UMH Properties, Inc. - Q1 2011 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2011. UMH Properties, Inc. is a self-administered Real Estate Investment Trust (REIT) owning and operating 35 manufactured home communities with approximately 8,045 sites across New Jersey, New York, Ohio, Pennsylvania, and Tennessee. The company also engages in the sale and financing of manufactured homes through its taxable subsidiary and maintains a portfolio of REIT securities.
Key Financial Metrics
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Total Income | $9,016,454 | $8,161,272 |
| Rental and Related Income | $7,930,210 | $6,704,321 |
| Sales of Manufactured Homes | $1,086,244 | $1,456,951 |
| Net Income | $2,124,864 | $1,884,998 |
| Funds From Operations (FFO) | $3,511,934 | $2,888,541 |
| Net Cash from Operating Activities | $2,375,966 | $2,681,185 |
| Cash and Cash Equivalents (End of Period) | $10,547,376 | $6,845,533 |
| Total Liabilities | $120,075,270 | $116,852,762 |
| Mortgages Payable | $99,783,208 | $90,815,777 |
| Securities Available for Sale | $30,544,752 | $28,757,477 |
Material Changes vs. Prior Period
- Revenue Growth: Total income increased 10% year-over-year, driven primarily by an 18% increase in rental income due to the acquisition of seven communities in 2010 and annual rental rate increases of 3% to 6%.
- Home Sales Decline: Sales of manufactured homes decreased 25% to $1.09 million, attributed to severe winter weather and a difficult economic environment affecting customer ability to sell existing homes.
- Expense Increases: Total expenses rose 13%, with community operating expenses up 23% and depreciation up 37%, largely due to the new 2010 acquisitions.
- Investment Gains: Net income was bolstered by a $1.54 million gain on securities transactions, compared to $981,915 in the prior year, as the REIT securities market improved.
- Debt Structure: Mortgages payable increased 10% following a new $9.52 million mortgage on Cedarcrest Village. Conversely, loans payable decreased 26% as proceeds from the new mortgage were used to pay down a margin loan.
Outlook, Guidance, and Risks
- Acquisition Activity: On April 15, 2011, the company entered a definitive agreement to acquire three Tennessee communities (680 sites) for approximately $13.3 million, with closing anticipated in Q2 2011.
- Liquidity Position: Management reports a strengthened balance sheet with $10.5 million in cash, $30 million in securities (encumbered by a $2.5 million term loan), and $2 million available on a $5 million unsecured line of credit.
- Dividends: A quarterly dividend of $0.18 per share was paid in March 2011. A subsequent dividend of $0.18 per share was declared on April 6, 2011, payable June 15, 2011.
- Refinancing Needs: The company has a mortgage of approximately $4.6 million maturing in December 2011 and is currently in the process of refinancing or extending this loan.
- Risks: Key risks include general economic conditions, high unemployment rates impacting home sales, the ability to maintain occupancy levels, and the ability to refinance debt on favorable terms.
Investor Verification Checklist
- Verify the closing status and financing terms of the $13.3 million Tennessee acquisition.
- Monitor the refinancing progress of the $4.6 million mortgage maturing in December 2011.
- Assess the sustainability of rental income growth given the 78% occupancy rate and economic headwinds.
- Review the performance of the REIT securities portfolio, which contributed significantly to Q1 net income via realized gains.
- Track the trend in manufactured home sales, which declined 25% and currently operate at a loss relative to sales revenue.