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UMH Properties Inc Reports Operating Results (10-Q)

August 05, 2010 | About:
10qk

10qk

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UMH Properties Inc (UMH) filed Quarterly Report for the period ended 2010-06-30.

Umh Properties Inc has a market cap of $144 million; its shares were traded at around $11.48 with a P/E ratio of 12.3 and P/S ratio of 4.1. The dividend yield of Umh Properties Inc stocks is 6.3%.

Highlight of Business Operations:

The Companys income primarily consists of rental and related income from the operation of its manufactured home communities. Income also includes sales of manufactured homes. Total income decreased by approximately 3% from $8,118,648 for the quarter ended June 30, 2009 to $7,862,640 for the quarter ended June 30, 2010. Total income increased by approximately 2% from $15,760,947 for the six months ended June 30, 2009 to $16,023,912 for the six months ended June 30, 2010. These variances were primarily due to an increase in rental and related income but a decrease in sales of manufactured homes. Sales of manufactured homes amounted to $1,091,480 and $2,548,431 for the quarter and six months ended June 30, 2010, as compared to the $1,494,118 and $2,579,918 for the quarter and six months ended June 30, 2009. Sales have continued to be disappointing due to weaknesses in the overall economy. While housing markets are beginning to stabilize, our customers still face difficulties in selling their existing homes. This coupled with continued high unemployment rates, has negatively impacted our sales and our gross profit percentage. The gross profit percentage decreased from 6% for the six months ended June 30, 2009 to 5% for the six months ended June 30, 2010. Rental and related income increased $146,630 and $294,452 for the quarter and six months ended June 30, 2010, as compared to the quarter and six months ended June 30, 2009. This was primarily due to rental increases to residents and the purchase of two new communities in June 2010, Sunny Acres, a 207-space community in Somerset, PA and Suburban Estates, a 200-space community in Greensburg, PA. Occupancy decreased from approximately 80% as of June 30, 2009 to approximately 78% at December 31, 2009 and has remained steady to June 30, 2010. Economic growth in the US economy has moderated and high unemployment rates have persisted. However, activity in our communities has recently increased as conventional home ownership rates continue to fall. We are seeing increased demand for rental units and have added approximately 50 rental units to selected communities.

Gain (loss) on securities transactions, net amounted to a gain of $702,169 and $1,684,084 for the quarter and six months ended June 30, 2010, respectively, as compared to a loss of $169,480 and $1,893,314 for the quarter and six months ended June 30, 2009. For the quarter and six months ended June 20, 2009, the Company recognized non-cash impairment charges of $169,480 and $1,893,314, respectively, relating to securities which were considered other than temporarily impaired. The market for REIT securities has dramatically improved and the Company has unrealized gains of $3,367,188 in its REIT securities portfolio as of June 30, 2010. It is our intent to hold these securities long-term.

Sales of manufactured homes amounted to $1,091,480 and $1,494,118 for the quarters ended June 30, 2010 and 2009, respectively, a decrease of 27%. Sales of manufactured homes amounted to $2,548,431 and $2,579,918 for the six months ended June 30, 2010 and 2009, respectively, a decrease of 1%. Cost of sales of manufactured homes amounted to $1,057,946 and $1,426,536 for the quarters ended June 30, 2010 and 2009, respectively. Cost of sales of manufactured homes amounted to $2,431,979 and $2,428,775 for the six months ended June 30, 2010 and 2009, respectively. Selling expenses amounted to $397,512 and $292,629 for the quarters ended June 30, 2010 and 2009, respectively. Selling expenses amounted to $796,230 and $616,259 for the six months ended June 30, 2010 and 2009, respectively. Loss from the sales operations (defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) amounted to $363,978, or 33% of total sales, for the quarter ended June 30, 2010 as compared to $225,047, or 15% of total sales, for the quarter ended June 30, 2009. Loss from sales operations amounted to $679,778, or 27% of total sales, for the six months ended June 30, 2010 as compared to $465,116, or 18% of total sales, for the six months ended June 30, 2009. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of the communities.

Community operating expenses increased 13% from $3,232,626 for the quarter ended June 30, 2009 to $3,649,910 for the quarter ended June 30, 2010. Community operating expenses increased 10% from $6,443,312 for the six months ended June 30, 2009 to $7,084,611 for the six months ended June 30, 2010. This was primarily due to an increase in repairs and maintenance due to the severe winter and spring and an increase in personnel. General and administrative expenses decreased 9% from $817,175 for the quarter ended June 30, 2009 to $743,564 for the quarter ended June 30, 2010 primarily due to a decrease in reporting and publication costs. General and administrative expenses remained relatively stable for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009. Acquisition costs relating to the transaction and due diligence costs associated to the acquisition of Sunny Acres and Suburban Estates amounted to $160,058 for the quarter and six months ended June 30, 2010. These costs would have previously been capitalized. Depreciation expense and amortization expense remained relatively stable for the quarter and six months ended June 30, 2010 as compared to the quarter and six months ended June 30, 2009.

Gain on securities transactions, net amounted to $702,169 for the quarter ended June 30, 2010, as compared to a loss of $169,480 for the quarter ended June 30, 2009 and a gain of $1,684,084 for the six months ended June 30, 2010, as compared to a loss of $2,450,065 for the six months ended June 30, 2009. During 2009, the Company recognized approximately $1,900,000 in impairment losses due to the writing down of the carrying value of certain securities which were considered other than temporarily impaired. The market for REIT securities has dramatically improved and the Company has unrealized gains of approximately $3,400,000 in its REIT securities portfolio as of June 30, 2010. The dividends received from our securities investments continue to meet our expectations. It is our intent to hold these securities long-term.

Interest expense increased 7% from $1,135,033 for the quarter ended June 30, 2009 to $1,212,270 for the quarter ended June 30, 2010. Interest expense increased 9% from $2,230,294 for the six months ended June 30, 2009 to $2,432,175 for the six months ended June 30, 2010. This was primarily due to an increase in mortgages payable and the change in fair value of the Companys interest rate swaps. The change in fair value of the Companys interest rate swaps decreased interest expense by $95,623 and $172,744 for the quarter and six months ended June 30, 2009. Cash paid for interest during the three and six months ended June 30, 2010 amounted to $1,128,853 and $2,303,392, respectively. Cash paid for interest during the three and six months ended June 30, 2009 amounted to $1,297,378 and $2,283,981, respectively.

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