payable		7,657			6,106			10,611			10,586

Total Liabilities		1,775,164			1,795,413			1,720,270			1,711,892


Commitments and contingencies
Non-controlling interests- Perpetual Preferred OP Units		200,000			200,000
Non-controlling interests — Perpetual Preferred OP Units								200,000			200,000

Equity:
Stockholders’ Equity:
Preferred stock, $.01 par value 10,000,000 shares authorized; none issued		—			—			—			—
Common stock, $.01 par value 100,000,000 shares authorized; 29,912,626 and 25,051,322 shares issued and outstanding for June 30, 2009 and December 31, 2008, respectively		299			238
Common stock, $.01 par value 100,000,000 shares authorized; 30,456,981 and 30,350,745 shares issued and outstanding for March 31, 2010 and December 31, 2009, respectively								305			301
Paid-in capital		450,714			320,084			456,074			456,696
Distributions in excess of accumulated earnings		(237,704	)		(241,609	)		(232,540	)		(238,467	)

Total Stockholders’ Equity		213,309			78,713			223,839			218,530


Non-controlling interests — Common OP Units		37,348			17,521			36,997			35,897

Total Equity		250,657			96,234			260,836			254,427

Total Liabilities and Equity	$	2,225,821		$	2,091,647		$	2,181,106		$	2,166,319

Equity LifeStyle Properties, Inc.

Consolidated Statements of Operations

For the Quarters Ended March 31, 2010 and ~~Six Months Ended June 30,~~ 2009 ~~and 2008~~

(amounts in thousands, except share and per share data)

(unaudited)


	Quarters Ended						Six Months Ended						Quarters Ended
	June 30,						June 30,						March 31,
	2009			2008		2009			2008			2010			2009
Property Operations:
Revenues:
Community base rental income	$	63,318		$	61,430		$	126,502		$	122,464		$	64,422		$	63,184
Resort base rental income		27,747			23,033			63,205			57,630			36,945			35,458
Right-to-use annual payments		12,702			—			25,597			—			12,185			12,895
Right-to-use contracts current period, gross		5,869			—			11,446			—			4,937			5,577
Right-to-use contracts deferred, net of prior period amortization		(5,271	)		—			(10,434	)		—
Right-to-use contracts, deferred, net of prior period amortization														(3,948	)		(5,163	)
Utility and other income		11,720			9,859			24,124			20,650			12,889			12,404

Property operating revenues		116,085			94,322			240,440			200,744			127,430			124,355
Gross revenues from home sales														1,047			1,211
Brokered resale revenues, net														239			186
Ancillary services revenues, net														1,063			1,156
Interest income														1,192			1,383
Income from other investments, net														1,177			2,523

Total revenues														132,148			130,814

Expenses:
Property operating and maintenance		45,565			33,930			87,569			67,699			43,454			42,004
Real estate taxes		8,235			7,478			16,691			14,918			8,314			8,456
Sales and marketing, gross		3,672			—			6,744			—			3,263			3,072
Sales and marketing, deferred commissions, net		(1,632	)		—			(3,125	)		—			(1,412	)		(1,493	)
Property management		7,730			5,243			16,434			10,537			8,740			8,704

Property operating expenses (exclusive of depreciation shown separately below)		63,570			46,651			124,313			93,154			62,359			60,743

Income from property operations		52,515			47,671			116,127			107,590


Home Sales Operations:
Gross revenues from inventory home sales		1,737			6,799			2,948			12,994
Cost of inventory home sales		(1,647	)		(6,859	)		(3,764	)		(13,609	)

Profit (loss) from inventory home sales		90			(60	)		(816	)		(615	)
Brokered resale revenues, net		199			301			385			668
Cost of home sales														1,159			2,117
Home selling expenses		(640	)		(1,635	)		(1,712	)		(3,148	)		477			1,072
Ancillary services revenues, net		418			(327	)		1,574			1,121

Profit (loss) from home sales operations and other		67			(1,721	)		(569	)		(1,974	)

Other Income (Expenses):
Interest income		1,223			294			2,606			681
Income from other investments, net		1,866			6,705			4,389			13,615
General and administrative		(6,216	)		(4,834	)		(12,373	)		(10,233	)		5,676			6,157
Rent control initiatives		(169	)		(518	)		(315	)		(1,865	)		714			146
Interest and related amortization		(25,026	)		(24,690	)		(49,576	)		(49,674	)		23,767			24,550
Depreciation on corporate and other assets		(234	)		(84	)		(402	)		(182	)
Depreciation on corporate assets														210			168
Depreciation on real estate assets		(17,143	)		(16,258	)		(34,542	)		(32,532	)		16,923			17,399

Total other expenses, net		(45,699	)		(39,385	)		(90,213	)		(80,190	)
Total expenses														111,285			112,352

Income before equity in income of unconsolidated joint ventures														20,863			18,462

Equity in income of unconsolidated joint ventures		475			2,499			2,378			3,383			841			1,903

Consolidated income from continuing operations		7,358			9,064			27,723			28,809			21,704			20,365


Discontinued Operations:
Discontinued operations		87			88			213			145			—			126
Loss on sale from discontinued real estate		—			(39	)		(20	)		(80	)
Loss from discontinued real estate														(177	)		(20	)

Income from discontinued operations		87			49			193			65
(Loss) income from discontinued operations														(177	)		106

Consolidated net income		7,445			9,113			27,916			28,874			21,527			20,471
Income allocated to non-controlling interests:
Common OP Units		(501	)		(964	)		(3,295	)		(3,968	)		(2,432	)		(2,794	)
Perpetual Preferred OP Units		(4,040	)		(4,040	)		(8,073	)		(8,072	)		(4,031	)		(4,033	)

Net income available for Common Shares	$	2,904		$	4,109		$	16,548		$	16,834		$	15,064		$	13,644

Equity LifeStyle Properties, Inc.

Consolidated Statements of Cash Flows

For the ~~Six Months~~Quarters Ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~

(amounts in thousands)

(unaudited)


	June 30,			June 30,			March 31,			March 31,
	2009			2008			2010			2009
Cash Flows From Operating Activities:
Consolidated net income	$	27,916		$	28,839		$	21,527		$	20,471
Adjustments to reconcile net income to cash provided by operating activities:
(Gain) loss on sale of properties and other		(783	)		80
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on discontinued real estate and other								177			20
Depreciation expense		36,718			33,873			18,175			18,459
Amortization expense		1,569			1,419			814			749
Debt premium amortization		(546	)		(372	)		4			(257	)
Equity in income of unconsolidated joint ventures		(3,017	)		(4,286	)		(1,147	)		(2,229	)
Distributions from unconsolidated joint ventures		2,540			3,148			564			2,011
Amortization of stock-related compensation		2,342			2,716			1,044			1,185
Revenue recognized from right-to-use contract sales		(1,012	)		—			(989	)		(414	)
Amortized commission expense related to right-to-use contract sales		325			—
Commission expense recognized related to right-to-use contract sales								296			136
Accrued long term incentive plan compensation		2,837			546			—			779
Increase in provision for uncollectible rents receivable		411			254			69			264
Increase in provision for inventory reserve		1,067			329			—			855
Changes in assets and liabilities:
Rent and other customer receivables, net		141			494			—			(517	)
Inventory		833			(1,221	)		600			192
Deferred commissions expense		(3,450	)		—
Deferred commission expense								(1,708	)		(1,629	)
Escrow deposits and other assets		(11,650	)		(6,406	)		(1,141	)		1,414
Accrued payroll and other operating expenses		10,352			12,476			2,015			2,206
Deferred revenue — sales of right-to-use contracts		11,445			—			4,937			5,577
Deferred revenue — right-to-use annual payments								6,650			6,476
Rents received in advance and security deposits		4,622			3,119			(80	)		(890	)

Net cash provided by operating activities		82,660			75,008			51,807			54,858

Cash Flows From Investing Activities:
Acquisition of real estate		(5,048	)		(3,984	)
Proceeds from disposition of rental properties		2,192			—
Acquisition of real estate and other								—			(5,048	)
Net tax-deferred exchange withdrawal		—			2,124			786			—
Joint Ventures:
Investments in		—			(5,346	)
Distributions from		—			497
Net repayment of notes receivable		2,721			131			712			1,590
Capital improvements		(15,810	)		(11,132	)		(8,010	)		(6,523	)

Net cash used in investing activities		(15,945	)		(17,710	)		(6,512	)		(9,981	)

Cash Flows From Financing Activities:
Net proceeds from stock options and employee stock purchase plan		961			3,014			314			349
Net proceeds from issuance of Common Stock		146,649			—
Distributions to Common Stockholders, Common OP Unitholders, and Perpetual Preferred OP Unitholders		(21,775	)		(18,645	)		(14,632	)		(10,122	)
Stock repurchase and Unit redemption		(120	)		—			(366	)		(108	)
Acquisition of non-controlling interests								(1,453	)		—
Lines of credit:
Proceeds		50,900			68,400			—			38,700
Repayments		(143,900	)		(109,900	)		—			(130,400	)
Principal repayments and mortgage debt payoff		(43,999	)		(20,053	)
Principal payments and mortgage debt payoff								(13,516	)		(28,106	)
New financing proceeds		74,313			25,832			11,950			56,813
Debt issuance costs		(905	)		(546	)		(413	)		(636	)

Net cash provided by (used in) financing activities		62,124			(51,898	)
Net cash used in financing activities								(18,116	)		(73,510	)

Net increase in cash and cash equivalents		128,839			5,400
Net increase (decrease) in cash and cash equivalents								27,179			(28,633	)
Cash and cash equivalents, beginning of period		45,312			5,785			145,128			45,312

Cash and cash equivalents, end of period	$	174,151		$	11,185		$	172,307		$	16,679

Definition of Terms:

Equity LifeStyle Properties, Inc., a Maryland corporation, together with MHC Operating Limited Partnership (the “Operating Partnership”) and other consolidated subsidiaries (“Subsidiaries”), are referred to herein as the “Company,” “ELS,” “we,” “us,” and “our.” Capitalized terms used but not defined herein are as defined in the Company’s Annual Report on Form 10-K (“~~2008~~2009 Form 10-K”) for the year ended December 31, ~~2008.~~2009.

Presentation:

These unaudited Consolidated Financial Statements have been prepared pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations and should be read in conjunction with the financial statements and notes thereto included in the ~~2008~~2009 Form 10-K. The following Notes to Consolidated Financial Statements highlight significant changes to the Notes included in the ~~2008~~2009 Form 10-K and present interim disclosures as required by the SEC. The accompanying Consolidated Financial Statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature. Revenues are subject to seasonal fluctuations and as such quarterly interim results may not be indicative of full year results.

Note 1 — Summary of Significant Accounting Policies

We follow accounting standards set by the Financial Accounting Standards Board, commonly referred to as the “FASB.” The FASB sets generally accepted accounting principles (“GAAP”) that we follow to ensure we consistently report our financial condition, results of operations and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (the “Codification”). The FASB finalized the Codification effective for periods ending on or after September 15, 2009. The Codification does not change how we account for our transactions or the nature of the related disclosures made.

(a) Basis of Consolidation

~~The Company consolidates its~~We consolidate our majority-owned subsidiaries in which ~~it has~~we have the ability to control the operations of the subsidiaries and all variable interest entities with respect to which ~~the Company is~~we are the primary beneficiary. ~~The Company~~We also ~~consolidates~~consolidate entities in which ~~it has~~we have a controlling direct or indirect voting interest. All inter-company transactions have been eliminated in consolidation. ~~The Company’s~~Our acquisitions on or prior to December 31, 2008 were all accounted for as purchases in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”). For business combinations for which the acquisition date is on or after January 1, 2009, the purchase price of Properties will be accounted for in accordance with ~~Statement of Financial Accounting Standard No. 141R,~~the Codification Topic “Business ~~Combinations,”~~Combinations” (“~~SFAS No. 141R”~~FASB ASC 805”).

~~The Company has applied~~On January 1, 2010, we adopted the ~~Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46R, “Consolidation of Variable~~Codification Sub-Topic “Variable Interest Entities” (“~~FIN 46R”~~FASB ASC 810-10-15”) ~~— an interpretation of ARB 51.~~. The objective of ~~FIN 46R~~FAS ASC 810-10-15 is to provide guidance on ~~how to identify~~a qualitative approach for determining which enterprise has a controlling financial interest in a variable interest entity (“VIE”) ~~and determine when~~. The approach focuses on identifying which enterprise has the ~~assets, liabilities, non-controlling interests, and results of operations~~power to direct the activities of a VIE ~~need to be included in~~that most significantly impact the entity’s economic performance. It also requires ongoing assessments of whether an enterprise is the primary beneficiary of a ~~company’s consolidated financial statements.~~VIE. A company that holds variable interests in an entity will need to consolidate ~~such~~an entity if the company ~~absorbs~~holds the majority power to direct the activities of a ~~majority of~~VIE that most significantly impact the entity’s ~~expected losses or receives a majority~~economic performance. We have evaluated our relationships with all types of ~~the entity’s expected residual returns if they occur, or both (i.e., the primary beneficiary). The Company has~~entity ownerships (general and limited partnerships and corporate interests) and are not required to consolidate any of our entity ownerships.

We have also applied ~~Emerging Issues Task Force 04-5, “Determining Whether a General Partner, or~~ the ~~General Partners as a Group, Controls a Limited Partnership or~~Codification Sub-Topic “Control of Partnerships and Similar ~~Entity When the Limited Partners Have Certain Rights”~~Entities” (“~~EITF 04-5”~~FASB ASC 810-20”), which determines whether a general partner or the general partners as a group controls a limited partnership or similar entity and therefore should consolidate the entity. ~~The Company~~We will continue to apply ~~FIN 46R~~FASB ASC 810-10-15 and ~~EITF 04-5~~FASB ASC 810-20 to all types of entity ownership (general and limited partnerships and corporate interests).

~~Note 1 — Summary of Significant Accounting Policies (continued)~~

(c) Markets

We manage all our operations on a property-by-property basis. Since each Property has similar economic and operational characteristics, the Company has one reportable segment, which is the operation of land lease Properties. The distribution of the Properties throughout the United States reflects our belief that geographic diversification helps insulate the portfolio from regional economic influences. We intend to target new acquisitions in or near markets where the Properties are located and will also consider acquisitions of Properties outside such markets.

(d) Inventory

As of March 31, 2010 and December 31, 2008, inventory primarily consists of new and used Site Set homes and is stated at the lower of cost or market after consideration of the N.A.D.A. (National Automobile Dealers Association) Manufactured Housing Appraisal Guide and the current market value of each home included in the home inventory. Inventory sales revenues and resale revenues are recognized when the home sale is closed. The expense for the inventory reserve is included in the cost of home sales in our Consolidated Statements of Operations. As of June 30, 2009, inventory primarily consists of merchandise inventory as almost all Site Set inventory has been reclassified to buildings and other depreciable property. (See Note 6 in the Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q (“Form 10-Q”)). Home sales revenues and resale revenues are recognized when the home sale is closed. The expense for home inventory reserve is included in the cost of home sales in our Consolidated Statements of Operations.

(e) Real Estate

In accordance with ~~SFAS No. 141R,~~FASB ASC 805, which is effective for acquisitions on or after January 1, 2009, we recognize all the assets acquired and all the liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. We also ~~recognize~~expense transaction costs as they are incurred.

Acquisitions prior to December 31, 2008 were accounted for in accordance with SFAS No. 141, and we allocated the purchase price of Properties we acquired to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be available in connection with the acquisition or financing of the respective Property and other market data. We also consider information obtained about each Property as a result of our due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

Real estate is recorded at cost less accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. We generally use a 30-year estimated life for buildings acquired and structural and land improvements (including site development), a ten-year estimated life for building upgrades and a five-year estimated life for furniture, fixtures and equipment. New rental units are generally depreciated using a 20-year estimated life from each model year down to a salvage value of 40% of the original costs. Used rental units are generally depreciated based on the estimated life of the unit with no estimated salvage value.

The values of above-and below-market leases are amortized and recorded as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income over the remaining term of the associated lease. The value associated with in-place leases is amortized over the expected term, which includes an estimated probability of lease renewal. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve the asset and extend the useful life of the asset are capitalized over their estimated useful life.

~~The Company~~We periodically ~~evaluates its~~evaluate our long-lived assets, including ~~its~~our investments in real estate, for impairment indicators. Our judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal ~~factors.~~and environmental concerns. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted.

Note 1 — Summary of Significant Accounting Policies (continued)

For long-lived assets to be held and used, including our investments in rental units, we compare the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, we further analyze each individual asset for other temporary or permanent indicators of impairment. An impairment loss would be recorded for the difference between the estimated fair value and the carrying amount of the asset if we deem this difference to be permanent.

For Properties to be disposed of, an impairment loss is recognized when the fair value of the Property, less the estimated cost to sell, is less than the carrying amount of the Property measured at the time ~~the Company has~~we have a commitment to sell the Property and/or isare actively marketing the Property for sale. A Property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less costs to sell. Subsequent to the date that a Property is held for disposition, depreciation expense is not recorded. ~~The Company accounts~~We account for ~~its~~our Properties held for disposition in accordance with ~~Statement of Financial Accounting Standards No. 144 “Accounting for~~ the ~~Impairment~~Codification Sub-Topic “Impairment or Disposal of ~~Long-Lived~~Long Lived Assets” (“~~SFAS No. 144”~~FASB ASC 360-10-35”). Accordingly, the results of operations for all assets sold or held for sale have been classified as discontinued operations in all periods presented.

(f) Identified Intangibles and Goodwill

We record acquired intangible assets and acquired intangible liabilities at their estimated fair value separate and apart from goodwill. We amortize identified intangible assets and liabilities that are determined to have finite lives over the period the assets and liabilities are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.

The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the carrying amounts of identified intangible assets and goodwill, a component of “Escrow deposits and other assets” on our consolidated balance sheets, were approximately ~~$4.3 million and $4.2 million, respectively.~~$19.6 million. Accumulated amortization of identified intangibles assets was approximately ~~$0.3~~$0.8 million and ~~$0.1~~$0.6 million as of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, respectively.

Estimated amortization of identified intangible assets for each of the next five years are as follows (amounts in thousands):


Year ending December 31,
2010	$	924,610
2011	$	846,735
2012	$	746,735
2013	$	705,069
2014	$	621,735

(g) Cash and Cash Equivalents

We consider all demand and money market accounts and certificates of deposit with a maturity date, when purchased, of three months or less to be cash equivalents. The cash and cash equivalents as of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008~~2009 include approximately $0.4 million of restricted cash.

~~Note 1 — Summary of Significant Accounting Policies (continued)~~

On August 14, 2008, we purchased Contract Receivables that were recorded at fair value at the time of acquisition of approximately $19.6 million under ~~American Institute of Certified Public Accountants Statement of Position (SOP) 03-3: Accounting for Certain Loans or~~the Codification Topic “Loans and Debt Securities Acquired ~~in a Transfer.~~with Deteriorated Credit Quality” (“FASB ASC 310-30”). The fair value of these Contracts Receivable includes an estimate of losses that are expected to be incurred over the estimated remaining lives of the receivables, and therefore no allowance for losses was recorded for these receivables as of the transaction date. Through ~~June 30, 2009,~~March 31, 2010, the credit performance of these receivables has generally been consistent with the assumptions used in determining the initial fair value of these loans, and our original expectations regarding the amounts and timing of future cash flows has not changed. A probable decrease in management’s expectation of future cash collections related to these receivables could result in the need to record an allowance for credit losses related to these loans in the future. A significant and probable increase in expected cash flows would generally result in an increase in interest income recognized over the remaining life of the underlying pool of receivables.

(i) Investments in Joint Ventures

Investments in joint ventures in which ~~the Company does~~we do not have a controlling direct or indirect voting interest, but can exercise significant influence over the entity with respect to ~~its~~our operations and major decisions, are accounted for using the equity method of accounting whereby the cost of an investment is adjusted for ~~the Company’s~~our share of the equity in net income or loss from the date of acquisition and reduced by distributions received. The income or loss of each entity is allocated in accordance with the provisions of the applicable operating agreements. The allocation provisions in these agreements may differ from the ownership interests held by each investor. Differences between the carrying amount of ~~the Company’s~~our investment in the respective entities and ~~the Company’s~~our share of the underlying equity of such unconsolidated entities are amortized over the respective lives of the underlying assets, as applicable. (See Note 5 in the Notes to Consolidated Financial Statements contained in this Form 10-Q).

(j) ~~Income from Other Investments, net~~

Prior to August 14, 2008, income from other investments, net, primarily included revenue relating to the Company’s former ground leases with Privileged Access. The ground leases were terminated on August 14, 2008 due to the PA Transaction. The ground leases with Privileged Access were for approximately 24,300 sites at 82 of the Company’s Properties and were accounted for in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases. The Company recognized income related to these ground leases of approximately $6.4 and approximately $12.7 million for the quarter and six months ended June 30, 2008, respectively.

~~(k)~~ Insurance Claims

The Properties are covered against losses caused by various events including fire, flood, property damage, earthquake, windstorm and business interruption by insurance policies containing various deductible requirements and coverage limits. Recoverable costs are classified in other assets as incurred. Insurance proceeds are applied against the asset when received. Recoverable costs relating to capital items are treated in accordance with ~~the Company’s~~our capitalization policy. The book value of the original capital item is written off once the value of the impaired asset has been determined. Insurance proceeds relating to the capital costs are recorded as income in the period they are received.

Approximately 70 Florida Properties suffered damage from the five hurricanes that struck the state during 2004 and 2005. The Company estimates its total claim to exceed $21.0 million and has made claims for full recovery of these amounts, subject to deductibles.

The Company has received proceeds from insurance carriers of approximately $10.5 million through June 30, 2009. The proceeds were accounted for in accordance with the Statement of Financial Accounting Standards No.5, “Accounting for Contingencies” (“SFAS No. 5”). During the six months ended June 30, 2009, $1.5 million has been recognized as a gain on insurance recovery, which is net of approximately $0.2 million of contingent legal fees and included in income from other investments, net.

Note 1 — Summary of Significant Accounting Policies (continued)

Approximately 70 Florida Properties suffered damage from five hurricanes that struck the state during 2004 and 2005. We estimate our total claims to be approximately $21.0 million and have made claims for the full recovery of these amounts, subject to deductibles.

We have received proceeds from insurance carriers of approximately $11.2 million through March 31, 2010. The proceeds were accounted for in accordance with the Codification Topic “Contingencies” (“FASB ASC 450”). During the quarters ended March 31, 2010 and 2009, approximately $0.4 million and $1.6 million, respectively, has been recognized as a gain on insurance recovery, which is net of approximately $0.2 million and $0.1 million, respectively, of contingent legal fees and included in income from other investments, net.

On June 22, 2007, ~~the Company~~we filed a lawsuit related to some of the unpaid claims against certain insurance carriers and its insurance broker. See Note 13 in the Notes to Consolidated Financial Statements contained in this Form 10-Q for further discussion of this lawsuit.

~~(l)~~(k) Fair Value of Financial Instruments

~~The Company’s~~Our financial instruments include short-term investments, notes receivable, accounts receivable, accounts payable, other accrued expenses, and mortgage notes payable.

Codification Topic “Fair Value Measurements and Disclosures” (“FASB ASC 820”) establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair ~~values~~value measurement. The three levels are defined as follows:

Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of ~~all~~the financial ~~instruments, including notes receivable, were not materially different from their carrying values at June 30, 2009~~instrument.

Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

At March 31, 2010 and December 31, ~~2008.~~

The valuation of financial instruments under Statement of Financial Accounting Standards No. 107, “Disclosures About Fair Value of Financial Instruments” (“SFAS No. 107”) and Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) requires us to make estimates and judgments that affect the fair value of the instruments. Where possible, we base2009, the fair values of our financial instruments ~~on listed market prices and third party quotes. Where these are not available, we base our estimates on other factors relevant to the financial instrument.~~

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosure about Derivative Instruments and Hedging Activities” (“SFAS No. 161”), an amendment of SFAS No. 133. SFAS No. 161 is intended to enhance the disclosure framework in SFAS No. 133 by requiring objectives of using derivatives to be disclosed in terms of underlying risk and accounting designation. The statement requires a new tabular disclosure format as a way of providing a more complete picture of derivative positions andapproximate their effect during the reporting period. SFAS No. 161 was effective November 15, 2008 with early adoption recommended. The Company currently does not have any financial instruments that require the application of SFAS No. 133carrying or ~~SFAS No. 161.~~contract values.

~~(m)~~(l) Deferred Financing Costs, net

Deferred financing costs, net include fees and costs incurred to obtain long-term financing. The costs are being amortized over the terms of the respective loans on a level yield basis. Unamortized deferred financing fees are written-off when debt is retired before the maturity date. Upon amendment of the lines of credit, unamortized deferred financing fees are accounted for in accordance with, ~~Emerging Issues Task Force No. 98-14, “Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements”~~Codification Sub-Topic “Modifications and Extinguishments” (“~~EITF No. 98-14”~~FASB ASC 470-50-40”). Accumulated amortization for such costs was ~~$14.0~~$13.1 million and ~~$13.1~~$12.5 million at ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, respectively.

~~(n)~~(m) Revenue Recognition

~~The Company accounts~~We account for leases with ~~its~~our customers as operating leases. Rental income is recognized over the term of the respective lease or the length of a customer’s stay, the majority of which are for a term of not greater than one year. We will reserve for receivables when we believe the ultimate collection is less than probable. Our provision for uncollectible rents receivable was approximately ~~$1.9 million and $1.5~~$2.2 million as of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008, respectively.~~2009.

Note 1 — Summary of Significant Accounting Policies (continued)

~~The~~We account for the sales of right-to-use contracts ~~are recognized~~ in accordance with ~~Staff Accounting Bulletin 104,~~~~Revenue Recognition in Consolidated Financial Statements, Corrected~~~~(“SAB 104”~~the Codification Topic “Revenue Recognition” (“FASB ASC 605”). A right-to-use contract gives the customer the right to a set schedule of usage at a specified group of Properties. Customers may choose to upgrade their contracts to increase their usage and the number of Properties they may access. A contract requires the customer to make an upfront nonrefundable payment and annual payments during the term of the contract. The ~~Company~~stated term of a right-to-use contract is generally three years and the customer may renew his contract by continuing to make the annual payments. We will recognize the upfront non-refundable payments over the estimated customer life which, based on historical attrition rates, ~~the Company has~~we have estimated to be ~~between~~from one to 31 years. ~~The current period sales~~For example, we have currently estimated that 7.9% of customers who purchase a new right-to-use contract will terminate their contract after five years. Therefore, the upfront ~~non-refundable~~nonrefundable payments ~~are reported on the Income Statement in the line item titled “Right-to-use contracts current period, gross.” The cumulative deferral~~from 7.9% of the contracts sold in any particular period are amortized on a straight-line basis over a period of five years as the estimated customer life for 7.9% of our customers who purchase a contract is five years. The historical attrition rates for upgrade contracts are lower than for new contacts, and therefore, the nonrefundable upfront ~~non-refundable~~ payments for upgrade contracts are ~~reported on the Balance Sheet in the line item titled “Deferred revenue — sale of right-to use~~amortized at a different rate than for new contracts.” The deferral of current period sales, net of amortization of prior period sales, is reported on the Income Statement in the line item titled “Right-to-use contracts, deferred, net of prior period amortization.” The decision to recognize this revenue in accordance with ~~SAB 104~~FASB ASC 605 was made after corresponding with the Office of the Chief Accountant at the SEC during September and October of 2008. The commissions paid on the sale of right-to-use contracts will be deferred and amortized over the same period as the related sales revenue. The current period commissions paid are reported on the Income Statement in the line item titled “Sales and marketing, gross.” The cumulative deferrals of commissions paid are reported on the Balance Sheet in the line item titled “Deferred commissions expense.” The deferral of current period commissions, net of amortization of prior period commissions is reported on the Income Statement in the line item titled “Sales and marketing, deferred commissions, net.”

~~Annual~~Right-to-use annual payments paid by customers under the terms of the right-to-use contracts are deferred and recognized ratably over the one-year period in which the services are provided.

Income from home sales is recognized when the earnings process is complete. The earnings process is complete when the home has been delivered, the purchaser has accepted the home and title has transferred.

~~(o) Recent Accounting Pronouncements~~

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS No. 160”), an amendment of Accounting Research Bulletin No. 51. SFAS No. 160 seeks to improve uniformity and transparency in reporting of the net income attributable to non-controlling interests in the consolidated financial statements of the reporting entity. The statement requires, among other provisions, the disclosure, clear labeling and presentation of non-controlling interests in the Consolidated Balance Sheet and Consolidated Income Statement. Per SFAS No. 160, a non-controlling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. The ownership interests in the subsidiary that are held by owners other than the parent are non-controlling interests. Under SFAS No. 160, such non-controlling interests are reported on the consolidated balance sheets within equity, separately from the Company’s equity. However, per FASB Emerging Issues Task Force Topic No. D-98, “Classification and Measurement of Redeemable Securities” (“EITF D-98”), securities that are redeemable for cash or other assets at the option of the holder, not solely within the control of the issuer, must be classified outside of permanent equity. This would result in certain outside ownership interests being included as redeemable non-controlling interests outside of permanent equity in the consolidated balance sheets. The Company makes this determination based on terms in applicable agreements, specifically in relation to redemption provisions. Additionally, with respect to non-controlling interests for which the Company has a choice to settle the contract by delivery of its own shares, the Company considered the guidance in EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” to evaluate whether the Company controls the actions or events necessary to issue the maximum number of shares that could be required to be delivered under share settlement of the contract.

In accordance with SFAS No. 160, effective January 1, 2009, the Company, for all periods presented, has reclassified the non-controlling interest for Common OP Units from the mezzanine section under Total Liabilities to the Equity section of the consolidated balance sheets. The caption Common OP Units on the consolidated balance sheets also includes $0.5 million of private REIT Subsidiaries preferred stock. Based on the Company’s analysis, Perpetual Preferred OP Units will remain in the mezzanine section. The presentation of income allocated to Common OP Units and Perpetual Preferred OP Units on the consolidated statements of operations has been moved to the bottom of the statement prior to Net income available to Common Shares.

~~Note 1 — Summary of Significant Accounting Policies (continued)~~

In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 seeks to establish general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. The Statement sets forth the period and circumstances after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. The Statement introduces the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The Statement applies to interim or annual financial periods ending after June 15, 2009. The adoption of SFAS No.165 has had no material effect on the Company’s financial statements. Our management evaluated for subsequent events through the time of our filing on August 10, 2009.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, amendments to FASB Interpretation No. 46 (R), (“SFAS No. 167”). SFAS No. 167 seeks to improve financial reporting by enterprises involved with variable interest entities. The Statement addresses the effects on certain provisions of FIN 46R, Consolidation of Variable Interest Entities,as a result of the elimination of the qualifying special-purpose entity concept in FASB Statement No. 166, Accounting for Transfers of Financial Assets. It also discusses the application of certain key provisions of FIN 46R, including those in which the accounting and disclosures under FIN 46R do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This Statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The Company does not believe the adoption of SFAS No. 167 will have a material effect on its consolidated financial statements.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162” (“SFAS No. 168”). SFAS No. 168 will become the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Statement will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Statement will become nonauthoritative. The Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The Company does not believe SFAS No. 168 will have an impact on its consolidated financial statements.

In June 2008, the FASB issued FASB Staff Position on Emerging Issues Task Force Issue 03-6, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. Early application was not permitted. Adoption on January 1, 2009 did not materially impact our earnings per share calculation.

~~(p)~~(n) Reclassifications

Certain ~~2008~~2009 amounts have been reclassified to conform to the ~~2009~~2010 presentation. This reclassification had no material effect on the consolidated balance sheets or statements of operations of the Company.

On March 24, 2010 the Company filed a Form 8-K disclosing and attaching as an exhibit a proposed new format for our Consolidated Statements of Operations. The proposed new format is in response to a comment letter received from the SEC on March 18, 2010. The proposed new format has been incorporated into this Form 10-Q.

1514

Note 2 — Earnings Per Common Share

Earnings per common share are based on the weighted average number of common shares outstanding during each year. ~~Statement of Financial Accounting Standards No. 128,~~Codification Topic “Earnings Per Share” (“~~SFAS No. 128”~~FASB ASC 260”) defines the calculation of basic and fully diluted earnings per share. Basic and fully diluted earnings per share are based on the weighted average shares outstanding during each ~~period~~year and basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. The conversion of OP Units has been excluded from the basic earnings per share calculation. The conversion of an OP Unit to a share of ~~Common Stock~~common stock has no material effect on earnings per common share.

The following table sets forth the computation of basic and diluted earnings per common share for the quarters ended March 31, 2010 and ~~six months ended June 30,~~ 2009 ~~and 2008~~ (amounts in thousands):


	Quarters Ended				Six Months Ended				Quarters Ended
	June 30,				June 30,				March 31,
	2009		2008		2009		2008		2010			2009
Numerators:
Income from Continuing Operations:
Income from continuing operations — basic	$	2,830	$	4,069	$	16,386	$	16,781	$	15,216		$	13,556
Amounts allocated to dilutive securities		488		955		3,264		3,956		2,457			2,776

Income from continuing operations — fully diluted	$	3,318	$	5,024	$	19,650	$	20,737	$	17,673		$	16,332


Income from Discontinued Operations:
Income from discontinued operations — basic	$	74	$	40	$	162	$	53
(Loss) income from discontinued operations — basic									$	(152	)	$	88
Amounts allocated to dilutive securities		13		9		31		12		(25	)		18

Income from discontinued operations — fully diluted	$	87	$	49	$	193	$	65
(Loss) income from discontinued operations — fully diluted									$	(177	)	$	106


Net Income Available for Common Shares — Fully Diluted:

Net income available for Common Shares — basic	$	2,904	$	4,109	$	16,548	$	16,834	$	15,064		$	13,644
Amounts allocated to dilutive securities		501		964		3,295		3,968		2,432			2,794

Net income available for Common Shares — fully diluted	$	3,405	$	5,073	$	19,843	$	20,802	$	17,496		$	16,438


Denominator:
Weighted average Common Shares outstanding — basic		25,163		24,370		25,055		24,285		30,304			24,945
Effect of dilutive securities:
Redemption of Common OP Units for Common Shares		5,164		5,777		5,212		5,802		4,912			5,261
Employee stock options and restricted shares		366		393		342		391		284			317

Weighted average Common Shares outstanding - fully diluted		30,693		30,540		30,609		30,478
Weighted average Common Shares outstanding — fully diluted										35,500			30,523

~~Note 4 — Investment in Real Estate (continued)~~

On April 17, 2009, we sold Caledonia, a 247-site Property in Caledonia, Wisconsin, for proceeds of approximately $2.2 million. The Company recognized a gain on sale of approximately $0.8 million and is included in Income from other investments, net. In addition, we received approximately $0.3 million of deferred rent due from the previous tenant.

On February 13, 2009, the Company acquired the remaining 75 percent interests in three Diversified Portfolio joint ventures known as (i) Robin Hill, a 270-site property in Lenhartsville, Pennsylvania, (ii) Sun Valley, a 265-site property in Brownsville, Pennsylvania, and (iii) Plymouth Rock, a 609-site property in Elkhart Lake, Wisconsin. The gross purchase price was approximately $19.2 million, and we assumed mortgage loans of approximately $12.9 million with a value of approximately $11.9 million and a weighted average interest rate of 6.0 percent per annum.

All acquisitions have been accounted for utilizing the purchase 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 ~~recorded~~made within one year following the acquisitions.

The Company actively seeks to acquire additional Properties and currently is engaged in negotiations relating to the possible acquisition of a number of Properties. At any time these negotiations are at varying stages, which may include contracts outstanding, to acquire certain Properties, which are subject to satisfactory completion of our due diligence review.

As of ~~June 30, 2009,~~March 31, 2010, the Company had ~~two~~no Properties designated as held for disposition pursuant to ~~SFAS No. 144. The Company determined that these Properties no longer met its investment criteria. As such,~~FASB ASC 360-10-35.

Creekside is a 165-site all-age manufactured home community located in Wyoming, Michigan. On December 29, 2009, we sent a notice of imminent default along with a deed-in-lieu of foreclosure to the ~~results from operations of these two Properties are classified as income from discontinued operations. The Company expects~~loan servicer regarding the $3.6 million mortgage loan on Creekside which bears interest at 6.327% and was scheduled to ~~sell these Properties for proceeds greater than their net book value. The Properties that were classified as held for disposition~~mature in 2015. We defaulted on the mortgage in January 2010 and ceased managing the property as of ~~June 30, 2009 are listed~~January 29, 2010. In accordance with FASB ASC 470-60, we recorded a loss on disposition of approximately $0.2 million during the quarter ended March 31, 2010. (See Note 13 in the ~~table below:~~Notes to Consolidated Financial Statements contained in this Form 10-Q.)


~~Property~~	~~Location~~	~~Sites~~
~~Casa Village~~₍₁₎	~~Billings, MT~~		~~490~~
~~Creekside.~~	~~Wyoming, MI~~		~~165~~

Note 4 — Investment in Real Estate (continued)


₍₁₎		~~Casa Village, was sold on July 20, 2009 for proceeds of approximately $12 million.~~

The following table summarizes the combined results of operations of the zero and two Properties currently held for sale for the quarters ended March 31, 2010 and ~~six months ended June 30,~~ 2009, ~~and 2008,~~ respectively (amounts in thousands).


	Quarters Ended						Six Months Ended						Quarters Ended
	June 30,						June 30,						March 31,
	2009			2008			2009			2008			2010			2009
Rental income	$	527		$	531		$	1,067		$	1,068		$	—		$	540
Utility and other income		39			36			77			78			—			38

Property operating revenues		566			567			1,144			1,146			—			578

Property operating expenses		254			252			496			540			—			(242	)

Income from property operations		312			315			648			606			—			336

Income from home sales operations		9			4			22			1			—			13

Interest and Amortization		(225	)		(231	)		(448	)		(462	)		—			(223	)
Depreciation		(9	)		—			(9	)		—

Total other expenses		(234	)		(231	)		(457	)		(462	)
Loss on real estate														(177	)		(20	)

Loss on sale of property		—			(39	)		(20	)		(80	)
(Loss) income from discontinued operations													$	(177	)	$	106

Net income from discontinued operations	$	87		$	49		$	193		$	65

Note 6 — Inventory

The following table sets forth Inventory as of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008~~2009 (amounts in thousands):

June 30,
2009 December 31,
2008
New homes_(a)
$ 466 $ 8,436
Used homes_(b)
— 312
Other_(c)
3,515 4,651

Total inventory_(d)
3,981 13,399
Inventory reserve — (465 )

Inventory, net of reserves $ 3,981 $ 12,934


	March 31,		December 31,
	2010		2009
New homes	$	184	$	174
Used homes		—		—
Other_(a)		3,003		2,790

Total inventory	$	3,187	$	2,964


^(a)		~~Includes 6 and 261 new units as of June 30, 2009 and December 31, 2008, respectively.~~

~~(b)~~		~~Includes zero and 27 used units as of June 30, 2009 and December 31, 2008, respectively.~~

~~(c)~~		Other inventory primarily consists of merchandise inventory.

~~(d)~~		~~Includes $0.3 million in discontinued operations as of June 30, 2009 and December 31, 2008.~~

During the ~~six months~~quarter ended ~~June 30,~~March 31, 2010 and year ended December 31, 2009, ~~$6.1~~$0.0 and $6.7 million, respectively, of new and used resort cottage inventory and related reserves were reclassified to fixed assets. The reclassification was made to reflect the current use of ~~these resources.~~the resources as rental units.

Note 7 — Notes Receivable

As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the Company had approximately ~~$29.1~~$29.2 million and ~~$31.8~~$30.0 million in notes receivable, respectively. As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the Company ~~had~~has approximately ~~$11.3~~$10.1 million and ~~$12.0~~$10.4 million, respectively, in Chattel Loans receivable, which yield interest at a per annum average rate of approximately ~~8.8%~~8.7%, have an average term and amortization of ~~approximately of five~~three to 1520 years, require monthly principal and interest payments and are collateralized by homes at certain of the Properties. These notes are recorded net of allowances of approximately $0.3 ~~million and $0.2~~ million as of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008, respectively.~~2009. During the ~~six months~~quarter ended ~~June 30,~~March 31, 2010 and year ended December 31, 2009, approximately ~~$0.5~~$0.1 million and $1.0 million, respectively, was repaid and an additional ~~$0.2~~$0.1 million and $0.5 million, respectively, was loaned to customers.

~~In connection with the PA Transaction, we acquired approximately $19.6 million of Contracts Receivable.~~

Note 7 — Notes Receivable (continued)

As of ~~June 30,~~March 31, 2010 and December 31, 2009, the Company had approximately ~~$17.6~~$16.9 million and $17.4 million, respectively, of Contracts Receivables, including allowances of approximately ~~$0.5~~$1.2 million. These Contracts Receivables represent loans to customers who have purchased right-to-use contracts. The Contracts Receivable yield interest at a per annum weighted average rate of ~~16.3% of the face value,~~16.5%, have a weighted average term remaining of approximately four years and require monthly payments of principal and interest. During the ~~six months~~quarter ended ~~June 30,~~March 31, 2010 and year ended December 31, 2009, approximately ~~$5.3~~$2.4 million and $9.6 million, respectively, was repaid and an additional ~~$3.9~~$2.1 million and $8.0 million, respectively, was loaned to customers.

As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the Company had ~~a $0.4~~approximately $0.2 million ~~note receivable,~~in notes, which ~~bears~~bear interest at a per annum rate of prime plus 0.5% and ~~matures~~mature on December 31, 2011. The ~~note is~~notes are collateralized with ~~a combination of Common OP Units and~~ partnership interests in certain joint ventures.

As of March 31, 2010 and December 31, 2009, the Company had approximately $2.0 million, in notes, which bear interest at a per annum rate of 11.0% and matures on July 6, 2010. The note is collateralized by first priority mortgages on four resort properties.

Note 8 — Long-Term Borrowings

As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the Company had outstanding mortgage indebtedness on Properties held for ~~long-term investment~~long term of approximately ~~$1,597~~$1,541.2 million and ~~$1,555~~$1,542.8 million, respectively, and approximately ~~$14~~$0.0 and $3.6 million of mortgage indebtedness as of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008~~2009, respectively, on Properties held for sale. The debt encumbered a total of 153 and 151 of the Company’s Properties as of June 30, 2009 and December 31, 2008, respectively, and the carrying value of such Properties was approximately $1,708 million and $1,694 million, respectively as of such dates. The weighted average interest rate on this mortgage indebtedness for the quarter ~~ending June 30, 2009~~ended March 31, 2010 and the year ending December 31, ~~2008,~~2009 was approximately 6.0% ~~and 5.9%~~ per ~~annum, respectively.~~annum. The debt bears interest at rates of 5.0% to ~~10.0%~~8.5% per annum and matures on various dates ranging from ~~2009~~2010 to ~~2019. Included in our~~2020. The debt ~~balance are three capital leases with balances~~encumbered a total of ~~approximately $6.7 million at June 30, 2009~~138 and 140 of the Company’s Properties as of March 31, 2010 and December 31, ~~2008 with imputed interest rates~~2009, respectively, and the carrying value of ~~13.1% per annum. The outstanding balances on the capital leases were paid off on July 1, 2009.~~such Properties was approximately $1,642 million and $1,680 million, respectively, as of such dates.

As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the ~~$370.0~~Company has outstanding debt secured by certain manufactured homes of $2.5 million and $1.5 million, respectively. This financing provided by the manufactured home dealer requires monthly payments, bears interest at 8.5% and matures on the earlier of: 1) the date the home is sold or 2) November 20, 2016.

As of March 31, 2010 and December 31, 2009, our unsecured lines of credit had ~~$370.0 million and $277.0 million, respectively, available for future borrowings.~~an availability of $370 million. The ~~weighted average interest rate for the six months ending~~lines of credit expire on June 30, ~~2009~~2010 and ~~the year ending December 31, 2008 was 5.4% and 3.6% per annum, respectively.~~have a one-year extension option. The one-year extension fee is 0.15%.

Note 9 — Deferred Revenue-sale of right-to-use contracts and Deferred Commission Expense

The sales of right-to-use contracts are recognized in accordance with ~~SAB 104.~~FASB ASC 605. The Company will recognize the upfront non-refundable payments over the estimated customer life which, based on historical attrition rates, the Company has estimated to be between one to 31 years. The commissions paid on the sale of right-to-use contracts will be deferred and amortized over the same period as the related sales revenue.

Components of the change in deferred revenue-sale of right-to-use contracts and deferred commission expense are as follows (amounts in thousands):

Six Months Ended
June 30, 2009
Deferred revenue-sale of right-to-use contracts-December 31, 2008 $ 10,611

Deferral of new right-to-use contracts 11,446
Deferred revenue recognized (1,012 )

Net increase in deferred revenue 10,434

Deferred revenue-sale of right-to-use contracts-June 30, 2009 $ 21,045

Deferred commission expense-December 31, 2008 $ 3,644

Costs deferred 3,450
Amortization of deferred costs (325 )

Net increase in deferred sales and marketing 3,125

Deferred commission expense-June 30, 2009 $ 6,769


	Quarters Ended
	March 31,
	2010			2009
Deferred revenue — sale of right-to-use contracts, as of January 1,	$	29,493		$	10,611

Deferral of new right-to-use contracts		4,937			5,577
Deferred revenue recognized		(989	)		(414	)

Net increase in deferred revenue		3,948			5,163

Deferred revenue — sale of right-to-use contracts, as of March 31,	$	33,441		$	15,774


Deferred commission expense, as of January 1,	$	9,373		$	3,644

Costs deferred		1,708			1,629
Commission expense recognized		(296	)		(136	)

Net increase in deferred commission expense		1,412			1,493

Deferred commission expense, March 31,	$	10,785		$	5,137

Note 10 — ~~Stock-Based Compensation~~Stock Option Plan and Stock Grants

The Company accounts for its stock-based compensation in accordance with ~~Statement of Financial Accounting Standards No. 123(R), “Share Based Payment”~~the Codification Topic “Compensation — Stock Compensation” (“~~SFAS 123(R)”~~FASB ASC 718”), which was adopted on July 1, 2005.

Stock-based compensation expense for the ~~six months~~quarters ended ~~June 30,~~March 31, 2010 and 2009, ~~and 2008,~~ was approximately ~~$2.3~~$1.0 million and ~~$2.8~~$1.2 million, respectively.

Pursuant to the Stock Option Plan as discussed in Note 1314 to the ~~2008~~2009 Form 10-K, certain officers, directors, employees and consultants have been offered the opportunity to acquire shares of common stock of the Company through stock options (“Options”). During the ~~six months~~quarter ended ~~June 30, 2009, Options~~March 31, 2010, no options were exercised.

On February 1, 2010, the Company awarded Restricted Stock Grants for ~~2,000~~74,665 shares of common stock ~~were exercised for gross proceeds~~to certain members of senior management of the Company. These Restricted Stock Grants will vest on December 31, 2010. The fair market value of these Restricted Stock Grants was approximately ~~$32,000.~~

~~On January 9, 2009, 2,818 shares~~$3.7 million as of ~~common stock were repurchased at~~ the ~~open market price~~date of grant and ~~represent common stock surrendered to the Company to satisfy income tax withholding obligations of approximately $0.1 million due~~is recorded as a ~~result of~~compensation expense and paid in capital over the vesting ~~of certain Restricted Share Grants.~~period.

On February 1, ~~2009,~~2010, the Company awarded Options to purchase 2,800 shares of common stock with an exercise price of $37.73 per share to Mr. David J. Contis. One-third of the Options awarded to purchase common stock vests on each of August 1, 2009, February 1, 2010, and February 1, 2011.

~~On February 2, 2009, the Company awarded restricted stock grants~~Restricted Stock Grants for ~~11,000~~31,000 shares of common stock at a fair market value of approximately ~~$0.4~~$1.5 million ~~and awarded Options to purchase 100,000 shares of common stock with an exercise price of $37.70 per share~~ to certain members of the Board of Directors for services rendered in ~~2008.~~2009. One-third of ~~the Options to purchase common stock and~~ the shares of restricted common stock covered by these awards vests on each of December 31, ~~2009,~~2010, December 31, ~~2010,~~2011, and December 31, ~~2011.~~2012.

On May 8, 2009, 310 shares of common stock were repurchased at the open market price and represent common stock surrendered to the Company to satisfy income tax withholding obligations of approximately $11,000 due as a result of the vesting of certain Restricted Share Grants.

On May 12, 2009, the Company awarded restricted stock grants for 16,000 shares of common stock at a fair market value of approximately $0.6 million to certain members of the Board of Directors for services rendered in 2008. One-third of the Options to purchase common stock and the shares of restricted common stock covered by these awards vests on each of November 12, 2009, May 12, 2010, and May 12, 2011.

Note 11 — Long-Term Cash Incentive Plan

On May 15, 2007, the Company’s Board of Directors approved a Long-Term Cash Incentive Plan (the ~~“Plan”~~“LTIP”) to provide a long-term cash bonus opportunity to certain members of the Company’s management and executive officers. Such Board approval was upon recommendation by the Company’s Compensation, Nominating and Corporate Governance Committee (the “Committee”). On January 18, 2010, the Committee approved payments under the LTIP of approximately $2.8 million.

~~The total cumulative payment for all participants (the “Eligible Payment”) is based upon certain performance conditions being met.~~

The Committee has responsibility for administering the Plan and may use its reasonable discretion to adjust the performance criteria or Eligible Payments to take into account the impact of any major or unforeseen transaction or events. The Plan includes approximately 20 participants. The Company’s Chief Executive Officer and President ~~are~~were not participants in the ~~Plan.~~LTIP. The ~~Eligible Payment will be~~approved payments were paid in cash ~~upon completion of the Company’s annual audit for the 2009 fiscal year and upon satisfaction of the vesting conditions as outlined in the Plan.~~

~~Note 11 — Long-Term Cash Incentive Plan (continued)~~on March 3, 2010.

The Company ~~accounts~~accounted for the ~~Plan~~LTIP in accordance with ~~SFAS 123(R).~~FASB ASC 718. As of ~~June 30,~~March 31, 2010 and December 31, 2009, the Company had accrued compensation expense of approximately $0.0 million and $2.8 million, respectively, related to the ~~Plan,~~LTIP, including approximately $0.0 million and $1.1 million in the ~~six months~~quarter ended ~~June 30, 2009. The amounts accrued reflect the Committee’s evaluation of the Plan based on forecasts~~March 31, 2010 and other information presented to the Committee and are subject to performance in line with forecasts and final evaluation and determination by the Committee. There can be no assurances that our estimates of the probable outcome will be representative of the actual outcome.year ended December 31, 2009, respectively.

Note 12 — Transactions with Related Parties

Privileged Access

On August 14, 2008, the Company ~~closed on the PA Transaction by acquiring~~acquired substantially all of the assets and assumed certain liabilities of Privileged Access for an unsecured note payable of $2.0 ~~million.~~million which was paid off during the year ended December 31, 2009. Prior to the purchase, Privileged Access had a 12-year lease with the Company for 82 Properties that terminated upon closing. At closing, approximately $4.8 million of Privileged Access cash was deposited into an escrow account for liabilities that Privileged Access has retained. The balance in the escrow account as of ~~June 30, 2009~~March 31, 2010 was approximately ~~$2.2~~$1.9 million. ~~In approximately two years, the excess cash in the escrow account, if any, will be paid to the Company.~~

The preliminary purchase price allocation has been recorded as of August 14, 2008. The preliminary allocation does not include a receivable for the contingent cash as the amount and timing of collection is uncertain. Further adjustments to the purchase price allocation may be necessary within the one-year allocation period allowed by SFAS No. 141.

Mr. McAdams, the Company’s President effective January 1, 2008, owns ~~100 percent~~100% of Privileged Access. The Company has entered into an employment agreement effective as of January 1, 2008 (the “Employment Agreement”) with Mr. McAdams which provides for an initial term of three years, but such Employment Agreement can be terminated at any time. The Employment Agreement provides for a minimum annual base salary of $0.3 million, with the option to receive an annual bonus in an amount up to three times his base salary. Mr. McAdams is also subject to a non-compete clause and to mitigate potential conflicts of interest shall have no authority, on behalf of the Company and its affiliates, to enter into any agreement with any entity controlling, controlled by or affiliated with Privileged Access. Prior to forming Privileged Access, Mr. McAdams was a member of our Board of Directors from January 2004 to October 2005. Simultaneous with his appointment as president of Equity LifeStyle Properties, Inc., Mr. McAdams resigned as Privileged Access’s Chairman, President and CEO. However, he was on the board of PATT Holding Company, LLC (“PATT”), ~~Thousand Trails’ parent entity and a subsidiary of Privileged Access,~~ until the entity was dissolved in 2008.

Mr. Heneghan, the Company’s CEO, was a member of the board of PATT, pursuant to the Company’s rights under its resort Property leases with Privileged Access to represent the Company’s interests from April 14, 2006 to August 13, 2008. Mr. Heneghan did not receive compensation in his capacity as a member of such board.

In connection with the PA Transaction, the Company hired most of the property employees and certain property management and corporate employees of Privileged Access. Subsequent to the PA Transaction, the Company reimbursed Privileged Access for services provided in 2008 by Privileged Access employees retained by Privileged Access, which were necessary for the transition of the former Privileged Access operations to the Company.

Privileged Access had the following substantial business relationships with the Company, which were all terminated with the closing of the PA Transaction on August 14, 2008. As of both June 30, 2009 and December 31, 2008, there were no payments owed to the Company or by the Company with respect to the relationships described below.

~~Note 12 — Transactions with Related Parties (continued)~~

	•		Prior to August 14, 2008, we were leasing approximately 24,300 sites at 82 resort Properties (which includes 60 Properties operated by a subsidiary of Privileged Access known as the “TT Portfolio”) to Privileged Access or its subsidiaries. For the six months ended June 30, 2009, and 2008, we recognized $0.0 million and $12.7 million in rent, respectively, from these leasing arrangements. The lease income is included in Income from other investments, net in the Company’s Consolidated Statement of Operations. During the six months ended June 30, 2009 and 2008, the Company reimbursed zero and $2.3 million to Privileged Access for capital improvements.

			Effective January 1, 2008, the leases for these Properties provided for the following significant terms: a) annual fixed rent of approximately $25.5 million, b) annual rent increases at the higher of Consumer Price Index (“CPI”) or a renegotiated amount based upon the fair market value of the Properties, c) expiration date of January 15, 2020, and d) two five-year extension terms at the option of Privileged Access. The January 1, 2008 lease for the TT Portfolio also included provisions where the Company paid Privileged Access $1 million for entering into the amended lease. The $1 million payment was being amortized on a pro-rata basis over the remaining term of the lease as an offset to the annual lease payments and the remaining balance at August 14, 2008 of $0.9 million was expensed and is included in Income from other investments, net during the year ended December 31, 2008.

			The Company had subordinated its lease payment for the TT Portfolio to a bank that loaned Privileged Access $5 million. The Company acquired this loan as part of the PA Transaction and paid off the loan during the year ended December 31, 2008.

	•		From June 12, 2006 through July 14, 2008, Privileged Access had leased 130 cottage sites at Tropical Palms, a resort Property located near Orlando, Florida. For the six months ended June 30, 2009 and 2008, we earned no rent and approximately $0.8 million, respectively, from this leasing arrangement. The lease income is included in the Resort base rental income in the Company’s Consolidated Statement of Operations. The Tropical Palms lease expired on July 15, 2008, and the entire property was leased to a new independent operator for 12 years.

	•		On April 14, 2006, the Company loaned Privileged Access approximately $12.3 million at a per annum interest rate of prime plus 1.5%, maturing in one year and secured by Thousand Trails membership sales contract receivables the loan was fully paid off during the quarter ended September 30, 2007.

	•		The Company previously leased 40 to 160 sites at three resort Properties in Florida, to a subsidiary of Privileged Access from October 1, 2007 until August 14, 2008. The sites varied during each month of the lease term due to the seasonality of the resort business in Florida. For the six months ended June 30, 2008, we recognized less than $0.1 million in rent from this leasing arrangement. The lease income is included in the Resort base rental income in the Company’s Consolidated Statement of Operations.

	•		The Company previously leased 40 to 160 sites at Lake Magic, a resort Property in Clermont, Florida, to a subsidiary of Privileged Access from December 15, 2006 until September 30, 2007. The sites varied during each month of the lease term due to the seasonality of the resort business in Florida. For the six months ended June 30, 2009 and 2008, we recognized no amounts in rent from this leasing arrangement.

	•		The Company had an option to purchase the subsidiaries of Privileged Access, including TT, beginning on April 14, 2009, at the then fair market value, subject to the satisfaction of a number of significant contingencies (“ELS Option”). The ELS Option terminated with the closing of the PA Transaction on August 14, 2008. The Company had consented to a fixed price option where the Chairman of PATT could acquire the subsidiaries of Privileged Access anytime before December 31, 2011. The fixed price option also terminated on August 14, 2008.

~~Note 12 — Transactions with Related Parties (continued)~~

Privileged Access and the Company previously agreed to certain arrangements in which we utilized each other’s services. Privileged Access assisted the Company with functions such as: call center management, property management, information technology, legal, sales and marketing. During the six months ended June 30, 2009 and 2008, the Company incurred no expense and approximately $0.4 million, respectively for the use of Privileged Access employees. The Company received approximately $0.1 million from Privileged Access for Privileged Access use of certain Company information technology resources during the year ended December 31, 2008. The Company and Privileged Access engaged a third party to evaluate the fair market value of such employee services.

In addition to the arrangements described above, the Company had the following smaller arrangements with Privileged Access. In each arrangement, the amount of income or expense, as applicable, recognized by the Company for the six months ended June 30, 2009 is zero and were less than $0.1 million for the six months ended June 30, 2008, and there were no amounts due under these arrangements as of June 30, 2009 or December 31, 2008.

	•		Since November 1, 2006, the Company leased 41 to 44 sites at 22 resort Properties to Privileged Access (the “Park Pass Lease”). The Park Pass Lease terminated with the closing of the PA Transaction on August 14, 2008.

	•		The Company and Privileged Access entered into a Site Exchange Agreement beginning September 1, 2007 and ending May 31, 2008. Under the Site Exchange Agreement, the Company allowed Privileged Access to use 20 sites at an Arizona resort Property known as Countryside. In return, Privileged Access allowed the Company to use 20 sites at an Arizona resort Property known as Verde Valley Resort (a property in the TT Portfolio).

	•		The Company and Privileged Access entered into a Site Exchange Agreement for a one-year period beginning June 1, 2008 and ending May 31, 2009. Under the Site Exchange Agreement, the Company allowed Privileged Access to use 90 sites at six resort Properties. In return, Privileged Access allowed the Company to use 90 sites at six resort Properties leased to Privileged Access. The Site Exchange Agreement was terminated with the closing of the PA Transaction on August 14, 2008.

	•		On September 15, 2006, the Company and Privileged Access entered into a Park Model Sales Agreement related to a Texas resort Property in the TT Portfolio known as Lake Conroe. Under the Park Model Sales Agreement, Privileged Access was allowed to sell up to 26 park models at Lake Conroe. Privileged Access was obligated to pay the Company 90% of the site rent collected from the park model buyer. All 26 homes have been sold as of December 31, 2007. The Park Model Sales Agreement terminated with the closing of the PA Transaction on August 14, 2008.

	•		The Company advertises in Trailblazer magazine that was published by a subsidiary of Privileged Access prior to August 14, 2008. Trailblazer is an award-winning recreational lifestyle magazine for active campers, which is read by more than 65,000 paid subscribers. Beginning on August 14, 2008, the Company began publishing Trailblazer in accordance with the terms of the PA Transaction.

	•		On July 1, 2008, the Company and Privileged Access entered into an agreement, where Privileged Access sold the Company’s used resort cottages at certain Properties leased to Privileged Access. The Company paid Privileged Access a commission for selling the inventory and the agreement was terminated on August 14, 2008.

	•		On April 1, 2008, the Company entered into a lease for a corporate apartment located in Chicago, Illinois for use by Mr. McAdams and other employees of the Company and Privileged Access. The Company paid monthly rent payments, plus utilities and housekeeping expenses and Mr. McAdams reimbursed the Company for a portion of the rent. Prior to August 14, 2008, Privileged Access reimbursed the Company for a portion of the rent and utilities and housekeeping expenses. Such lease terminated on December 31, 2008.

Note 13 — Commitments and Contingencies

California Rent Control Litigation

As part of the Company’s effort to realize the value of its Properties subject to rent control, the Company has initiated lawsuits against several municipalities in California. The Company’s goal is to achieve a level of regulatory fairness in California’s rent control jurisdictions, and in particular those jurisdictions that prohibit increasing rents to market upon turnover. Regulations in California allow tenants to sell their homes for a premium representing the value of the future discounted rent-controlled rents. In the Company’s view, such regulation results in a transfer of the value of the Company’s stockholders’ land, which would otherwise be reflected in market rents, to tenants upon the sales of their homes in the form of an inflated purchase price that cannot be attributed to the value of the home being sold. As a result, in the Company’s view, the Company loses the value of its asset and the selling tenant leaves the Property with a windfall premium. The Company has discovered through the litigation process that certain municipalities considered condemning the Company’s Properties at values well below the value of the underlying land. In the Company’s view, a failure to articulate market rents for sites governed by restrictive rent control would put the Company at risk for condemnation or eminent domain proceedings based on artificially reduced rents. Such a physical taking, should it occur, could represent substantial lost value to stockholders. The Company is cognizant of the need for affordable housing in the jurisdictions, but asserts that restrictive rent regulation does not promote this purpose because the benefits of such regulation are fully capitalized into the prices of the homes sold. The Company estimates that the annual rent subsidy to tenants in these jurisdictions may be in excess of $15 million. In a more well balanced regulatory environment, the Company would receive market rents that would eliminate the subsidy and homes would trade at or near their intrinsic value.

In connection with such efforts, the Company entered into a settlement agreement with the City of Santa Cruz, California and that, pursuant to the settlement agreement, the City amended its rent control ordinance to exempt the Company’s Property from rent control as long as the Company offers a long term lease which gives the Company the ability to increase rents to market upon turnover and bases annual rent increases on the CPI. The settlement agreement benefits the Company’s stockholders by allowing them to receive the value of their investment in this Property through vacancy decontrol while preserving annual CPI based rent increases in this age-restricted Property.

The Company has filed two lawsuits in federal court against the City of San Rafael, challenging its rent control ordinance on constitutional grounds. The Company believes that one of those lawsuits was settled by the City agreeing to amend the ordinance to permit adjustments to market rent upon turnover. The City subsequently rejected the settlement agreement. The Court initially found the settlement agreement was binding on the City, but then reconsidered and determined to submit the claim of breach of the settlement agreement to a jury. In October 2002, ~~the first case against the City went to trial, based on both breach of the settlement agreement and the constitutional claims. A~~a jury found no breach of the settlement ~~agreement; the Company then filed motions asking the Court to rule in its~~

~~Note 13 — Commitments and Contingencies (continued)~~

favor on that claim, notwithstanding the jury verdict. The Court postponed decision on those motions and on the constitutional claims, pending a ruling on certain property rights issues by the United States Supreme Court.agreement.

The Company also had pending a claim seeking a declaration that the Company could close the Property and convert it to another use which claim was not tried in 2002. The United States Supreme Court issued the property rights rulings in 2005 and subsequently on January 27, 2006, the Court hearing the San Rafael cases issued a ruling that granted the Company’s motion for leave to amend to assert alternative takings theories in light of the United States Supreme Court’s decisions. The Court’s ruling also denied the Company’s post trial motions related to the settlement agreement and dismissed the park closure claim without prejudice to the Company’s ability to reassert such claim in the future. As a result, the Company filed a new complaint challenging the City’s ordinance as violating the takings clause and substantive due process. The City of San Rafael filed a motion to dismiss the amended complaint. On December 5, 2006, the Court denied portions of the City’s motion to dismiss that had sought to eliminate certain of the Company’s taking claims and substantive due process claims. The Company’sconstitutional claims against the City were tried in a bench trial during April 2007. On ~~July 26, 2007,~~January 29, 2008, the United States District Court for the Northern District of California issued Preliminary Findings of Facts and Legal Standards, Preliminary Conclusions of Law and Request for Further Briefing (“Preliminary Findings”) in this matter. The Company filed the Preliminary Findings on Form 8-K on August 2, 2007. In August 2007, the Company and the City filed the further briefs requested by the Court. On January 29, 2008, the Court issued its Findings of Facts, Conclusions of Law and Order Thereon (the “Order”). The Company filed the Order on Form 8-K on January 31, 2008. On March 14, 2008, the Company filed a petition for attorneys’ fees incurred in the amount of approximately $6.8 million plus costs of approximately $1.3 million. The City also filed a petition for attorneys’ fees incurred in the amount of approximately $0.8 million plus costs of approximately $0.1 million in connection with the jury verdict that found no breach of the settlement agreement (as described above). While the City alleges it is the prevailing party on the settlement agreement issue, the Company asserts that the outcome of the entirety of the case finding the ordinance unconstitutional means that the Company is the prevailing party in the case. The parties submitted briefs with respect to the petitions for attorneys’ fees and costs.

On April 17, 2009, the ~~United States District~~ Court ~~for the Northern District of California~~ issued its Order for Entry of Judgment (“April 2009 Order”), and its “Order” relating to the parties’ requests for attorneys’ fees (the “Fee Order”). The Company filed the April 2009 Order and the Fee Order on Form 8-K on April 20, 2009. In the April 2009 Order, the Court stated that the judgment to be entered will gradually phase out the City’s site rent regulation scheme that the Court has found unconstitutional. Existing residents of the Company’s ~~property~~Property in San Rafael will be able to continue to pay site ~~rentals~~rent as if the Ordinance were to remain in effect for a period of ten years. Enforcement of the Ordinance will be immediately enjoined with respect to new residents of the ~~property~~Property and expire entirely ten years from the date of judgment. Enforcement of the Ordinance will be enjoined as to site lessees of the property who come into possession after the date of judgment so that all current site lessees at the property shall be allowed to continue their leases at rents regulated by the Ordinance. When a current site lessee at the ~~property~~Property transfers his leasehold to a new resident upon the sale of the accompanying mobilehome, the Ordinance shall be enjoined as to the next resident and any future resident. The Ordinance shall be enjoined as to all residents ten years from the entry of judgment. ~~The Court directed the Company to submit a proposed form of judgment, which the Company submitted on April 21, 2009, the form of which was agreed to by all parties.~~

The Fee Order awarded certain amounts of attorneys’ fees to the Company with respect to its constitutional claims, certain amounts to the City with respect to the Company’s contract claims, the net effect of which was that the City must pay the Company approximately $1.8 million for attorneys’ fees. In the Fee Order the Court also directed the parties to confer and agree if they can on an allocation and award of costs in accordance with the court’s determinations on the attorneys’ fees. The parties did so and, on May 5, 2009, submitted a proposed Order on Award of Fees and Costs (the “Fees and Costs Order”) that was agreed to as to form by counsel for the Company and the City. On June 10, 2009, the Court entered ~~the Fees~~an order on fees and ~~Costs Order~~costs which, in addition to the net attorneys’ fees of approximately $1.8 million the Court previously ordered the City to pay the Company, orders the City to pay to the Company net costs of approximately $0.3 million. On June 30, 2009, the Court entered final judgment as anticipated by the April 2009 Order. The City filed a notice of appeal, and ~~has also filed a motion and~~ posted a bond of approximately $2.1 million ~~seeking to~~securing a stay pending appeal of the enforcement of the order awarding attorneys’ fees and costs to the Company. The ~~residensts’~~residents’ association, which intervened in the case, ~~has~~ filed a motion in the Court of Appeals, which the City ~~has~~ joined, seeking a stay of the ~~injunctions.~~injunctions, which the Court of Appeals denied. The Company ~~has~~ filed a notice of ~~cross-appeal, and will oppose any stay.~~

~~Note 13 — Commitments and Contingencies (continued)~~

The Company’s efforts to achieve a balanced regulatory environment incentivize tenant groups to file lawsuits against the Company seeking large damage awards. The homeowners association at Contempo Marin (“CMHOA”), a 396 site Property in San Rafael, California, sued the Company in December 2000 over a prior settlement agreement on a capital expenditure pass-through after the Company suedcross-appeal. On February 2, 2010, the City ~~of San Rafael in October 2000 alleging its rent control ordinance is unconstitutional. In~~and the ~~Contempo Marin case,~~Association filed their opening brief on appeal. On June 22, 2010, the CMHOA prevailed on a motion for summary judgment on an issue that permits the Company to collect only $3.72 out of a monthly pass-through amount of $7.50 that the Company believed had been agreed to by the CMHOAparties will participate in a settlement ~~agreement. The CMHOA continued to seek damages from the Company in this matter. The Company reached~~mediation before a ~~settlement with the CMHOA in this matter which allows the Company to recover $3.72~~mediator of the requested monthly pass-through and does not provide for the payment of any damages to the CMHOA. Both the CMHOA and the Company brought motions to recover their respective attorneys’ fees in the matter, which motions were heard by the Court in January 2007. On January 12, 2007, the Court granted CMHOA’s motion for attorneys’ fees in the amount of approximately $0.3 million and denied the Company’s motion for attorneys’ fees. The Company appealed both decisions. On September 19, 2008, the Court of ~~Appeal affirmed~~Appeals’ Mediation Program. The briefing schedule for the ~~attorneys’ fees rulings. The Company filed a Petition for Rehearing of that appellate decision. On October 17, 2008,~~appeal has been suspended pending the ~~Court of Appeal issued an order modifying its original opinion in certain respects without changing its judgment. The Company petitioned the California Supreme Court for review~~outcome of the decision, which was denied. Accordingly, the Company has paid the CMHOA’s attorneys’ fees as previously ordered by the trial court and, pursuant to an agreement of the parties, incurred on appeal. The Company believes that such lawsuits will be a consequence of the Company’s efforts to change rent control since tenant groups actively desire to preserve the premium value of their homes in addition to the discounted rents provided by rent control. The Company has determined that its efforts to rebalance the regulatory environment despite the risk of litigation from tenant groups are necessary not only because of the $15 million annual subsidy to tenants, but also because of the condemnation risk.mediation.

In June 2003, the Company won a judgment against the City of Santee in California Superior Court ~~(case no.~~(Case No. 777094). The effect of the judgment was to invalidate, on state law grounds, two ~~(2)~~ rent control ordinances the City of Santee had enforced against the Company and other property owners. However, the Court allowed the City to continue to enforce a rent control ordinance that predated the two invalid ordinances (the “prior ordinance”). As a result of the judgment the Company was entitled to collect a one-time rent increase based upon the difference in annual adjustments between the invalid ordinance(s) and the prior ordinance and to adjust its base rents to reflect what the Company could have charged had the prior ordinance been continually in effect. The City of Santee appealed the judgment. The Court of Appeal and California Supreme Court refused to stay enforcement of these rent adjustments pending appeal. After the City was unable to obtain a stay, the City and the tenant association each sued the Company in separate actions alleging the rent adjustments pursuant to the judgment violate the prior ordinance (Case Nos. GIE 020887 and GIE 020524). They seek to rescind the rent adjustments, refunds of amounts paid, and penalties and damages in these separate actions. On January 25, 2005, the California Court of Appeal reversed the judgment in part and affirmed it in part with a remand. The Court of Appeal affirmed that one ordinance was unlawfully adopted and therefore void and

~~Note 13 — Commitments and Contingencies (continued)~~

~~decision. On October 31, 2008, the court~~also awarded the City some but not all of the prejudgment interest it sought. The stipulated judgment was entered on November 5, 2008, and the Company deposited into the escrow the amounts required by the judgment and continues to deposit monthly disputed amounts until the disputes are resolved on appeal. ~~The~~On appeal, ~~is proceeding. On June 11, 2009,~~the California Court of Appeal reversed the trial court’s ruling that the City had standing to obtain restitution from the Company for the additional rents the Company collected in reliance on the trial court’s subsequently reversed ruling that two of the prior ordinances were void, and affirmed the remainder of the trial courts’ rulings. The Company filed with the Court of Appeal a petition for rehearing. Based on the petition for rehearing, the Court of Appeal modified its ~~Opening Brief on appeal.~~opinion in certain respects, but did not change its judgment. The Company has filed a petition for review by the California Supreme Court. The tenant association continued to seek damages, penalties and fees in their separate action based on the same claims made on the tenants’ behalf by the City in the City’s case. The Company moved for judgment on the pleadings in the tenant association’s case on the ground that the tenant association’s case is moot in light of the stipulated judgment in the City’s case. On November 6, 2008, the Court granted the Company’s motion for judgment on the pleadings without leave to amend. The tenant association sought reconsideration of that ruling, which was denied. The tenant association ~~has~~ filed a notice of ~~appeal. Briefing on that~~ appeal, which has ~~not yet commenced.~~been fully briefed. Oral argument in the tenant association’s appeal is set for June 17, 2010.

In addition, the Company has sued the City of Santee in federal court alleging all three of the ordinances are unconstitutional under the Fifth and Fourteenth Amendments to the United States Constitution. Thus, it is the Company’s position that the ordinances are subject to invalidation as a matter of law in the federal court action. Separately, the ~~Federal District Court~~federal district court granted the City’s Motion for Summary Judgment in the Company’s federal court lawsuit. This decision was based not on the merits, but on procedural grounds, including that the Company’s claims were moot given its success in the state court case. The Company appealed the decision, and on May 3, 2007 the United States Court of Appeals for the Ninth Circuit affirmed the District Court’s decision on procedural grounds. The Company intends to continue to pursue an adjudication of its rights on the merits in Federal Court through claims that are not subject to such procedural defenses.

~~In October 2004, the United States Supreme Court granted certiorari inState of Hawaii vs. Chevron USA, Inc~~., a Ninth Circuit Court of Appeals case that upheld the standard that a regulation must substantially advance a legitimate state purpose in order to be constitutionally viable under the Fifth Amendment. On May 24, 2005 the United States Supreme Court reversed the Ninth Circuit Court of Appeals in an opinion that clarified the standard of review for regulatory takings brought under the Fifth Amendment. The Supreme Court held that the heightened scrutiny applied by the Ninth Circuit is not the applicable standard in a regulatory takings analysis, but is an appropriate factor for determining if a due process violation has occurred. The Court further clarified that regulatory takings would be determined in significant part by an analysis of the economic impact of the regulation. The Company believes that the severity of the economic impact on its Properties caused by rent control will enable it to continue to challenge the rent regulations under the Fifth Amendment and the due process clause.

~~As a result of the Company’s efforts to achieve a level of regulatory fairness in California, a commercial lending company, 21~~^st Mortgage Corporation, a Delaware corporation, sued MHC Financing Limited Partnership. Such lawsuit asserts that certain rent increases implemented by the partnership pursuant to the rights afforded to the property owners under the City of San Jose’s rent control ordinance were invalid or unlawful. 21^st ~~Mortgage has asserted that it should benefit from the vacancy control provisions of the City’s ordinance as if 21~~^st Mortgage were a “homeowner” and contrary to the ordinance’s provision that rents may be increased without restriction upon termination of the homeowners’ tenancy. In each of the disputed cases, the Company believes it had terminated the tenancy of the homeowner (21^st ~~Mortgage’s borrower) through the legal process. The Court, in granting 21~~^st ~~Mortgage’s motion for summary judgment, has indicated that 21~~^st ~~Mortgage may be a “homeowner” within the meaning of the ordinance. The Company does not believe that 21~~^st Mortgage can show that it has ever applied for tenancy, entered into a rental agreement or been accepted as a homeowner in the communities. A bench trial in this matter concluded in January 2008 with the trial court determining that the Company had validly exercised its rights under the rent control ordinance, that the Company had not violated the ordinance and that 21^st Mortgage was not entitled to the benefit of rent control protection in the circumstances presented. In April 2008, the Company filed a petition for attorneys’ fees and costs. On August 22, 2008, the Court granted the Company $0.4 million in attorneys’ fees and costs. On October 20, 2008, the Company entered a Post-Judgment Agreement with 21^st ~~Mortgage pursuant to which 21~~^st Mortgage paid the Company the $0.4 million in attorneys’ fees and costs that the court had awarded, and the parties agreed to let the trial court’s judgment stand, to otherwise end the litigation, and exchanged releases.

~~Note 13 — Commitments and Contingencies (continued)~~

~~Countryside at Vero Beach~~

On January 12, 2006, the Company was served with a complaint filed in Indian River County Circuit Court on behalf of a purported class of homeowners at Countryside at Vero Beach. The complaint includes counts for alleged violations of the Florida Mobile Home Act and the Florida Deceptive and Unfair Trade Practices Act, and claims that the Company required homeowners to pay water and sewer impact fees, either to the Company or to the County, “as a condition of initial or continued occupancy in the Park,” without properly disclosing the fees in advance and notwithstanding the Company’s position that all such fees were fully paid in connection with the settlement agreement described above. On February 8, 2006, the Company served its motion to dismiss the complaint. In May 2007, the Court granted the Company’s motion to dismiss, but also allowed the plaintiff to amend the complaint. The plaintiff filed an amended complaint, which the Company has also moved to dismiss. Before any ruling on the Company’s motion to dismiss the amended complaint, the plaintiff asked for and received leave to file a second amended complaint, which the plaintiff filed on April 11, 2008. On May 1, 2008, the Company filed an answer and a motion for summary judgment. The motion for summary judgment was denied with leave to resubmit the motion after further discovery. On or about February 4, 2009, the Company accepted the Plaintiff’s offer to voluntarily dismiss the case with prejudice in exchange for the Company’s waiver of any claim for attorneys’ fees.

Colony Park

On December 1, 2006, a group of tenants at the Company’s Colony Park Property in Ceres, California filed a complaint in the California Superior Court for Stanislaus County alleging that the Company has failed to properly maintain the Property and has improperly reduced the services provided to the tenants, among other allegations. The Company has answered the complaint by denying all material allegations and filed a counterclaim for declaratory relief and damages. The case will proceed in Superior Court because the Company’s motion to compel arbitration was denied and the denial was upheld on appeal. Discovery has commenced. The Company filed a motion for summary adjudication of various of the plaintiffs’ claims and allegations, which was denied. The Court has set a trial date for July 20, 2010. The Company believes that the allegations in the first amended complaint are without merit, and intends to vigorously defend the lawsuit.

California’s Department of Housing and Community Development (“HCD”) issued a Notice of Violation dated August 21, 2006 regarding the sewer system at Colony Park. The notice ordered the Company to replace the Property’s sewer system or show justification from a third party explaining why the sewer system does not need to be replaced. The Company has provided such third party report to HCD and believes that the sewer system does not need to be replaced. Based upon information provided by the Company to HCD to date, HCD has indicated that it agrees that the entire system does not need to be replaced.

~~Rancho Mesa~~

On December 31, 2003, the tenants’ association at the Company’s Rancho Mesa Property in El Cahon, California filed a complaint in the California Superior Court for San Diego County alleging that the Company had failed to properly maintain the Property and had improperly increased rents, among other allegations. The case was settled in May 2006 pursuant to an agreement to offer favorable long-term leases to residents. The association repudiated the settlement agreement and appealed the trial court’s decision that the case was settled. The California Court of Appeal remanded the case with directions to the trial court to clarify the pleadings and move forward with pretrial and trial proceedings. Discovery has proceeded and the case was previously set for trial on June 5, 2009. The trial did not commence on that date because of the court’s other commitments, and trial date was re-set for July 20, 2009. After mandatory settlement conferences before the court, the case was settled on July 15, 2009. The settlement is not material to the Company’s financial position and results of operations.

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Note 13 — Commitments and Contingencies (continued)

California Hawaiian

On April 30, 2009, a group of tenants at the Company’s California Hawaiian Property in San Jose, California filed a complaint in the California Superior Court for Santa Clara County alleging that the Company has failed to properly maintain the Property and has improperly reduced the services provided to the tenants, among other allegations. The Company ~~has~~ moved to compel arbitration and stay the proceedings, to dismiss the case, and to strike portions of the complaint. By order dated October 8, 2009, the Court granted the Company’s motion to compel arbitration and stayed the court proceedings pending the outcome of the arbitration. The plaintiffs filed with the Court of Appeal a petition for writ seeking to overturn the trial court’s arbitration and stay orders. The Company submitted a preliminary opposition and the Court of Appeal issued an order allowing further written submissions and requests for oral argument, which the parties have submitted. Oral argument has not been set. The Company believes that the allegations in the complaint are without merit, and intends to vigorously defend the ~~lawsuit.~~litigation.

Hurricane Claim Litigation

On June 22, 2007, the Company filed suit in the Circuit Court of Cook County, Illinois (Case No. 07CH16548), against its insurance carriers, Hartford Fire Insurance Company, Essex Insurance Company, Lexington Insurance Company, and Westchester Surplus Lines Insurance Company, regarding a coverage dispute arising from losses suffered by the Company as a result of hurricanes that occurred in Florida in 2004 and 2005. The Company also brought claims against Aon Risk Services, Inc. of Illinois, the Company’s former insurance broker, regarding the procurement of appropriate insurance coverage for the Company. The Company is seeking declaratory relief establishing the coverage obligations of its carriers, as well as a judgment for breach of contract, breach of the covenant of good faith and fair dealing, unfair settlement practices and, as to Aon, for failure to provide ordinary care in the selling and procuring of insurance. The claims involved in this action exceed $11 million.

In response to motions to dismiss, the trial court dismissed: (1) the requests for declaratory relief as being duplicative of the claims for breach of contract and (2) certain of the breach of contract claims as being not ripe until the limits of underlying insurance policies have been exhausted. On or about January 28, 2008, the Company filed its Second Amended Complaint. Aon filed a motion to dismiss the Second Amended Complaint in its entirety as against Aon, and the insurers moved to dismiss portions of the Second Amended Complaint as against them. The insurers’ motion was denied and they have now answered the Second Amended Complaint. Aon’s motion was granted, with leave granted to the Company to file an amended pleading containing greater factual specificity. The Company did so by adding to the Second Amended Complaint a new Count VII against Aon, which the Company filed on August 15, 2008. Aon then answered the new Count VII in part and moved to strike certain of its allegations. The Court left Count VII undisturbed, except for ruling that the Company’s alternative claim that Aon was negligent in carrying out its duty to give notice to certain of the insurance carriers on the Company’s behalf should be re-pleaded in the form of a breach of contract theory. On February 2, 2009, the Company filed such a claim in the form of a new Count VIII against Aon. Aon ~~has~~ answered Count VIII. In January 2010, the parties engaged in a settlement mediation, which did not result in a settlement. Discovery is proceeding.

Since filing the lawsuit, the Company has received additional payments from Essex Insurance Company, Lexington Insurance Company, and Westchester Surplus Lines Insurance Company, of approximately ~~$2.6~~$3.7 million. In January 2008 the Company entered a settlement with Hartford Fire Insurance Company pursuant to which Hartford paid the Company the remaining disputed limits of Hartford’s insurance policy, in the amount of approximately $0.5 million, and the Company dismissed and released Hartford from additional claims for interest and bad faith claims handling.

~~Note 13 — Commitments and Contingencies (continued)~~

exemplary and punitive damages. The complaint does not specify a dollar amount sought. On December 18, 2008, the Company filed a demurrer seeking dismissal of the complaint in its entirety without leave to amend. On May 14, 2009, the Court granted the Company’s demurrer and dismissed the complaint, in part without leave to amend and in part with leave to amend. On June 2, 2009, the plaintiff filed an amended complaint. On July 6, 2009, the Company filed a demurrer seeking dismissal of the amended complaint in its entirety without leave to amend. On October 20, 2009, the Court granted the Company’s demurrer and dismissed the amended complaint, in part without leave to amend and in part with leave to amend. On November 9, 2009, the plaintiff filed a third amended complaint. On December 11, 2009, the Company filed a demurrer seeking dismissal of the third amended complaint in its entirety without leave to amend. On February 23, 2010, the court dismissed without leave to amend the claim for breach of the duty of good faith and fair dealings, and otherwise denied the Company’s demurrer. Discovery is proceeding. The Company will vigorously defend the lawsuit.

On December 16, 2008, the Company was served with a class action lawsuit in Washington state court filed by a single named plaintiff, represented by the same counsel as the plaintiff in the California class action. The complaint asserts on behalf of a putative class of Washington employees of PA who became employees of the Company substantially similar allegations as are alleged in the California class action. The Company moved to dismiss the complaint. On April 3, 2009, the court dismissed: (1) the first cause of action, which alleged a claim under the Washington Labor Code for failure to pay accrued vacation time; (2) the second cause of action, which alleged a claim under the Washington Labor Code for unpaid wages on termination; (3) the third cause of action, which alleged a claim under the Washington Labor Code for payment of wages less than entitled; and (4) the fourth cause of action, which alleged a claim under the Washington Consumer Protection Act. The court did not dismiss the fifth cause of action for breach of contract, the sixth cause of action of the breach of the duty of good faith and fair dealing; and the seventh cause of action for unjust enrichment. On May 22, 2009, the Company filed a motion for summary judgment on the causes of action not previously dismissed, which was denied. With leave of court, the plaintiff filed an amended complaint, the material allegations of which the Company denied in an answer filed on September 11, 2009. Discovery is proceeding. The Company will vigorously defend the lawsuit.

Cascade

On December 10, 2008, the King County Hospital District No. 4 (the “Hospital District”) filed suit against the Company seeking a declaratory judgment that it had properly rescinded an agreement to acquire the Company’s Thousand Trails — Cascade ~~property~~Property (“Cascade”) located 20 miles east of Seattle, Washington. The agreement was entered into after the Hospital District had passed a resolution authorizing the condemnation of Cascade. Under the agreement, in lieu of a formal condemnation proceeding, the Company agreed to accept from the Hospital District $12.5 million for the ~~property~~Property with an earnest money deposit of approximately $0.4 million. The Company has not included in income the earnest money deposit received. The closing of the transaction was originally scheduled in January 2008, and was extended to April 2009. The Company has filed an answer to the Hospital District’s suit and a counterclaim seeking recovery of the amounts owed under the agreement. On February 27, 2009, the Hospital District filed a summary judgment motion arguing that it was entitled to rescind the agreement because the ~~property~~Property is zoned residential and the Company did not provide the Hospital District a residential real estate disclosure form. On April 2, 2009, the Court denied the Hospital District’s summary judgment motion, ruling that a real property owner who is compelled to transfer land under the power of eminent domain is not legally required to provide a disclosure form. The

~~Note 13 — Commitments and Contingencies (continued)~~

~~has agreed to enter into~~entered a civil consent order effective March 10, 2010, pursuant to which the Company ~~will pay~~paid a penalty and ~~undertake~~placed funds in escrow for an environmental benefit project at a total cost of approximately $0.2 million in connection with the alleged violations. The ~~consent order is being prepared but has not yet been sent by the DEC pursuant to that agreement and the~~ amounts ~~expected to be~~ paid under the consent order were accrued as property operating expenses during the quarter ended June 30, 2008.

~~Appalachian RV~~Creekside

The U.S. Environmental Protection Agency (“EPA”) undertook an investigation of potential lead contamination at Appalachian RV, which is located in Shartlesville, Pennsylvania, reportedly stemming from observations of remnants of old auto battery parts at the Property. In late November and earlyOn December ~~2007, the EPA conducted an assessment by taking samples of surface soil, sediment, surface water, and well water at the Property.~~

In March 2008, the EPA issued a report regarding the findings of the sampling (“EPA Report”). The EPA Report found no elevated concentrations of lead in either the sediment samples, surface water samples, or well water samples. However, out of the more than 800 soil samples the EPA took, which were collected from locations throughout the Property, the EPA Report identified elevated levels of lead in 61 samples.

~~Following issuance of the EPA Report, the EPA sent~~29, 2009, the Company ~~a Notice of Potential Liability for a cleanup of~~sent to the ~~elevated lead levels at the Property, and a proposed administrative consent order seeking the Company’s agreement to conduct such a cleanup. On April 9, 2008~~,~~the Company submitted a response suggesting that the Company conduct additional soil testing, which the EPA approved, to determine what type of cleanup might be appropriate.~~

The EPA also advised the Company that, because elevated arsenic levels were detected at six locations at the Property during the EPA’s testing for lead, at the suggestion of the Agency for Toxic Substances and Disease Registry (ATSDR), the EPA further analyzed for potentially elevated arsenic levels the samples it previously collected. As a result of that analysis, the Company engaged a laboratory to analyze those samples for elevated arsenic levels. In light of these results, the additional soil testing the Company conducted tested for arsenic as well as lead.

The additional soil testing commenced in July 2008 and was completed in August 2008. Based on the results of the additional soil testing, the Company entered a contract with an environmental consulting company to remediate the site and, with the permission of the EPA, submittedloan servicer a notice of ~~intent to remediate the site under the supervision~~imminent default along with a deed-in-lieu of the Pennsylvania Department of Environmental Protection (“PADEP”). The contaminated soil has been excavated and delivered to facilities approved for receiving such contaminated waste, and has been replaced at the propertyforeclosure agreement executed by ~~clean fill. On February 20, 2009,~~ the Company ~~submitted~~(the “Proposed DIL Agreement”) regarding our nonrecourse mortgage loan of approximately $3.6 million secured by our Creekside property, which went into default in January 2010. A receiver was appointed by agreed order, and the Company has recorded a ~~“Remedial Investigation/Final Report” to PADEP regarding~~loss on disposition of approximately $0.2 million during the ~~cleanup of~~quarter ended March 31, 2010. The Lender has alleged that the Property. On April 17, 2009, PADEP issued its “Approval of Final Report, Appalachian RV Resort,” which concluded that “[p]ost excavation sampling of the areas of concern demonstrate attainment of the Residential Statewide Health Standard for lead and arsenic in soils.”

~~In addition, the local township in which~~borrower misappropriated rents from the Property ~~is located issued~~after the default and that payment of accrued and unpaid management fees may constitute an unauthorized transfer in violation of Michigan’s Uniform Fraudulent Transfer Act, apparently referring to a ~~notice~~payment of violation regarding the operation of the wastewater system with respect to various sites at the Property. The Company has reached agreement with the township regarding connecting portions of the propertyapproximately $130,700, made to the township’s sewer system, pursuant to which the issues raised by the township’s notice of violation have been resolved and the township has agreed to waive any potential penalties associated with the notice of violation.

~~As a result of these circumstances, the Company decided not to open~~Company’s affiliate that managed the Property, for ~~the 2008 season until these issues were resolved. Because the issues have now~~unpaid and accrued management fees and advances of operating shortfalls. The Company disputes and will vigorously defend against any allegation that there has been ~~resolved, the Company has re-opened the Property.~~

~~Note 13 — Commitments and Contingencies (continued)~~

~~Gulf View in Punta Gorda~~

~~In 2004, the Company acquired ownership~~any misappropriation of ~~various property owning entities, including an entity owning a property called Gulf View, in Punta Gorda, Florida. Gulf View continues~~rents, any unauthorized or improper transfers, or that there is any personal liability for any amounts claimed to be ~~held in a special purpose entity. At the time of acquisition of the entity owning Gulf View, it was financed with a secured loan that was cross-collateralized~~due and cross-defaulted with a loan on another property whose ownership entity was not acquired. At the time of acquisition, the Operating Partnership guaranteed certain obligations relating to exceptions from the non-recourse nature of the loans. Because of certain penalties associated with repayment of these loans, the loans have not been restructuredowing. The Company and the ~~terms and conditions remain~~lender have negotiated a “Prenegotiation Agreement” as a precursor to discussing the ~~same today. The approximate outstanding amount~~Proposed DIL Agreement or other method of the loan secured by Gulf View is $1.4 million and of the crossed loan secured by the other property is $5.5 million. The Company is not aware of any notice of default regarding either of the loans; however, should the owner of the cross-collateralized property default, the special purpose entity owning Gulf View and the Operating Partnership may be impactedtransferring title to the ~~extent of their obligations.~~

~~Florida Utility Operations~~

~~The Company received notice from the Florida Department of Environmental Protection (“DEP”) that as a result of a compliance inspection it is alleging violations of Florida law relating~~Property to the operation of onsite water plants and wastewater treatment plants at seven properties in Florida. The alleged violations relate to record keeping and reporting requirements, physical and operating deficiencies and permit compliance. The Company has investigated each of the alleged violations, including a review of a third party operator hired to oversee such operations. The Company met with the DEP in November 2007 to respond to the alleged violations and as a follow-up to such meeting provided a written response to the DEP in December 2007. In light of the Company’s written response, in late January 2008 the DEP conducted a follow-up compliance inspection at each of the seven properties. In early March 2008, the DEP provided the Company comments in connection with the follow-up inspection, which made various recommendations and raised certain additional alleged violations similar in character to those alleged after the initial inspection. The Company has investigated and responded to the additional alleged violations. While the outcome of this investigation remains uncertain, the Company expects to resolve the issues raised by the DEP by entering into a consent decree in which the Company will agree to make certain improvements in its facilities and operations to resolve the issues and pay certain costs and penalties associated with the violations. In August 2008, the DEP provided the Company a proposed consent order for resolving the issues raised by the DEP, the details of which the Company negotiated with the DEP. On December 2, 2008, a Consent Order was entered resolving the issues raised by the DEP. Pursuant to the Consent Order, the Company agreed to pay a penalty of approximately $0.1 million, which is subject to reduction in the event the Company elects to perform “in-kind” capital improvement projects that the DEP approves. The Company has proposed two such projects, which are subject to DEP approval. Accordingly, the amount of the penalty that the Company will ultimately be required to pay is not yet certain. The Company also replaced its third party operator hired to oversee onsite water and wastewater operations at each of the seven properties. The Company is evaluating the costs of any improvements to its facilities, which would be capital expenditures depreciated over the estimated useful life of the improvement. During the course of this investigation, one permit for operation of a wastewater treatment plant expired. The Company applied for renewal of the permit and expects the DEP to grant the application after certain determinations and capital improvements are made. In the meantime, the Company is permitted to operate the wastewater treatment plant pursuant to the Consent Order.Lender.

Other

The Company is involved in various other legal proceedings arising in the ordinary course of business. Such proceedings include, but are not limited to, notices, consent decrees, additional permit requirements and other similar enforcement actions by governmental agencies relating to the Company’s water and wastewater treatment plants and other waste treatment facilities. Additionally, in the ordinary course of business, the Company’s operations are subject to audit by various taxing authorities. Management believes that all proceedings herein described or referred to, taken together, are not expected to have a material adverse impact on the Company. In addition, to the extent any such proceedings or audits relate to newly acquired Properties, the Company considers any potential indemnification obligations of sellers in favor of the Company.

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~~Item 2.~~		~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company is a self-administered, self-managed, real estate investment trust (“REIT”) with headquarters in Chicago, Illinois. The Company is a fully integrated owner and operator of lifestyle-oriented properties (“Properties”). The Company leases individual developed areas (“sites”) with access to utilities for placement of factory built homes, cottages, cabins or recreational vehicles (“RVs”). Customers may lease individual sites or purchase right-to-use contracts providing the customer access to specific Properties for limited stays. The Company was formed to continue the property operations, business objectives and acquisition strategies of an entity that had owned and operated Properties since 1969. As of ~~June 30, 2009,~~March 31, 2010, the Company owned or had an ownership interest in a portfolio of ~~308~~303 Properties located throughout the United States and Canada containing ~~110,852~~110,411 residential sites. These Properties are located in 2827 states and British Columbia (with the number of Properties in each state or province shown parenthetically, as follows): Florida (86), California (48), Arizona (35), Texas (15), Washington (14), Pennsylvania ~~(13)~~(12), Colorado (10), Oregon (9), North Carolina (8), Delaware (7), Nevada (6), New York (6), Virginia (6), Wisconsin (5), Indiana (5), Maine (5), Illinois (4), Massachusetts (3), New Jersey ~~(4), Massachusetts (4), Michigan~~ (3), South Carolina (3), Michigan (2), New Hampshire (2), Ohio (2), Tennessee (2), Utah (2), Alabama (1), Kentucky (1)~~, Montana (1),~~ and British Columbia (1).

This report includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as “anticipate,” “expect,” “believe,” “project,” “intend,” “may be” and “will be” and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including, but not limited to:

	•		our ability to control costs, real estate market conditions, the actual rate of decline in customers, the actual use of sites by customers and our success in acquiring new customers at our Properties (including those recently acquired);

	•		our ability to maintain historical rental rates and occupancy with respect to Properties currently owned or that we may acquire;

	•		our assumptions about rental and home sales markets;

	•		in the age-qualified Properties, home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility;

	•		~~in the all-age Properties,~~ results from home sales and occupancy will continue to be impacted by local economic conditions, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing;

	•		impact of government intervention to stabilize site-built single family housing and not manufactured housing;

	•		the completion of future acquisitions, if any, and timing with respect thereto and the effective integration and successful realization of cost savings;

	•		ability to obtain financing or refinance existing debt on favorable terms or at all;

	•		the effect of interest rates;

	•		the dilutive effects of issuing additional common stock;

	•		the effect of accounting for the sale of agreements to customers representing a right-to-use the Properties ~~previously leased by Privileged Access~~ under ~~Staff Accounting Bulletin No. 104,~~the Codification Topic “Revenue ~~Recognition in Consolidated Financial Statements, Corrected~~Recognition;;” and

	•		other risks indicated from time to time in our filings with the Securities and Exchange Commission.

These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.

3527

December 31, 2009 from approximately $5.9 million for the year ended December 31, 2007. We believe that, unlike the home sales business, at this time we compete effectively with other types of rentals (i.e. apartments). We are currently evaluating whether we want to continue to invest in additional rental units.

In our resort Properties, we continue to work on extending customer stays. We have had success converting transient customers to seasonal customers and seasonal customers to annual customers. We also ~~adjusted our business model with the introduction of~~have and continue to introduce low-cost ~~internet and alternate distribution channels~~products that focus on the installed base of almost eight million RV owners. RV manufacturers and dealers experienced the second year of declining volumes in 2008 with current monthly activity reflecting precipitous declines over the prior year. Availability of financing for both floor plan inventory and retail customers has been severely constrained and there is little hope for improvement in 2009. Although industry experts are predicting shipments of approximately 180,000 RV units in 2009, down from the estimated 237,000 in 2008, shipments for the twelve months ended June 2009 were less than 150,000. As with the decline experienced by the manufactured home industry, the remaining participants’ survival depends on their ability to react to the new environment.

~~Privileged Access~~

Privileged Access owned Thousand Trails (“TT”) from April 14, 2006 until August 13, 2008. Prior to the purchase, Privileged Access had a 12-year lease with the Company that terminated upon closing. The Company assumed TT’s operations in connection with the PA Transaction. TT’s primary business consists of sellingSuch products may include right-to-use contracts that entitle the purchasers to use certain properties (the “Agreements”), a business that TT has been engaged in for almost 40 years. Our 82 Properties utilized to service the Agreements generally contain designated sites for the placement of recreational vehicles which service the customer base of over 100,000 families..

Several different Agreements are currently offered to new customers. These front-line Agreements are generally distinguishable from each other by the number of Properties a customer can access. The Agreements generally grant the customer the contractual right-to-use designated space within the Properties on a continuous basis for up to 14 days. The Agreements ~~are generally for three years~~require annual payments and may also require nonrefundable upfront ~~payments as well as annual~~ payments. The Company has reduced the number of traditional front line sales locations to three from almost 20 in 2008 significant sales related overhead. The Company has recently introduced one-year memberships that require smaller upfront and/or annual payments that can be purchased through the internet and other alternate distribution channels. Similar to our efforts at our Core resort Properties we have also been focusing on adding annual customers to the TT Properties.

Existing customers may be offered an upgrade Agreement from time-to-time. The upgrade Agreement is currently distinguishable from ~~the~~a new Agreement that a customer would enter into by (1) increased length of consecutive stay by ~~50 percent~~50% (i.e. up to 21 days); (2) ability to make earlier advance ~~reservations~~reservations; (3) discounts on rental units and ~~(3)~~(4) access to additional ~~properties.~~Properties, which may include discounts at non-membership RV Properties. Each upgrade requires ~~an additional~~a nonrefundable upfront payment. The Company may finance the nonrefundable upfront ~~nonrefundable~~ payment under any Agreement.

The PA Transaction also included the purchase of the operations of Resort Parks International (“RPI”) and Thousand Trails Management Services, Inc. (“TTMSI”). Since 1983, RPI has provided a member-only RV reciprocal camping program in North America. The RPI network offers access to 200 private RV resorts, 450 public RV campgrounds, cabins and hundreds of condominiums world wide. TTMSI manages approximately 200 public campgrounds for the U.S. Forest Service.

Refer to Note 12 — Transactions with Related Parties included in the Notes to Consolidated Financial Statements in this Form 10-Q for a description of all agreements between the Company and Privileged Access.

Supplemental Property Disclosure

We provide the following disclosures with respect to certain assets:

•

Tropical Palms~~— Beginning on~~- On July 15, 2008, Tropical Palms, a 541-site resort Property located in Kissimmee, Florida, was leased to a new operator for 12 years. The lease provides for an initial fixed annual lease payment of $1.6 million, which escalates at the greater of CPI or ~~three percent.~~3%. Percentage rent payments are provided for beginning in 2010, subject to gross revenue floors. The Company will match the lessee’s capital investment in new rental units at the Property up to a maximum of $1.5 million. The lessee will pay the Company additional rent equal to ~~eight percent~~8% per year on the Company’s capital investment. The lease income recognized during the ~~quarter~~quarters ended March 31, 2010 and ~~six months ended June 30,~~ 2009 was approximately $0.5 million ~~and $0.9 million, respectively,~~ and is included in income from other investments, net. During the ~~quarter~~quarters ended March 31, 2010 and ~~six months ended June 30,~~ 2009, the Company spent approximately $0.0 million and $0.6 million, respectively, to match the lessee’s investment in new rental units at the Property.

Results of Operations

The results of operations for the one Property disposed of during 2010 and two Properties ~~designated as held for disposition as of June 30,~~sold during 2009 ~~pursuant to SFAS No. 144~~ have been classified as income from discontinued ~~operations.~~operations, pursuant to FASB ASC 360-10-35. See Note 4 in the Notes to the Consolidated Financial Statements for summarized information for these Properties.

Comparison of the Quarter Ended ~~June 30, 2009~~March 31, 2010 to the Quarter Ended ~~June 30, 2008~~March 31, 2009

Income from Property Operations

The following table summarizes certain financial and statistical data for the Property Operations for all Properties owned and operated for the same period in both years (“Core Portfolio”) and the Total Portfolio for the quarters ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ (amounts in thousands). The Core Portfolio may change from time-to-time depending on acquisitions, dispositions and significant transactions or unique situations. The Core Portfolio in this Form 10-Q includes all Properties acquired prior to December 31, ~~2007~~2008 and which have been owned and operated by the Company continuously since January 1, ~~2008.~~2009. Core growth percentages exclude the impact of GAAP deferrals of right-to-use contract sales and related commissions.

Core Portfolio Total Portfolio
Increase / % Increase /
2009 2008 (Decrease) Change 2009 2008 (Decrease) % Change
Community base rental income $ 63,318 $ 61,430 $ 1,888 3.1 % $ 63,318 $ 61,430 $ 1,888 3.1 %
Resort base rental income 22,671 22,072 599 2.7 % 27,747 23,033 4,714 20.5 %
Right-to-use annual payments — — — — 12,702 — 12,702 100.0 %
Right-to-use contracts current period, gross — — — — 5,869 — 5,869 100.0 %
Right-to-use contracts, deferred, net of prior period amortization — — — — (5,271 ) — (5,271 ) (100.0 %)
Utility and other income 10,188 9,723 465 4.8 % 11,720 9,859 1,861 18.9 %

Property operating revenues 96,177 93,225 2,952 3.2 % 116,085 94,322 21,763 23.1 %
Property operating and Maintenance 32,440 32,692 (252 ) (0.8 %) 45,565 33,930 11,635 34.3 %
Real estate taxes 7,328 7,408 (80 ) (1.1 %) 8,235 7,478 757 10.1 %
Sales and marketing, gross — — — — 3,672 — 3,672 100.0 %
Sales and marketing, deferred commissions, net — — — — (1,632 ) — (1,632 ) (100.0 %)
Property management 4,435 5,182 (747 ) (14.4 %) 7,730 5,243 2,487 47.4 %

Property operating expenses 44,203 45,282 (1,079 ) (2.4 %) 63,570 46,651 16,919 36.3 %

Income from property operations $ 51,974 $ 47,943 $ 4,031 8.4 % $ 52,515 $ 47,671 $ 4,844 10.2 %

~~Property Operating Revenues~~


	Core Portfolio												Total Portfolio
							Increase /
	2010			2009			(Decrease)			% Change			2010			2009			Increase / (Decrease)			% Change
Community base rental income	$	64,401		$	63,148		$	1,253			2.0	%	$	64,422		$	63,184		$	1,238			2.0	%
Resort base rental income		36,418			35,246			1,172			3.3	%		36,945			35,458			1,487			4.2	%
Right-to-use annual payments		12,185			12,895			(710	)		(5.5	%)		12,185			12,895			(710	)		(5.5	%)
Right-to-use contracts current period, gross		4,937			5,577			(640	)		(11.5	%)		4,937			5,577			(640	)		(11.5	%)
Utility and other income		12,866			12,399			467			3.8	%		12,889			12,404			485			3.9	%

Property operating revenues, excluding deferrals		130,807			129,265			1,542			1.2	%		131,378			129,518			1,860			1.4	%
Property operating and maintenance		43,099			41,824			1,275			3.0	%		43,454			42,004			1,450			3.5	%
Real estate taxes		8,260			8,435			(175	)		(2.1	%)		8,314			8,456			(142	)		(1.7	%)
Sales and marketing, gross		3,263			3,072			191			6.2	%		3,263			3,072			191			6.2	%

Property operating expenses excluding deferrals and Property management		54,622			53,331			1,291			2.4	%		55,031			53,532			1,499			2.8	%

Property management		8,680			8,691			(11	)		(0.1	%)		8,740			8,704			36			0.4	%
Property operating expenses excluding deferrals		63,302			62,022			1,280			2.1	%		63,771			62,236			1,535			2.5	%

Income from property operations, excluding deferrals		67,505			67,243			262			0.4	%		67,607			67,282			325			0.5	%

Right-to-use contract sales, deferred, net		(3,948	)		(5,163	)		1,215			23.5	%		(3,948	)		(5,163	)		1,215			23.5	%
Right-to-use contract commissions, deferred net		1,412			1,493			(81	)		(5.4	%)		1,412			1,493			(81	)		(5.4	%)

Income from property operations	$	64,969		$	63,573		$	1,396			2.2	%	$	65,071		$	63,612		$	1,459			2.3	%

The ~~3.2%~~1.2% increase in the Core Portfolio property operating revenues primarily reflects: (i) a ~~3.1%~~2.3% increase in rates in our community base rental income offset by a 0.3% decrease in occupancy (ii) a ~~2.7%~~3.3% increase in revenues for our resort base income comprised of an increase in annual and seasonal revenue offset by decreases in ~~seasonal and~~ transient resort revenue and (iii) ~~an increase~~a 5.5% decrease in utility income due to increased pass-throughs at certain Properties. The Total Portfolio property operating revenues increase of 23.1% is primarily due to the consolidation of the Properties formerly leased to Privileged Access beginning August 14, 2008 as a result of the PA Transaction. The right-to-use annual payments represent the annual payments earned on right-to-use contracts acquired in the PA Transaction or sold since the PA Transaction on August 14, 2008. The right-to-use contracts current period, gross represents all right-to-use contract sales during the quarter ended June 30, 2009. The right-to-use contracts, deferred represents the deferral of current period sales into future periods, offset by the amortization of revenue deferred in prior periods.due to net member attrition.

4032

~~Property Operating Expenses~~

The ~~2.4% decrease~~2.1% increase in property operating expenses in the Core Portfolio ~~reflects~~is primarily due to a ~~0.8% decrease~~3.0% increase in property operating and maintenance expenses ~~and a 14.4% decrease~~which includes increases in ~~property management expenses. Core property operating~~repair and maintenance expenses, ~~decreased primarily from decreases in advertising~~payroll expenses and ~~administrative~~utility expenses. Our Total Portfolio property operating and maintenance expenses increased due to the consolidation of the Properties formerly leased to Privileged Access beginning August 14, 2008 as a result of the PA Transaction. Total Portfolio sales and marketing expense are all related to the costs incurred for the sale of right-to-use contracts. Total Portfolio property management expenses primarily increased due to the PA Transaction. Sales and marketing, deferred commissions, net represents commissions on right-to-use contract sales deferred until future periods to match the deferral of the right-to-use contract sales, offset by the amortization of prior period commission.

Home Sales Operations

The following table summarizes certain financial and statistical data for the Home Sales Operations for the quarters ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008 (dollars~~(amounts in thousands).


	2009			2008			Variance			% Change			2010			2009			Variance			% Change
Gross revenues from new home sales	$	675		$	5,941		$	(5,266	)		(88.6	%)	$	424		$	826		$	(402	)		(48.7	%)
Cost of new home sales		(1,033	)		(5,897	)		4,864			82.5	%		(395	)		(1,769	)		1,374			77.7	%

Gross (loss) profit from new home sales		(358	)		44			(402	)		(913.6	%)
Gross profit (loss) from new home sales														29			(943	)		972			103.1	%

Gross revenues from used home sales		1,062			858			204			23.8	%		623			385			238			61.8	%
Cost of used home sales		(614	)		(962	)		348			36.2	%		(764	)		(348	)		(416	)		(119.5	%)

Gross profit (loss) from used home sales		448			(104	)		552			530.8	%
Gross (loss) profit from used home sales														(141	)		37			(178	)		(481.1	%)

Brokered resale revenues, net		199			301			(102	)		(33.9	%)		239			186			53			28.5	%
Home selling expenses		(640	)		(1,635	)		995			60.9	%		(477	)		(1,072	)		595			55.5	%
Ancillary services revenues, net		418			(327	)		745			227.8	%		1,063			1,156			(93	)		(8.0	%)


Income (loss) from home sales operations	$	67		$	(1,721	)	$	1,788			103.9	%
Income (loss) from home sales operations and other													$	713		$	(636	)	$	1,349			212.1	%


Home sales volumes
New home sales (1)		21			112			(91	)		(81.3	%)		18			20			(2	)		(10.0	%)
Used home sales (2)		188			107			81			75.7	%		133			67			66			98.5	%
Brokered home resales		163			217			(54	)		(24.9	%)		187			158			29			18.4	%

~~Interest income is higher primarily due to interest income on Contract Receivables purchased in the PA Transaction.~~ Income from other investments, net decreased primarily due to ~~lower Privileged Access lease income of $6.4 million and $0.3 million of~~reduced incremental ~~net~~hurricane insurance proceeds ~~received during 2008 offset by the Caledonia sale~~ of ~~$0.8 million during 2009, incremental Caledonia lease income of $0.3 million, and $0.5 million in Tropical Palms lease payments recognized during 2009.~~$1.3 million. General and administrative ~~expense increased~~decreased primarily due to ~~higher~~decreased payroll ~~expense~~ and professional fees. Rent control ~~initiatives decreased~~expense increased primarily due to the ~~2008 activity regarding the City of~~ San Rafael ~~briefing, the City of Santee decision and 21~~^st ~~Mortgage trial. (See Note 13 in the Notes to Consolidated Financial Statements contained in this Form 10-Q for a detailed discussion of this legal activity).~~appeal. Interest and related amortization ~~increased~~decreased due to decreased lines of credit amounts outstanding.

Equity in Income of Unconsolidated Joint Ventures

During the quarter ended ~~June 30, 2009,~~March 31, 2010, equity in income of unconsolidated joint ventures decreased primarily due to ~~approximately~~ a ~~$1.6~~$1.1 million gain on the sale of a 25% interest in ~~four Morgan~~two Diversified joint ventures by the Company during the quarter ended ~~June 30, 2008.~~March 31, 2009.

~~Comparison of the Six Months Ended June 30, 2009 to the Six Months Ended June 30, 2008~~

The following table summarizes certain financial and statistical data for the Property Operations for the Core Portfolio and the Total Portfolio for the six months ended June 30, 2009 and 2008 (amounts in thousands).

Core Portfolio Total Portfolio
Increase / % Increase / %
2009 2008 (Decrease) Change 2009 2008 (Decrease) Change
Community base rental income $ 126,502 $ 122,464 $ 4,038 3.3 % $ 126,502 $ 122,464 $ 4,038 3.3 %
Resort base rental income 55,300 55,266 34 0.1 % 63,205 57,630 5,575 9.7 %
Right-to-use annual payments — — — — 25,597 — 25,597 100.0 %
Right-to-use contracts current period, gross — — — — 11,446 — 11,446 100.0 %
Right-to-use contracts, deferred, net of prior period amortization — — — — (10,434 ) — (10,434 ) (100.0 %)
Utility and other income 21,566 20,385 1,181 5.8 % 24,124 20,650 3,474 16.8 %

Property operating revenues 203,368 198,115 5,253 2.7 % 240,440 200,744 39,696 19.8 %
Property operating and Maintenance 64,585 65,414 (829 ) (1.3 %) 87,569 67,699 19,870 29.4 %
Real estate taxes 14,799 14,778 21 0.1 % 16,691 14,918 1,773 11.9 %
Sales and marketing, gross — — — — 6,744 — 6,744 100.0 %

Sales and marketing, deferred commissions, net — — — — (3,125 ) — (3,125 ) (100.0 %)
Property management 9,757 10,400 (643 ) (6.2 %) 16,434 10,537 5,897 56.0 %

Property operating expenses 89,141 90,592 (1,451 ) (1.6 %) 124,313 93,154 31,159 33.4 %

Income from property operations $ 114,227 $ 107,523 $ 6,704 6.2 % $ 116,127 $ 107,590 $ 8,537 7.9 %

~~Property Operating Revenues~~

The 2.7% increase in the Core Portfolio property operating revenues reflects: (i) a 3.6% increase in rates in our community base rental income offset by a 0.3% decrease in occupancy, (ii) a 0.1% increase in revenues for our resort base income comprised of an increase in annual resort revenue offset by a decrease in seasonal and transient resort revenue and (iii) an increase in utility income due to increased pass-throughs at certain Properties. The Total Portfolio property operating revenues increase of 19.8.% is primarily due to the consolidation of the Properties formerly leased to Privileged Access beginning August 14, 2008 as a result of the PA Transaction. The right-to-use

annual payments represent the annual payments earned on right-to-use contracts acquired in the PA Transaction or sold since the PA Transaction on August 14, 2008. The right-to-use contracts current period, gross represents all right-to-use contract sales during the quarter ended June 30, 2009. The right-to-use contracts, deferred represents the deferral of current period sales into future periods, offset by the amortization of revenue deferred in prior periods.

~~Property Operating Expenses~~

The 1.6% decrease in property operating expenses in the Core Portfolio reflects a 1.3% decrease in property operating and maintenance expenses and a 6.2% decrease in property management expenses. The Core property operating and maintenance expense decrease is primarily due to a decrease in administrative and advertising expenses. Our Total Portfolio property operating and maintenance expenses increased due to the consolidation of the Properties formerly leased to Privileged Access beginning August 14, 2008 as a result of the PA Transaction. Total Portfolio sales and marketing expense are all related to the costs incurred for the sale of right-to-use contracts. Core Portfolio and Total Portfolio property management expenses primarily increased due to the PA Transaction. Sales and marketing, deferred commissions, net represents commissions on right-to-use contract sales deferred until future periods to match the deferral of the right-to-use contract sales, offset by the amortization of prior period commission.

~~Home Sales Operations~~

~~The following table summarizes certain financial and statistical data for the Home Sales Operations for the six months ended June 30, 2009 and 2008 (dollars in thousands).~~

2009 2008 Variance % Change
Gross revenues from new home sales $ 1,501 $ 11,741 $ (10,240 ) (87.2 %)
Cost of new home sales (2,802 ) (12,126 ) 9,324 76.9 %

Gross loss from new home sales (1,301 ) (385 ) (916 ) (237.9 %)

Gross revenues from used home sales 1,447 1,253 194 15.5 %
Cost of used home sales (962 ) (1,483 ) 521 35.1 %

Gross profit (loss) from used home sales 485 (230 ) 715 310.9 %

Brokered resale revenues, net 385 668 (283 ) (42.4 %)
Home selling expenses (1,712 ) (3,148 ) 1,436 45.6 %
Ancillary services revenues, net 1,574 1,121 453 40.4 %

Loss from home sales operations $ (569 ) $ (1,974 ) $ 1,405 71.2 %

Home sales volumes

New home sales (1) 41 236 (195 ) (82.6 %)
Used home sales (2) 255 168 87 51.8 %
Brokered home resales 321 457 (136 ) (29.8 %)


~~(1)~~		~~Includes third party home sales of six and 45 for the six months ending June 30, 2009 and 2008, respectively.~~

~~(2)~~		~~Includes third party home sales of three and one for the six months ending June 30, 2009 and 2008, respectively.~~

Income from home sales operations increased as a result of increased used home volume and gross profits offset by decreased new and brokered resale volumes and reduced new home volume and gross profits. Gross loss from new home sales includes an increase in the manufactured home inventory reserve of approximately $1.1 million. Home selling expenses for 2009 have been down as a result of lower sales volumes and decreased advertising costs. Ancillary services revenues, net increased primarily due to the inclusion of the ancillary activities of the Properties leased to Privileged Access prior to August 14, 2008.

~~Rental Operations~~

The following table summarizes certain financial and statistical data for the Rental Operations for the six months ended June 30, 2009 and 2008 (dollars in thousands). Except as otherwise noted, the amounts below are included in Ancillary services revenue, net in the Home Sales Operations table in the previous section.

%
2009 2008 Variance Change
Manufactured homes:
New Home $ 3,247 $ 1,666 $ 1,581 94.9 %
Used Home 4,313 3,413 900 26.4 %

Rental operations revenue⁽¹⁾
7,560 5,079 2,481 48.8 %

Property operating and maintenance 945 855 (90 ) (10.5 %)
Real estate taxes 86 53 (33 ) (62.3 %)

Rental operations expenses 1,031 908 (123 ) (13.5 %)

Income from rental operations 6,529 4,171 2,358 56.5 %
Depreciation (1,163 ) (319 ) (844 ) (264.6 %)

Income from rental operations, net of depreciation $ 5,366 $ 3,852 $ 1,514 39.3 %

Number of occupied rentals — new, end of period 568 291 277 95.2 %
Number of occupied rentals — used, end of period 1,030 843 187 22.2 %


~~(1)~~		~~Approximately $5.7 million and $3.8 million for the six months ended June 30, 2009 and 2008, respectively, are included in Community base rental income in the Property Operations table.~~

The increase in rental operations revenue is primarily due to the increase in the number of occupied rentals. The increase in depreciation is due to the increase of the number of rental units in 2009 as compared to 2008.

~~Other Income and Expenses~~

~~The following table summarizes other income and expenses for the six months ended June 30, 2009 and 2008 (amounts in thousands).~~

%
2009 2008 Variance Change
Interest income $ 2,606 $ 681 $ 1,925 282.7 %
Income from other investments, net 4,389 13,615 (9,226 ) (67.8 %)
General and administrative (12,373 ) (10,233 ) (2,140 ) (20.9 %)
Rent control initiatives (315 ) (1,865 ) 1,550 83.1 %
Interest and related amortization (49,576 ) (49,674 ) 98 0.2 %
Depreciation on corporate and other assets (402 ) (182 ) (220 ) (120.9 %)
Depreciation on real estate assets (34,542 ) (32,532 ) (2,010 ) (6.2 %)

Total other expenses, net $ (90,213 ) $ (80,190 ) $ (10,023 ) (12.5 %)

Interest income is higher primarily due to interest income on Contracts Receivable purchased in the PA Transaction. Income from other investments, net decreased primarily due to lower Privileged Access lease income of $12.7 million received during 2008 offset by the following items received in 2009: $0.8 million incremental insurance proceeds, $0.9 million in Tropical Palms lease payments, Caledonia gain on sale of $0.8 million and incremental Caledonia lease income of $0.3 million. General and administrative expense increased primarily due to higher payroll, professional fees, and public company costs. General and administrative in 2009 includes

~~approximately $0.2 million of costs related to transactions required to be expensed in accordance with SFAS No.141R. Prior to 2009, such costs were capitalized in accordance with SFAS No.141.~~

~~Rent control initiatives decreased due to the 2008 activity regarding the City of San Rafael briefing, the City of Santee decision and 21~~^st Mortgage trial. (See Note 13 in the Notes to Consolidated Financial Statements contained in this Form 10-Q for a detailed discussion of this activity). Interest and related amortization decreased due to decreased lines of credit amounts outstanding. The Company has determined that certain depreciable assets acquired during years prior to 2009 were inadvertently omitted from prior year depreciation expense calculations. Since the total amounts involved were immaterial to the Company’s financial position and results of operations, the Company has decided to record additional depreciation expense in 2009 to reflect this adjustment. As a result, the six months ended June 30, 2009 includes approximately $1.1 million of prior period depreciation expense.

~~Equity in Income of Unconsolidated Joint Ventures~~

During the six months ended June 30, 2009, equity in income of unconsolidated joint ventures decreased primarily due a $1.1 million gain on the sale of our 25% interest in two Diversified Portfolio joint ventures during the six months ended June 30, 2009, offset by a $2.2 million gain from joint venture dispositions or liquidations during the six months ended June 30, 2008.

Liquidity and Capital Resources

Liquidity

As of ~~June 30, 2009,~~March 31, 2010, the Company had approximately ~~$174.2~~$172.3 million in cash and cash equivalents primarily held in treasury reserve accounts, and $370.0 million available on its lines of credit. The increase in the cash balance during the six months ended June 30, 2009 is primarily due to $146.6 million of net proceeds generated from the sale of 4.6 million shares of our common stock in a public offering that closed on June 29, 2009. The Company expects to meet its short-term liquidity requirements, including its distributions, generally through its working capital, net cash provided by operating activities, proceeds from the sale of Properties and availability under the existing lines of credit. The Company expects to meet certain long-term liquidity requirements such as scheduled debt maturities, property acquisitions and capital improvements by use of its current cash balance, long-term collateralized and uncollateralized borrowings including borrowings under its existing lines of credit and the issuance of debt securities or additional equity securities in the Company, in addition to net cash provided by operating activities. ~~As of June 30, 2009, the Company has approximately $47 million of remaining scheduled debt maturities in 2009 (excluding scheduled principal payments on debt maturing in~~During 2010 ~~and beyond). During 2008~~ and 2009, we received financing proceeds from Fannie Mae secured by mortgages on individual manufactured home Properties. The terms of the Fannie Mae financings were relatively attractive as compared to other potential lenders. If financing proceeds are no longer available from Fannie Mae for any reason or if Fannie Mae terms are no longer attractive, it may adversely affect cash flow and our ability to service debt and make distributions to stockholders. The Company currently has approximately $77 million of scheduled debt maturities in 2010 (excluding scheduled principal payments on debt maturing in 2011 and beyond). The Company expects to satisfy its 2010 maturities with its existing cash balance and approximately $15.0 million of new financing proceeds we expect to receive in 2010.

The table below summarizes cash flow activity for the ~~six months~~quarters ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ (amounts in thousands).

For the six months ended
June 30,
2009 2008
Cash provided by operating activities $ 82,660 $ 75,008
Cash used in investing activities (15,945 ) (17,710 )
Cash provided by (used in) financing activities 62,124 (51,898 )

Net increase in cash $ 128,839 $ 5,400


	For the quarters ended
	March 31,
	2010			2009
Net cash provided by operating activities	$	51,807		$	54,858
Net cash used in investing activities		(6,512	)		(9,981	)
Net cash used in financing activities		(18,116	)		(73,510	)

Net increase (decrease) in cash and cash equivalents	$	27,179		$	(28,633	)

Operating Activities

Net cash provided by operating activities ~~increased $7.7~~decreased $3.1 million for the ~~six months~~quarter ended ~~June 30,~~March 31, 2010, as compared to the net cash provided by operating activity for the quarter ended March 31, 2009. The decrease in cash provided by operating activities is primarily due to a $1.4 million decrease in distributions from unconsolidated joint ventures and a $0.6 million decrease in deferred revenue – sales of right-to-use contracts.

Acquisitions

2009 Acquisitions

On February 13, 2009, the Company acquired the remaining ~~75 percent~~75% interests in three Diversified Portfolio joint ventures known as (i) Robin Hill, a 270-site property in Lenhartsville, Pennsylvania, (ii) Sun Valley, a 265-site property in Brownsville, Pennsylvania, and (iii) Plymouth Rock, a 609-site property in Elkhart Lake, Wisconsin. The gross purchase price was approximately $19.2 million, and we assumed mortgage loans of approximately $12.9 million with a value of approximately $11.9 million and a weighted average interest rate of ~~6.0 percent~~6.0% per annum.

~~2008 Acquisitions~~

On January 14, 2008, we acquired a 179-site Property known as Grandy Creek located on 63 acres near Concrete, Washington. The purchase price was $1.8 million and the Property was leased to Privileged Access from January 14, 2008 through August 14, 2008.

On January 23, 2008, we acquired a 151-site resort Property known as Lake George Schroon Valley Resort on approximately 20 acres in Warrensburg, New York. The purchase price was approximately $2.1 million and was funded by proceeds from the tax-deferred exchange account established as a result of the November 2007 sale of Holiday Village-Iowa.

Certain purchase price adjustments may be made within one year following the acquisitions.

Dispositions

Creekside is a 165-site all-age manufactured home community located in Wyoming, Michigan. On ~~April 17,~~December 29, 2009, we ~~sold Caledonia,~~sent a ~~247-site Property~~notice of imminent default along with a deed-in-lieu of foreclosure to the loan servicer regarding the $3.6 million mortgage loan on Creekside which bears interest at 6.327% and was scheduled to mature in ~~Caledonia, Wisconsin, for proceeds~~2015. We defaulted on the mortgage in January 2010 and ceased managing the property as of January 29, 2010. In accordance with FASB ASC 470-60, we recorded a loss on disposition of approximately ~~$2.2 million. The Company recognized a gain on sale of approximately $0.8~~$0.2 million ~~which is included~~during the quarter ended March 31, 2010. (See Notes 4 and 13 in ~~Income from other investments, net. In addition, we received approximately $0.3 million of deferred rent due from~~ the ~~previous tenant.~~Notes to Consolidated Financial Statements contained in this Form 10-Q.)

On February 13, 2009, the Company sold its 25 percent interest in two Diversified Portfolio joint ventures known as (i) Pine Haven, a 625-site property in Ocean View, New Jersey and (ii) Round Top, a 319-site property in Gettysburg, Pennsylvania. A gain on sale of approximately $1.1 million was recognized during the quarter ended March 31, 2009 and is included in Equity in income of unconsolidated joint ventures.

During the quarter ended June 30, 2008, the Company sold its 25% interest in the following properties, Newpoint in New Point, Virginia, Virginia Park in Old Orchard Beach, Maine, Club Naples, Florida, and Gwynn’s Island in Gwynn, Virginia, four properties held in the Morgan Portfolio, for approximately $2.1 million. A gain on sale of approximately $1.6 million was recognized. The Company also received approximately $0.3 million of funds held for the purchase of five Morgan Properties disposed of in 2006.

As of June 30, 2009, we had two family Properties held for disposition. On July 20, 2009, we sold one of these Properties, Casa Village. The purchase price was approximately $12 million and the buyer assumed mortgage debt on the Property of approximately $11 million.

We continue to look at acquiring additional assets and are at various stages of negotiations with respect to potential acquisitions. Funding is expected to come from either proceeds from potential dispositions, lines of credit draws, or other financing.

	•	During the quarter ended March 31, ~~2009,~~2010, the Company closed an approximately $12.0 million financing on ~~approximately $57 million of financing with Fannie Mae on two~~one manufactured home ~~Properties at a stated~~community with an interest rate of ~~6.38 percent~~5.99% per annum, maturing in 2020.The Company also paid off two maturing mortgages totaling approximately ~~$22 million with a weighted average interested rate of 5.43 percent per annum.~~

•	During the quarter ended June 30, 2009, the Company refinanced approximately $5 million of maturing mortgage debt on Kloshe Illahee in Federal Way, Washington with a stated interest rate of 7.15 percent per annum for approximately $18 million with a stated interest rate of 5.79 percent per annum, maturing in 2019.

•	In July 2009, the Company closed on approximately $10 million of Fannie Mae financing on Villa Borega in Las Vegas, Nevada at a stated interest rate of 6.53 percent per annum, maturing in 2019. In July and August 2009, the Company also paid off ten maturing mortgages totaling approximately $41$7.1 million, with a weighted average interest rate of ~~8.15 percent~~8.53% per annum.

During April 2010, the Company closed on approximately $49.7 million of financing on two manufactured home communities at a weighted average interest rate of 7.14% per annum, maturing in 10 years. The Company also paid off seven maturing mortgages totaling approximately $94.1 million, with a weighted average interest rate of 7.84% per annum. The Company has locked rate on approximately $15.0 million of financing on one resort Property at a stated interest rate of 6.50% per annum, maturing in 10 years.

~~2008~~2009 Activity

During the ~~six months~~quarter ended ~~June 30, 2008,~~March 31, 2009, the Company ~~completed the following transactions:~~

	•		~~The Company repaid $3.4 million of mortgage debt on Mesa Verde in Yuma, Arizona that had a stated interest rate of 4.9%~~closed on approximately $57 million of financing with Fannie Mae on two manufactured home Properties at a stated interest rate of 6.38% per annum. The Company also paid off two maturing mortgages totaling approximately $22 million with a weighted average interest rate of 5.43% per annum.

	•		~~The Company closed on two of the nine Fannie Mae loans for total financing proceeds of approximately $25.8 million bearing interest of 5.76% and maturing on May 1, 2018.~~

	•		~~In connection with the closing of the two Fannie Mae loans, the Company refinanced a $6.7 million mortgage on Holiday Village, in Ormond Beach, Florida.~~

Secured Debt

As of ~~June 30, 2009,~~March 31, 2010, our secured long-term debt balance was approximately ~~$1.6~~$1.5 billion, with a weighted average interest rate ~~in 2009~~ of approximately 6.0% per annum. The debt bears interest at rates between 5.0% and ~~10.0%~~8.5% per annum and matures on various dates primarily ranging from ~~2009~~2010 to ~~2019. Included~~2020. Excluding scheduled principal amortization, we have approximately $175 million of long-term debt maturing in ~~our~~2010 and approximately $56 million maturing in 2011. The weighted average term to maturity for the long-term debt ~~balance are three capital leases~~is approximately 5.3 years. During April 2010, we paid off $94.1 million of the long-term debt maturing in 2010.

In the remainder of 2010, the Company expects to payoff eight mortgages totaling approximately $77 million, with ~~an imputed~~a weighted average interest rate of ~~13.1%~~5.78% per annum. ~~The Company has approximately $7~~Approximately $15 million is expected to come from the financing of ~~secured debt currently outstanding that matures in 2009 and approximately $213 million maturing in 2010.~~

~~The Company has locked an annual~~one resort Property at a stated interest rate of ~~6.925% on approximately $12.0~~6.50% per annum for 10 years. The Company anticipates paying off the remaining $62 million of maturing debt and 7.135% on approximately $49.7 million of debt with Fannie Mae related to mortgages on three manufactured home Properties. The loans will have a term of ten years, with principal amortization over 30 years. The net proceeds from the loans will be used to repay secured long-term debt and for general corporate purposes. The closing of these loans is subject to the execution of definitive loan documentation and the fulfillment of certain conditions; accordingly, no assurance can be given that these financings will be consummatedcash on the terms described or at all. The Company is seeking to enter into commitments with Fannie Mae to borrow an additional $21.6 million secured by mortgages on two additional manufactured home Properties, however no assurance can be given that it will be successful in doing so.balance sheet.

Unsecured Debt

We have two unsecured Lines of Credit (“LOC”) with a maximum borrowing capacity of $350 million and $20 million, respectively, which bear interest at a per annum rate of LIBOR plus a maximum of 1.20% per annum, have a 0.15% facility fee, mature on June 30, 2010, and have a one-year extension option. The one-year extension fee is 0.15%. The weighted average interest rate for the ~~six months~~quarter ended ~~June 30, 2009~~March 31, 2010 for our unsecured debt was approximately ~~5.4%~~3.5% per annum. ~~During the six months ended June 30, 2009, we borrowed $50.9 million and paid down $143.9 million on the lines of credit for a net pay down of $93.0 million.~~ As of ~~June 30, 2009~~March 31, 2010 there were no amounts outstanding on the line of credit.

Other Loans

During the quarter ended March 31, 2010 we borrowed approximately $1.0 million, which is secured by individual manufactured homes. This financing provided by the dealer requires monthly payments, bears interest at 8.5% and matures on the earlier of: 1) the date the home is sold, or 2) November 20, 2016.

Contractual Obligations

As of ~~June 30, 2009,~~March 31, 2010, we were subject to certain contractual payment obligations as described in the table below ~~(dollars~~(amounts in thousands).


	Total			2009			2010			2011			2012			2013			Thereafter			Total			2010			2011			2012			2013			2014			2015			Thereafter
Long Term Borrowings₍₁₎	$	1,611,126		$	58,670		$	231,321		$	75,576		$	21,599		$	131,230		$	1,092,730		$	1,544,509		$	190,249	⁽²⁾	$	75,879		$	21,975		$	121,866		$	199,540		$	530,311		$	404,689
Weighted average interest rates		6.19	%		5.99	%		5.93	%		5.81	%		5.77	%		5.77	%		5.87	%		5.95	%		5.89	%		5.82	%		5.78	%		5.78	%		5.79	%		5.82	%		6.14	%

Funds From Operations

Funds from Operations (“FFO”) is a non-GAAP financial measure. We believe FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), ~~to be~~is generally an appropriate measure of performance for an equity REIT. While FFO is a relevant and widely used measure of operating performance for equity REITs, it does not represent cash flow from operations or net income as defined by GAAP, and it should not be considered as an alternative to these indicators in evaluating liquidity or operating performance.

We define FFO ~~is defined~~ as net income, computed in accordance with GAAP, excluding gains or actual or estimated losses from sales of properties, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. ~~The Company receives~~We receive up-front non-refundable payments from the sale of right-to-use contracts. In accordance with GAAP, the upfront non-refundable payments and related commissions are deferred and amortized over the estimated customer life. Although the NAREIT definition of FFO does not address the treatment of nonrefundable right-to-use payments, ~~the Company believes~~we believe that it is appropriate to adjust for the impact of the deferral activity in our calculation of FFO. ~~The Company believes~~We believe that FFO is helpful to investors as one of several measures of the performance of an equity REIT. ~~The Company~~We further ~~believes~~believe that by excluding the effect of depreciation, amortization and gains or actual or estimated losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and among other equity REITs. ~~The Company believes~~We believe that the adjustment to FFO for the net revenue deferral of upfront non-refundable payments and expense deferral of right-to-use contract commissions also facilitates the comparison to other equity REITs. Investors should review FFO, along with GAAP net income and cash flow from operating activities, investing activities and financing activities, when evaluating an equity REIT’s operating performance. ~~The Company computes~~We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of our financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

The following table presents a calculation of FFO for the quarters ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ (amounts in thousands):


	Quarters Ended					Six Months Ended					Quarters Ended
	June 30,					June 30,					March 31,
	2009			2008		2009			2008		2010			2009
Computation of funds from operations:
Net income available for common shares	$	2,904		$	4,109	$	16,548		$	16,834	$	15,064		$	13,644
Income allocated to common OP Units		501			964		3,295			3,968
Income allocated to common OP units												2,432			2,794
Right-to-use contract sales, deferred, net		5,271			—		10,434			—		3,948			5,163
Right-to-use contract commissions, deferred, net		(1,632	)		—		(3,125	)		—		(1,412	)		(1,493	)
Depreciation on real estate assets and other		17,143			16,258		34,542			32,532		16,923			17,399
Depreciation on unconsolidated joint ventures		314			311		640			903		305			326
(Gain) loss on sale of property		(803	)		39		(783	)		80
Loss on real estate												177			20

Funds from operations available for common shares	$	23,698		$	21,681	$	61,551		$	54,317	$	37,437		$	37,853


Weighted average common shares outstanding — fully diluted		30,693			30,540		30,609			30,478		35,500			30,523


Item 3.		Quantitative and Qualitative Disclosure of Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. Our earnings, cash flows and fair values relevant to financial instruments are dependent on prevailing market interest rates. The primary market risk we face is long-term indebtedness, which bears interest at fixed and variable rates. The fair value of our long-term debt obligations is affected by changes in market interest rates. At ~~June 30, 2009,~~March 31, 2010, approximately 100% or approximately ~~$1.6~~$1.5 billion of our outstanding debt had fixed interest rates, which minimizes the market risk until the debt matures. For each increase in interest rates of 1% (or 100 basis points), the fair value of the total outstanding debt would decrease by approximately ~~$88.8~~$80.2 million. For each decrease in interest rates of 1% (or 100 basis points), the fair value of the total outstanding debt would increase by approximately ~~$94.0~~$84.7 million.

At ~~June 30, 2009,~~March 31, 2010, none of our outstanding debt was short-term and at variable rates.


Item 4.		Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal ~~financial~~accounting officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures as of ~~June 30, 2009.~~March 31, 2010. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder as of ~~June 30, 2009.~~March 31, 2010.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Changes in Internal Control Over Financial Reporting

As previously announced and discussed in this Form 10-Q, we acquired substantially all of the assets and certain liabilities of Privileged Access on August 14, 2008 in the PA Transaction. We are in the process of integrating the operations of Privileged Access with those of the Company and incorporating the internal controls and procedures of Privileged Access into our internal control over financial reporting. We do not expect this acquisition to materially affect our internal control over financial reporting. The Company will report on its assessment of the combined operations within the one-year time period provided by the Sarbanes-Oxley Act of 2002 and the applicable SEC rules and regulations concerning business combinations.

~~Excluding the operations of Privileged Access, there~~There were no material changes in the Company’s internal control over financial reporting during the quarter ended ~~June 30, 2009.~~March 31, 2010.

5341

Part II — Other Information


Item 1.		Legal Proceedings

See Note 13 of the Consolidated Financial Statements contained herein.


Item 1A.		Risk Factors

~~None~~.With the exception of the following there have been no material changes to the factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009.

Some Potential Losses Are Not Covered by Insurance.We carry comprehensive insurance coverage for losses resulting from property damage, liability claims and business interruption on all of our Properties. In addition we carry liability coverage for other activities not specifically related to property operations. These coverages include, but are not limited to, Directors & Officers liability, Employer Practices liability and Fiduciary liability. We believe that the policy specifications and coverage limits of these policies should be adequate and appropriate. There are, however, certain types of losses, such as lease and other contract claims that generally are not insured. Should an uninsured loss or a loss in excess of coverage limits occur, we could lose all or a portion of the capital we have invested in a Property or the anticipated future revenue from a Property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the Property.

Our current property and casualty insurance policies expire on March 31, 2011. We have a $100 million loss limit with respect to our all-risk property insurance program including Named Windstorm. This loss limit is subject to additional sub-limits as outlined in the policy form, including a $25 million loss limit for California Earthquake. Policy deductibles primarily range from a $100,000 minimum to 5% per unit of insurance for most catastrophic events. A deductible indicates ELS’ maximum exposure, subject to policy sub-limits, in the event of a loss.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3.		Defaults Upon Senior Securities

None.


Item 4.		~~Submission of Matters to a Vote of Security Holders~~(Removed and Reserved)

The Company held its Annual Meeting of Stockholders on May 12, 2009. Stockholders holding 23,514,352 Common Shares (being the only class of shares entitled to vote at the meeting), or 93.2%, of the Company’s 25,233,184 outstanding Common Shares as of the record date for the meeting, attended the meeting or were represented by proxy. The Company’s shareholders voted on two matters presented at the meeting, which received the requisite number of votes to pass. The results of the stockholders’ votes were as follows:

~~Proposal No. 1~~~~: Election of eight directors to terms expiring in 2010. A plurality of the votes cast was required for the election of directors.~~

DIRECTOR FOR WITHHELD
Philip C. Calian 23,423,518 90,835
David J. Contis 23,421,313 93,039
Thomas E. Dobrowski 23,303,297 211,056
Thomas P. Heneghan 23,329,915 184,438
Sheli Z. Rosenberg 23,155,525 358,828
Howard Walker 23,224,802 289,551
Gary L. Waterman 23,340,169 174,184
Samuel Zell 22,463,473 1,050,879

~~Proposal No. 2~~~~: Approval to ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2009. A majority of the votes cast was required for approval.~~

FOR AGAINST ABSTAIN
Total Shares_(a)
23,249,361 262,759 2,232
% of Voted Shares 98.87 % 1.12 % 0.01 %
% of Outstanding Shares 98.87 % 1.12 % 0.01 %


_(a)		~~Broker non-votes were zero.~~


Item 5.		Other Information

None.


		Page
Part I — Financial Information

Item 1. Financial Statements

Index To Financial Statements

Consolidated Balance Sheets as of ~~June 30, 2009~~March 31, 2010 (unaudited) and December 31, ~~2008~~2009		3
	3
Consolidated Statements of Operations for the quarters ended March 31, 2010 and ~~six months ended June 30,~~ 2009 ~~and 2008~~ (unaudited)		4
	4
Consolidated Statements of Changes in Equity for the ~~six months~~quarter ended ~~June 30, 2009~~March 31, 2010 (unaudited)		6
	6
Consolidated Statements of Cash Flows for the ~~six months~~quarters ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ (unaudited)		6	7
Notes to Consolidated Financial Statements			9

~~Notes to Consolidated Financial Statements~~		8

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
	27
Item 3.Quantitative and Qualitative Disclosures About Market Risk		53
	41
Item 4.Controls and Procedures		53	41

Part II — Other Information

Item 1.Legal Proceedings		54
	42
Item 1A.Risk Factors		54
	42
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds		54
	42
Item 3.Defaults Upon Senior Securities		54
	42
Item 4.Submission of Matters to a Vote of Security Holders		54
	42
Item 5.Other Information		54
	42
Item 6.Exhibits		55	42
EX-31.1
EX-31.2
EX-32.1
EX-32.2


Property	Transaction Date	Sites
Total Sites as of January 1, 2008			112,779

Property or Portfolio (# of Properties in parentheses):
Grandy Creek (1)	January 14, 2008		179
Lake George Schroon Valley Resort (1)	January 23, 2008		151

Expansion Site Development and other:
Sites added (reconfigured) in 2008			71
Sites added (reconfigured) in 2009			(3	)

Dispositions:
Morgan Portfolio JV (5)	2008		(1,134	)
Round Top JV (1)	February 13, 2009		(319	)
Pine Haven JV (1)	February 13, 2009		(625	)
Caledonia (1)	April 17, 2009		(247	)


Total Sites as of June 30, 2009			110,852


Property	Transaction Date	Sites
Total Sites as of December 31, 2008			112,257
Property or Portfolio (# of Properties in parentheses):
Expansion Site Development and other:
Sites added (reconfigured) in 2009			(1	)
Sites added (reconfigured) in 2010			1

Dispositions:
Round Top JV (1)	February 13, 2009		(319	)
Pine Haven JV (1)	February 13, 2009		(625	)
Caledonia (1)	April 17, 2009		(247	)
Casa Village (1)	July 20, 2009		(490	)
Creekside (1)	January 10, 2010		(165	)

Total Sites as of March 31, 2010			110,411


	Total Sites as of		Total Sites as of		Total Sites as of		Total Sites as of
	June 30,		December 31,		March 31,		December 31,
	2009		2008		2010		2009
	(rounded to 000s)		(rounded to 000s)		(rounded to 000s)		(rounded to 000s)
Community sites₍₁₎		44,900		44,800		44,200		44,400
Resort sites :
Resort sites:
Annual		20,700		20,100		20,600		20,600
Seasonal		8,900		8,800		8,900		8,900
Transient		8,900		8,800		9,300		9,300
Right-to-use(2)		24,300		24,300		24,300		24,300
Joint Ventures₍₂₎₍₃₎		3,100		5,200		3,100		3,100

		110,800		112,000		110,400		110,600


₍₁₎		Balance excludes net premiums and discounts of ~~$0.1~~$0.8 million. Balances include debt maturing and scheduled periodic principal payments.

₍₂₎		Includes approximately $94.1 million of mortgage notes payable paid off after March 31, 2010.


						Distributions in
						Excess of			Non-controlling
						Accumulated			interests –
	Common		Paid-in			Comprehensive			Common OP
	Stock		Capital			Earnings			Units			Total Equity

Balance, December 31, 2008	$	238	$	320,084		$	(241,609	)	$	17,521		$	96,234
Conversion of OP Units to common stock		—		758			—			(758	)		—
Issuance of common stock through exercise of options		—		32			—			—			32
Issuance of common stock through employee stock purchase plan		—		929			—			—			929
Issuance of common stock through stock offering		46		146,603			—			—			146,649
Compensation expenses related to stock options and restricted stock		15		2,327			—			—			2,342
Repurchase of common stock		—		(120	)		—			—			(120	)
Adjustment of Common OP Unitholders in the Operating Partnership		—		(19,899	)		—			19,899			—
Net income		—		—			16,548			3,295			19,843
Distributions		—		—			(12,643	)		(2,609	)		(15,252	)

Balance, June 30, 2009	$	299	$	450,714		$	(237,704	)	$	37,348		$	250,657


	As of						As of
	June 30,			December 31,			March 31,			December 31,
Properties Held for Long Term	2009			2008			2010			2009
Investment in real estate:
Land	$	543,735		$	539,702		$	543,663		$	543,613
Land improvements		1,732,633			1,715,627			1,743,811			1,741,142
Buildings and other depreciable property_(a)		240,772			222,699			254,372			248,907

		2,517,140			2,478,028			2,541,846			2,533,662
Accumulated depreciation		(592,850	)		(557,001	)		(646,695	)		(628,839	)

Net investment in real estate	$	1,924,290		$	1,921,027		$	1,895,151		$	1,904,823


_(a)		As of June 30, 2009, the balance includes approximately $45.7 million of new rental units and approximately $15.5 million of used rental units. As of December 31, 2008, the balance includes approximately $44.4 million of new manufactured home rental units and $13.4 million of used manufactured home rental units.


									JV Income for
					Investment as of				Six Months Ended							Economic							JV Income for the
		Number		Economic			December									Interest			Investment as of				Quarters Ended
Investment	Location	of Sites		Interest_(a)	June 30, 2009		31, 2008		June 30, 2009		June 30, 2008		Location	Number of Sites		_(a)			March 31, 2010		December 31, 2009		March 31, 2010		March 31, 2009
Meadows	Various (2,2)		1,027	50%	$	115	$	406	$	472	$	471	Various (2,2)		1,027		50	%	$	72	$	245	$	302	$	258
Lakeshore	Florida (2,2)		342	90%		140		110		162		750	Florida (2,2)		342		65	%		127		133		46		72
Voyager	Arizona (1,1)		1,706	50%_(b)		8,841		8,953		580		789	Arizona (1,1)		1,706		50	%_(b)		9,114		8,732		449		430
Other Investments	Various (0,5)_(c)		—	25%		309		207		1,164		1,373	Various (0,0)_(c)		—		25	%		338		332		44		1,143

			3,075		$	9,405	$	9,676	$	2,378	$	3,383			3,075				$	9,651	$	9,442	$	841	$	1,903


_(a)		The percentages shown approximate the Company’s economic interest as of ~~June 30, 2009.~~March 31, 2010. The Company’s legal ownership interest may differ.

_(b)		Voyager joint venture primarily consists of a 50% interest in Voyager RV Resort. A 25% interest in the utility plant servicing the Property is included in Other Investments.

_(c)		~~As noted above,~~In February 2009, the Company sold its 25% interest in two Diversified Portfolio joint ~~ventures and purchased~~ventures. The JV income reported for the ~~remaining 75% interest in three Diversified Portfolio joint ventures during~~quarter ended March 31, 2009 is primarily from the ~~six months ended June 30, 2009 (see Note 4 in~~sale of the ~~Notes to Consolidated Financial Statements contained in this Form 10-Q).~~interest.


	June 30, 2009		December 31, 2008
New homes_(a)	$	466	$	8,436
Used homes_(b)		—		312
Other_(c)		3,515		4,651

Total inventory_(d)		3,981		13,399
Inventory reserve		—		(465	)

Inventory, net of reserves	$	3,981	$	12,934


	Six Months Ended
	June 30, 2009
Deferred revenue-sale of right-to-use contracts-December 31, 2008	$	10,611

Deferral of new right-to-use contracts		11,446
Deferred revenue recognized		(1,012	)

Net increase in deferred revenue		10,434

Deferred revenue-sale of right-to-use contracts-June 30, 2009	$	21,045


Deferred commission expense-December 31, 2008	$	3,644

Costs deferred		3,450
Amortization of deferred costs		(325	)

Net increase in deferred sales and marketing		3,125

Deferred commission expense-June 30, 2009	$	6,769


(1)		~~Total includes 655~~Includes zero and 165 sites from discontinued ~~operations.~~operations at March 31, 2010 and December 31, 2009, respectively.

(2)		Includes approximately 2,500 sites rented on an annual basis.

(3)		Joint Venture income is included in Equity in income of unconsolidated joint ventures.


(1)		Includes third party home sales of ~~three~~seven and 21three for the quarters ending ~~June 30,~~March 31, 2010 and 2009, ~~and 2008,~~ respectively.

(2)		Includes one third party home ~~sales of three and one~~sale for the ~~quarters~~quarter ending ~~June 30, 2009 and 2008, respectively.~~March 31, 2010.


(1)		Approximately ~~$2.9~~$3.4 million and ~~$2.0~~$2.7 million for the quarters ended ~~June 30,~~March 31, 2010 and 2009, ~~and 2008,~~ respectively, are included in Community base rental income in the Property Operations table.


	For the six months ended
	June 30,
	2009			2008
Cash provided by operating activities	$	82,660		$	75,008
Cash used in investing activities		(15,945	)		(17,710	)
Cash provided by (used in) financing activities		62,124			(51,898	)

Net increase in cash	$	128,839		$	5,400


(1)		Recurring capital expenditures (“Recurring CapEx”) are primarily comprised of common area improvements, furniture, and mechanical improvements.

(2)		New construction — upgrades primarily represents costs to improve and upgrade Property infrastructure or amenities.

(3)		Home site development includes acquisitions of or improvements to rental ~~units for the six months ended June 30, 2009.~~units.


DIRECTOR	FOR		WITHHELD
Philip C. Calian		23,423,518		90,835
David J. Contis		23,421,313		93,039
Thomas E. Dobrowski		23,303,297		211,056
Thomas P. Heneghan		23,329,915		184,438
Sheli Z. Rosenberg		23,155,525		358,828
Howard Walker		23,224,802		289,551
Gary L. Waterman		23,340,169		174,184
Samuel Zell		22,463,473		1,050,879


	FOR			AGAINST			ABSTAIN
Total Shares_(a)		23,249,361			262,759			2,232
% of Voted Shares		98.87	%		1.12	%		0.01	%
% of Outstanding Shares		98.87	%		1.12	%		0.01	%


~~4.1(a)~~		~~Amended and Restated 8.065% Series D Cumulative Redeemable Perpetual Preference Units Term Sheet and Joinder to the Second Amended and Restated Agreement of Limited Partnership~~

~~4.2(a)~~		~~7.95% Series F Cumulative Redeemable Perpetual Preference Units Term Sheet and Joinder to Second Amended and Restated Agreement of Limited Partnership~~

~~4.3(a)~~		~~Form of specimen stock certificate evidencing the common stock of the Company, par value $.01 per share~~

31.1		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


31.2		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


32.1		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350


32.2		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

~~10.44(b)~~		~~Underwriting Agreement, dated June 23, 2009~~


~~(a)~~		~~Included as an exhibit to the Company’s Registration Statement on Form S-3 ASR dated May 6, 2009~~

~~(b)~~		~~Included as an exhibit to the Company’s Current Report on Form 8-K dated June 23, 2009~~


	EQUITY LIFESTYLE PROPERTIES, INC.
Date: ~~August 10, 2009~~May 6, 2010	By:	/s/ Thomas P. Heneghan
		Thomas P. Heneghan
		Chief Executive Officer (Principal ~~executive officer)~~Executive Officer)


Date: ~~August 10, 2009~~May 6, 2010	By:	/s/ Michael B. Berman
		Michael B. Berman
		Executive Vice President and Chief Financial Officer (Principal ~~financial~~Financial Officer and ~~accounting officer)~~Principal Accounting Officer)