UMH Properties, Inc. (United Mobile Homes, Inc.) - 2001 Annual Report Summary
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 2001. United Mobile Homes, Inc. (UMH) is a Real Estate Investment Trust (REIT) incorporated in New Jersey. The Company owns and operates 25 manufactured home communities containing 5,979 sites located in New Jersey, New York, Ohio, Pennsylvania, and Tennessee. Effective April 1, 2001, the Company launched a subsidiary, UMH Sales and Finance, Inc., to sell manufactured homes to enhance community occupancy.
Key Financial Metrics
| Metric | 2001 | 2000 |
|---|---|---|
| Total Revenues | $26,882,399 | $20,644,731 |
| Net Income | $5,550,488 | $5,189,371 |
| Net Income Per Share (Basic/Diluted) | $0.74 | $0.71 |
| Funds from Operations (FFO) | $8,263,308 | $7,845,529 |
| Total Assets | $80,334,844 | $62,945,597 |
| Total Liabilities | $52,370,310 | $40,106,171 |
| Shareholders' Equity | $27,964,534 | $22,839,426 |
| Mortgages Payable | $38,652,025 | $32,055,839 |
| Cash Flow from Operations | $4,277,851 | $7,171,086 |
| Dividends Per Share | $0.8025 | $0.7575 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by approximately 30% to $26.9 million. This was driven by the acquisition of a new community (Allentown), a 3.5% average rent increase, and the initiation of manufactured home sales ($4.77 million in sales revenue).
- Expense Increases: Total expenses rose to $21.3 million. Increases were attributed to higher community operating expenses (insurance and personnel), interest expense due to higher principal balances, and costs associated with the new sales subsidiary.
- Investment Portfolio: The Company significantly expanded its securities portfolio, increasing holdings from $15.5 million to $25.9 million. This resulted in higher interest/dividend income ($2.19 million) and realized gains on sales ($530,324).
- Cash Flow: Net cash provided by operating activities decreased to $4.28 million from $7.17 million in 2000, primarily due to the buildup of inventory for manufactured home sales and increased receivables.
Guidance, Outlook, and Risks
Outlook: Management anticipates continuing profits in 2002. The Company plans to purchase approximately 25 manufactured homes for rental use at a cost of $500,000 and budget approximately $1,000,000 for capital improvements (excluding expansions). Management believes modest inflation will allow for rent increases that match operating expense growth.
Risks and Contingencies:
- REIT Qualification: The Company must distribute at least 90% of taxable income to maintain REIT status. Failure to qualify would subject the Company to corporate income taxes, significantly reducing cash flow.
- Financing: The Company has $38.7 million in mortgages and $10.7 million in variable-rate debt (margin loans). Risks include rising interest rates and refinancing challenges.
- Environmental: The Company operates 11 communities with their own water/sewer systems, subject to strict testing and compliance regulations. While no material liabilities are currently known, future environmental costs are a risk.
- Competition: Increased competition for manufactured home community investments has driven up purchase prices and fixed costs.
Investor Verification Checklist
- REIT Compliance: Verify that the Company distributed at least 90% of its taxable income for 2001 to maintain tax-advantaged status.
- Debt Maturities: Review the schedule of mortgage maturities, noting significant payments due in 2002 ($3.6 million) and 2003 ($6.9 million), and assess refinancing capacity.
- Inventory Valuation: Confirm the valuation of the new $2.78 million inventory of manufactured homes and the profitability of the new sales subsidiary.
- Occupancy Rates: Monitor occupancy levels, particularly in the 10 communities currently experiencing vacancies over 10%.
- Related Party Transactions: Review transactions with Monmouth Capital Corporation and The Mobile Home Store, Inc., including the purchase of inventory and rental income.