UMH Properties, Inc. - Q1 2006 10-Q Summary
Business Context and Reporting Period
UMH Properties, Inc. (formerly United Mobile Homes, Inc.) is a Real Estate Investment Trust (REIT) owning and operating 28 manufactured home communities with approximately 6,600 sites across New Jersey, New York, Ohio, Pennsylvania, and Tennessee. The company also sells and finances manufactured homes through a taxable subsidiary. This report covers the quarterly period ended March 31, 2006.
Key Financial Metrics
| Metric | Q1 2006 | Q1 2005 |
|---|---|---|
| Total Revenues | $9,512,201 | $8,543,418 |
| Net Income | $2,140,525 | $2,456,249 |
| Diluted EPS | $0.22 | $0.27 |
| Funds From Operations (FFO) | $2,949,403 | $3,291,094 |
| Operating Cash Flow | $1,927,479 | $1,574,903 |
| Total Assets | $115,726,055 | $114,782,535 (Dec 2005) |
| Total Liabilities | $58,404,510 | $59,943,211 (Dec 2005) |
| Mortgages Payable | $48,204,795 | $48,706,241 (Dec 2005) |
| Cash and Equivalents | $3,902,378 | $4,555,356 (Dec 2005) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 11% year-over-year, driven primarily by a $1.13 million increase in sales of manufactured homes.
- Net Income Decline: Net income decreased 13% to $2.14 million. This was primarily due to a $319,000 decrease in gains from securities available for sale transactions.
- Expense Increases: Total expenses rose 22%. Interest expense surged from $116,214 to $546,530, largely due to a $218,617 deduction related to the change in fair value of interest rate swap agreements.
- Acquisition: The company acquired Weatherly Estates I, a 270-space community in Tennessee, for approximately $5.2 million.
- Dividends: A dividend of $0.245 per share was paid in March 2006, with another declared for June 2006.
Outlook, Risks, and Management Commentary
Management notes that rental rates have been increasing by approximately 3% to 4% annually. The company maintains a portfolio of REIT securities ($22.6 million) to provide liquidity and income while seeking real property acquisitions. Management believes funds from operations and refinancing will be sufficient to meet needs for the next several years.
Risks and Contingencies: The filing includes a Safe Harbor statement regarding forward-looking statements. Risks include changes in the general economic climate, increased competition, regulatory changes, and the ability to acquire properties on favorable terms. Management does not believe current litigation will have a material adverse effect.
Investor Verification Checklist
- Verify the impact of interest rate swap fair value changes on reported interest expense and net income.
- Confirm the sustainability of the 11% revenue growth driven by manufactured home sales versus recurring rental income.
- Review the composition of the $22.6 million securities portfolio and the strategy for deploying these funds into real estate acquisitions.
- Assess the liquidity position given the $5.2 million acquisition and the net decrease in cash of $652,978 during the quarter.
- Monitor the dividend reinvestment plan (DRIP) activity, which generated $2.3 million in new capital during the quarter.