UMH PROPERTIES, INC.
2018 ANNUAL REPORT
Our Vision
Founded in 1968, UMH Properties, Inc. owns and operates a portfolio of manufactured home communities consisting
of 118 communities with 21,500 developed homesites situated in eight states. Manufactured home communities
satisfy a fundamental need – quality affordable housing. As home prices and mortgage rates rise and available home
inventory continues to shrink, the supply of affordable housing becomes an ever-increasing concern.
UMH also recognizes our obligation to reduce our impact on the environment and to conserve our natural resources.
We have implemented energy and water conservation strategies. Our manufactured homes are highly competitive
in quality and value as a result of the benefits provided by factory production. These homes are increasingly energy
efficient and environmentally conscious. Many manufacturers are implementing green construction practices, utilizing
renewable materials and installing energy star rated products. Factory construction also maximizes material efficiency
and reduces jobsite waste.
UMH has a 51-year history of providing
quality affordable housing for our Nation’s
workforce. We build and manage well-
maintained communities that our residents
are proud to call home. We believe in
enriching the lives of the people impacted
by our Company – our employees, our
residents and our neighbors.
We are
committed to being a part of the solution to
America’s affordable housing crisis.
On Our Cover: CINNAMON WOODS
Conowingo, MD
National Industry Awards
2018 Community Operator of the Year
2018 Land-Lease Community of the Year, Woods Edge
COMMUNITY
OPERATOR
WOODS EDGE
West Lafayette, IN
Presented by the Manufactured Housing Institute
MEMPHIS BLUES
Memphis, TN
DEAR FELLOW
SHAREHOLDERS
During 2018, UMH continued to successfully execute
our long-term business plan. We grew our portfolio
of manufactured home communities by 7% to 118
communities containing 21,500 developed homesites.
Our total revenue increased by 15% to $130 million.
This growth was primarily driven by a 12% increase in
rental and related income and a 45% increase in sales
revenue. Community net operating income increased
by 13%. This strong operating performance resulted in
a 12% increase in our normalized FFO per share this
year.
Our focus at UMH is on creating long-term value.
Manufactured home communities are one of the
most difficult property types to obtain construction
approvals. Therefore, because new supply is so hard to
come by, each and every one of our assets effectively
has a moat around it, making it extremely difficult to
replicate a real estate portfolio such as ours.
Looking back over our 51-year history, our growth has
been extraordinary. Over the past 25 years, we have
made substantial investments in growing our property
portfolio and expanding our existing communities.
During this time, our communities have become
younger as we have replaced older homes with new
ones. This rejuvenation process is a hallmark of our
property type. Because our assets are irreplaceable, it
is imperative to us that we make the necessary capital
improvements in order to create communities that
our residents are proud to call home. I am extremely
grateful to our management team for looking after
our communities and our residents with the utmost
care. Looking forward to the next 25 years, we plan
to continue to modernize our communities, complete
significant expansions, and grow our Company in
every way.
Our manufactured home communities are situated on
6,400 acres of valuable land. This includes 3,300 acres
in the energy-rich Marcellus and Utica Shale regions.
As anticipated, the vast oil and natural gas reserves
in these areas have become substantial economic
catalysts that are creating significant prosperity and
growth here. We believe we are still in the early stages
of this energy bonanza and as a result, we look forward
to very strong demand for decades to come. The
American Petroleum Institute projects employment
increases in Ohio and Pennsylvania of 138,000 jobs per
year through 2035. If this is actually achieved, it will be
a game changer for these states.
Our 6,400 total acres also includes 1,700 acres of
future expansion and development land. The existing
communities predominantly contain 50’ x 100’ lots.
The value of our land and housing units increase every
year. Throughout America, the shortage of affordable
housing is a growing problem. Over the past seven
OUR TEAM
Page 2
2018 ANNUAL REPORT
years, UMH has added 5,600 rental homes to our
communities and we are confident that we can increase
our income streams further by continuing to fill our
3,900 vacant sites in the years ahead.
Looking out over the long term, we are confident that
with the proper care, our portfolio of properties will
consistently generate meaningful growth in revenue,
income, and asset value. All growth involves risk and
our job is to responsibly take that risk and carefully
create long-term value for our shareholders. We have
been successfully doing that for the past 51 years.
Because management has a substantial amount of what
is often called, “skin in the game,” investors should take
comfort that our interests are well-aligned, and that
our conservative philosophy will guide our decision-
making process going forward.
Looking at the year ahead, we have budgeted a 4%
site rent increase for 2019, and we expect to install
and rent an additional 800 rental homes. This should
result in total revenue growth of approximately $10
million. Our net operating income should increase by
$6 million. We are happy to report that 2018 marks our
sales division’s return to profitability for the first time
since 2006. We are optimistic that our increased home
sales will continue into 2019.
Our mission at UMH is to provide quality affordable
housing. UMH has responded to the affordable
housing crisis by providing a 1,000 square foot, three
bedroom, two bathroom home on a 5,000 square foot
lot for monthly rent as low as $750 per month. This
compelling value proposition is driving our strong
growth.
Since 2010, we have acquired 83 communities
containing approximately 13,600 homesites for a
total purchase price of $407 million. During this
same period, we have grown our rental revenue by
approximately 308% from $27.9 million to $113.8
million. Our net operating income has increased by
368%, from $13.0 million in 2010 to $60.9 million
this year. To achieve these results, each year we filled
vacant sites, completed new acquisitions, and reduced
our overall operating expense ratio. All of this progress
resulted in UMH becoming a stronger and more
valuable Company.
sectors. However, no commercial real estate sector has
experienced the substantial cap rate compression that
our sector has. Investing in real estate is a total return
equation. The income that our shareholders receive
through our quarterly distributions is one component
of the total return, while the price appreciation of the
underlying real estate is the other. We look forward to
growing both of these components in the years ahead.
SAMUEL A. LANDY
MHI Congress and Expo
Visiting our communities, we are very proud of
the job we have done acquiring, expanding and
upgrading these properties. Even more satisfying
is watching our associates grow with the company
as their responsibilities and duties evolve. We have
created quality, long-term careers for a substantial
number of people, and we are extremely proud of the
job our employees have done creating value for our
shareholders.
Our founder, Eugene Landy recognized the need for
UMH Properties 51 years ago. Over the next 25 years, by
adhering to his culture of integrity, entrepreneurship,
hard work, respect for our shareholders, residents and
all of our associates, we will continue to find ourselves
very pleased and proud of our many accomplishments.
Very truly yours,
Capitalization rates across most commercial property
types have been on a steady downward trend
throughout the past decade. This has resulted in
rising property values for most commercial real estate
SAMUEL A. LANDY
President and Chief Executive Officer
March 2019
Page 3
2018 ANNUAL REPORT
PROPERTY PORTFOLIO
AND YEAR IN REVIEW
PIKEWOOD MANOR
Acquired 11/30/2018
Elyria, OH
OUR ACCOMPLISHMENTS
“We are committed to the innovation and advancement
of the manufactured housing industry, and dedicated to
providing the highest standard of affordable housing.”
- Samuel A. Landy, President and Chief Executive Officer
During 2018, UMH has made substantial progress on multiple fronts – generating solid operating
results, achieving strong growth and improving our financial position. We have:
• Generated a 12% increase in our Normalized
•
•
•
•
•
FFO to $0.74 per diluted share;
Increased Rental and Related Income by
12%;
Increased Community Net Operating
Income (“NOI”) by 13%;
Improved our Operating Expense ratio by
50 basis points over the prior year from
47.0% to 46.5%;
Increased Same Property NOI by 7%;
Increased Same Property Occupancy by 40
basis points from 82.6% to 83.0%;
Increased Home Sales by 45%;
communities
containing
approximately 1,600 homesites for a total
cost of $59.1 million, bringing our total
property portfolio to 118 manufactured
home communities with approximately
21,500 developed homesites;
6
•
• Acquired
•
•
•
credit
revolving
Increased our rental home portfolio by 905
homes to approximately 6,500 total rental
homes, representing an increase of 16%;
Expanded and extended our existing
unsecured
facility,
increasing the available borrowings and
reducing interest costs;
Issued 2,000,000 shares of a new 6.375%
Series D Cumulative Redeemable Preferred
Stock, for net proceeds after deducting the
underwriting discount and other estimated
offering expenses, of approximately $48
million; and
• Raised $35.1 million through our Dividend
Reinvestment and Stock Purchase Plan.
Portfolio Growth
Community Net Operating Income
($ in millions)
25,000
20,000
15,000
13,500
74
No. of
Communities
15,000
88
Developed Sites
17,800
98
18,000
101
21,500
118
20,000
112
10,000
5,000
0
2013
2014
2015
2016
2017
2018
$70
$60
$50
$40
$30
$20
$10
$0
$60.9
$54.0
e
s
a
e
r
c
n
$48.0
0 % I
5
1
$37.7
$30.3
$24.3
2013
2014
2015
2016
2017
2018
Page 6
2018 ANNUAL REPORT
PROPERTY PORTFOLIO
Acquired prior to 2017
101 communities and 17,900 sites
Acquired in 2017
11 communities and 2,000 sites
Acquired in 2018
6 communities and 1,600 sites
220 acres to be developed into a
manufactured home community
Marcellus and Utica Shale Region
Total Acreage
6,395 Acres
Total Shale Region Acreage - 3,335
Total Non Shale Region Acreage - 3,060
Vacant Acreage per State
1,689 Acres
MD - 67
4%
TN - 92
5%
Developed
2,538
40%
Developed
2,168
34%
Vacant
892
14%
Vacant
797
12%
NJ - 162
10%
IN - 234
14%
OH - 466
28%
PA - 359
21%
NY - 309
18%
Sites per State
21,510 Sites
MI - 354
2%
MD - 58
1%
NJ - 1,006
5%
NY - 1,161
5%
TN - 1,699
8%
PA - 7,342
34%
IN - 3,982
18%
OH - 5,908
27%
For drone video footage of our communities, visit www.umh.reit/VideoGallery.
MARCELLUS & UTICA SHALE
UMH Properties, Inc. owns approximately 3,300 acres in the Marcellus and Utica Shale regions. Owning communities
near these tremendous oil and gas reserves is a great benefit. These benefits are derived, not only directly from the
oil and gas industry through drilling, power and cracker plant projects and pipeline construction, but indirectly from
manufacturing. This vast source of domestic energy will greatly reduce energy prices which will lower the cost of
manufacturing in the Northeast and create new jobs in our regions. Our communities in these regions are currently
experiencing increased demand and have improved their overall operations. As the oil and gas industry continues to
develop, we expect the local economies to further strengthen, resulting in even greater occupancy and rent growth.
Page 7
2018 ANNUAL REPORT
VALUE-ADDED ACQUISITIONS
Occupancy Percentage
Number of Rentals
Site Rent
Rental and Related Income*
Net Operating Income*
Value per Site**
Value of Community**
A Case Study - Holiday Village
At Acquisition
82%
6
$425
$1,141,000
$408,000
n/a
n/a
Today
98%
111
$510
$2,004,000
$1,254,000
$78,600
$20,900,000
Increase
16 bps
105
20%
75.6%
207.4%
43%***
43%***
*At acquisition – 2013 annualized; Year ended December 31, 2018.
**Value calculated based on a 6% Cap Rate.
***Increase from total capital investment.
Number of Acquired Sites
Cumulative Volume
Annual Volume
14,851
13,236
10,950
11,239
8,176
6,564
3,826
1,727
2,738
2,774
1,612
1,997
1,615
289
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
1,231
2,099
868
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
Manufactured home communities have historically been
owned by operators that may not have had the capital
to make the necessary improvements required to retain
residents and enhance operations. This has given us
the unique opportunity to acquire communities below
replacement cost.
Holiday Village, a 266-site community,
located in
Nashville, Tennessee, was purchased in 2013 for $7.2
million or $27,000 per site. Over the past five years, we
have put in place a strong management team who has
removed obsolete homes replacing them with modern
new homes, made the necessary capital improvements
and ultimately filled the vacant sites and upgraded
this community. We have invested an additional $7.4
million, including $5 million in rental homes, bringing
our total capital investment in this community to $14.6
million. Occupancy has increased from 82% to 98% and
the community is now valued at $21 million or $79,000
per site. Holiday Village is also approved for a 150-site
expansion which will drive additional future earnings
growth and value.
Page 8
2018 ANNUAL REPORT
HOLIDAY VILLAGE
Nashville, TN
HIGHLAND ESTATES EXPANSION
Kutztown, PA
VALUE-ADDED EXPANSIONS
UMH has a hidden asset in its 1,700 acres of vacant
land adjoining our communities. This acreage has
the potential to be developed into 6,000 or more sites
which can provide us with a runway to organically
improve our earnings while upgrading the quality of
our communities and increase the efficiency of our
operations. We currently have plans to develop 1,700
sites over the next 3 years.
Highland Estates, located in Kutztown, Pennsylvania,
was purchased in 1988 for $2 million. We have
expanded and upgraded this community from its
original 186 sites to its current 318 sites. The cost of these
improvements totaled $13 million. The sales generated
by the expansion resulted in a net profit of $1.9 million.
Our total capital investment in this community is $15
million, or $13.1 million net of the sales profit. The
property is now valued at approximately $24 million.
700
600
500
400
300
200
100
0
Sites Engineered for Expansion
566
553
537
415
300
263
2019
2020
2021
2022
2023
2024
A Case Study - Highland Estates
Occupancy Percentage
Number of Sites
Site Rent
Rental and Related Income*
Net Operating Income*
Value per Site**
Value of Community**
*Before expansion- 1996; Year ended December 31, 2018.
**Value calculated based on a 6% Cap Rate.
***Increase from total capital investment.
Before Expansion
97%
186
$302
$683,000
$450,000
n/a
n/a
Today
97%
318
$569
$2,362,000
$1,457,000
$76,400
$24,283,300
Increase/Decrease
-
132
88.4%
245.8%
223.8%
61%***
61%***
Page 9
2018 ANNUAL REPORT
SALES & SALES CENTERS
Sales of manufactured homes play an integral role in increasing
occupancy, increasing earnings and enhancing the value of our
communities. After the lull in sales as a result of the recession
and various legislative hurdles, sales have steadily improved.
We have experienced double-digit sales growth in each of the
past 3 years. In 2018, sales amounted to almost $16 million,
a 45% increase from 2017. More communities are starting to
sell homes and we are optimistic that we can continue to build
upon our recent success.
To enhance sales, UMH has opened four modern sales centers
staffed with qualified sales professionals to help our customers
in their purchase of a manufactured or modular home. Our
geographic footprint allows us to leverage our communities’
close proximity to one another to drive demand to our sales
centers. Potential homebuyers are able to tour model homes,
browse floor plans and hand-select custom features.
Modular Home Installation on Private Land
by UMH Sales Center, Anderson, IN
Increase in Sales
Sales ($ in millions)
# of Homes Sold
$8.7
164
$7.5
134
$6.8
135
$10.8
222
$8.5
170
s
e
l
a
S
$
$18
$15
$12
$9
$6
$3
$0
$15.8
295
#
o
f
H
o
m
e
s
S
o
d
l
350
300
250
200
150
100
50
2013
2014
2015
2016
2017
2018
Page 10
2018 ANNUAL REPORT
UMH SALES CENTER
Belle Vernon, PA
PARKE PLACE
Elkhart, IN
RENTAL HOME OPERATIONS
The macro-economic environment and current housing fundamentals continue to favor home rentals. The inability
to satisfy down payment requirements, more stringent credit terms, and steadily increasing home prices continue to
create hurdles for would-be homebuyers. Rental homes in a manufactured home community allow the resident to
obtain the efficiencies of factory-built housing and the amenities of community living for less than the cost of other
forms of affordable housing. For many residents this is their first experience in a manufactured home community.
Often, these first-time renters are pleased with their experience and ultimately become long-term residents.
Over the past five years, UMH has been increasing its rental home portfolio, and as of yearend 2018, owns 6,500 rental
homes. We will continue to grow our rental home portfolio as it is the most efficient way to fill vacant sites and improve
operations at our value-added acquisitions. Our rental homes are high-quality homes built to withstand the typical
wear and tear of the rental business. Rental homes produce income from both the home and the site which might
otherwise be non-income producing.
Growth in Rental Home Portfolio
6,500
4 , 8 0 0 h o m e
2 8 2 %
-
s
4,700
5,600
e o f
r e a s
I n c
3,700
s
e
m
o
H
l
a
t
n
e
R
f
o
#
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2,600
1,700
2013
2014
2015
2016
2017
2018
Page 11
2018 ANNUAL REPORT
COMPANY GROWTH
)
s
n
o
i
l
l
i
m
n
i
$
(
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
Equity Market Capitalization
Preferred Equity
Total Debt
$1,157
$1,182
e
s
a
e
r
I n c
3 1 0 %
$752
$980
$582
$495
$386
$288
2011
2012
2013
2014
2015
2016
2017
2018
RECENT SHARE ACTIVITY
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$14.96
15.40
16.69
15.70
2018
Low
$11.38
12.77
14.89
11.14
Distribution
$0.18
0.18
0.18
0.18
$0.72
High
$15.35
17.90
17.29
16.06
2017
Low
$13.65
14.84
14.25
14.02
Distribution
$0.18
0.18
0.18
0.18
$0.72
2018
2017
2016
2015
2014
2013
Share Volume Opening Price
Closing Price
Dividend Paid
Total Return
47,226,100
40,160,500
23,498,900
17,683,400
18,773,700
14,631,200
$14.90
$11.84
$0.72
-16.24%
15.05
10.12
9.55
9.42
10.33
14.90
15.05
10.12
9.55
9.42
0.72
0.72
0.72
0.72
0.72
3.69%
59.0%
14.1%
9.1%
-2.3%
UMH Properties, Inc. common shares are traded on the NYSE under the ticker symbol: UMH.
Page 12
2018 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Operating Information
Number of Communities
Number of Sites
Rental and Related Income
Community Operating Expenses
Community NOI
Expense Ratio
Sales of Manufactured Homes
Number of Homes Sold
Number of Rentals Added
Net Income (Loss) (1)
Net Loss Attributable to Common Shareholders (1)
Adjusted EBITDA
FFO Attributable to Common Shareholders (1)
Core FFO Attributable to Common Shareholders
Normalized FFO Attributable to Common Shareholders
Shares Outstanding and Per Share Data
Weighted Average Shares Outstanding - Basic and Diluted
Net Loss Attributable to Common
Shareholders per Share - Basic and Diluted (1)
FFO per Share - Diluted (1)
Core FFO per Share - Diluted
Normalized FFO per Share - Diluted
Dividends per Common Share
Balance Sheet
Total Assets
Total Liabilities
Market Capitalization
Total Debt, Net of Unamortized Debt Issuance Costs
Equity Market Capitalization
Series B Preferred Stock
Series C Preferred Stock
Series D Preferred Stock
Total Market Capitalization
(1) Includes change in unrealized gain (loss) in marketable securities in 2018.
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
December 31, 2018
December 31, 2017
118
21,510
113,832,660
52,948,510
60,884,150
46.5%
15,754,033
295
905
(36,215,571)
(56,531,515)
63,541,619
(24,709,177)
26,966,219
27,471,112
36,871,322
(1.53)
(0.66)
0.72
0.74
0.72
878,985,924
454,287,884
439,078,416
453,713,702
95,030,000
143,750,000
50,000,000
1,181,572,118
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
112
20,029
101,801,425
47,846,565
53,954,860
47.0%
10,846,494
222
948
12,668,034
(7,679,265)
56,347,752
19,959,411
23,461,898
21,714,370
32,675,650
(0.24)
0.60
0.71
0.66
0.72
823,881,326
402,665,862
389,599,604
528,772,213
95,030,000
143,750,000
-0-
1,157,151,817
Page 13
2018 ANNUAL REPORT
SAME PROPERTY STATISTICS
Same Property Performance
($ in millions)
Same Property Occupancy
2017
2018
2016
2017
2018
$120
$103.3
$100
$96.9
$80
$60
$40
$20
$0
84.0%
83.0%
82.0%
81.8%
83.2%
83.3% 83.2%
83.0%
82.8%
82.6%
82.3%
$57.9
$54.3
81.0%
81.0%
$45.3
$42.6
80.0%
79.0%
78.0%
Dec 31
Mar 31
Jun 30
Sep 30
Dec 31
Mar 31
Jun 30
Sep 30
Dec 31
Rental and
Related Income
Community
Operating Expenses
Community NOI
Total Sites
Occupied Sites
Occupancy %
Number of Properties
Total Rentals
Occupied Rentals
Rental Occupancy
Monthly Rent Per Site
Monthly Rent Per Home Including Site
December 31, 2018
December 31, 2017
17,929
14,881
83.0%
101
5,870
5,435
92.6%
$449
$743
17,894
14,779
82.6%
101
5,297
4,946
93.4%
$434
$723
Same Property includes all properties owned as of January 1, 2017, with the exception of Memphis Blues.
Page 14
2018 ANNUAL REPORT
COMPANY 10K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ]
[ ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ____________________ to _____________________
Commission File Number 001-12690
UMH Properties, Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer identification number)
Maryland
22-1890929
3499 Route 9, Suite 3C, Freehold, New Jersey
(Address of principal executive offices)
07728
(Zip code)
Registrant's telephone number, including area code (732) 577-9997
Securities registered pursuant to Section 12(b) of the Act:
Common Stock $.10 par value-New York Stock Exchange
8.0% Series B Cumulative Redeemable Preferred Stock $.10 par value per share, $25 liquidation value per share – New York Stock Exchange
6.75% Series C Cumulative Redeemable Preferred Stock $.10 par value per share, $25 liquidation value per share – New York Stock Exchange
6.375% Series D Cumulative Redeemable Preferred Stock $.10 par value per share, $25 liquidation value per share – New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ___Yes X No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ___Yes X No
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. X Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). X Yes No
Indicate by check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging
growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
X
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes X No
Based upon the assumption that directors and executive officers of the registrant are not affiliates of the registrant, the aggregate market value of
the voting stock of the registrant held by nonaffiliates of the registrant at June 30, 2018 was $566,368,474. Presuming that such directors and
executive officers are affiliates of the registrant, the aggregate market value of the voting stock of the registrant held by nonaffiliates of the
registrant at June 30, 2018 was $521,546,735.
The number of shares outstanding of issuer's common stock as of February 28, 2019 was 38,778,069 shares.
Documents Incorporated by Reference:
-Part III incorporates certain information by reference from the Registrant’s definitive proxy statement for the 2019 annual meeting
of stockholders, which will be filed no later than 120 days after the close of the Registrant’s fiscal year ended December 31, 2018.
-Exhibits incorporated by reference are listed in Part IV; Item 15 (a) (3).
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TABLE OF CONTENTS
PART I .......................................................................................................................................................................... 3
Item 1 – Business ..................................................................................................................................................... 3
Item 1A – Risk Factors ............................................................................................................................................. 6
Item 1B – Unresolved Staff Comments .................................................................................................................. 19
Item 2 – Properties ................................................................................................................................................. 19
Item 3 – Legal Proceedings .................................................................................................................................... 28
Item 4 – Mine Safety Disclosures .......................................................................................................................... 28
PART II ...................................................................................................................................................................... 29
Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities .............................................................................................................................................. 29
Item 6 – Selected Financial Data ............................................................................................................................ 31
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations ................... 32
Item 7A – Quantitative and Qualitative Disclosures about Market Risk................................................................ 47
Item 8 – Financial Statements and Supplementary Data ........................................................................................ 48
Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................... 48
Item 9A – Controls and Procedures ....................................................................................................................... 48
Item 9B – Other Information .................................................................................................................................. 51
PART III..................................................................................................................................................................... 51
Item 10 – Directors, Executive Officers and Corporate Governance ..................................................................... 51
Item 11 – Executive Compensation ........................................................................................................................ 51
Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
.............................................................................................................................................................. 51
Item 13 – Certain Relationships and Related Transactions, and Director Independence ....................................... 51
Item 14 – Principal Accounting Fees and Services ................................................................................................ 51
Item 15 – Exhibits, Financial Statement Schedules ............................................................................................... 52
Item 16 – Form 10-K Summary ............................................................................................................................. 56
SIGNATURES ......................................................................................................................................................... 109
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Item 1 – Business
General Development of Business
PART I
UMH Properties, Inc. (“UMH”), together with its predecessors and consolidated subsidiaries, are referred to
herein as “we”, “us”, “our”, or “the Company”, unless the context requires otherwise.
UMH is a self-administered and self-managed qualified real estate investment trust (“REIT”) under Sections
856-860 of the Internal Revenue Code (the “Code”). The Company had elected REIT status effective January 1, 1992
and intends to maintain its qualification as a REIT in the future. As a qualified REIT, with limited exceptions, the
Company will not be taxed under Federal and certain state income tax laws at the corporate level on taxable income
that it distributes to its shareholders. For special tax provisions applicable to REITs, refer to Sections 856-860 of the
Code.
The Company was incorporated in the state of New Jersey in 1968. On September 29, 2003, the Company
changed its state of incorporation from New Jersey to Maryland by merging with and into a Maryland corporation.
Narrative Description of Business
The Company’s primary business is the ownership and operation of manufactured home communities –
leasing manufactured homesites to private manufactured home owners. The Company also leases homes to residents,
and through its wholly-owned taxable REIT subsidiary, UMH Sales and Finance, Inc. (“S&F”), conducts
manufactured home sales in its communities.
As of December 31, 2018, the Company owns and operates 118 manufactured home communities containing
approximately 21,500 developed homesites. These communities are located in New Jersey, New York, Ohio,
Pennsylvania, Tennessee, Indiana, Michigan and Maryland.
A manufactured home community is designed to accommodate detached, single-family manufactured homes.
These manufactured homes are produced off-site by manufacturers and installed on sites within the communities.
These homes may be improved with the addition of features constructed on-site, including garages, screened rooms
and carports. Manufactured homes are available in a variety of designs and floor plans, offering many amenities and
custom options. Each manufactured home owner leases the site on which the home is located from the Company.
The Company owns the underlying land, utility connections, streets, lighting, driveways, common area amenities and
other capital improvements and are responsible for enforcement of community guidelines and maintenance.
Manufactured homes are accepted by the public as a viable and economically attractive alternative to
common stick-built single-family housing. The affordability of the modern manufactured home makes it a very
attractive housing alternative. Depending on the region of the country, construction cost per square foot for a new
manufactured home averages anywhere from 10 to 50 percent less than a comparable site-built home, excluding the
cost of land. This is due to a number of factors, including volume purchase discounts and inventory control of
construction materials and control of all aspects of the construction process, which is generally a more efficient and
stream-lined process as compared to a site-built home.
Modern residential land lease communities are similar to typical residential subdivisions containing central
entrances, paved well-lit streets, curbs and gutters. Generally, modern manufactured home communities contain
buildings for recreation, green areas, and other common area facilities, all of which are the property of the community
owner. In addition to such general improvements, certain manufactured home communities include recreational
improvements such as swimming pools, tennis courts and playgrounds. Municipal water and sewer services are
available in some manufactured home communities, while other communities supply these facilities on-site.
Typically, our leases are on an annual or month-to-month basis, renewable upon the consent of both parties.
The community manager interviews prospective residents, collects rent and finance payments, ensures compliance
with community regulations, maintains public areas and community facilities and is responsible for the overall
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appearance of the community. The homeowner is responsible for the maintenance of the home and leased site. As a
result, our capital expenditures tend to be less significant relative to multi‐family rental apartments. Manufactured
home communities produce predictable income streams and provide protection from inflation due to the ability to
annually increase rents.
Many of our communities compete with other manufactured home community properties located in the same
or nearby markets that are owned and operated by other companies in our business. We generally monitor the rental
rates and other terms being offered by our competitors and consider this information as a factor in determining our
own rental rates. In addition to competing with other manufactured home community properties, our communities
also compete with alternative forms of housing (such as apartments and single-family homes).
In connection with the operation of its communities, UMH also leases homes to prospective tenants. As of
December 31, 2018, UMH owned a total of 6,500 rental homes, representing approximately 30% of its developed
homesites. These rental homes are owned by the Company and rented to residents. The Company engages in the
rental of manufactured homes primarily in areas where the communities have existing vacancies. The rental homes
produce income from both the home and the site which might otherwise be non-income producing. The Company
sells the rental homes when the opportunity arises.
Inherent in the operation of a manufactured home community is the development, redevelopment, and
expansion of our communities. The Company sells and finances the sale of manufactured homes in our communities
through S&F. S&F was established to potentially enhance the value of our communities. The home sales business is
operated like other homebuilders with sales centers, model homes, an inventory of completed homes and the ability
to supply custom designed homes based upon the requirements of the new homeowners.
Investment and Other Policies
The Company may invest in improved and unimproved real property and may develop unimproved real
property. Such properties may be located throughout the United States, but the Company has concentrated on the
Northeast and Midwest. Since 2010, we have tripled the size of our property portfolio from 28 communities with
approximately 6,800 developed homesites to 118 communities with over 21,500 developed homesites. We are focused
on acquiring communities with significant upside potential and leveraging our expertise to build long-term capital
appreciation.
The Company seeks to finance acquisitions with the most appropriate available source of capital, including
purchase money mortgages or other financing, which may be first liens, wraparound mortgages or subordinated
indebtedness, sales of investments, and issuance of additional equity securities. In connection with its ongoing
activities, the Company may issue notes, mortgages or other senior securities. The Company intends to use both
secured and unsecured lines of credit.
The Company may issue securities for property; however, this has not occurred to date. The Company may
repurchase or reacquire its shares from time to time if, in the opinion of the Board of Directors, such acquisition is
advantageous to the Company. No shares were repurchased or reacquired during 2018 and, as of December 31, 2018,
the Company does not own any of its own shares.
The Company also owns a portfolio of marketable REIT securities, which the Company generally limits to
no more than approximately 15% of its undepreciated assets (which is the Company’s total assets excluding
accumulated depreciation). These liquid real estate holdings provide diversification, additional liquidity and income,
and serves as a proxy for real estate when more favorable risk adjusted returns are not available. The Company, from
time to time, may purchase these securities on margin when the interest and dividend yields exceed the cost of funds.
As of December 31, 2018, the Company had borrowings of $31,975,086 under its margin line at 2.75% interest. The
REIT securities portfolio is subject to risk arising from adverse changes in market rates and prices, primarily interest
rate risk and market price risk relating to equity securities. From time to time, the Company may use derivative
instruments to mitigate interest rate risk; however, this has not occurred during any periods presented. At December
31, 2018 and 2017, the Company had $99,595,736 and $132,964,276, respectively, of marketable securities. Included
in these securities are Preferred Stock of $3,399,558 and $5,377,522 at December 31, 2018 and 2017, respectively.
The realized net gain on marketable securities for the year ended December 31, 2018 and 2017 amounted to $20,107
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and $1,747,528, respectively. The unrealized net gain (loss) on marketable securities at December 31, 2018 and 2017
amounted to $(40,155,814) and $11,519,582, respectively.
Regulations, Insurance and Property Maintenance and Improvement
Manufactured home communities are subject to various laws, ordinances and regulations, including
regulations relating to recreational facilities such as swimming pools, clubhouses and other common areas, and
regulations relating to operating water and wastewater treatment facilities at several of our communities. We believe
that each community has all material operating permits and approvals.
Our properties are insured against risks that may cause property damage and business interruption including
events such as fire, business interruption, general liability and if applicable, flood. Our insurance policies contain
deductible requirements, coverage limits and particular exclusions. It is the policy of the Company to maintain
adequate insurance coverage on all of our properties; and, in the opinion of management, all of our properties are
adequately insured. We also obtain title insurance insuring fee title to the properties in an aggregate amount which
we believe to be adequate.
It is the policy of the Company to properly maintain, modernize, expand and make improvements to its
properties when required. The Company anticipates that renovation expenditures with respect to its present properties
during 2019 will be approximately $16 million.
Executive Officers
The following table sets forth information with respect to the executive officers of the Company as of
December 31, 2018:
Name
Eugene W. Landy
Samuel A. Landy
Anna T. Chew
Craig Koster
Brett Taft
Number of Employees
Age
85
58
60
43
29
Position
Chairman of the Board of Directors and Founder
President and Chief Executive Officer
Vice President, Chief Financial and Accounting Officer
and Treasurer
General Counsel and Secretary
Vice President
As of February 28, 2019, the Company had approximately 380 employees, including Officers. During the
year, the Company hires approximately 50 part-time and full-time temporary employees as grounds keepers,
lifeguards, and for emergency repairs.
Available Information
Additional information about the Company can be found on the Company’s website which is located
at www.umh.reit. Information contained on or hyperlinked from our website is not incorporated by reference into and
should not be considered part of this Annual Report on Form 10-K or our other filings with the Securities and Exchange
Commission (“SEC”). The Company makes available, free of charge, on or through its website, annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an Internet
site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC.
-5-
Item 1A – Risk Factors
Our business faces many risks. The following risk factors may not be the only risks we face but address what
we believe may be the material risks concerning our business at this time. If any of the risks discussed in this report
were to occur, our business, prospects, financial condition, results of operation and our ability to service our debt
and make distributions to our shareholders could be materially and adversely affected and the market price per share
of our stock could decline significantly. Some statements in this report, including statements in the following risk
factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Statement Regarding
Forward-Looking Statements.”
Real Estate Industry Risks
General economic conditions and the concentration of our properties in New Jersey, New York, Ohio,
Pennsylvania, Tennessee, Indiana, Michigan and Maryland may affect our ability to generate sufficient revenue.
The market and economic conditions in our current markets may significantly affect manufactured home occupancy
or rental rates. Occupancy and rental rates, in turn, may significantly affect our revenues, and if our communities do
not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our
cash flow and ability to pay or refinance our debt obligations could be adversely affected. As a result of the geographic
concentration of our properties in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan and
Maryland, we are exposed to the risks of downturns in the local economy or other local real estate market conditions
which could adversely affect occupancy rates, rental rates, and property values in these markets.
Other factors that may affect general economic conditions or local real estate conditions include:
the national and local economic climate, including that of the energy-market dependent Marcellus
and Utica Shale regions, may be adversely impacted by, among other factors, plant closings, and
industry slowdowns;
local real estate market conditions such as the oversupply of manufactured homesites or a reduction
in demand for manufactured homesites in an area;
the number of repossessed homes in a particular market;
the lack of an established dealer network;
the rental market which may limit the extent to which rents may be increased to meet increased
expenses without decreasing occupancy rates;
the safety, convenience and attractiveness of our properties and the neighborhoods where they are
located;
zoning or other regulatory restrictions;
competition from other available manufactured home communities and alternative forms of housing
(such as apartment buildings and single-family homes);
our ability to provide adequate management, maintenance and insurance;
increased operating costs, including insurance premiums, real estate taxes and utilities; and
the enactment of rent control laws or laws taxing the owners of manufactured homes.
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Our income would also be adversely affected if tenants were unable to pay rent or if sites were unable to be
rented on favorable terms. If we were unable to promptly relet or renew the leases for a significant number of sites,
or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then our business and
results of operations could be adversely affected. In addition, certain expenditures associated with each property (such
as real estate taxes and maintenance costs) generally are not reduced when circumstances cause a reduction in income
from the property.
We may be unable to compete with our larger competitors for acquisitions, which may increase prices for
communities. The real estate business is highly competitive. We compete for manufactured home community
investments with numerous other real estate entities, such as individuals, corporations, REITs and other enterprises
engaged in real estate activities. In many cases, the competing concerns may be larger and better financed than we
are, making it difficult for us to secure new manufactured home community investments. Competition among private
and institutional purchasers of manufactured home community investments has resulted in increases in the purchase
price paid for manufactured home communities and consequently higher fixed costs. To the extent we are unable to
effectively compete in the marketplace, our business may be adversely affected.
We may not be able to integrate or finance our acquisitions and our acquisitions may not perform as
expected. We acquire and intend to continue to acquire manufactured home communities on a select basis. Our
acquisition activities and their success are subject to risks, including the following:
if we enter into an acquisition agreement for a property, it is usually subject to customary conditions
to closing, including completion of due diligence investigations to our satisfaction, which may not
be satisfied;
we may be unable to finance acquisitions on favorable terms;
acquired properties may fail to perform as expected;
the actual costs of repositioning or redeveloping acquired properties may be higher than our
estimates;
acquired properties may be located in new markets where we face risks associated with a lack of
market knowledge or understanding of the local economy, lack of business relationships in the area
and unfamiliarity with local governmental and permitting procedures; and
we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of
portfolios of properties, into our existing operations.
If any of the above were to occur, our business and results of operations could be adversely affected.
In addition, we may acquire properties subject to liabilities and without any recourse, or with only limited
recourse, with respect to unknown liabilities. As a result, if a liability were to be asserted against us based upon
ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our
cash flow.
We may be unable to accurately estimate and anticipate costs and timing associated with expansion
activities. We periodically consider expansion of communities. Our expansion activities are subject to risks such as:
construction costs exceeding original estimates, construction and lease-up interruptions resulting in increased
construction costs, and lower than anticipated occupancy and rental rates causing a property to be unprofitable or less
profitable than prior to the expansion.
We may be unable to sell properties when appropriate because real estate investments are illiquid. Real
estate investments generally cannot be sold quickly and, therefore, will tend to limit our ability to vary our property
portfolio promptly in response to changes in economic or other conditions. In addition, the Code limits our ability to
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sell our properties. The inability to respond promptly to changes in the performance of our property portfolio could
adversely affect our financial condition and ability to service our debt and make distributions to our stockholders.
Our ability to sell manufactured homes may be affected by various factors, which may in turn adversely
affect our profitability. S&F operates in the manufactured home market offering homes for sale to tenants and
prospective tenants of our communities. The market for the sale of manufactured homes may be adversely affected
by the following factors:
downturns in economic conditions which adversely impact the housing market;
an oversupply of, or a reduced demand for, manufactured homes;
the ability of manufactured home manufacturers to adapt to change in the economic climate and the
availability of units from these manufacturers;
the difficulty facing potential purchasers in obtaining affordable financing as a result of heightened
lending criteria; and
an increase or decrease in the rate of manufactured home repossessions which provide aggressively
priced competition to new manufactured home sales.
Any of the above listed factors could adversely impact our rate of manufactured home sales, which would
result in a decrease in profitability.
Licensing laws and compliance could affect our profitability. We are subject to the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), which requires that we obtain appropriate licenses
pursuant to the Nationwide Mortgage Licensing System & Registry in each state where we conduct business. There
are extensive federal and state requirements mandated by the SAFE Act and other laws pertaining to financing,
including the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), and there can be
no assurance that we will obtain or renew our SAFE Act licenses, which could result in fees and penalties and have
an adverse impact on our ability to continue with our home financing activities.
Costs associated with taxes and regulatory compliance may reduce our revenue. We are subject to
significant regulation that inhibits our activities and may increase our costs. Local zoning and use laws, environmental
statutes and other governmental requirements may restrict expansion, rehabilitation and reconstruction activities.
These regulations may prevent us from taking advantage of economic opportunities. Legislation such as the
Americans with Disabilities Act may require us to modify our properties at a substantial cost and noncompliance could
result in the imposition of fines or an award of damages to private litigants. Future legislation may impose additional
requirements. We cannot predict what requirements may be enacted or amended or what costs we will incur to comply
with such requirements. Costs resulting from changes in real estate laws, income taxes, service or other taxes may
adversely affect our funds from operations and our ability to pay or refinance our debt. Similarly, changes in laws
increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on
discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect our
business and results of operations.
Laws and regulations also govern the provision of utility services. Such laws regulate, for example, how and
to what extent owners or operators of property can charge renters for provision of utilities. Such laws can also regulate
the operations and performance of utility systems and may impose fines and penalties on real property owners or
operators who fail to comply with these requirements. The laws and regulations may also require capital investment
to maintain compliance.
Rent control legislation may harm our ability to increase rents. State and local rent control laws in certain
jurisdictions may limit our ability to increase rents and to recover increases in operating expenses and the costs of
capital improvements. Currently, rent control affects only two of our manufactured home communities, both of which
are in New Jersey, and has resulted in slower growth of earnings from these properties. However, we may purchase
-8-
additional properties in markets that are either subject to rent control or in which rent-limiting legislation exists or
may be enacted.
Environmental liabilities could affect our profitability. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real estate is liable for the costs of removal or remediation of
certain hazardous substances at, on, under or in such property, as well as certain other potential costs relating to
hazardous or toxic substances. Such laws often impose such liability without regard to whether the owner knew of,
or was responsible for, the presence of such hazardous substances. A conveyance of the property, therefore, does not
relieve the owner or operator from liability. As a current or former owner and operator of real estate, we may be
required by law to investigate and clean up hazardous substances released at or from the properties we currently own
or operate or have in the past owned or operated. We may also be liable to the government or to third parties for
property damage, investigation costs and cleanup costs. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs the government incurs in connection with the
contamination. Contamination may adversely affect our ability to sell or lease real estate or to borrow using the real
estate as collateral. Persons who arrange for the disposal or treatment of hazardous substances also may be liable for
the costs of removal or remediation of such substances at a disposal or treatment facility owned or operated by another
person. In addition, certain environmental laws impose liability for the management and disposal of asbestos-
containing materials and for the release of such materials into the air. These laws may provide for third parties to seek
recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials.
In connection with the ownership, operation, management, and development of real properties, we may be considered
an owner or operator of such properties and, therefore, are potentially liable for removal or remediation costs, and also
may be liable for governmental fines and injuries to persons and property. When we arrange for the treatment or
disposal of hazardous substances at landfills or other facilities owned by other persons, we may be liable for the
removal or remediation costs at such facilities. We are not aware of any environmental liabilities relating to our
investment properties which would have a material adverse effect on our business, assets, or results of operations.
However, we cannot assure you that environmental liabilities will not arise in the future and that such liabilities will
not have a material adverse effect on our business, assets or results of operation.
Of the 118 manufactured home communities we currently operate, forty-five have their own wastewater
treatment facility or water distribution system, or both. At these locations, we are subject to compliance with monthly,
quarterly and yearly testing for contaminants as outlined by the individual state’s Department of Environmental
Protection Agencies. Currently, we are not subject to radon or asbestos monitoring requirements.
Additionally, in connection with the management of the properties or upon acquisition or financing of a
property, the Company authorizes the preparation of Phase I or similar environmental reports (which involves general
inspections without soil sampling or ground water analysis) completed by independent environmental consultants.
Based upon such environmental reports and the Company’s ongoing review of its properties, as of the date of this
Annual Report, the Company is not aware of any environmental condition with respect to any of its properties which
it believes would be reasonably likely to have a material adverse effect on its financial condition and/or results of
operations. However, these reports cannot reflect conditions arising after the studies were completed, and no
assurances can be given that existing environmental studies reveal all environmental liabilities, that any prior owner
or operator of a property or neighboring owner or operator did not create any material environmental condition not
known to us, or that a material environmental condition does not otherwise exist as to any one or more properties.
Some of our properties are subject to potential natural or other disasters. Certain of our manufactured home
communities are located in areas that may be subject to natural disasters, including our manufactured home
communities in flood plains or in areas that may be adversely affected by tornados, as well as our manufactured home
communities in coastal regions that may be adversely affected by increases in sea levels or in the frequency or severity
of hurricanes, tropical storms or other severe weather conditions. The occurrence of natural disasters may delay
redevelopment or development projects, increase investment costs to repair or replace damaged properties, increase
future property insurance costs and negatively impact the tenant demand for lease space. To the extent insurance is
unavailable to us or is unavailable on acceptable terms, or our insurance is not adequate to cover losses from these
events, our financial condition and results of operations could be adversely affected.
-9-
Actions by our competitors may decrease or prevent increases in the occupancy and rental rates of our
properties which could adversely affect our business. We compete with other owners and operators of manufactured
home community properties, some of which own properties similar to ours in the same submarkets in which our
properties are located. The number of competitive manufactured home community properties in a particular area
could have a material adverse effect on our ability to attract tenants, lease sites and maintain or increase rents charged
at our properties or at any newly acquired properties. In addition, other forms of multi-family residential properties,
such as private and federally funded or assisted multi-family housing projects and single-family housing, provide
housing alternatives to potential tenants of manufactured home communities. If our competitors offer housing at
rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential
tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants
when our tenants’ leases expire. As a result, our financial condition, cash flow, cash available for distribution, and
ability to satisfy our debt service obligations could be materially adversely affected.
Losses in excess of our insurance coverage or uninsured losses could adversely affect our cash flow. We
generally maintain insurance policies related to our business, including casualty, general liability and other policies
covering business operations, employees and assets. However, we may be required to bear all losses that are not
adequately covered by insurance. In addition, there are certain losses that are not generally insured because it is not
economically feasible to insure against them, including losses due to riots, acts of war or other catastrophic events. If
an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, then we
could lose the capital we invested in the properties, as well as the anticipated profits and cash flow from the properties
and, in the case of debt which is with recourse to us, we would remain obligated for any mortgage debt or other
financial obligations related to the properties. Although we believe that our insurance programs are adequate, no
assurance can be given that we will not incur losses in excess of its insurance coverage, or that we will be able to
obtain insurance in the future at acceptable levels and reasonable cost.
Our investments are concentrated in the manufactured housing/residential sector and our business would
be adversely affected by an economic downturn in that sector. Our investments in real estate assets are primarily
concentrated in the manufactured housing/residential sector. This concentration may expose us to the risk of economic
downturns in this sector to a greater extent than if our business activities included a more significant portion of other
sectors of the real estate industry.
Financing Risks
We face risks generally associated with our debt. We finance a portion of our investments in properties and
marketable securities through debt. We are subject to the risks normally associated with debt financing, including the risk
that our cash flow will be insufficient to meet required payments of principal and interest. In addition, debt creates other
risks, including:
rising interest rates on our variable rate debt;
inability to repay or refinance existing debt as it matures, which may result in forced disposition of
assets on disadvantageous terms;
refinancing terms less favorable than the terms of existing debt; and
failure to meet required payments of principal and/or interest.
We mortgage our properties, which subjects us to the risk of foreclosure in the event of non-payment. We
mortgage many of our properties to secure payment of indebtedness. If we are unable to meet mortgage payments,
then the property could be foreclosed upon or transferred to the mortgagee with a consequent loss of income and asset
value. A foreclosure of one or more of our properties could adversely affect our financial condition, results of
operations, cash flow, ability to service debt and make distributions and the market price of our preferred and common
stock and any other securities we issue.
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We face risks related to “balloon payments” and refinancings. Certain of our mortgages will have significant
outstanding principal balances on their maturity dates, commonly known as “balloon payments.” There can be no
assurance that we will be able to refinance the debt on favorable terms or at all. To the extent we cannot refinance debt on
favorable terms or at all, we may be forced to dispose of properties on disadvantageous terms or pay higher interest rates,
either of which would have an adverse impact on our financial performance and ability to service debt and make
distributions.
We face risks associated with our dependence on external sources of capital. In order to qualify as a REIT, we
are required each year to distribute to our stockholders at least 90% of our REIT taxable income, and we are subject to tax
on our income to the extent it is not distributed. Because of this distribution requirement, we may not be able to fund all
future capital needs from cash retained from operations. As a result, to fund capital needs, we rely on third-party sources
of capital, which we may not be able to obtain on favorable terms, if at all. Our access to third-party sources of capital
depends upon a number of factors, including (i) general market conditions; (ii) the market’s perception of our growth
potential; (iii) our current and potential future earnings and cash distributions; and (iv) the market price of our preferred
and common stock. Additional debt financing may substantially increase our debt-to-total capitalization ratio. Additional
equity issuance may dilute the holdings of our current stockholders.
We may become more highly leveraged, resulting in increased risk of default on our obligations and an
increase in debt service requirements which could adversely affect our financial condition and results of operations
and our ability to pay distributions. We have incurred, and may continue to incur, indebtedness in furtherance of our
activities. Our governing documents do not limit the amount of indebtedness we may incur. Accordingly, our Board
of Directors may vote to incur additional debt and would do so, for example, if it were necessary to maintain our status
as a REIT. We could therefore become more highly leveraged, resulting in an increased risk of default on our
obligations and in an increase in debt service requirements, which could adversely affect our financial condition and
results of operations and our ability to pay distributions to stockholders.
Fluctuations in interest rates could materially affect our financial results. Because a portion of our debt
bears interest at variable rates, increases in interest rates could materially increase our interest expense. If the United
States Federal Reserve increases short-term interest rates, this may have a significant upward impact on shorter-term
interest rates, including the interest rates that our variable rate debt is based upon. Potential future increases in interest
rates and credit spreads may increase our interest expense and therefore negatively affect our financial condition and
results of operations, and reduce our access to the debt or equity capital markets.
We may be adversely affected by changes in the London Inter-bank Offered Rate (“LIBOR”) or the
method in which LIBOR is determined. A portion of our debt bears interest at variable rates based on LIBOR for
deposits of U.S. dollars. LIBOR and certain other interest “benchmarks” may be subject to regulatory guidance and/or
reform that could cause interest rates under our current or future debt agreements to perform differently than in the
past or cause other unanticipated consequences. The United Kingdom’s Financial Conduct Authority, which regulates
LIBOR, has announced that it intends to stop encouraging or requiring banks to submit LIBOR rates after 2021, and
it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve. If LIBOR ceases to
exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future
indebtedness may be adversely affected.
Covenants in our credit agreements could limit our flexibility and adversely affect our financial condition.
The terms of our various credit agreements and other indebtedness require us to comply with a number of customary
financial and other covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance
coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in
defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If
we were to default under our credit agreements, our financial condition would be adversely affected.
A change in the United States government policy with regard to Fannie Mae and Freddie Mac could impact
our financial condition. Fannie Mae and Freddie Mac are a major source of financing for the manufactured housing real
estate sector. We depend frequently on Fannie Mae and Freddie Mac to finance growth by purchasing or guaranteeing
manufactured housing community loans. We do not know when or if Fannie Mae or Freddie Mac will restrict their support
of lending to our real estate sector or to us in particular. A decision by the government to eliminate Fannie Mae or Freddie
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Mac, or reduce their acquisitions or guarantees of our mortgage loans, may adversely affect interest rates, capital
availability and our ability to refinance our existing mortgage obligations as they come due and obtain additional long-
term financing for the acquisition of additional communities on favorable terms or at all.
We face risks associated with the financing of home sales to customers in our manufactured home
communities. To produce new rental revenue and to upgrade our communities, we sell homes to customers in our
communities at competitive prices and finance these home sales through S&F. We allow banks and outside finance
companies the first opportunity to finance these sales. We are subject to the following risks in financing these homes:
the borrowers may default on these loans and not be able to make debt service payments or
pay principal when due;
the default rates may be higher than we anticipate;
demand for consumer financing may not be as great as we anticipate or may decline;
the value of property securing the installment notes receivable may be less than the amounts
owed; and
interest rates payable on the installment notes receivable may be lower than our cost of funds.
Additionally, there are many regulations pertaining to our home sales and financing activities. There are
significant consumer protection laws and the regulatory framework may change in a manner which may adversely
affect our operating results. The regulatory environment and associated consumer finance laws create a risk of greater
liability from our home sales and financing activities and could subject us to additional litigation. We are also
dependent on licenses granted by state and other regulatory authorities, which may be withdrawn or which may not
be renewed and which could have an adverse impact on our ability to continue with our home sales and financing
activities.
Risks Related to our Status as a REIT
If our leases are not respected as true leases for federal income tax purposes, we would fail to qualify as a
REIT. To qualify as a REIT, we must, among other things, satisfy two gross income tests, under which specified
percentages of our gross income must be certain types of passive income, such as rent. For the rent paid pursuant to our
leases to qualify for purposes of the gross income tests, the leases must be respected as true leases for federal income tax
purposes and not be treated as service contracts, joint ventures or some other type of arrangement. We believe that our
leases will be respected as true leases for federal income tax purposes. However, there can be no assurance that the Internal
Revenue Service (“IRS”) will agree with this view. If the leases are not respected as true leases for federal income tax
purposes, we would not be able to satisfy either of the two gross income tests applicable to REITs, and we could lose our
REIT status.
Failure to make required distributions would subject us to additional tax. In order to qualify as a REIT, we
must, among other requirements, distribute, each year, to our stockholders at least 90% of our taxable income, excluding
net capital gains. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable
income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4%
nondeductible excise tax on the amount, if any, by which our distributions (or deemed distributions) in any year are less
than the sum of:
85% of our ordinary income for that year;
95% of our capital gain net earnings for that year; and
100% of our undistributed taxable income from prior years.
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To the extent we pay out in excess of 100% of our taxable income for any tax year, we may be able to carry
forward such excess to subsequent years to reduce our required distributions for purposes of the 4% nondeductible
excise tax in such subsequent years. We intend to pay out our income to our stockholders in a manner intended to
satisfy the 90% distribution requirement. Differences in timing between the recognition of income and the related cash
receipts or the effect of required debt amortization payments could require us to borrow money or sell assets to pay
out enough of our taxable income to satisfy the 90% distribution requirement and to avoid corporate income tax.
We may not have sufficient cash available from operations to pay distributions to our stockholders, and,
therefore, distributions may be made from borrowings. The actual amount and timing of distributions to our stockholders
will be determined by our Board of Directors in its discretion and typically will depend on the amount of cash available
for distribution, which will depend on items such as current and projected cash requirements, limitations on distributions
imposed by law on our financing arrangements and tax considerations. As a result, we may not have sufficient cash
available from operations to pay distributions as required to maintain our status as a REIT. Therefore, we may need to
borrow funds to make sufficient cash distributions in order to maintain our status as a REIT, which may cause us to incur
additional interest expense as a result of an increase in borrowed funds for the purpose of paying distributions.
We may be required to pay a penalty tax upon the sale of a property. The federal income tax provisions
applicable to REITs provide that any gain realized by a REIT on the sale of property held as inventory or other property
held primarily for sale to customers in the ordinary course of business is treated as income from a “prohibited transaction”
that is subject to a 100% penalty tax. Under current law, unless a sale of real property qualifies for a safe harbor, the
question of whether the sale of real estate or other property constitutes the sale of property held primarily for sale to
customers is generally a question of the facts and circumstances regarding a particular transaction. We intend that we and
our subsidiaries will hold the interests in the real estate for investment with a view to long-term appreciation, engage in the
business of acquiring and owning real estate, and make occasional sales as are consistent with our investment objectives.
We do not intend to engage in prohibited transactions. We cannot assure you, however, that we will only make sales that
satisfy the requirements of the safe harbors or that the IRS will not successfully assert that one or more of such sales are
prohibited transactions.
We may be adversely affected if we fail to qualify as a REIT. If we fail to qualify as a REIT, we will not be
allowed to deduct distributions to shareholders in computing our taxable income and will be subject to federal income
tax at regular corporate rates and possibly increased state and local taxes. In addition, we might be barred from
qualification as a REIT for the four years following the year of disqualification. The additional tax incurred at regular
corporate rates would reduce significantly the cash flow available for distribution to shareholders and for debt service.
Furthermore, we would no longer be required to make any distributions to our shareholders as a condition to REIT
qualification. Any distributions to shareholders would be taxable as ordinary income to the extent of our current and
accumulated earnings and profits, although such dividend distributions to non-corporate shareholders would be subject
to a top federal income tax rate of 20% (and potentially a Medicare tax of 3.8%), provided applicable requirements of
the Code are satisfied. Furthermore, corporate shareholders may be eligible for the dividends received deduction on
the distributions, subject to limitations under the Code. Additionally, if we fail to qualify as a REIT, non-corporate
stockholders would no longer be able to deduct up to 20% of our dividends (other than capital gain dividends and
dividends treated as qualified dividend income), as would otherwise generally be permitted for taxable years beginning
after December 31, 2017 and before January 1, 2026.
To qualify as a REIT, we must comply with certain highly technical and complex requirements. We cannot
be certain we have complied, and will always be able to comply, with the requirements to qualify as a REIT because there
are few judicial and administrative interpretations of these provisions. In addition, facts and circumstances that may be
beyond our control may affect our ability to continue to qualify as a REIT. We cannot assure you that new legislation,
regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to our
qualification as a REIT or with respect to the Federal income tax consequences of qualification. We believe that we have
qualified as a REIT since our inception and intend to continue to qualify as a REIT. However, we cannot assure you that
we are so qualified or will remain so qualified.
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There is a risk of changes in the tax law applicable to REITs. Because the IRS, the United States Treasury
Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what
extent new federal tax laws, regulations, interpretations or rulings will be adopted. Numerous changes to the U.S. federal
income tax laws are proposed on a regular basis. Any of such legislative action may prospectively or retroactively modify
our tax treatment and, therefore, may adversely affect taxation of us and/or our investors. Additionally, the REIT rules are
constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department,
which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain
proposed changes could have an adverse impact on our business and financial results. Importantly, legislation has been
proposed in several states specifically taxing REITs. If such legislation were to be enacted, our income from such states
would be adversely impacted.
The act popularly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), has significantly changed
the U.S. federal income taxation of U.S. businesses and their owners, including REITs and their shareholders. Changes
made by the Tax Act that could affect us and our shareholders include:
temporarily reducing individual U.S. federal income tax rates on ordinary income; the highest
individual U.S. federal income tax rate has been reduced from 39.6% to 37% for taxable years
beginning after December 31, 2017 and before January 1, 2026;
permanently eliminating the progressive corporate tax rate structure, with a maximum corporate tax
rate of 35%, and replacing it with a flat corporate tax rate of 21%;
permitting a deduction for certain pass-through business income, including dividends received by
our shareholders from us that are not designated by us as capital gain dividends or qualified dividend
income, which will allow individuals, trusts, and estates to deduct up to 20% of such amounts for
taxable years beginning after December 31, 2017 and before January 1, 2026;
reducing the highest rate of withholding with respect to our distributions to non-U.S. stockholders
that are treated as attributable to gains from the sale or exchange of U.S. real property interests from
35% to 21%;
limiting our deduction for net operating losses to 80% of REIT taxable income (prior to the
application of the dividends paid deduction);
generally limiting the deduction for net business interest expense in excess of 30% of a business’s
adjusted taxable income except for taxpayers that engage in certain real estate businesses and elect
out of this rule (provided that such electing taxpayers must use an alternative depreciation system
for certain property); and
eliminating the corporate alternative minimum tax.
Many of these changes are effective immediately, without any transition periods or grandfathering for
existing transactions. The Tax Act is unclear in many respects and could be subject to potential amendments and
technical corrections, as well as interpretations and implementing regulations by the United States Treasury
Department and the IRS, any of which could lessen or increase certain adverse impacts of the Tax Act. Some technical
corrections, proposed regulations and final regulations have already been promulgated, some of which specifically
address REITs. It is unclear how these U.S. federal income tax changes will affect state and local taxation in various
states and localities, which often use federal taxable income as a starting point for computing state and local tax
liabilities.
While some of the changes made by the Tax Act may adversely affect us, other changes may be beneficial
on a going forward basis. We continue to work with our tax advisors and auditors to determine the full impact that the
recent tax legislation as a whole will have on us. You are urged to consult with your tax advisor with respect to the
status of legislative, regulatory, judicial or administrative developments and proposals and their potential effect on an
investment in our securities.
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We may be unable to comply with the strict income distribution requirements applicable to REITs. To
maintain qualification as a REIT under the Code, a REIT must annually distribute to its stockholders at least 90% of
its REIT taxable income, excluding the dividends paid deduction and net capital gains. This requirement limits our
ability to accumulate capital. We may not have sufficient cash or other liquid assets to meet the distribution
requirements. Difficulties in meeting the distribution requirements might arise due to competing demands for our
funds or to timing differences between tax reporting and cash receipts and disbursements, because income may have
to be reported before cash is received, because expenses may have to be paid before a deduction is allowed, because
deductions may be disallowed or limited or because the IRS may make a determination that adjusts reported income.
In those situations, we might be required to borrow funds or sell properties on adverse terms in order to meet the
distribution requirements and interest and penalties could apply which could adversely affect our financial condition.
If we fail to make a required distribution, we could cease to be taxed as a REIT.
If we were considered to have actually or constructively paid a “preferential dividend” to certain of our
stockholders, our status as a REIT could be adversely affected. In order to qualify as a REIT, we must distribute annually
to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance
with accounting principles generally accepted in the United States of America (“GAAP”)), determined without regard to
the deduction for dividends paid and excluding net capital gain. For distributions to be counted as satisfying the annual
distribution requirements for REITs, and to provide us with a REIT level tax deduction, the distributions for REIT years
beginning prior to January 1, 2015 must not be “preferential dividends.” A dividend is not a preferential dividend if the
distribution is pro rata among all outstanding shares of stock within a particular class, and in accordance with the
preferences among different classes of stock as set forth in a REIT’s organizational documents. There is no de minimis
exception with respect to preferential dividends; therefore, if the IRS were to take the position that we inadvertently paid
a preferential dividend, for a REIT year beginning prior to January 1, 2015, we may be deemed to have failed the 90%
distribution test, and our status as a REIT could be terminated for the year in which such determination is made if we were
unable to cure such failure. While we believe that our operations have been structured in such a manner that we will not
be treated as inadvertently having paid preferential dividends for a REIT year beginning prior to January 1, 2015, we can
provide no assurance to this effect.
Notwithstanding our status as a REIT, we are subject to various federal, state and local taxes on our income
and property. For example, we will be taxed at regular corporate rates on any undistributed taxable income, including
undistributed net capital gains; provided, however, that properly designated undistributed capital gains will effectively
avoid taxation at the stockholder level. We may be subject to other Federal income taxes and may also have to pay some
state income or franchise taxes because not all states treat REITs in the same manner as they are treated for Federal income
tax purposes.
Other Risks
We may not be able to obtain adequate cash to fund our business. Our business requires access to adequate
cash to finance our operations, distributions, capital expenditures, debt service obligations, development and
redevelopment costs and property acquisition costs, if any. We expect to generate the cash to be used for these purposes
primarily with operating cash flow, borrowings under secured and unsecured loans, proceeds from sales of
strategically identified assets and, when market conditions permit, through the issuance of debt and equity securities
from time to time. We may not be able to generate sufficient cash to fund our business, particularly if we are unable
to renew leases, lease vacant space or re-lease space as leases expire according to our expectations.
We are dependent on key personnel. Our executive and other senior officers have a significant role in our
success. Our ability to retain our management group or to attract suitable replacements should any members of the
management group leave is dependent on the competitive nature of the employment market. The loss of services from key
members of the management group or a limitation in their availability could adversely affect our financial condition and
cash flow. Further, such a loss could be negatively perceived in the capital markets.
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We may amend our business policies without stockholder approval. Our Board of Directors determines our
growth, investment, financing, capitalization, borrowing, REIT status, operations and distributions policies. Although our
Board of Directors has no present intention to change or reverse any of these policies, they may be amended or revised
without notice to stockholders. Accordingly, stockholders may not have control over changes in our policies. We cannot
assure you that changes in our policies will serve fully the interests of all stockholders.
The market value of our preferred and common stock could decrease based on our performance and market
perception and conditions. The market value of our preferred and common stock may be based primarily upon the
market’s perception of our growth potential and current and future cash dividends, and may be secondarily based upon the
real estate market value of our underlying assets. The market price of our preferred and common stock is influenced by
their respective distributions relative to market interest rates. Rising interest rates may lead potential buyers of our stock to
expect a higher distribution rate, which would adversely affect the market price of our stock. In addition, rising interest
rates would result in increased expense, thereby adversely affecting cash flow and our ability to service our indebtedness
and pay distributions.
There are restrictions on the transfer of our capital stock. To maintain our qualification as a REIT under the
Code, no more than 50% in value of our outstanding capital stock may be owned, actually or by attribution, by five or
fewer individuals, as defined in the Code to also include certain entities, during the last half of a taxable year. Accordingly,
our charter contains provisions restricting the transfer of our capital stock. These restrictions may discourage a tender offer
or other transaction, or a change in management or of control of us that might involve a premium price for our common
stock or preferred stock or that our shareholders otherwise believe to be in their best interests, and may result in the transfer
of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the
forfeiture by the acquirer of the benefits of owning the additional shares.
Our earnings are dependent, in part, upon the performance of our investment portfolio. As permitted by the
Code, we invest in and own securities of other REITs, which we generally limit to no more than approximately 15% of
our undepreciated assets. To the extent that the value of those investments declines or those investments do not provide a
return, our earnings and cash flow could be adversely affected.
We are subject to restrictions that may impede our ability to effect a change in control. Certain provisions
contained in our charter and bylaws and certain provisions of Maryland law may have the effect of discouraging a third
party from making an acquisition proposal for us and thereby inhibit a change in control. These provisions include the
following:
Our charter provides for three classes of directors with the term of office of one class expiring each
year, commonly referred to as a “staggered board.” By preventing common stockholders from
voting on the election of more than one class of directors at any annual meeting of stockholders, this
provision may have the effect of keeping the current members of our Board of Directors in control
for a longer period of time than stockholders may desire.
Our charter generally limits any holder from acquiring more than 9.8% (in value or in number,
whichever is more restrictive) of our outstanding equity stock (defined as all of our classes of capital
stock, except our excess stock). While this provision is intended to assure our ability to remain a
qualified REIT for Federal income tax purposes, the ownership limit may also limit the opportunity
for stockholders to receive a premium for their shares of common stock that might otherwise exist
if an investor was attempting to assemble a block of shares in excess of 9.8% of the outstanding
shares of equity stock or otherwise effect a change in control.
The request of stockholders entitled to cast at least a majority of all votes entitled to be cast at such
meeting is necessary for stockholders to call a special meeting. We also require advance notice by
common stockholders for the nomination of directors or proposals of business to be considered at a
meeting of stockholders.
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Our Board of Directors may authorize and cause us to issue securities without shareholder approval.
Under our charter, the board has the power to classify and reclassify any of our unissued shares of capital
stock into shares of capital stock with such preferences, rights, powers and restrictions as the Board of
Directors may determine.
“Business combination” provisions that provide that, unless exempted, a Maryland corporation may not
engage in certain business combinations, including mergers, dispositions of 10 percent or more of its
assets, certain issuances of shares of stock and other specified transactions, with an “interested
shareholder” or an affiliate of an interested shareholder for five years after the most recent date on which
the interested shareholder became an interested shareholder, and thereafter unless specified criteria are
met. An interested shareholder is defined generally as any person who beneficially owns 10% or more
of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the
beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding
voting stock at any time within the two-year period immediately prior to the date in question. In our
charter, we have expressly elected that the Maryland Business Combination Act not govern or apply to
any transaction with our affiliated company, Monmouth Real Estate Investment Corporation
(“MREIC”), a Maryland corporation.
The duties of directors of a Maryland corporation do not require them to, among other things (a) accept,
recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b)
authorize the corporation to redeem any rights under, or modify or render inapplicable, any shareholders
rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland
Control Share Acquisition Act to exempt any person or transaction from the requirements of those
provisions, or (d) act or fail to act solely because of the effect of the act or failure to act may have on an
acquisition or potential acquisition of control of the corporation or the amount or type of consideration
that may be offered or paid to the shareholders in an acquisition.
We cannot assure you that we will be able to pay distributions regularly. Our ability to pay distributions in the
future is dependent on our ability to operate profitably and to generate cash from our operations and the operations of our
subsidiaries and is subject to limitations under our financing arrangements and Maryland law. Under the Maryland General
Corporation Law, (“MGCL”), a Maryland corporation generally may not make a distribution if, after giving effect to the
distribution, the corporation would not be able to pay its debts as the debts became due in the usual course of business, or
the corporation’s total assets would be less than the sum of its total liabilities plus, unless the charter permits otherwise,
the amount that would be needed if the corporation were to be dissolved at the time of the distribution to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving
the distribution. Accordingly, we cannot guarantee that we will be able to pay distributions on a regular quarterly basis in
the future.
Dividends on our capital stock do not qualify for the reduced tax rates available for some
dividends. Income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts and estates are
generally subject to tax at preferential rates. Dividends payable by REITs, however, generally are not eligible for the
preferential tax rates applicable to qualified dividend income. Although these rules do not adversely affect our taxation
or the dividends payable by us, to the extent that the preferential rates continue to apply to regular corporate qualified
dividends, investors who are individuals, trusts and estates may perceive an investment in us to be relatively less
attractive than an investment in the stock of a non-REIT corporation that pays dividends, which could materially and
adversely affect the value of the shares of, and per share trading price of, our capital stock. It should be noted that the
recently enacted Tax Act provides for a deduction from income for individuals, trusts and estates up to 20% of certain
REIT dividends, which reduces the effective tax rate on such dividends below the effective tax rate on interest, though
the deduction is generally not as favorable as the preferential rate on qualified dividends. The deduction for certain
REIT dividends, unlike the favorable rate for qualified dividends, expires after 2025.
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We are subject to risks arising from litigation. We may become involved in litigation. Litigation can be costly,
and the results of litigation are often difficult to predict. We may not have adequate insurance coverage or contractual
protection to cover costs and liability in the event we are sued, and to the extent we resort to litigation to enforce our rights,
we may incur significant costs and ultimately be unsuccessful or unable to recover amounts we believe are owed to us.
We may have little or no control of the timing of litigation, which presents challenges to our strategic planning.
Future terrorist attacks and military conflicts could have a material adverse effect on general economic
conditions, consumer confidence and market liquidity. Among other things, it is possible that interest rates may be
affected by these events. An increase in interest rates may increase our costs of borrowing, leading to a reduction in our
earnings. Terrorist acts affecting our properties could also result in significant damages to, or loss of, our properties.
Additionally, we may be unable to obtain adequate insurance coverage on acceptable economic terms for losses resulting
from acts of terrorism. Our lenders may require that we carry terrorism insurance even if we do not believe this insurance
is necessary or cost effective. Should an act of terrorism result in an uninsured loss or a loss in excess of insured limits,
we could lose capital invested in a property, as well as the anticipated future revenues from a property, while remaining
obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types
would adversely affect our financial condition.
Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have
other adverse effects on us and the market price of our capital stock. Over the last several years, the U.S. stock and credit
markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market
prices of many stocks and debt securities to fluctuate substantially and the spreads on prospective debt financing to widen
considerably. Continued uncertainty in the stock and credit markets may negatively impact our ability to access additional
financing at reasonable terms, which may negatively affect our ability to acquire properties and otherwise pursue our
investment strategy. A prolonged downturn in the stock or credit markets may cause us to seek alternative sources of
potentially less attractive financing, and may require us to adjust our investment strategy accordingly. These types of events
in the stock and credit markets may make it more difficult or costly for us to raise capital through the issuance of the
common stock, preferred stock or debt securities. The potential disruptions in the financial markets may have a material
adverse effect on the market value of the common stock and preferred stock, or the economy in general. In addition, the
national and local economic climate, including that of the energy-market dependent Marcellus and Utica Shale regions,
may be adversely impacted by, among other factors, plant closings and industry slowdowns, which may have a material
adverse effect on the return we receive on our properties and investments, as well as other unknown adverse effects on us.
We may be adversely impacted by volatility in foreign financial markets. During the last few years, the financial
crisis in Europe (including financial difficulties at several large European banks) has led to increased price volatility,
dislocations and liquidity disruptions. Adding to the European credit crisis, in June 2016, voters in the United Kingdom
elected to withdraw from the European Union in a national referendum. The referendum has created significant uncertainty
about the future relationship between the United Kingdom and the European Union and has continued to have a material
adverse effect on global economic conditions and the stability of global financial markets and could significantly reduce
global market liquidity and restrict the ability of key market participants to operate in certain financial markets.
We face risks relating to cybersecurity attacks which could adversely affect our business, cause loss of
confidential information and disrupt operations. We rely extensively on information technology to process
transactions and manage our business. In the ordinary course of our business, we collect and store sensitive data,
including our business information and that of our tenants, clients, vendors and employees on our network. This data
is hosted on internal, as well as external, computer systems. Our external systems are hosted by third-party service
providers that may have access to such information in connection with providing necessary information technology
and security and other business services to us. This information may include personally identifiable information such
as social security numbers, banking information and credit card information. We employ a number of measures to
prevent, detect and mitigate potential breaches or disclosure of this confidential information. We also maintain cyber
risk insurance to provide some coverage for certain risks arising out of data and network breaches. While we continue
to improve our cybersecurity and take measures to protect our business, we and our third-party service providers may
be vulnerable to attacks by hackers (including through malware, ransomware, computer viruses, and email phishing
schemes) or breached due to employee error, malfeasance, fire, flood or other physical event, or other disruptions.
Any such breach or disruption could compromise the confidential information of our employees, customers and
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vendors to the extent such information exists on our systems or on the systems of third-party providers. Such an
incident could result in potential liability, damage our reputation, cause a loss of confidence and disrupt and affect our
business operations and result in lawsuits against us.
We face risks relating to expanding use of social media mediums. The use of social media could cause us
to suffer brand damage or information leakage. Negative posts or comments about us or our properties on any social
networking website could damage our, or our properties’ reputations. In addition, employees or others might disclose
non-public sensitive information relating to our business through external media channels. The continuing evolution
of social media may present us with new challenges and risks. The considerable increase in the use of social media
over recent years has greatly expanded the potential scope and scale, and increased the rapidity of the dissemination
of negative publicity that could be generated by negative posts and comments.
Item 1B – Unresolved Staff Comments
None.
Item 2 – Properties
UMH Properties, Inc. is engaged in the ownership and operation of manufactured home communities located
in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan and Maryland. As of December 31,
2018, the Company owns 118 manufactured home communities containing approximately 21,500 developed sites.
The rents collectible from the land ultimately depend on the value of the home and land. Therefore, fewer but more
expensive homes can actually produce the same or greater rents. There is a long-term trend toward larger
manufactured homes. Manufactured home communities designed for older manufactured homes must be modified to
accommodate modern, wider and longer manufactured homes. These changes may decrease the number of homes
that may be accommodated in a manufactured home community. For this reason, the number of developed sites
operated by the Company is subject to change, and the number of developed sites listed is always an approximate
number. The following table sets forth certain information concerning the Company’s real estate investments as of
December 31, 2018.
Name of Community
Allentown
4912 Raleigh-Millington Road
Memphis, TN 38128
Arbor Estates
1081 North Easton Road
Doylestown, PA 18902
Auburn Estates
919 Hostetler Road
Orrville, OH 44667
Birchwood Farms
8057 Birchwood Drive
Birch Run, MI 48415
Boardwalk
2105 Osolo Road
Elkhart, IN 46514
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
434
89%
90%
76
-0-
$477
230
93%
94%
31
-0-
$690
42
90%
100%
13
-0-
$402
143
90%
83%
28
-0-
$440
195
97%
95%
45
-0-
$367
-19-
Name of Community
Broadmore Estates
148 Broadmore Estates
Goshen, IN 46528
Brookside Village
107 Skyline Drive
Berwick, PA 18603
Brookview Village
2025 Route 9N, Lot 137
Greenfield Center, NY 12833
Camelot Village
2700 West 38th Street
Anderson, IN 46013
Candlewick Court
1800 Candlewick Drive
Owosso, MI 48867
Carsons
649 North Franklin St. Lot 116
Chambersburg, PA 17201
Catalina
6501 Germantown Road
Middletown, OH 45042
Cedarcrest Village
1976 North East Avenue
Vineland, NJ 08360
Chambersburg I & II
5368 Philadelphia Ave Lot 34
Chambersburg, PA 17201
Chelsea
459 Chelsea Lane
Sayre, PA 18840
Cinnamon Woods
70 Curry Avenue
Conowingo, MD 21918
City View
110 Fort Granville Lot C5
Lewistown, PA 17044
Clinton Mobile Home Resort
60 N State Route 101
Tiffin, OH 44883
Collingwood
358 Chambers Road Lot 001
Horseheads, NY 14845
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
390
91%
89%
93
19
$442
170
79%
81%
37
2
$435
140
91%
90%
52
22
$516
95
78%
N/A
32
50
$311
211
61%
67%
40
-0-
$456
131
71%
75%
14
4
$394
463
54%
54%
75
26
$412
283
96%
96%
71
30
$599
99
75%
77%
11
-0-
$391
84
98%
93%
12
-0-
$452
58
98%
92%
10
67
$495
57
93%
93%
20
116
99%
98%
23
2
1
$323
$405
102
88%
86%
20
-0-
$448
-20-
Name of Community
Colonial Heights
917 Two Ridge Road
Wintersville, OH 43953
Countryside Estates
1500 East Fuson Road
Muncie, IN 47302
Countryside Estates
6605 State Route 5
Ravenna, OH 44266
Countryside Village
200 Early Road
Columbia, TN 38401
Cranberry Village
100 Treesdale Drive
Cranberry Township, PA 16066
Crestview
Wolcott Hollow Rd & Route 220
Athens, PA 18810
Cross Keys Village
259 Brown Swiss Circle
Duncansville, PA 16635
Crossroads Village
549 Chicory Lane
Mount Pleasant, PA 15666
Dallas Mobile Home Community
1104 N 4th Street
Toronto, OH 43964
Deer Meadows
1291 Springfield Road
New Springfield, OH 44443
D & R Village
430 Route 146 Lot 65A
Clifton Park, NY 12065
Evergreen Estates
425 Medina Street
Lodi, OH 44254
Evergreen Manor
26041 Aurora Avenue
Bedford, OH 44146
Evergreen Village
9249 State Route 44
Mantua, OH 44255
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
159
75%
78%
31
1
$321
160
83%
76%
36
28
$340
143
92%
90%
27
-0-
$336
349
97%
95%
89
63
$372
187
94%
94%
36
-0-
$593
98
82%
75%
19
-0-
$415
132
83%
84%
21
2
$445
34
71%
61%
9
-0-
$370
145
77%
79%
21
-0-
$261
98
91%
90%
22
8
$314
235
91%
90%
44
-0-
$584
55
100%
96%
10
3
$344
68
75%
75%
7
-0-
$340
50
98%
94%
10
4
$359
-21-
Name of Community
Fairview Manor
2110 Mays Landing Road
Millville, NJ 08332
Forest Creek
855 E. Mishawaka Road
Elkhart, IN 46517
Forest Park Village
102 Holly Drive
Cranberry Township, PA 16066
Fox Chapel Village
7 Greene Drive
Cheswick, PA 15024
Frieden Manor
102 Frieden Manor
Schuylkill Haven, PA 17972
Green Acres
4496 Sycamore Grove Road
Chambersburg, PA 17201
Gregory Courts
1 Mark Lane
Honey Brook, PA 19344
Hayden Heights
5501 Cosgray Road
Dublin, OH 43016
Heather Highlands
109 Main Street
Inkerman, PA 18640
High View Acres
399 Blue Jay Lane
Apollo, PA 15613
Highland
1875 Osolo Road
Elkhart, IN 46514
Highland Estates
60 Old Route 22
Kutztown, PA 19530
Hillcrest Crossing
100 Lorraine Drive
Lower Burrell, PA 15068
Hillcrest Estates
14200 Industrial Parkway
Marysville, OH 43040
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
317
95%
95%
66
132
$643
167
98%
98%
37
-0-
$469
246
91%
85%
79
-0-
$526
121
66%
72%
23
2
$352
193
87%
91%
42
22
$466
24
100%
100%
39
77%
82%
6
9
-0-
-0-
$415
$628
115
100%
99%
19
-0-
$381
407
70%
68%
79
-0-
$438
156
80%
79%
43
-0-
$369
246
94%
90%
42
-0-
$382
318
97%
97%
98
65
$569
198
55%
49%
222
77%
66%
60
46
16
45
$312
$425
-22-
Name of Community
Hillside Estates
Snyder Avenue
Greensburg, PA 15601
Holiday Village
201 Grizzard Avenue
Nashville, TN 37207
Holiday Village
1350 Co Road 3
Elkhart, IN 46514
Holly Acres Estates
7240 Holly Dale Drive
Erie, PA 16509
Hudson Estates
100 Keenan Road
Peninsula, OH 44264
Huntingdon Pointe
240 Tee Drive
Tarrs, PA 15688
Independence Park
355 Route 30
Clinton, PA 15026
Kinnebrook
351 State Route 17B
Monticello, NY 12701
Lake Sherman Village
7227 Beth Avenue, SW
Navarre, OH 44662
Lakeview Meadows
11900 Duff Road, Lot 58
Lakeview, OH 43331
Laurel Woods
1943 St. Joseph Street
Cresson, PA 16630
Little Chippewa
11563 Back Massillon Road
Orrville, OH 44667
Maple Manor
18 Williams Street
Taylor, PA 18517
Marysville Estates
548 North Main Street
Marysville, OH 43040
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
90
80%
83%
29
20
$344
266
98%
95%
36
29
$510
326
76%
79%
53
153
90%
90%
30
2
9
$456
$371
159
95%
88%
19
-0-
$299
67
91%
94%
42
7
$285
92
91%
93%
36
15
$372
249
96%
95%
66
8
$584
237
91%
94%
54
43
$436
81
86%
65%
21
32
$349
207
79%
78%
43
-0-
$395
62
79%
89%
13
-0-
$332
316
78%
77%
71
-0-
$390
305
55%
49%
58
-0-
$383
-23-
Name of Community
Meadowood
9555 Struthers Road
New Middletown, OH 44442
Meadows
11 Meadows
Nappanee, IN 46550
Meadows of Perrysburg
27484 Oregon Road
Perrysburg, OH 43551
Melrose Village
4400 Melrose Drive, Lot 301
Wooster, OH 44691
Melrose West
4455 Cleveland Road
Wooster, OH 44691
Memphis Blues (1)
1401 Memphis Blues Avenue
Memphis, TN 38127
Monroe Valley
15 Old State Road
Jonestown, PA 17038
Moosic Heights
118 1st Street
Avoca, PA 18641
Mount Pleasant Village
549 Chicory Lane
Mount Pleasant, PA 15666
Mountaintop
Mountain Top Lane
Narvon, PA 17555
Mountain View (2)
Van Dyke Street
Coxsackie, NY 12501
Oak Ridge Estates
1201 Country Road 15 (Apt B)
Elkhart, IN 46514
Oakwood Lake Village
308 Gruver Lake
Tunkhannock, PA 18657
Olmsted Falls
26875 Bagley Road
Olmsted Township, OH 44138
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
122
91%
89%
20
-0-
$397
335
61%
52%
61
-0-
$389
191
87%
N/A
39
16
$403
293
90%
91%
71
-0-
$343
29
97%
97%
27
3
$376
39
100%
17%
22
-0-
$411
44
86%
98%
11
-0-
$500
151
92%
87%
35
-0-
$412
115
93%
95%
19
-0-
$317
39
95%
97%
11
2
$580
-0-
N/A
N/A
-0-
220
$-0-
205
99%
98%
40
-0-
$462
79
73%
82%
40
-0-
$438
125
93%
92%
15
-0-
$402
-24-
Name of Community
Oxford Village
2 Dolinger Drive
West Grove, PA 19390
Parke Place
2331 Osolo Road
Elkhart, IN 46514
Perrysburg Estates
23720 Lime City Road
Perrysburg, OH 43551
Pikewood Manor
1780 Lorain Boulevard
Elyria, OH 44035
Pine Ridge Village/Pine Manor
100 Oriole Drive
Carlisle, PA 17013
Pine Valley Estates
1283 Sugar Hollow Road
Apollo, PA 15613
Pleasant View Estates
6020 Fort Jenkins Lane
Bloomsburg, PA 17815
Port Royal Village
485 Patterson Lane
Belle Vernon, PA 15012
Redbud Estates
1800 West 38th Street
Anderson, IN 46013
River Valley Estates
2066 Victory Road
Marion, OH 43302
Rolling Hills Estates
14 Tip Top Circle
Carlisle, PA 17015
Rostraver Estates
1198 Rostraver Road
Belle Vernon, PA 15012
Sandy Valley Estates
11461 State Route 800 N.E.
Magnolia, OH 44643
Shady Hills
1508 Dickerson Pike #L1
Nashville, TN 37207
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
224
99%
97%
59
2
$666
364
95%
84%
79
30
$371
133
67%
N/A
24
9
$369
488
66%
N/A
86
31
$458
194
83%
95%
50
30
$513
212
67%
68%
38
-0-
$376
110
71%
74%
21
9
$382
473
55%
59%
101
-0-
$458
579
90%
N/A
128
20
$274
232
75%
75%
60
-0-
$375
90
96%
91%
31
1
$369
66
80%
92%
17
66
$432
364
70%
67%
102
10
$400
212
87%
93%
25
-0-
$484
-25-
Name of Community
Somerset Estates/Whispering Pines
1873 Husband Road
Somerset, PA 15501
Southern Terrace
1229 State Route 164
Columbiana, OH 44408
Southwind Village (3)
435 E. Veterans Highway
Jackson, NJ 08527
Spreading Oaks Village
7140-29 Selby Road
Athens, OH 45701
Springfield Meadows
4100 Troy Road
Springfield, OH 45502
Suburban Estates
33 Maruca Drive
Greensburg, PA 15601
Summit Estates
3305 Summit Road
Ravenna, OH 44266
Summit Village
246 North 500 East
Marion, IN 46952
Sunny Acres
272 Nicole Lane
Somerset, PA 15501
Sunnyside
2901 West Ridge Pike
Eagleville, PA 19403
Trailmont
122 Hillcrest Road
Goodlettsville, TN 37072
Twin Oaks I & II
27216 Cook Road Lot 1-A
Olmsted Township, OH 44138
Twin Pines
2011 West Wilden Avenue
Goshen, IN 46528
Valley High
229 Fieldstone Lane
Ruffs Dale, PA 15679
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
249
78%
78%
74
24
$372/$441
118
100%
99%
26
4
$340
250
97%
98%
36
-0-
$569
148
89%
85%
37
24
$396
124
90%
82%
43
77
$348
200
91%
92%
36
-0-
$413
141
93%
93%
25
1
$346
82
74%
N/A
25
33
$235
207
93%
92%
55
3
$384
64
88%
83%
8
-0-
$660
129
93%
94%
32
-0-
$526
141
96%
96%
21
-0-
$487
241
83%
83%
48
2
$431
74
84%
85%
13
16
$354
-26-
Name of Community
Valley Hills
4364 Sandy Lake Road
Ravenna, OH 44266
Valley Stream
60 Valley Stream
Mountaintop, PA 18707
Valley View I
1 Sunflower Drive
Ephrata, PA 17522
Valley View II
1 Sunflower Drive
Ephrata, PA 17522
Valley View – Honey Brook
1 Mark Lane
Honey Brook, PA 19344
Voyager Estates
1002 Satellite Drive
West Newton, PA 15089
Waterfalls Village
3450 Howard Road Lot 21
Hamburg, NY 14075
Wayside
1000 Garfield Avenue
Bellefontaine, OH 43331
Weatherly Estates
271 Weatherly Drive
Lebanon, TN 37087
Wellington Estates
58 Tanner Street
Export, PA 15632
Woodland Manor
338 County Route 11, Lot 165
West Monroe, NY 13167
Woodlawn Village (3)
265 Route 35
Eatontown, NJ 07724
Woods Edge
1670 East 650 North
West Lafayette, IN 47906
Wood Valley
2 West Street
Caledonia, OH 43314
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
271
92%
94%
66
67
$341
143
73%
66%
37
6
$331
104
97%
91%
19
-0-
$503
43
100%
100%
7
-0-
$525
147
89%
88%
28
13
$615
259
61%
58%
72
20
$358
198
77%
80%
35
-0-
$565
84
77%
75%
16
5
$300
270
97%
96%
41
-0-
$474
206
53%
56%
46
1
$289
148
63%
58%
77
-0-
$374
156
92%
92%
14
-0-
$673
597
52%
54%
151
50
$382
160
56%
55%
31
56
$325
-27-
Name of Community
Worthington Arms
5277 Columbus Pike
Lewis Center, OH 43035
Youngstown Estates
999 Balmer Road
Youngstown, NY 14174
Number of
Developed
Sites
Occupancy Occupancy
Percentage
Percentage
Acreage
at 12/31/17 Developed
at 12/31/18
Approximate
Additional Monthly Rent Per
Acreage
Site at 12/31/18
224
84%
83%
36
-0-
$546
89
64%
61%
14
59
$350
Total
21,510
82.0%
81.4% (4)
4,706
1,689
$435 (5)
______________________
(1) Community was closed due to an unusual flooding throughout the region in May 2011. We are currently working on the redevelopment of
this community.
(2) We are currently seeking site plan approvals for approximately 220 sites for this property.
(3) Community subject to local rent control laws.
(4) Does not include sites at Memphis Blues.
(5) Weighted average monthly rent per site.
The Company also has approximately 2,100 additional sites at its properties in various stages of
engineering/construction. Due to the difficulties involved in the approval and construction process, it is difficult to
predict the number of sites which will be completed in a given year.
Significant Properties
The Company operates manufactured home properties with an approximate cost of $881,456,000. These
properties consist of 118 separate manufactured home communities and related improvements. No single community
constitutes more than 10% of the total assets of the Company. Our larger properties consist of: Woods Edge with 597
developed sites, Redbud Estates with 579 developed sites, Pikewood Manor with 488 developed sites, Port Royal
Village with 473 developed sites, and Catalina with 463 developed sites.
Mortgages on Properties
The Company has mortgages on many of its properties. The maturity dates of these mortgages range from
the years 2019 to 2028, with a weighted average term of 6.3 years. Interest on these mortgages are at fixed rates
ranging from 3.71% to 6.5%. The weighted average interest rate on our mortgages, not including the effect of
unamortized debt issuance costs, was approximately 4.3% and 4.2% at December 31, 2018 and 2017, respectively.
The aggregate balances of these mortgages, net of unamortized debt issuance costs, total $331,093,063 and
$304,895,117 at December 31, 2018 and 2017, respectively. (For additional information, see Part IV, Item 15(a) (1)
(vi), Note 5 of the Notes to Consolidated Financial Statements – Loans and Mortgages Payable).
Item 3 – Legal Proceedings
The Company is subject to claims and litigation in the ordinary course of business. For additional information
about legal proceedings, see Part IV, Item 15(a)(1)(vi), Note 12 of the Notes to Consolidated Financial Statements –
Commitments, Contingencies and Legal Matters.
Item 4 – Mine Safety Disclosures
Not Applicable.
-28-
PART II
Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
The Company’s common and preferred shares are traded on the New York Stock Exchange (“NYSE”), under
the symbol “UMH” , “UMHPRB”, “UMHPRC” and “UMHPRD”.
Shareholder Information
As of February 28, 2019, there were approximately 1,002 registered shareholders of the Company’s common
stock based on the number of record owners.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
On January 15, 2019, the Board of Directors reaffirmed its Share Repurchase Program (the “Repurchase
Program”) that authorizes the Company to purchase up to $25,000,000 in the aggregate of the Company's common
stock. The Repurchase Program was originally created in June 2008 and is intended to be implemented through
purchases made from time to time using a variety of methods, which may include open market purchases, privately
negotiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider
trading and other securities laws and regulations. The size, scope and timing of any purchases will be based on
business, market and other conditions and factors, including price, regulatory and contractual requirements or
consents, and capital availability. The Repurchase Program does not require the Company to acquire any particular
amount of common stock, and the Repurchase Program may be suspended, modified or discontinued at any time at
the Company's discretion without prior notice. There have been no purchases under the Repurchase Program to date.
Securities Authorized for Issuance Under Equity Compensation Plans
On June 13, 2013, the shareholders approved and ratified the Company's 2013 Stock Option and Stock Award
Plan (the “2013 Plan”) authorizing the grant to officers and key employees of options to purchase up to 3,000,000
shares of common stock. The 2013 Plan replaced the Company's 2003 Stock Option and Award Plan, as amended,
which, pursuant to its terms, terminated in 2013. The outstanding options under the 2003 Stock Option and Award
Plan, as amended, remain outstanding until exercised, forfeited or expired. See Note 6 of the Notes to the Consolidated
Financial Statements for a description of the plans. On June 14, 2018, the shareholders approved and ratified an
amendment and restatement (and renaming) of the Company's Amended and Restated 2013 Incentive Award Plan
(formerly 2013 Stock Option and Stock Award Plan). The amendment and restatement made two substantive changes:
(1) provide an additional 2,000,000 common shares for future grant of option awards, restricted stock awards, or other
stock-based awards; and (2) allow for the issuance of other stock-based awards. See Item 12 – Security Ownership
of Certain Beneficial Owners and Management and Related Matters for a table of beneficial ownership of the
Company’s common stock.
The following table summarizes information, as of December 31, 2018, relating to equity compensation plans
of the Company (including individual compensation arrangements) pursuant to which equity securities of the
Company are authorized for issuance:
-29-
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted
Average Exercise
Price of
Outstanding
Options, Warrants
and Rights
Number of Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
(excluding Securities
reflected in column (a))
2,252,600
N/A
2,252,600
$12.09
N/A
$12.09
1,961,500
N/A
1,961,500
Plan Category
Equity Compensation Plans
Approved by Security Holders
Equity Compensation Plans not
Approved by Security Holders
Total
Comparative Stock Performance
The following line graph compares the total return of the Company’s common stock for the last five years to
the FTSE NAREIT All REITs Index published by the National Association of Real Estate Investment Trusts
(“NAREIT”) and to the S&P 500 Index for the same period. The graph assumes a $100 investment in our common
stock and in each of the indexes listed below on December 31, 2013 and the reinvestment of all dividends. The total
return reflects stock price appreciation and dividend reinvestment for all three comparative indices. The information
herein has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness is
guaranteed. Our stock performance shown in the graph below is not indicative of future stock performance.
250
200
150
100
s
r
a
l
l
o
D
50
0
198
143
129
132
115
124
205
157
155
172
150
149
128
114
109
100
2013
2014
2015
2016
2017
2018
YEAR ENDED DECEMBER 31,
UMH PROPERTIES, INC.
FTSE NAREIT ALL REIT
S & P 500
-30-
Item 6 – Selected Financial Data
The following table sets forth selected financial and other information for the Company as of and for each of
the years in the five year period ended December 31, 2018. The historical financial data has been derived from our
historical financial statements. This following information should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial
Statements and Notes thereto included elsewhere herein.
Operating Data:
Rental and Related Income
Sales of Manufactured Homes
Total Income
Community Operating Expenses
Community NOI (2)
Total Expenses
Interest Income
Dividend Income
Gain on Sales of Marketable Securities, net
Decrease in Fair Value of Marketable
Securities (3)
Interest Expense
Net Income (Loss)
Net Loss Attributable to Common
Shareholders
Net Loss Attributable to Common
Shareholders Per Share
Basic and Diluted
Cash Flow Data:
Net Cash Provided (Used) by:
Operating Activities
Investing Activities
Financing Activities
Balance Sheet Data:
Total Investment Property
Total Assets
Mortgages Payable, net of
unamortized debt issuance costs
Loans Payable, net of unamortized
debt issuance costs
Series A 8.25% Cumulative
Redeemable Preferred Stock
Series B 8.0% Cumulative
Redeemable Preferred Stock
Series C 6.75% Cumulative
Redeemable Preferred Stock
Series D 6.375% Cumulative
Redeemable Preferred Stock
Total Shareholders’ Equity
Other Information:
Average Number of Shares Outstanding
Basic and Diluted
Funds from Operations (2)
Core Funds from Operations (2)
Normalized Funds from Operations (2)
Cash Dividends Per Common Share
2018
2017 (1)
2016 (1)
2015 (1)
2014 (1)
$113,832,660
15,754,033
129,586,693
52,948,510
60,884,150
111,009,550
2,254,690
10,367,155
20,107
(51,675,396)
16,038,585
(36,215,571)
$101,801,425
10,846,494
112,647,919
47,846,565
53,954,860
96,616,337
2,006,880
8,134,898
1,747,528
-0-
15,876,972
12,668,034
$90,679,557
8,534,272
99,213,829
42,638,333
48,041,224
83,255,514
1,584,585
6,636,126
2,285,301
-0-
15,432,364
11,534,559
$74,762,548
6,754,123
81,516,671
37,049,462
37,713,086
72,076,546
1,819,567
4,399,181
204,230
-0-
14,074,446
2,144,205
$63,886,010
7,545,923
71,431,933
33,592,327
30,293,683
64,521,158
2,098,974
4,065,986
1,542,589
-0-
10,716,722
4,237,803
(56,531,515)
(7,679,265)
(2,568,873)
(6,122,993)
(3,318,785)
(1.53)
(0.24)
(0.10)
(0.24)
(0.15)
$40,175,186
(137,603,160)
82,314,136
$40,857,424
(152,919,761)
130,604,097
$29,203,209
(77,567,390)
45,894,673
$29,646,963
(148,674,626)
121,419,519
$24,749,768
(56,033,767)
32,174,955
$881,456,088
878,985,924
$764,438,633
823,881,326
$640,216,767
680,444,818
$577,709,074
600,317,390
$448,164,459
476,040,197
331,093,063
304,895,117
293,025,592
283,049,802
180,752,425
107,985,353
84,704,487
58,285,385
57,862,206
77,128,880
-0-
-0-
91,595,000
91,595,000
91,595,000
95,030,000
95,030,000
95,030,000
45,030,000
143,750,000
143,750,000
-0-
-0-
-0-
-0-
50,000,000
424,698,040
-0-
421,215,464
-0-
317,031,967
-0-
246,238,425
-0-
208,827,105
36,871,322
$(24,709,177)
$26,966,219
$27,471,112
$0.72
32,675,650
$19,959,411
$23,461,898
$21,714,370
$0.72
27,808,895
$20,647,390
$20,731,742
$18,446,441
$0.72
25,932,626
$12,834,786
$14,267,036
$14,187,806
$0.72
22,496,103
$11,837,322
$12,320,844
$10,778,255
$0.72
-31-
(1) Financial information has been revised to reflect certain reclassifications in prior periods to conform to the current period
presentation.
(2) Refer to Item 7, Supplemental Measures, contained in this Form 10-K for information regarding the presentation of community NOI,
and for the presentation and reconciliation of funds from operations, core funds from operations and normalized funds from operations
to net loss attributable to common shareholders.
(3) Represents change in unrealized gain (loss) in marketable securities which is included in the Consolidated Statements of Income (Loss)
in accordance with ASU 2016-01.
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
Statements contained in this Form 10-K, that are not historical facts are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements provide our current
expectations or forecasts of future events. Forward-looking statements include statements about the Company’s
expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying
assumptions and other statements that are not historical facts. Forward-looking statements can be identified by their
use of forward-looking words, such as “may,” “will,” “anticipate,” “expect,” “believe,” “intend,” “plan,” “should,”
“seek” or comparable terms, or the negative use of those words, but the absence of these words does not necessarily
mean that a statement is not forward-looking.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future
performance, taking into account all information currently available to us. Forward-looking statements are not
predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible
events or factors, not all of which are known to us. Some of these factors are described below and under the headings
“Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”. These and other risks, uncertainties and factors could cause our actual results to differ materially from
those included in any forward-looking statements we make. Any forward-looking statement speaks only as of the
date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those
events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise. Important
factors that could cause actual results to differ materially from our expectations include, among others:
changes in the real estate market conditions and general economic conditions;
the inherent risks associated with owning real estate, including local real estate market conditions,
governing laws and regulations affecting manufactured housing communities and illiquidity of real
estate investments;
increased competition in the geographic areas in which we own and operate manufactured housing
communities;
our ability to continue to identify, negotiate and acquire manufactured housing communities and/or
vacant land which may be developed into manufactured housing communities on terms favorable to us;
our ability to maintain rental rates and occupancy levels;
changes in market rates of interest;
our ability to repay debt financing obligations;
our ability to refinance amounts outstanding under our credit facilities at maturity on terms favorable to
us;
our ability to comply with certain debt covenants;
our ability to integrate acquired properties and operations into existing operations;
the availability of other debt and equity financing alternatives;
continued ability to access the debt or equity markets;
the loss of any member of our management team;
our ability to maintain internal controls and processes to ensure all transactions are accounted for
properly, all relevant disclosures and filings are timely made in accordance with all rules and regulations,
and any potential fraud or embezzlement is thwarted or detected;
-32-
the ability of manufactured home buyers to obtain financing;
the level of repossessions by manufactured home lenders;
market conditions affecting our investment securities;
changes in federal or state tax rules or regulations that could have adverse tax consequences;
our ability to qualify as a REIT for federal income tax purposes; and
those risks and uncertainties referenced under the heading "Risk Factors" contained in this Form 10-K
and the Company's filings with the Securities and Exchange Commission.
You should not place undue reliance on these forward-looking statements, as events described or implied in
such statements may not occur. The forward-looking statements contained in this Form 10-K speak only as of the
date hereof and the Company expressly disclaims any obligation to publicly update or revise any forward-looking
statements whether as a result of new information, future events, or otherwise.
2018 Accomplishments
During 2018, UMH has made substantial progress on multiple fronts – generating solid operating results,
achieving strong growth and improving our financial position. We have:
Increased Rental and Related Income by 12%;
Increased Community Net Operating Income (“NOI”) by 13%;
Improved our Operating Expense ratio by 50 basis points to 46.5%;
Increased Same Property NOI by 7%;
Increased Same Property Occupancy by 40 basis points from 82.6% to 83.0%;
Increased home sales by 45%;
Generated a 12% increase in Normalized FFO per share;
Acquired 6 communities containing approximately 1,600 homesites for a total cost of $59.1 million,
bringing our total property portfolio to 118 manufactured home communities with approximately 21,500
developed homesites;
Increased our rental home portfolio by 905 homes to approximately 6,500 total rental homes,
representing an increase of 16%;
Expanded and extended our existing unsecured revolving credit facility, increasing the available
borrowings and reducing interest costs.
Issued 2,000,000 shares of a new 6.375% Series D Cumulative Redeemable Preferred Stock, for net
proceeds after deducting the underwriting discount and other estimated offering expenses, of
approximately $48 million; and
Raised $35.1 million through our Dividend Reinvestment and Stock Purchase Plan.
Overview
The following discussion and analysis of the consolidated financial condition and results of operations should
be read in conjunction with "Selected Financial Data" and the historical Consolidated Financial Statements and Notes
thereto included elsewhere in this Form 10-K.
The Company is a self-administered, self-managed, REIT with headquarters in Freehold, New Jersey. The
Company’s primary business is the ownership and operation of manufactured home communities, which includes
leasing manufactured home spaces on an annual or month-to-month basis to residential manufactured home owners.
The Company also leases homes to residents and, through its taxable REIT subsidiary, S&F, sells and finances homes
to residents and prospective residents of our communities.
Our communities are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan
and Maryland. UMH has continued to execute our growth strategy of purchasing well-located communities in our
target markets, including the energy-rich Marcellus and Utica Shale regions. During the year ended December 31,
2018, we purchased six manufactured home communities, for an aggregate purchase price of $59,093,000. These
acquisitions added approximately 1,600 developed homesites to our portfolio, bringing our total to 118 communities
containing approximately 21,500 developed homesites.
-33-
The Company earns income from the operation of its manufactured home communities, leasing of
manufactured homesites, the rental of manufactured homes, the sale and finance of manufactured homes, the brokering
of home sales, and from appreciation in the values of the manufactured home communities and vacant land owned by
the Company. Management views the Company as a single segment based on its method of internal reporting in
addition to its allocation of capital and resources. The Company also invests in securities of other REITs which the
Company generally limits to no more than approximately 15% of its undepreciated assets.
Occupancy in our properties, as well as our ability to increase rental rates, directly affects revenues. In 2018,
total income increased 15.0% from the prior year and Community NOI (as defined below) increased 12.8% from the
prior year, primarily due to the acquisition and rental programs in 2017 and 2018. Overall occupancy increased from
81.4% at December 31, 2017 to 82.0% at December 31, 2018. Same property occupancy, which includes communities
owned and operated as of January 1, 2017, increased from 82.6% at December 31, 2017 to 83.0% at December 31,
2018. Overall occupancy includes communities acquired in 2018 at a weighted average occupancy of 80%.
Sales of manufactured homes performed exceptionally well during 2018, increasing by 45% year-over-year.
Demand for housing remains healthy, due to improvements in the economy, sustained wage and job growth and still
favorable interest rates. Conventional single-family home prices continue their rise supported by low inventories and
increasing sales. As household formation strengthens and for-sale inventory remains limited, a large share of housing
demand will be looking at alternative forms of housing. Our property type offers substantial comparative value that
should result in increased demand.
The macro-economic environment and current housing fundamentals continue to favor home rentals. The
inability to satisfy down payment requirements, more stringent credit terms, and steadily increasing home prices
continue to create hurdles for would-be homebuyers. Rental homes in a manufactured home community allow the
resident to obtain the efficiencies of factory-built housing and the amenities of community living for less than the cost
of other forms of affordable housing. We continue to see increased demand for rental homes. During 2018, our
portfolio of rental homes increased by 905 homes. Occupied rental homes represent approximately 34.1% of total
occupied sites. Occupancy in rental homes continues to be strong and is at 92.3% as of December 31, 2018. We
compare favorably with other types of rental housing, including apartments, and we will continue to allocate capital
to rental home purchases, as demand dictates.
The Company holds a portfolio of marketable securities of other REITs with a fair value of $99,595,736 at
December 31, 2018, representing 9.3% of our undepreciated assets (total assets excluding accumulated depreciation).
The Company generally limits its marketable securities investments to no more than approximately 15% of its
undepreciated assets. The REIT securities portfolio provides the Company with additional diversification, liquidity
and income, and serves as a proxy for real estate when more favorable risk adjusted returns are not available. As of
December 31, 2018, the Company’s portfolio consisted of 3% REIT preferred stocks and 97% REIT common stocks.
The Company invests in these REIT securities and, from time to time, may use margin debt when an adequate
yield spread can be obtained. As of December 31, 2018, the Company has borrowings of $31,975,086 under its margin
line at 2.75% interest. The Company’s weighted average yield on the securities portfolio was approximately 7.3% at
December 31, 2018. The Company realized a net gain of $20,107 on sale of securities in 2018 as compared to a net
gain of $1,747,528 during 2017. At December 31, 2018, the Company had unrealized losses of $(40,155,814) in its
REIT securities portfolio. The dividends received from our securities investments continue to meet our expectations.
It is our intent to hold these securities for investment on a long-term basis.
The Company continues to strengthen its balance sheet. During 2018, the Company raised approximately
$35.1 million in new capital through the Dividend Reinvestment and Stock Purchase Plan (“DRIP”). The Company
also reduced its cost of capital in 2018 by issuing 2,000,000 shares of a new 6.375% Series D Cumulative Redeemable
Preferred Stock (“Series D Preferred Stock”) for net proceeds of $48.2 million.
At December 31, 2018, the Company had approximately $7.4 million in cash and cash equivalents and $25
million available on our credit facility, with an additional $50 million potentially available pursuant to an accordion
feature. We also had $18.6 million available on our revolving lines of credit for the financing of home sales and the
purchase of inventory. In addition, we held approximately $99.6 million in marketable REIT securities encumbered
-34-
by $32.0 million in margin loans. In general, the Company may borrow up to 50% of the value of the marketable
securities.
The Company intends to continue to increase its real estate investments. Our business plan includes acquiring
communities that yield in excess of our cost of funds and then making physical improvements, including adding rental
homes onto otherwise vacant sites. In 2017 and 2018, we have added a total of seventeen manufactured home
communities to our portfolio, encompassing approximately 3,600 developed sites. These manufactured home
communities were acquired with an average occupancy rate of 71%. The Company will utilize the rental home
program to increase occupancy rates and improve operating results at these communities. There is no guarantee that
any additional opportunities will materialize or that the Company will be able to take advantage of such opportunities.
The growth of our real estate portfolio depends on the availability of suitable properties which meet the Company’s
investment criteria and appropriate financing. Competition in the market areas in which the Company operates is
significant and affects acquisitions, occupancy levels, rental rates and operating expenses of certain properties.
See PART I, Item 1- Business and Item 1A – Risk Factors for a more complete discussion of the economic
and industry-wide factors relevant to the Company, the Company's lines of business and principal products and
services, and the opportunities, challenges and risks on which the Company is focused.
Acquisitions
Community
Acquisitions in 2018
Redbud Estates and
Camelot Village
Summit Village
Pikewood Manor
Perrysburg Estates and
Meadows of Perrysburg
Total 2018
Acquisitions in 2017
Hillcrest Estates and
Marysville Estates
Boardwalk and Parke
Place
Hillcrest Crossing
Cinnamon Woods
Pennsylvania 5
Community Portfolio
Total 2017
Date of
Acquisition
State
Number
of Sites
Purchase
Price
Number
of Acres
Occupancy
at
Acquisition
May 30, 2018
August 31, 2018
November 30, 2018
December 19, 2018
January 20, 2017
January 20, 2017
January 24, 2017
May 31, 2017
December 22, 2017
IN
IN
OH
OH
OH
IN
PA
MD
PA
669
134
488
324
$20,500,000
3,500,000
23,000,000
12,093,000
231
58
117
88
91%
60%
67%
79%
1,615
$59,093,000
449
79%
532
559
200
63
643
$9,588,000
24,437,000
2,485,000
4,000,000
22,780,000
149
155
78
79
141
57%
77%
40%
92%
72%
1,997
$63,290,000
602
67%
-35-
Supplemental Measures
In addition to the results reported in accordance with GAAP, management’s discussion and analysis of
financial condition and results of operations include certain non‐GAAP financial measures that in
management’s view of the business we believe are meaningful as they allow the investor the ability to
understand key operating details of our business both with and without regard to certain accounting
conventions or items that may not always be indicative of recurring annual cash flow of the portfolio. These
non‐GAAP financial measures as determined and presented by us may not be comparable to related or similarly
titled measures reported by other companies, and include Community Net Operating Income (“Community
NOI”), Funds from Operations Attributable to Common Shareholders (“FFO”), Core Funds from Operations
Attributable to Common Shareholders (“Core FFO”) and Normalized Funds from Operations Attributable to
Common Shareholders (“Normalized FFO”).
We define Community NOI as rental and related income less community operating expenses such as real
estate taxes, repairs and maintenance, community salaries, utilities, insurance and other expenses. We believe that
Community NOI is helpful to investors and analysts as a direct measure of the actual operating results of our
manufactured home communities, rather than our Company overall. Community NOI should not be considered
a substitute for the reported results prepared in accordance with GAAP. Community NOI should not be
considered as an alternative to net income (loss) as an indicator of our financial performance, or to cash flows
as a measure of liquidity; nor is it indicative of funds available for our cash needs, including our ability to make
cash distributions.
The Company’s Community NOI is calculated as follows:
2018
2017
2016
2015
2014
Rental and Related Income
Community Operating Expenses
$113,832,660
(52,948,510)
$101,801,425
(47,846,565)
$90,679,557
(42,638,333)
$74,762,548
(37,049,462)
$63,886,010
(33,592,327)
Community NOI
$60,884,150
$53,954,860
$48,041,224
$37,713,086
$30,293,683
We also assess and measure our overall operating results based upon an industry performance measure
referred to as FFO, which management believes is a useful indicator of our operating performance. FFO is used by
industry analysts and investors as a supplemental operating performance measure of a REIT. FFO, as defined by
NAREIT, represents net income (loss) attributable to common shareholders, as defined by GAAP, excluding
extraordinary items, as defined under GAAP, gains or losses from sales of previously depreciated real estate assets,
impairment charges related to depreciable real estate assets, plus certain non-cash items such as real estate asset
depreciation and amortization. NAREIT created FFO as a non-GAAP supplemental measure of REIT operating
performance. We define Core FFO as FFO , excluding acquisition costs, costs of early extinguishment of debt, change
in the fair value of marketable securities and costs associated with the redemption of preferred stock. We define
Normalized FFO as Core FFO excluding gains and losses realized on securities investments and certain non-recurring
charges. FFO, Core FFO and Normalized FFO should be considered as supplemental measures of operating
performance used by REITs. FFO, Core FFO and Normalized FFO exclude historical cost depreciation as an expense
and may facilitate the comparison of REITs which have a different cost basis. The items excluded from FFO, Core
FFO and Normalized FFO are significant components in understanding the Company’s financial performance.
FFO, Core FFO and Normalized FFO (i) do not represent Cash Flow from Operations as defined by GAAP;
(ii) should not be considered as an alternative to net income (loss) as a measure of operating performance or to cash
flows from operating, investing and financing activities; and (iii) are not alternatives to cash flow as a measure of
liquidity. FFO, Core FFO and Normalized FFO, as calculated by the Company, may not be comparable to similarly
titled measures reported by other REITs.
-36-
The Company’s FFO, Core FFO and Normalized FFO attributable to common shareholders are calculated
as follows:
2018
2017
2016
2015
2014
Net Loss Attributable
to Common Shareholders
Depreciation Expense
(Gain) Loss on Sales of
Depreciable Assets
FFO Attributable to Common
Shareholders
Adjustments:
Acquisition Costs
Early Extinguishment of Debt (1)
Decrease in Fair Value of
Marketable Securities (4)
Redemption of Preferred Stock
Core FFO Attributable to Common
Shareholders
Adjustments:
Gain on Sales of Marketable
Securities, net
Non- Recurring Other Expense(2)
Settlement of Memphis Mobile
City Litigation (3)
Normalized FFO Attributable to
Common Shareholders
$(56,531,515)
31,691,209
$(7,679,265)
27,557,746
$(2,568,873)
23,214,100
$(6,122,993)
18,877,511
$(3,318,785)
15,163,420
131,129
80,930
2,163
80,268
(7,313)
(24,709,177)
19,959,411
20,647,390
12,834,786
11,837,322
-0-
-0-
-0-
-0-
79,231
5,121
957,219
475,031
483,522
-0-
51,675,396
-0-
-0-
3,502,487
-0-
-0-
-0-
-0-
-0-
-0-
26,966,219
23,461,898
20,731,742
14,267,036
12,320,844
(20,107)
(1,747,528)
(2,285,301)
(204,230)
(1,542,589)
525,000
-0-
-0-
-0-
-0-
-0-
-0-
125,000
-0-
-0-
$27,471,112
$21,714,370
$18,446,441
$14,187,806
$10,778,255
Included in Interest Expense on the Consolidated Statements of Income (Loss).
(1)
(2) Consists of one- time payroll expenditure.
(3)
(4) Represents change in unrealized gain (loss) in marketable securities which is included in the Consolidated Statements of Income
Included in Community Operating Expenses on the Consolidated Statements of Income (Loss).
(Loss) in accordance with ASU 2016-01.
Results of Operations
2018 vs. 2017
Rental and related income increased from $101,801,425 for the year ended December 31, 2017 to
$113,832,660 for the year ended December 31, 2018, or 12%. This increase was due to the acquisitions during 2017
and 2018, as well as an increase in rental rates, same property occupancy and additional rental homes. During 2018,
the Company raised rental rates by 3% to 4% at most communities. Rent increases vary depending on overall market
conditions and demand. Occupancy, as well as the ability to increase rental rates, directly affects revenues. The
Company has been acquiring communities with vacant sites that can potentially be occupied and earn income in the
future. Overall occupancy has increased from to 81.4% at December 31, 2017 to 82.0% at December 31, 2018.
Overall occupancy includes communities acquired in 2018 and 2017, which had a weighted average occupancy of
79% and 67%, respectively, at the time of acquisition. Same property occupancy has increased from 82.6% at
December 31, 2017 to 83.0% at December 31, 2018. The same property occupancy rate is exclusive of the sites at
Memphis Blues, which is under redevelopment due to a flood in 2011. Demand for rental homes continues to be
strong. As of December 31, 2018, we had approximately 6,500 rental homes with an occupancy of 92.3%. We
continue to evaluate the demand for rental homes and will invest in additional homes as demand dictates. Vacant sites
allow for future revenue growth.
-37-
Community operating expenses increased from $47,846,565 for the year ended December 31, 2017 to
$52,948,510 for the year ended December 31, 2018, or 11%. This increase was due to the acquisitions during 2017
and 2018.
Community NOI increased from $53,954,860 for the year ended December 31, 2017 to $60,884,150 for the
year ended December 31, 2018, or 13%. This increase was primarily due to the acquisitions during 2017 and 2018
and an increase in rental rates, occupancy and rental homes. The Operating Expense Ratio (defined as Community
Operating Expenses divided by Rental and Related Income) also improved from 47.0% for the year ended December
31, 2017 to 46.5% for the year ended December 31, 2018. Many acquisitions have deferred maintenance requiring
higher than normal expenditures in the first few years of ownership. Because most of the community expenses are
fixed costs, as occupancy rates continue to increase, these expense ratios will continue to improve. Because of the
Company’s ability to increase its rental rates annually, increasing costs due to inflation and changing prices have
generally not had a material effect on revenues and income from continuing operations.
Sales of manufactured homes increased from $10,846,494 for the year ended December 31, 2017 to
$15,754,033 for the year ended December 31, 2018, or 45%. The total number of homes sold was 295 homes in 2018
as compared to 222 homes in 2017. There were 125 new homes sold in 2018 as compared to 74 in 2017. The
Company’s average sales price was $53,404 and $48,858 for the years ended December 31, 2018 and 2017,
respectively. Cost of sales of manufactured homes increased from $8,471,190 for the year ended December 31, 2017
to $11,715,987 for the year ended December 31, 2018, or 38%. The gross profit percentage was 26% and 22% for
2018 and 2017, respectively. Selling expenses increased from $3,095,155 for the year ended December 31, 2107 to
$3,774,425 for the year ended December 31, 2018, or 22%. Gain (Loss) from the sales operations (defined as sales
of manufactured homes less cost of sales of manufactured homes less selling expenses less interest on the financing
of inventory) decreased from a loss $1,147,501 for the year ended December 31, 2017 to a gain of $75,064 for the
year ended December 31, 2018, an improvement of 107%. The gain on sales include selling expenses of
approximately $3.8 million for the year ended December 31, 2018. Many of these costs, such as rent, salaries, and to
an extent, advertising and promotion, are fixed. Although sales of manufactured homes have not yet returned to pre-
recession levels, the Company has experienced three consecutive years of double-digit sales growth. The Company
is encouraged by our sales operations’ return to profitability. The U.S. homeownership rate was 64.8% in the fourth
quarter of 2018, according to the U.S. Census. This is down from 69.2% at its peak at the end of 2004. The
conventional single-family housing market has strengthened, and conventional home prices continue their rise. The
inherent affordability of our property type becomes more and more apparent which should result in increased demand.
The Company continues to be optimistic about future sales and rental prospects given the fundamental need for
affordable housing. The Company believes that sales of new homes produce new rental revenue and is an investment
in the upgrading of our communities.
General and Administrative Expenses increased from $9,645,681 for the year ended December 31, 2017 to
$10,879,419 for the year ended December 31, 2018, or 13%. This increase was primarily due to an increase in
personnel and personnel costs, as headcount, wages and incentive compensation increased in connection with the
Company's growth, and an increase in non-cash stock compensation expense. Stock compensation expense increased
from $1,314,491 for the year ended December 31, 2017 to $1,613,110 for the year ended December 31, 2018. These
increases were primarily due to an increase in the weighted-average fair value of options granted from $1.81 per share
for the year ended December 31, 2017 to $2.05 per share for the year ended December 31, 2018. Additionally, the
Founder and Chairman of the Board was granted a discretionary stock option award of 100,000 shares, as well as
1,000 shares of restricted stock. Although these awards are usually recognized over the vesting period, the entire
compensation cost of approximately $210,000 was recognized at the time of grant since he is of retirement age.
Additionally, for the year ended December 31, 2018, there was a one-time payroll expenditure of $525,000 for two
employees. General and Administrative expenses without this one-time payroll expenditure as a percentage of gross
revenue (Total Income plus Interest, Dividend and Other Income) remains in line at 7.3% and 7.8% at December 31,
2018 and 2017, respectively.
Depreciation expense increased from $27,557,746 for the year ended December 31, 2017 to $31,691,209 for
the year ended December 31, 2018, or 15%. This increase was primarily due to the acquisitions and the increase in
rental homes during 2017 and 2018.
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Interest income increased from $2,006,880 for the year ended December 31, 2017 to $2,254,690 for the year
ended December 31, 2018, or 12%. This increase was primarily due to an increase in the average balance of notes
receivable from $21.2 million for the year ended December 31, 2017 to $26.9 million for the year ended December
31, 2018.
Dividend income increased from $8,134,898 for the year ended December 31, 2017 to $10,367,155 for the
year ended December 31, 2018, or 27%. This increase was due to an increase in the cost of securities from $121.4
million for the year ended December 31, 2017 to $139.8 million for the year ended December 31, 2018. The dividends
received from our securities investments were at a weighted average yield of 7.3% and 7.4% as of December 31, 2018
and 2017, respectively, and continue to meet our expectations. It is the Company’s intent to hold these marketable
securities long-term.
Realized gain on sales of marketable securities, net consists of the following:
Gross realized gains
Gross realized losses
Year Ended December 31,
2018
2017
$20,107
-0-
$1,749,034
(1,506)
Total Gain on Sales of Marketable Securities, net
$20,107
$1,747,528
The Company had an accumulated net unrealized loss on its securities portfolio of $(40,155,814) as of
December 31, 2018.
Decrease in Fair Value of Marketable Securities decreased from of $0 for the year ended December 31, 2017
to a loss of $51,675,396 for the year ended December 31, 2018. On January 1, 2018, the Company adopted ASU
2016-01, which requires changes in the fair value of our marketable securities to be recorded in current period
earnings. Previously, changes in the fair value of marketable securities were recognized in "Accumulated Other
Comprehensive Income" on our Consolidated Balance Sheets. As a result, on January 1, 2018 the Company recorded
an increase to beginning undistributed income (accumulated deficit) of $11,519,582 to recognize the unrealized gains
previously recorded in "Accumulated Other Comprehensive Income" on our Consolidated Balance Sheets. As of
December 31, 2018, the Company had total net unrealized losses of $40,155,814 in its REIT securities portfolio.
Other income decreased from $705,048 at December 31, 2017 to $410,444 at December 31, 2018. This
decrease is mainly due to an upfront oil and gas bonus payment in 2017 of $251,680 that the Company received at
one of its communities.
Interest expense, including amortization of financing costs, remained relatively stable for the year ended
December 31, 2018 as compared to the year ended December 31, 2017. During the year, we obtained 2 new mortgage
loans, and assumed 2 loans in conjunction with acquisitions, totaling $33 million. The average balance of mortgages
payable was approximately $318 million during 2018 as compared to approximately $299 million during 2017. The
weighted average interest rate on its mortgages, not including the effect of unamortized debt issuance costs, was 4.3%
at December 31, 2018 as compared to 4.2% at December 31, 2017.
2017 vs. 2016
Rental and related income increased from $90,679,557 for the year ended December 31, 2016 to
$101,801,425 for the year ended December 31, 2017, or 12%. This increase was due to the acquisitions during 2016
and 2017, as well as an increase in rental rates, same property occupancy and additional rental homes. During 2017,
the Company raised rental rates by 3% to 4% at most communities. Rent increases vary depending on overall market
conditions and demand. Occupancy, as well as the ability to increase rental rates, directly affects revenues. The
Company has been acquiring communities with vacant sites that can potentially be occupied and earn income in the
future. Overall occupancy has increased from 81.0% at December 31, 2016 to 81.4% at December 31, 2017. Overall
occupancy includes communities acquired in 2017 and 2016, which had a weighted average occupancy of 67% and
-39-
74%, respectively, at the time of acquisition. Same property occupancy has increased from 81.2% at December 31,
2016 to 82.7% at December 31, 2017. The overall and same property occupancy rates is exclusive of the sites at
Memphis Blues, which is under redevelopment due to a flood in 2011. Demand for rental homes continues to be
strong. As of December 31, 2017, we had approximately 5,600 rental homes with an occupancy of 93.0%. We
continue to evaluate the demand for rental homes and will invest in additional homes as demand dictates. Vacant sites
allow for future revenue growth.
Community operating expenses increased from $42,638,333 for the year ended December 31, 2016 to
$47,846,565 for the year ended December 31, 2017, or 12%. This increase was due to the acquisitions during 2016
and 2017.
Community NOI increased from $48,041,224 for the year ended December 31, 2016 to $53,954,860 for the
year ended December 31, 2017, or 12%. This increase was primarily due to the acquisitions during 2016 and 2017
and an increase in rental rates, occupancy and rental homes. The Operating Expense Ratio (defined as Community
Operating Expenses divided by Rental and Related Income) was 47.0% for both the years ended December 31, 2017
and 2016. Many acquisitions have deferred maintenance requiring higher than normal expenditures in the first few
years of ownership. Because most of the community expenses are fixed costs, as occupancy rates continue to increase,
these expense ratios will continue to improve. Because of the Company’s ability to increase its rental rates annually,
increasing costs due to inflation and changing prices have generally not had a material effect on revenues and income
from continuing operations.
Sales of manufactured homes increased from $8,534,272 for the year ended December 31, 2016 to
$10,846,494 for the year ended December 31, 2017, or 27%. The total number of homes sold was 222 homes in 2017
as compared to 170 homes in 2016. There were 74 new homes sold in 2017 as compared to 61 in 2016. The
Company’s average sales price was $48,858 and $50,202 for the years ended December 31, 2017 and 2016,
respectively. Cost of sales of manufactured homes increased from $6,466,520 for the year ended December 31, 2016
to $8,471,190 for the year ended December 31, 2017, or 31%. The gross profit percentage was 22% and 24% for
2017 and 2016, respectively. Selling expenses remained relatively stable at $3,095,155 for the year ended December
31, 2017 as compared to $2,852,405 for the year ended December 31, 2016. Loss from the sales operations (defined
as sales of manufactured homes less cost of sales of manufactured homes less selling expenses less interest on the
financing of inventory) decreased from $1,444,076 for the year ended December 31, 2016 to $1,147,501 for the year
ended December 31, 2017, an improvement of 21%. The losses on sales include selling expenses of approximately
$3.1 million for the year ended December 31, 2017. Many of these costs, such as rent, salaries, and to an extent,
advertising and promotion, are fixed. Sales of manufactured homes have not yet returned to pre-recession levels. The
U.S. homeownership rate was 64.2% in the fourth quarter of 2017, according to the U.S. Census. This is down from
69.2% at its peak at the end of 2004. The conventional single-family housing market has strengthened and
conventional home prices continue their rise. The inherent affordability of our property type becomes more and more
apparent which should result in increased demand. The Company continues to be optimistic about future sales and
rental prospects given the fundamental need for affordable housing. The Company believes that sales of new homes
produce new rental revenue and is an investment in the upgrading of our communities.
General and Administrative Expenses increased from $8,004,925 for the year ended December 31, 2016 to
$9,645,681 for the year ended December 31, 2017, or 21%. This increase was primarily due to an increase in personnel
and personnel costs, as headcount increased in connection with the Company's growth, and an increase in non-cash
stock compensation expense. Stock compensation expense increased from $1,064,678 for the year ended December
31, 2016 to $1,314,491 for the year ended December 31, 2017. These increases were primarily due to the increase in
our stock price during the year, which increased the fair value of options granted. The weighted-average fair value of
options granted increased from $0.81 per share for the year ended December 31, 2016 to $1.81 for the year ended
December 31, 2017. Additionally, the Founder and Chairman of the Board was granted a discretionary stock option
award of 100,000 shares, as well as 1,100 shares of restricted stock. Although these awards are usually recognized
over the vesting period, the entire compensation cost of approximately $201,000 was recognized at the time of grant
since he is of retirement age. General and Administrative expenses as a percentage of gross revenue (Total Income
plus Interest, Dividend and Other Income) remains in line at 7.8% and 7.4% at December 31, 2017 and 2016,
respectively.
-40-
Acquisition Costs amounted to $-0- for the year ended December 31, 2017 and $79,231 for the year ended
December 31, 2016. As a result of the adoption of Accounting Standards Update 2017-01 “Business Combinations
(Topic 805) Clarifying the Definition of a Business” prospectively as of January 1, 2017, we account for our property
acquisitions as acquisitions of assets and no longer account for our property acquisitions as business combinations. In
an acquisition of assets, certain acquisition costs are capitalized to real estate investments as part of the purchase price
as opposed to being expensed as Acquisition Costs under the previous accounting treatment for business combinations.
Depreciation expense increased from $23,214,100 for the year ended December 31, 2016 to $27,557,746 for
the year ended December 31, 2017, or 19%. This increase was primarily due to the acquisitions and the increase in
rental homes during 2016 and 2017.
Interest income increased from $1,584,585 for the year ended December 31, 2016 to $2,006,880 for the year
ended December 31, 2017, or 27%. This increase was primarily due to an increase in the average balance of notes
receivable from $18.3 million for the year ended December 31, 2016 to $21.2 million for the year ended December
31, 2017.
Dividend income increased from $6,636,126 for the year ended December 31, 2016 to $8,134,898 for the
year ended December 31, 2017, or 23%. This increase was due to an increase in the average balance of securities
from $91.9 million for the year ended December 31, 2016 to $120.9 million for the year ended December 31, 2017.
The dividends received from our securities investments were at a weighted average yield of 7.4% and 6.8% as of
December 31, 2017 and 2016, respectively.
Realized gain on sales of marketable securities, net consists of the following:
Gross realized gains
Gross realized losses
Year Ended December 31,
2017
2016
$1,749,034
(1,506)
$2,287,454
(2,153)
Total Gain on Sales of Marketable Securities, net
$1,747,528
$2,285,301
The Company had an accumulated net unrealized gain on its securities portfolio of $11,519,582 as of
December 31, 2017.
Other income increased from $504,759 at December 31, 2016 to $705,048 at December 31, 2017. The
increase is mainly due to an upfront oil and gas bonus payment of $251,680 that the Company received at one of its
communities.
Interest expense remained relatively stable for the year ended December 31, 2017 as compared to the year
ended December 31, 2016. During the year, we obtained 3 new mortgage loans, and assumed 1 loan in conjunction
with an acquisition, totaling $47 million. The average balance of mortgages payable was approximately $299 million
during 2017 as compared to approximately $288 million during 2016. The weighted average interest rate on its
mortgages, not including the effect of unamortized debt issuance costs, was 4.2% at December 31, 2017 as compared
to 4.3% at December 31, 2016.
Liquidity and Capital Resources
The Company operates as a REIT deriving its income primarily from real estate rental operations. The
Company’s principal liquidity demands have historically been, and are expected to continue to be, payments of
expenses relating to real estate operations, acquisitions, capital improvements, development and expansions of
properties, debt service, purchases of manufactured homes, investment in debt and equity securities of other REITs,
financing of manufactured home sales and distribution requirements. The Company’s ability to generate cash
adequate to meet these demands is dependent primarily on income from its real estate investments and securities
portfolio, the sale of real estate investments and securities, financing and refinancing of mortgage debt, leveraging of
real estate investments, availability of bank borrowings, proceeds from the DRIP, and access to the capital markets.
-41-
The Company intends to operate its existing properties from the cash flows generated by the properties.
However, the Company’s expenses are affected by various factors, including inflation. Increases in operating
expenses raise the breakeven point for a property and, to the extent that they cannot be passed on through higher rents,
reduce the amount of available cash flow which can adversely affect the market value of the property.
The Company continues to strengthen its capital and liquidity positions. The Company has a DRIP in which
participants can purchase stock from the Company at a price of approximately 95% of market. During 2018, amounts
received, including dividends reinvested of $5.1 million, totaled $35.1 million. The Company also issued 2,000,000
shares of its Series D Preferred Stock in an underwritten registered public offering, raising net proceeds of
approximately $48 million.
On November 29, 2018, the Company entered into a First Amendment to Amended and Restated Credit
Agreement to expand and extend its existing unsecured revolving credit facility. The Facility is syndicated with two
banks led by BMO Capital Markets Corp., as sole lead arranger and sole book runner, with Bank of Montreal as
administrative agent, and includes JPMorgan Chase Bank, N.A. as the sole syndication agent. The Amendment
provides for an increase from $50 million in available borrowings to $75 million in available borrowings with a $50
million accordion feature, bringing the total potential availability up to $125 million, subject to certain conditions
including obtaining commitments from additional lenders. The Amendment also extends the maturity date of the
Facility from March 27, 2020 to November 29, 2022, with a one-year extension available at the Company’s option,
subject to certain conditions including payment of an extension fee. Availability under the Facility is limited to 60%
of the value of the unencumbered communities which the Company has placed in the Facility’s unencumbered asset
pool. The Amendment increased the value of the Borrowing Base communities by reducing the capitalization rate
applied to the Net Operating Income generated by the communities in the Borrowing Base from 7.5% to 7.0%. As of
December 31, 2018, $25 million was available on this credit facility.
The Company has the ability to finance home sales, inventory purchases and rental home purchases. The
Company has a $10 million revolving line of credit for the financing of homes, of which $4 million was utilized at
December 31, 2018, and revolving credit facilities totaling $28.5 million to finance inventory purchases, of which
$15.9 million was utilized at December 31, 2018.
As of December 31, 2018, the Company had $7.4 million of cash and cash equivalents and marketable
securities of $99.6 million encumbered by $32.0 million in margin loans. The Company owns 118 communities of
which 45 are unencumbered. The Company’s marketable securities and non-mortgaged properties provide us with
additional liquidity. The Company believes that cash on hand, funds generated from operations, the DRIP and capital
market, the funds available on the lines of credit, together with the ability to finance and refinance its properties will
provide sufficient funds to adequately meet its obligations over the next several years.
The Company’s focus is on real estate investments. The Company has historically financed purchases of real
estate primarily through mortgages. During 2018, total investment property increased 15% or $117 million. The
Company made acquisitions of six manufactured home communities totaling approximately 1,600 developed sites at
an aggregate purchase price of $59.1 million. These acquisitions were funded through new mortgages, the use of our
unsecured credit facility and the issuance of preferred stock. See Note 3 of the Notes to Consolidated Financial
Statements for additional information on our acquisitions and Note 5 of the Notes to Consolidated Financial
Statements for related debt transactions. The Company continues to evaluate acquisition opportunities. The funds for
these acquisitions may come from bank borrowings, proceeds from the DRIP, and private placements or public
offerings of common or preferred stock. To the extent that funds or appropriate properties are not available, fewer
acquisitions will be made.
The Company also invests in rental homes and as of December 31, 2018 the Company owned approximately
6,500 rental homes, or approximately 30% of our total homesites. During 2018, our rental home portfolio increased
by 905 homes or $37.6 million. The Company markets these rental homes for sale to existing residents. The Company
estimates that in 2019 it will purchase approximately 800 manufactured homes to use as rental units for a total cost,
including setup, of approximately $36 million. Rental home rates on new homes range from $700-$1,200 per month,
including lot rent, depending on size, location and market conditions. During 2018, the Company also invested
approximately $17 million in other improvements to our communities.
-42-
Additionally, the Company invests in marketable debt and equity securities of other REITs. The REIT
securities portfolio provides the Company with additional liquidity and income and serves as a proxy for real estate
when more favorable risk adjusted returns are not available. The Company generally limits its marketable securities
investments to no more than approximately 15% of its undepreciated assets. During 2018, the securities portfolio
decreased 25% or $33.4 million primarily due to a net unrealized loss of $51.7 million and sales of securities with a
cost of $249,000, offset by purchases of $18.6 million. The Company recognized gains on sales of securities of
approximately $20,000 in addition to the dividend income earned of $10.4 million. The Company from time to time
may purchase these securities on margin when there is an adequate yield spread. At December 31, 2018, $32.0 million
was outstanding on the margin loan at a 2.75% interest rate.
The following table summarizes cash flow activity for the years ended December 31, 2018, 2017 and 2016:
2018
2017
2016
Net Cash Provided by Operating Activities
Net Cash Used in Investing Activities
Net Cash Provided by Financing Activities
Net Increase (Decrease) in Cash, Cash
Equivalents and Restricted Cash
$
40,175,186
(137,603,160)
82,314,136
$
(15,113,838)
$
$
40,857,424
(152,919,761)
130,604,097
$
29,203,209
(77,567,391)
45,894,673
18,541,760
$
(2,469,509)
Net cash provided by operating activities remained relatively stable from 2017 to 2018. Net cash provided
by operating activities increased by $12.0 million in 2017. This increase was primarily due to increased income from
operations generated from acquisitions and increased rental homes and a smaller increase in inventory purchases.
Net cash used in investing activities decreased by $15.3 million in 2018 primarily due to a decrease in
acquisitions of manufactured home communities and a decrease in purchases of REIT securities. Net cash used in
investing activities increased by $75.4 million in 2017 primarily due to an increase in acquisitions of manufactured
home communities and an increase in our REIT securities portfolio.
Net cash provided by financing activities decreased by $48.3 million in 2018 to $82.3 million. The Company
received $35.1 million, including dividends reinvested, through the DRIP, and issued 2,000,000 shares of its Series D
Preferred Stock in an underwritten registered public offering, raising net proceeds of approximately $48 million.
During 2018, the Company also distributed to our common shareholders a total of $26.6 million, including dividends
reinvested. It is anticipated, although no assurances can be given, that the level of participation in the DRIP in 2019
will be comparable to 2018. In addition, the Company also paid $20.0 million in preferred dividends.
Net cash provided by financing activities increased by $84.7 million in 2017 to $130.6 million. The Company
received $60.4 million, including dividends reinvested, through the DRIP, issued 1,400,000 shares of its common
stock in a registered direct placement, raising net proceeds of $22.5 million, and issued 5,750,000 shares of its Series
C Preferred Stock in an underwritten registered public offering, raising net proceeds of approximately $139 million.
$91.6 million of the net proceeds from the issuance of the Series C Preferred Stock was used to redeem all of the
3,663,800 outstanding shares of the Series A Preferred Stock. During 2017, the Company also distributed to our
common shareholders a total of $23.6 million, including dividends reinvested. In addition, the Company also paid
$16.7 million in preferred dividends.
Cash flows were primarily used for purchases of manufactured home communities, capital improvements,
payment of dividends, purchases of marketable securities, purchase of inventory and rental homes, loans to customers
for the sales of manufactured homes, and expansion of existing communities. The Company meets maturing mortgage
obligations by using a combination of cash flow and refinancing. The dividend payments were primarily made from
cash flow from operations.
Cash flows used for capital improvements include amounts needed to meet environmental and regulatory
requirements in connection with the manufactured home communities that provide water or sewer service. Excluding
expansions and rental home purchases, the Company is budgeting approximately $16 million in capital improvements
for 2019.
-43-
The Company’s significant commitments and contractual obligations relate to its mortgages and loans
payable, acquisitions of manufactured home communities, retirement benefits, and the lease on its corporate offices
as described in Note 8 to the Consolidated Financial Statements.
The Company has 1,700 acres of undeveloped land which it could develop over the next several years. The
Company continues to analyze the best use of its vacant land.
As of December 31, 2018, the Company had total assets of $879.0 million and total liabilities of $454.3
million. Our net debt (net of cash and cash equivalents) to total market capitalization as of December 31, 2018 and
2017 was approximately 37% and 32%, respectively. Our net debt, less securities (net of cash and cash equivalents
and marketable securities) to total market capitalization as of December 30, 2018 and 2017 was approximately 28%
and 20%, respectively.
The Company believes that it has the ability to meet its obligations and to generate funds for new investments.
Off-Balance Sheet Arrangements and Contractual Obligations
The Company has not executed any material off-balance sheet arrangements.
The following is a summary of the Company’s contractual obligations as of December 31, 2018:
Contractual Obligations
Total
year
1-3 years
3-5 years
5 years
Less than 1
More than
Mortgages Payable
Interest on Mortgages Payable
Loans Payable
Interest on Loans Payable
Operating Lease Obligations
Purchase of Properties
Retirement Benefits
$334,411,425
80,803,848
108,417,479
15,009,023
729,740
45,287,000
450,000
$21,140,538
14,374,283
19,767,278
4,445,004
214,800
45,287,000
-0-
$29,313,422
26,182,408
4,593,603
5,977,278
441,100
-0-
-0-
$75,069,454
21,435,598
51,699,576
3,704,610
73,840
-0-
-0-
$208,888,011
18,811,559
32,357,022
882,131
-0-
-0-
450,000
Total
$585,108,515
$105,228,903
$66,507,811
$151,983,078
$261,388,723
Mortgages payable represents the principal amounts outstanding based on scheduled payments. The interest
on these mortgages are at fixed rates ranging from 3.71% to 6.5%. The weighted average interest rate, not including
the effect of unamortized debt issuance costs, was approximately 4.3% at December 31, 2018. As of December 31,
2018, the weighted average loan maturity of the mortgage payable is 6.3 years.
Loans payable represents $50,000,000 outstanding on the Company’s unsecured line of credit with an interest
rate ranging from LIBOR plus 1.75% to 2.50% or Prime plus 0.75% to 1.50%, based on the Company’s overall
leverage (interest rate of 4.05% as of December 31, 2018); $31,975,086 outstanding on its margin line with an interest
rate of 2.75% at December 31, 2018; $15,928,350 outstanding on the Company’s revolving credit agreements to
finance inventory with interest rates ranging from prime with a minimum of 6% to Prime plus 2% with a minimum of
8% after 18 months (weighted average interest rate of 7.04% as of December 31, 2018); $373,499 loans outstanding
for the finance of rental homes with an interest rate of 6.99% at December 31, 2018; $3,779,477 outstanding on its
commercial term loan with an interest rate of 4.625% at December 31, 2018; $4,000,000 outstanding on the
Company’s revolving line of credit secured by eligible notes receivables with an interest rate of prime plus 50 basis
points (interest rate of 5.50 % as of December 31, 2018); and $2,361,066 outstanding on its automotive loans with a
weighted average interest rate of 4.43%.
Operating lease obligations represent a lease with a related party for the Company’s corporate offices. On
May 1, 2015, the Company renewed this lease for additional space and for an additional seven-year term with monthly
lease payments of $14,900 through April 30, 2020 and $15,300 through April 30, 2022. On July 1, 2017, the Company
entered into a lease for additional office space adjacent to its existing corporate office space requiring monthly lease
payments of $1,275 through April 30, 2020 and $1,310 through April 30, 2022. On February 14, 2018, the Company
-44-
entered into a lease for additional office space adjacent to its existing corporate office space requiring monthly lease
payments of $1,800 through April 30, 2020 and $1,850 through April 30, 2022. The Company is also responsible for
its proportionate share of real estate taxes and common area maintenance. Mr. Eugene W. Landy, the Founder and
Chairman of the Board of the Company, owns a 24% interest in the entity that is the landlord of the property where
the Company’s corporate office space is located. Management believes that the aforesaid rent is no more than what
the Company would pay for comparable space elsewhere.
Purchase of Properties represents the total purchase price of two communities under contract, one in Ohio
and one in Michigan, totaling 1,187 developed home sites.
Retirement benefits of $450,000 represent the total future amount to be paid, on an undiscounted basis,
relating to the Company’s Founder and Chairman. These benefits are based upon his specific employment agreement.
The agreement does not require the Company to separately fund the obligation and therefore will be paid from the
general assets of the Company. The Company has accrued these benefits on a present value basis over the term of the
agreement (See Note 8 of the Notes to Consolidated Financial Statements).
Critical Accounting Policies and Estimates
The discussion and analysis of the Company’s financial condition and results of operations are based upon
the Company’s consolidated financial statements, which have been prepared in accordance with GAAP. The
preparation of these consolidated financial statements requires management to make estimates and judgments that
affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of the Company’s consolidated financial statements. Actual results may differ from these
estimates under different assumptions or conditions.
Significant accounting policies are defined as those that involve significant judgment and potentially could
result in materially different results under different assumptions and conditions. Management believes the following
critical accounting policies are affected by our more significant judgments and estimates used in the preparation of
the Company’s consolidated financial statements. For a detailed description of these and other accounting policies,
see Note 2 of the Notes to Consolidated Financial Statements included in this Form 10-K.
Real Estate Investments
The Company applies Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 360-10, Property, Plant & Equipment (“ASC 360-10”) to measure impairment in real estate investments.
Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is
probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property
is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors
such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other
factors. Upon determination that an other than temporary impairment has occurred, rental properties are reduced to
their fair value. 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 there is a
commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported
at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property
is held for disposition, depreciation expense is not recorded.
Upon acquisition of a property, the Company applies ASC 805, Business Combinations (“ASC 805”) and
allocates the purchase price of the property based upon the fair value of the assets acquired, which generally consist
of land, site and land improvements, buildings and improvements and rental homes. The Company allocates the
purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal of
the property obtained in conjunction with the purchase.
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In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-01, “Business Combinations
(Topic 805), Clarifying the Definition of a Business”. ASU 2017-01 seeks to clarify the definition of a business with
the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting
including acquisitions, disposals, intangible assets and consolidation. The adoption of ASU 2017-01 is effective for
annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments
should be applied prospectively on or after the effective dates. Early adoption is permitted. The Company adopted
this standard effective January 1, 2017, on a prospective basis. The Company evaluated its acquisitions and has
determined that its acquisitions of manufactured home communities during 2017 and 2018 should be accounted for as
acquisitions of assets. As such, transaction costs, such as broker fees, transfer taxes, legal, accounting, valuation, and
other professional and consulting fees, related to acquisitions are capitalized as part of the cost of the acquisitions,
which is then subject to a purchase price allocation based on relative fair value. Prior to the adoption of ASU 2017-
01, the Company’s acquisitions were considered an acquisition of a business and therefore, the acquisition costs were
expensed.
The Company conducted a comprehensive review of all real estate asset classes in accordance with ASC
360-10-35-21, which indicates that asset values should be analyzed whenever events or changes in circumstances
indicate that the carrying value of a property may not be fully recoverable. The process entailed the analysis of property
for instances where the net book value exceeds the estimated fair value. In accordance with ASC 360-10-35-17, an
impairment loss shall be recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair
value. The Company utilizes the experience and knowledge of its internal valuation team to derive certain assumptions
used to determine an operating property’s cash flow. Such assumptions include lease-up rates, rental rates, rental
growth rates, and capital expenditures. The Company reviewed its operating properties in light of the requirements
of ASC 360-10 and determined that, as of December 31, 2018, the undiscounted cash flows over the holding period
for these properties were in excess of their carrying values and, therefore, no impairment charges were required.
Marketable Securities
Investments in marketable securities consist of marketable common and preferred stock securities of other
REITs, which the Company generally limits to no more than approximately 15% of its undepreciated assets. These
marketable securities are all publicly-traded and purchased on the open market, through private transactions or through
dividend reinvestment plans. The Company normally holds REIT securities on a long-term basis and has the ability
and intent to hold securities to recovery, therefore as of December 31, 2018 and 2017, gains or losses on the sale of
securities are based on average cost and are accounted for on a trade date basis.
On January 1, 2018, the Company adopted ASU 2016-01, “Financial Instruments – Overall: Recognition and
Measurement of Financial Assets and Financial Liabilities”. ASU 2016-01 requires changes in the fair value of our
marketable securities to be recorded in current period earnings. Previously, changes in the fair value of marketable
securities were recognized in "Accumulated Other Comprehensive Income" on our Consolidated Balance Sheets. As
a result, on January 1, 2018 the Company recorded an increase to beginning undistributed income (accumulated
deficit) of $11,519,582 to recognize the unrealized gains previously recorded in "Accumulated Other Comprehensive
Income" on our Consolidated Balance Sheets. Subsequent changes in the fair value of the Company’s marketable
securities are recorded in "Other Investment Income (Loss), net" on our Consolidated Statements of Income (Loss).
See “Recently Adopted Accounting Pronouncements” below for additional information regarding the adoption of this
ASU.
Other
Estimates are used when accounting for the allowance for doubtful accounts for our rents and loans
receivable, potentially excess and obsolete inventory and contingent liabilities, among others. These estimates are
susceptible to change and actual results could differ from these estimates. The effects of changes in these estimates
are recognized in the period they are determined.
-46-
Recent Accounting Pronouncements
See Note 2 of the Notes to Consolidated Financial Statements.
Item 7A – Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market prices and interest rates. The Company's
principal market risk exposure is interest rate risk. The Company’s future income, cash flows and fair values relevant
to financial instruments are dependent upon prevalent market interest rates. Many factors, including governmental
monetary and tax policies, domestic and international economic and political considerations and other factors that are
beyond the Company’s control contribute to interest rate risk. The Company mitigates this risk by maintaining prudent
amounts of leverage, minimizing capital costs and interest expense while continuously evaluating all available debt
and equity resources and following established risk management policies and procedures, which may include the
periodic use of derivatives. The Company's primary strategy in entering into derivative contracts is to minimize the
variability that changes in interest rates could have on its future cash flows. The Company generally employs
derivative instruments that effectively convert a portion of its variable rate debt to fixed rate debt. The Company does
not enter into derivative instruments for speculative purposes.
The following table sets forth information as of December 31, 2018, concerning the Company’s mortgages
and loans payable, including principal cash flow by scheduled maturity, weighted average interest rates and estimated
fair value.
Mortgages Payable
Loans Payable
Carrying Value
Weighted
Average
Interest Rate
Carrying Value
Weighted
Average
Interest Rate
2019
2020
2021
2022
2023
Thereafter
Total
Estimated Fair
Value
$2,364,577
11,739,329
2,157,664
20,420,083
61,227,236
236,502,536
$334,411,425
$332,131,000
5.74%
5.94%
6.50%
4.42%
4.34%
4.06%
4.29%(1)
$19,767,278
4,215,285
378,318
51,130,884
568,692
32,357,022
$108,417,479
$108,417,000
6.58%
5.48%
4.79%
4.06%
4.69%
2.78%
4.20%(1)
(1) Weighted average interest rate, not including the effect of unamortized debt issuance costs. The weighted average interest rate,
including the effect of unamortized debt issuance costs, at December 31, 2018 was 4.33% for mortgages payable and 4.21% for
loans payable.
All mortgage loans are at fixed rates. The Company has approximately $19.9 million in variable rate loans
payable. If short-term interest rates increased or decreased by 1%, interest expense would have increased or decreased
by approximately $199,000.
The Company invests in equity securities of other REITs and is primarily exposed to market price risk from
adverse changes in market rates and conditions. The Company generally limits its marketable securities investments to no
more than approximately 15% of its undepreciated assets. All securities are carried at fair value.
-47-
Item 8 – Financial Statements and Supplementary Data
The financial statements and supplementary data listed in Part IV, Item 15(a)(1) are incorporated herein by
reference and filed as part of this report.
The following is the Unaudited Selected Quarterly Financial Data:
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
2018
March 31
June 30
September 30
December 31
$29,795,964
25,492,249
(26,496,347)
Total Income
Total Expenses
Other Income (Expense)
Net Income (Loss) from
continuing operations
Net Income (Loss) Attributable
to Common Shareholders
Net Income (Loss) Attributable to Common
Shareholders per Share –
Basic and Diluted
(22,208,337)
(27,154,510)
(0.76)
$32,098,550
27,761,189
15,799,550
$33,447,114
28,436,258
(11,332,720)
$34,245,065
29,319,854
(32,632,068)
20,071,984
(6,349,343)
(27,729,875)
14,948,727
(11,472,600)
(32,943,132)
0.41
(0.31)
(0.87)
2017
March 31
June 30
September 30
December 31
Total Income
Total Expenses
Other Income (Expense)
Net Income from continuing
operations
Net Loss Attributable
to Common Shareholders
Net Loss Attributable to Common
Shareholders per Share –
Basic and Diluted
$26,448,549
22,485,487
(1,653,136)
$28,817,848
24,858,243
(383,472)
$28,684,937
24,704,729
(699,309)
2,285,546
3,589,871
3,262,001
(1,504,201)
(199,876)
(5,179,423)
$28,696,585
24,567,878
(546,701)
3,530,616
(795,765)
(0.05)
(0.01)
(0.15)
(0.03)
Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in, or any disagreements with, the Company’s independent registered public
accounting firm on accounting principles and practices or financial disclosure during the years ended December 31,
2018 and 2017.
Item 9A – Controls and Procedures
Disclosure Controls and Procedures
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rule 13a-
15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to give
reasonable assurances to the timely collection, evaluation and disclosure of information that would potentially be
subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder as of December 31, 2018.
-48-
Internal Control over Financial Reporting
(a)
Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining effective internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal
control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external purposes in accordance with GAAP. Because of its
inherent limitations, including the possibility of collusion or improper management override of controls, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the Company’s internal control over financial reporting as of December 31, 2018. This
assessment was based on criteria for effective internal control over financial reporting established in Internal Control
— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) (2013 framework). Based on this assessment, management has concluded that the Company’s internal
control over financial reporting was effective as of December 31, 2018.
PKF O’Connor Davies, LLP, the Company’s independent registered public accounting firm, has issued their
report on their audit of the Company’s internal control over financial reporting, a copy of which is included herein.
-49-
(b)
Attestation Report of the Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
UMH Properties, Inc.
Opinion on Internal Control over Financial Reporting
We have audited UMH Properties, Inc.’s (the “Company”) internal control over financial reporting as of December
31, 2018, based on criteria established in Internal Control–Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria
established in Internal Control–Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the
related consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity and cash flows
for each of the three years in the period ended December 31, 2018, and our report dated March 7, 2019, expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
-50-
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ PKF O’Connor Davies, LLP
March 7, 2019
New York, New York
(c) Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting during the quarter ended
December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.
Item 9B – Other Information
None.
Item 10 – Directors, Executive Officers and Corporate Governance
PART III
The information required by this item is incorporated herein by reference to the definitive proxy statement
for the Company’s 2019 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A and the
information included under the caption "Executive Officers" in Part I hereof, in accordance with General Instruction
G(3) to Form 10-K.
Item 11 – Executive Compensation
The information required by this item is incorporated herein by reference to the definitive proxy statement
for the Company’s 2019 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A, in
accordance with General Instruction G(3) to Form 10-K.
Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item is incorporated herein by reference to the definitive proxy statement
for the Company’s 2019 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A, in
accordance with General Instruction G(3) to Form 10-K.
Item 13 – Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the definitive proxy statement
for the Company’s 2019 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A, in
accordance with General Instruction G(3) to Form 10-K.
Item 14 – Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to the definitive proxy statement
for the Company’s 2019 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A, in
accordance with General Instruction G(3) to Form 10-K.
-51-
Item 15 – Exhibits, Financial Statement Schedules
PART IV
(a) (1)
The following Financial Statements are filed as part of this report.
(i)
Report of Independent Registered Public Accounting Firm
(ii)
Consolidated Balance Sheets as of December 31, 2018 and 2017
(iii)
(iv)
(iv)
(v)
Consolidated Statements of Income (Loss) for the years ended December 31, 2018,
2017 and 2016
Consolidated Statement of Comprehensive Income (Loss) for the years ended
December 31, 2018, 2017 and 2016
Consolidated Statements of Shareholders’ Equity for the years ended December 31,
2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2018,
2017 and 2016
(vi) Notes to Consolidated Financial Statements
(a) (2)
The following Financial Statement Schedule is filed as part of this report:
Page(s)
57
58-59
60-61
62
63-64
65
66-98
(i)
Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2018
99-108
All other schedules are omitted for the reason that they are not required, are not applicable, or the required
information is set forth in the consolidated financial statements or notes thereto.
-52-
(a) (3) The Exhibits set forth in the following index of Exhibits are filed as part of this Report.
Exhibit
No.
Description
(2)
2.1
(3)
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Agreement and Plan of Merger dated as of June 23, 2003 (incorporated by reference from the
Company’s Definitive Proxy Statement as filed with the Securities and Exchange Commission
on July 10, 2003, Registration No. 001-12690).
Articles of Incorporation and By-Laws
Articles of Incorporation of UMH Properties, Inc., a Maryland corporation (incorporated by
reference from the Company’s Definitive Proxy Statement as filed with the Securities and
Exchange Commission on July 10, 2003, Registration No. 001-12690).
Amendment to Articles of Incorporation (incorporated by reference to the 8-K as filed by the
Registrant with the Securities and Exchange Commission on April 3, 2006, Registration No. 001-
12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on May 26, 2011, Registration No.
001-12690).
Articles Supplementary (incorporated by reference to the Form 8-K as filed by the Registrant
with the Securities and Exchange Commission on May 26, 2011, Registration No. 001-12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on April 10, 2012, Registration No.
001-12690).
Articles Supplementary (incorporated by reference to the Form 8-K as filed by the Registrant
with the Securities and Exchange Commission on April 10, 2012, Registration No. 001-12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on October 31, 2012, Registration
No. 001-12690).
Articles Supplementary (incorporated by reference to the Form 8-K as filed by the Registrant
with the Securities and Exchange Commission on October 31, 2012, Registration No. 001-
12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on October 20, 2015, Registration
No. 001-12690).
Articles Supplementary (incorporated by reference to the Form 8-K as filed by the Registrant
with the Securities and Exchange Commission on October 20, 2015, Registration No. 001-
12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on April 5, 2016, Registration No.
001-12690).
-53-
Exhibit
No.
Description
3.12
3.13
3.14
3.15
3.16
3.17
3.18
(4)
4.1
4.2
4.3
4.4
4.5
(10)
10.1
Articles Supplementary (incorporated by reference to the Form 8-K as filed by the Registrant
with the Securities and Exchange Commission on April 5, 2016, Registration No. 001-12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on August 11, 2016, Registration
No. 001-12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on June 5, 2017, Registration No.
001-12690).
Amendment to Articles of Incorporation (incorporated by reference to the Form 8-K as filed by
the Registrant with the Securities and Exchange Commission on July 26, 2017, Registration No.
001-12690).
Articles Supplementary (incorporated by reference to the Form 8-K as filed by the Registrant
with the Securities and Exchange Commission on July 26, 2017, Registration No. 001-12690).
Articles Supplementary (incorporated by reference to the Form 8-K as filed by the Registrant
with the Securities and Exchange Commission on January 22, 2018, Registration No. 001-
12690).
Bylaws of the Company, as amended and restated, dated March 31, 2014 (incorporated by
reference to the Form 8-K as filed by the Registrant with the Securities and Exchange
Commission on March 31, 2014, Registration No. 001-12690).
Instruments Defining the Rights of Security Holders, Including Indentures
Specimen certificate of common stock of UMH Properties, Inc. (incorporated by reference to
Exhibit 4.1 to the Form S-3 as filed by the Registrant with the Securities and Exchange
Commission on December 21, 2010, Registration No. 333-171338).
Specimen certificate representing the Series A Preferred Stock of UMH Properties, Inc.
(incorporated by reference to Exhibit 4.2 to the Form 8-A12B filed by the Registrant with the
Securities and Exchange Commission on February 28, 2012, Registration No. 001-12690).
Specimen certificate representing the Series B Preferred Stock of UMH Properties, Inc.
(incorporated by reference to Exhibit 4.3 to the Form S-3 as filed by the Registrant with the
Securities and Exchange Commission on January 21, 2016, Registration No. 333-209078).
Specimen certificate representing the Series C Preferred Stock of UMH Properties, Inc.
(incorporated by reference to Exhibit 4.2 to the Form 8-A12B as filed by the Registrant with the
Securities and Exchange Commission on July 26, 2017, Registration No. 001-12690).
Specimen certificate representing the Series D Preferred Stock of UMH Properties, Inc.
(incorporated by reference to Exhibit 4.2 to the Form 8-A12B as filed by the Registrant with the
Securities and Exchange Commission on January 22, 2018, Registration No. 001-12690).
Material Contracts
+
Employment Agreement with Mr. Eugene W. Landy dated December 14, 1993 (incorporated by
reference to the Company’s 1993 Form 10-K as filed with the Securities and Exchange
Commission on March 28, 1994).
-54-
Exhibit
No.
Description
+
+
+
+
+
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
+
10.10
+
(21)
(23)
(31.1)
(31.2)
(32)
*
*
*
*
*
Amendment to Employment Agreement with Mr. Eugene W. Landy effective January 1, 2004
(incorporated by reference to the Company’s 2004 Form 10-K/A as filed with the Securities and
Exchange Commission on March 30, 2005, Registration No. 001-12690).
Second Amendment to Employment Agreement of Eugene W. Landy, dated April 14, 2008
(incorporated by reference to the Form 8-K as filed by the Registrant with the Securities and
Exchange Commission on April 16, 2008, Registration No. 001-12690).
Third Amendment to Employment Agreement with Mr. Eugene W. Landy effective October 1,
2014 (incorporated by reference to the Form 8-K as filed by the Registrant with the Securities
and Exchange Commission on October 8, 2014, Registration No. 001-12690).
Form of Indemnification Agreement between UMH Properties, Inc. and its Directors and
Executive Officers (incorporated by reference to the Form 8-K as filed by the Registrant with the
Securities and Exchange Commission on April 23, 2012, Registration No. 001-12690).
UMH Properties, Inc. Amended and Restated 2013 Incentive Award Plan (incorporated by
reference to the Company’s Definitive Proxy Statement (DEF 14A) as filed with the Securities
and Exchange Commission on April 20, 2018, Registration No. 001-12690).
Dividend Reinvestment and Stock Purchase Plan (incorporated by reference to the Company’s
Registration Statement filed on Form S-3D as filed with the Securities and Exchange
Commission on June 9, 2017, Registration No. 333-218615).
Amended and Restated Credit Agreement by and among UMH Properties, Inc. and Bank of
Montreal dated March 28, 2017 (incorporated by reference to the Form 8-K as filed by the
Registrant with the Securities and Exchange Commission on December 4, 2018, Registration No.
001-12690).
Amended and Restated Employment Agreement Effective January 1, 2018, between UMH
Properties, Inc. and Samuel A. Landy (incorporated by reference to the Form 8-K as filed by the
Registrant with the Securities and Exchange Commission on April 13, 2018, Registration No.
001-12690).
Amended and Restated Employment Agreement Effective January 1, 2018, between UMH
Properties, Inc. and Anna T. Chew (incorporated by reference to the Form 8-K as filed by the
Registrant with the Securities and Exchange Commission on April 13, 2018, Registration No.
001-12690).
Subsidiaries of the Registrant.
Consent of PKF O’Connor Davies, LLP.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
-55-
Exhibit
No.
(101)
Interactive Data File
Description
++
101.INS
101.SCH ++
101.CAL ++
101.LAB ++
++
101.PRE
++
101.DEF
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
*
+
++
Filed herewith.
Denotes a management contract or compensatory plan or arrangement.
Pursuant to Rule 406T of Regulation S-T, this interactive date file is deemed not “filed” or part
of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act,
is deemed not “filed” for purposes of Section 18 of the Exchange Act, and otherwise is not subject
to liability under these sections.
Item 16 – Form 10-K Summary
Not applicable.
-56-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
UMH Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of UMH Properties, Inc. and subsidiaries (the
“Company”) as of December 31, 2018 and 2017, and the related consolidated statements of income (loss),
comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the in the period
ended December 31, 2018, and the related notes and schedule listed in the Index at Item 15(a)(2)(i) (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, based on
criteria established in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 7, 2019, expressed an unqualified
opinion.
Adoption of New Accounting Standard
As discussed in Note 2 to the financial statements, the Company changed its method of accounting for investments in
equity securities in the year ended December 31, 2018 due to the adoption of ASU No. 2016-01, Recognition and
Measurement of Financial Assets and Financial Liabilities.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ PKF O’Connor Davies, LLP
We have served as the Company’s auditor since 2008.
March 7, 2019
New York, New York
-57-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2018 and 2017
-ASSETS-
2018
2017
Investment Property and Equipment
Land
Site and Land Improvements
Buildings and Improvements
Rental Homes and Accessories
Total Investment Property
Equipment and Vehicles
Total Investment Property and Equipment
Accumulated Depreciation
Net Investment Property and Equipment
Other Assets
Cash and Cash Equivalents
Marketable Securities at Fair Value
Inventory of Manufactured Homes
Notes and Other Receivables, net
Prepaid Expenses and Other Assets
Land Development Costs
Total Other Assets
$ 68,154,110
533,547,154
25,156,183
254,598,641
881,456,088
18,791,688
900,247,776
(197,208,363)
703,039,413
$ 61,239,644
463,242,075
22,963,926
216,992,988
764,438,633
16,874,760
781,313,393
(166,444,512)
614,868,881
7,433,470
99,595,736
23,703,322
31,493,555
4,279,403
9,441,025
175,946,511
23,242,090
132,964,276
17,569,365
25,451,053
3,457,083
6,328,578
209,012,445
TOTAL ASSETS
$ 878,985,924
$ 823,881,326
See Accompanying Notes to Consolidated Financial Statements
-58-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 2018 and 2017
- LIABILITIES AND SHAREHOLDERS’ EQUITY -
2018
2017
LIABILITIES:
Mortgages Payable, net of unamortized debt issuance costs
$ 331,093,063
$ 304,895,117
Other Liabilities:
Accounts Payable
Loans Payable, net of unamortized debt issuance costs
Accrued Liabilities and Deposits
Tenant Security Deposits
Total Other Liabilities
Total Liabilities
Commitments and Contingencies
Shareholders’ Equity:
Series B – 8.0% Cumulative Redeemable Preferred
Stock, par value $0.10 per share, 4,000,000 shares authorized;
3,801,200 shares issued and outstanding as of December 31,
2018 and 2017
Series C – 6.75% Cumulative Redeemable Preferred
Stock, par value $0.10 per share, 5,750,000 shares authorized,
issued and outstanding as of December 31, 2018 and 2017
Series D – 6.375% Cumulative Redeemable Preferred
Stock, par value $0.10 per share, 2,300,000 shares authorized;
2,000,000 and -0- shares issued and outstanding as of
December 31, 2018 and 2017, respectively
Common Stock - $0.10 par value per share,111,363,800 and
113,663,800 shares authorized; 38,320,414 and 35,488,068
shares issued and outstanding as of December 31, 2018 and
2017, respectively
Excess Stock - $0.10 par value per share, 3,000,000 shares
authorized; no shares issued or outstanding as of
December 31, 2018 and 2017
Additional Paid-In Capital
Accumulated Other Comprehensive Income
Undistributed Income (Accumulated Deficit)
Total Shareholders’ Equity
3,873,445
107,985,353
5,493,862
5,842,161
123,194,821
454,287,884
2,960,739
84,704,487
4,977,886
5,127,633
97,770,745
402,665,862
95,030,000
95,030,000
143,750,000
143,750,000
50,000,000
-0-
3,832,041
3,548,807
-0-
157,449,781
-0-
(25,363,782)
424,698,040
-0-
168,034,868
11,519,582
(667,793)
421,215,464
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$ 878,985,924
$ 823,881,326
See Accompanying Notes to Consolidated Financial Statements
-59-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
2018
2017
2016
INCOME:
Rental and Related Income
Sales of Manufactured Homes
$ 113,832,660
15,754,033
$ 101,801,425
10,846,494
$ 90,679,557
8,534,272
Total Income
129,586,693
112,647,919
99,213,829
EXPENSES:
Community Operating Expenses
Cost of Sales of Manufactured Homes
Selling Expenses
General and Administrative Expenses
Acquisition Costs
Depreciation Expense
52,948,510
11,715,987
3,774,425
10,879,419
-0-
31,691,209
47,846,565
8,471,190
3,095,155
9,645,681
-0-
27,557,746
42,638,333
6,466,520
2,852,405
8,004,925
79,231
23,214,100
Total Expenses
111,009,550
96,616,337
83,255,514
OTHER INCOME (EXPENSE):
Interest Income
Dividend Income
Gain on Sales of Marketable Securities, net
Decrease in Fair Value of Marketable Securities
Other Income
Interest Expense
2,254,690
10,367,155
20,107
(51,675,396)
410,444
(16,038,585)
2,006,880
8,134,898
1,747,528
-0-
705,048
(15,876,972)
1,584,585
6,636,126
2,285,301
-0-
504,759
(15,432,364)
Total Other Income (Expense)
(54,661,585)
(3,282,618)
(4,421,593)
Income (Loss) Before Loss on Sales of
Investment Property and Equipment
Loss on Sales of Investment Property
and Equipment
(36,084,442)
12,748,964
11,536,722
(131,129)
(80,930)
(2,163)
Net Income (Loss)
(36,215,571)
12,668,034
11,534,559
Less: Preferred Dividends
Less: Redemption of Preferred Stock
(20,315,944)
-0-
(16,844,812)
(3,502,487)
(14,103,432)
-0-
Net Loss Attributable to Common Shareholders
$ (56,531,515)
$ (7,679,265)
$ (2,568,873)
See Accompanying Notes to Consolidated Financial Statements
-60-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
Basic and Diluted Income (Loss) Per Share:
Net Income (Loss)
Less: Preferred Dividends
Less: Redemption of Preferred Stock
Net Loss Attributable to Common Shareholders
Weighted Average Common Shares Outstanding:
2018
2017
2016
$(0.98)
(0.55)
-0-
$(1.53)
$0.39
(0.52)
(0.11)
$0.41
(0.51)
-0-
$(0.24)
$(0.10)
Basic and Diluted
36,871,322
32,675,650
27,808,895
See Accompanying Notes to Consolidated Financial Statements
-61-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
2018
2017
2016
Net Income (Loss)
$(36,215,571)
$12,668,034
$11,534,559
Other Comprehensive Income (Loss):
Unrealized Holding Gains (Losses) Arising During the Year
Reclassification Adjustment for Net Gains Realized in Income
Change in Fair Value of Interest Rate Swap Agreements
-0-
-0-
-0-
(3,450,061)
(1,747,528)
3,983
21,057,498
(2,285,301)
(2,283)
Comprehensive Income (Loss)
Less: Preferred Dividends
Less: Redemption of Preferred Stock
(36,215,571)
(20,315,944)
-0-
7,474,428
(16,844,812)
(3,502,487)
30,304,473
(14,103,432)
-0-
Comprehensive Income (Loss) Attributable to Common
Shareholders
$(56,531,515)
$(12,872,871)
$16,201,041
See Accompanying Notes to the Consolidated Financial Statements
-62-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
Common Stock
Issued and Outstanding
Number
Amount
Preferred
Stock
Series A
Preferred
Stock
Series B
Preferred
Stock
Series C
Balance December 31, 2015
27,086,838
$2,708,684
$91,595,000
$45,030,000
$-0-
Common Stock Issued with the DRIP*
Common Stock Issued through Restricted Stock Awards
Common Stock Issued through Stock Options
Cancellation of Shares due to Restricted Stock Forfeitures
Preferred Stock Issued through Registered Direct Placement, net
Distributions
Stock Compensation Expense
Net Income
Unrealized Net Holding Gain on Securities Available
for Sale Net of Reclassification Adjustment
Interest Rate Swaps
1,966,133
60,500
277,500
(2,160)
-0-
-0-
-0-
-0-
-0-
-0-
196,613
6,050
27,750
(216)
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
50,000,000
-0-
-0-
-0-
-0-
-0-
Balance December 31, 2016
29,388,811
2,938,881
91,595,000
95,030,000
Common Stock Issued with the DRIP*
Common Stock Issued through Restricted Stock Awards
Common Stock Issued through Stock Options
Common Stock Issued through Registered Direct Placement, net
Preferred Stock Issued through Underwritten Registered Public
Offering, net
Preferred Stock Called for Redemption
Distributions
Stock Compensation Expense
Net Income
Unrealized Net Holding Gain on Securities Available
for Sale, Net of Reclassification Adjustment
Interest Rate Swaps
4,095,357
56,000
547,900
1,400,000
409,536
5,600
54,790
140,000
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
(91,595,000)
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
143,750,000
-0-
-0-
-0-
-0-
-0-
-0-
Balance December 31, 2017
35,488,068
3,548,807
-0-
95,030,000
143,750,000
Unrealized Net Holding Gain on Securities Available
for Sale, Net of Reclassification Adjustment (See Note 2)
Common Stock Issued with the DRIP*
Common Stock Issued through Restricted Stock Awards
Common Stock Issued through Stock Options
Preferred Stock Issued through Underwritten Registered Public
Offering, net
Distributions
Stock Compensation Expense
Net Income (Loss)
-0-
2,654,846
49,000
128,500
-0-
-0-
-0-
-0-
-0-
265,484
4,900
12,850
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
Balance December 31, 2018
38,320,414
$3,832,041
$-0-
$95,030,000 $143,750,000
*Dividend Reinvestment and Stock Purchase Plan
See Accompanying Notes to Consolidated Financial Statements
-63-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
Preferred
Stock
Series D
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Undistributed
Income
(Accumulated
Deficit)
Total
Shareholders’
Equity
Balance December 31, 2015
$-0-
$109,629,260
$(2,056,726)
$(667,793)
$246,238,425
Common Stock Issued with the DRIP*
Common Stock Issued through Restricted Stock Awards
Common Stock Issued through Stock Options
Cancellation of Shares Due to Restricted Stock Forfeitures
Preferred Stock Issued through Registered Direct
Placement, net
Distributions
Stock Compensation Expense
Net Income
Unrealized Net Holding Gain on Securities Available
for Sale Net of Reclassification Adjustment
Interest Rate Swaps
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
22,204,332
(6,050)
2,457,310
216
(879,147)
(23,047,908)
1,064,678
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
22,400,945
-0-
2,485,060
-0-
49,120,853
(11,534,559)
-0-
11,534,559
(34,582,467)
1,064,678
11,534,559
18,772,197
(2,283)
-0-
-0-
18,772,197
(2,283)
Balance December 31, 2016
-0-
111,422,691
16,713,188
(667,793)
317,031,967
Common Stock Issued with the DRIP*
Common Stock Issued through Restricted Stock Awards
Common Stock Issued through Stock Options
Common Stock Issued through Registered Direct
Placement, net
Preferred Stock Issued through Underwritten Registered
Public Offering, net
Preferred Stock Called for Redemption
Distributions
Stock Compensation Expense
Net Income
Unrealized Net Holding Gain on Securities Available
for Sale, Net of Reclassification Adjustment
Interest Rate Swaps
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
59,955,654
(5,600)
5,380,844
22,378,238
(4,774,153)
3,488,159
(31,125,456)
1,314,491
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
60,365,190
-0-
5,435,634
22,518,238
-0-
(3,488,159)
(9,179,875)
-0-
12,668,034
138,975,847
(91,595,000)
(40,305,331)
1,314,491
12,668,034
-0-
-0-
(5,197,589)
3,983
-0-
-0-
(5,197,589)
3,983
Balance December 31, 2017
-0-
168,034,868
11,519,582
(667,793)
421,215,464
Unrealized Net Holding Gain on Securities Available
for Sale, Net of Reclassification Adjustment (See Note 2)
Common Stock Issued with the DRIP*
Common Stock Issued through Restricted Stock Awards
Common Stock Issued through Stock Options
Preferred Stock Issued through Underwritten Registered
Public Offering, net
Distributions
Stock Compensation Expense
Net Income (Loss)
-0-
-0-
-0-
-0-
50,000,000
-0-
-0-
-0-
34,848,229
(4,900)
1,372,150
(1,752,720)
(46,660,956)
1,613,110
-0-
(11,519,582)
-0-
-0-
-0-
11,519,582
-0-
-0-
-0-
-0-
35,113,713
-0-
1,385,000
-0-
-0-
-0-
-0-
-0-
-0-
-0-
(36,215,571)
48,247,280
(46,660,956)
1,613,110
(36,215,571)
Balance December 31, 2018
$50,000,000
$157,449,781
$-0-
$(25,363,782)
$424,698,040
*Dividend Reinvestment and Stock Purchase Plan.
See Accompanying Notes to Consolidated Financial Statements
-64-
UMH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)
Non-cash items included in Net Income (Loss):
Depreciation
Amortization of Financing Costs
Stock Compensation Expense
Provision for Uncollectible Notes and Other Receivables
Gain on Sales of Marketable Securities, net
Decrease in Fair Value of Marketable Securities
Loss on Sales of Investment Property and Equipment
Changes in Operating Assets and Liabilities:
Inventory of Manufactured Homes
Notes and Other Receivables, net of Notes Acquired with
Acquisitions
Prepaid Expenses and Other Assets
Accounts Payable
Accrued Liabilities and Deposits
Tenant Security Deposits
Net Cash Provided by Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Manufactured Home Communities,
net of mortgages assumed
Purchase of Investment Property and Equipment
Proceeds from Sales of Investment Property and Equipment
Additions to Land Development Costs
Purchase of Marketable Securities
Proceeds from Sales of Marketable Securities
Net Cash Used in Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Mortgages, net of mortgages assumed
Net Proceeds from Short Term Borrowings
Principal Payments of Mortgages and Loans
Financing Costs on Debt
Proceeds from Issuance of Preferred Stock, net of offering costs
Redemption of 8.25% Series A Preferred Stock
Proceeds from Registered Direct Placement of Common Stock,
net of offering costs
Proceeds from Issuance of Common Stock in the DRIP, net of
Dividend Reinvestments
Proceeds from Exercise of Stock Options
Preferred Dividends Paid
Common Dividends Paid, net of Dividend Reinvestments
Net Cash Provided by Financing Activities
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
Cash, Cash Equivalents and Restricted Cash at Beginning of Year
2018
2017
2016
$ (36,215,571)
$ 12,668,034
$ 11,534,559
31,691,209
625,445
1,613,110
1,231,112
(20,107)
51,675,396
131,129
27,557,746
660,910
1,314,491
1,273,535
(1,747,528)
-0-
80,930
23,214,100
733,485
1,064,678
909,397
(2,285,301)
-0-
2,163
(6,133,957)
(144,791)
(3,113,164)
(6,438,252)
(127,538)
912,706
515,976
714,528
40,175,186
(55,880,468)
(52,970,053)
2,754,508
(13,220,398)
(18,555,424)
268,675
(137,603,160)
28,192,000
23,651,656
(6,865,631)
(748,926)
48,247,280
-0-
(2,331,386)
557,116
(1,298)
161,727
807,938
40,857,424
(61,669,247)
(62,009,984)
2,299,670
(3,881,035)
(45,075,311)
17,416,146
(152,919,761)
44,420,000
26,401,635
(34,970,645)
(641,471)
138,975,847
(91,595,000)
(1,204,014)
(585,328)
145,747
(1,878,718)
665,605
29,203,209
(4,081,798)
(58,184,812)
1,114,503
(3,728,869)
(27,518,151)
14,831,737
(77,567,390)
31,804,000
406,935
(25,072,315)
(668,338)
49,120,853
-0-
-0-
22,518,238
-0-
30,038,166
1,385,000
(20,050,319)
(21,535,090)
82,314,136
(15,113,838)
27,891,249
57,506,016
5,435,634
(16,665,934)
(20,780,223)
130,604,097
20,012,393
2,485,060
(14,563,645)
(17,630,270)
45,894,673
18,541,760
9,349,489
(2,469,509)
11,818,998
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT
END OF YEAR
$ 12,777,411
$ 27,891,249
$ 9,349,489
See Accompanying Notes to Consolidated Financial Statements
-65-
UMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2018 and 2017
NOTE 1 – ORGANIZATION
UMH Properties, Inc., a Maryland corporation, and its subsidiaries (the “Company”) operates as a real estate
investment trust (“REIT”) deriving its income primarily from real estate rental operations. The Company, through its
wholly-owned taxable subsidiary, UMH Sales and Finance, Inc. (“S&F”), also sells manufactured homes to residents and
prospective residents in our communities. Inherent in the operations of manufactured home communities are site
vacancies. S&F was established to fill these vacancies and enhance the value of the communities. The Company also
owns a portfolio of REIT securities which the Company generally limits to no more than approximately 15% of its
undepreciated assets (which is the Company’s total assets excluding accumulated depreciation). Management views the
Company as a single segment based on its method of internal reporting in addition to its allocation of capital and resources.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
As of December 31, 2018, the Company owns and operates 118 manufactured home communities containing
approximately 21,500 developed sites. These communities are located in New Jersey, New York, Ohio, Pennsylvania,
Tennessee, Indiana, Michigan and Maryland.
These manufactured home communities are listed by trade names as follows:
MANUFACTURED HOME COMMUNITY
LOCATION
Allentown
Arbor Estates
Auburn Estates
Birchwood Farms
Boardwalk
Broadmore Estates
Brookside Village
Brookview Village
Camelot Village
Candlewick Court
Carsons
Catalina
Cedarcrest Village
Chambersburg I & II
Chelsea
Cinnamon Woods
City View
Clinton Mobile Home Resort
Collingwood
Colonial Heights
Countryside Estates
Countryside Estates
Countryside Village
Cranberry Village
Crestview
Cross Keys Village
Crossroads Village
Dallas Mobile Home Community
Deer Meadows
D & R Village
Memphis, Tennessee
Doylestown, Pennsylvania
Orrville, Ohio
Birch Run, Michigan
Elkhart, Indiana
Goshen, Indiana
Berwick, Pennsylvania
Greenfield Center, New York
Anderson, Indiana
Owosso, Michigan
Chambersburg, Pennsylvania
Middletown, Ohio
Vineland, New Jersey
Chambersburg, Pennsylvania
Sayre, Pennsylvania
Conowingo, Maryland
Lewistown, Pennsylvania
Tiffin, Ohio
Horseheads, New York
Wintersville, Ohio
Muncie, Indiana
Ravenna, Ohio
Columbia, Tennessee
Cranberry Township, Pennsylvania
Athens, Pennsylvania
Duncansville, Pennsylvania
Mount Pleasant, Pennsylvania
Toronto, Ohio
New Springfield, Ohio
Clifton Park, New York
-66-
MANUFACTURED HOME COMMUNITY
LOCATION
Evergreen Estates
Evergreen Manor
Evergreen Village
Fairview Manor
Forest Creek
Forest Park Village
Fox Chapel Village
Frieden Manor
Green Acres
Gregory Courts
Hayden Heights
Heather Highlands
High View Acres
Highland
Highland Estates
Hillcrest Crossing
Hillcrest Estates
Hillside Estates
Holiday Village
Holiday Village
Holly Acres Estates
Hudson Estates
Huntingdon Pointe
Independence Park
Kinnebrook
Lake Sherman Village
Lakeview Meadows
Laurel Woods
Little Chippewa
Maple Manor
Marysville Estates
Meadowood
Meadows
Meadows of Perrysburg
Melrose Village
Melrose West
Memphis Blues
Monroe Valley
Moosic Heights
Mount Pleasant Village
Mountaintop
Oak Ridge Estates
Oakwood Lake Village
Olmsted Falls
Oxford Village
Parke Place
Perrysburg Estates
Pikewood Manor
Pine Ridge Village/Pine Manor
Pine Valley Estates
Pleasant View Estates
Port Royal Village
Redbud Estates
River Valley Estates
Rolling Hills Estates
Rostraver Estates
Lodi, Ohio
Bedford, Ohio
Mantua, Ohio
Millville, New Jersey
Elkhart, Indiana
Cranberry Township, Pennsylvania
Cheswick, Pennsylvania
Schuylkill Haven, Pennsylvania
Chambersburg, Pennsylvania
Honey Brook, Pennsylvania
Dublin, Ohio
Inkerman, Pennsylvania
Apollo, Pennsylvania
Elkhart, Indiana
Kutztown, Pennsylvania
Lower Burrell, Pennsylvania
Marysville, Ohio
Greensburg, Pennsylvania
Nashville, Tennessee
Elkhart, Indiana
Erie, Pennsylvania
Peninsula, Ohio
Tarrs, Pennsylvania
Clinton, Pennsylvania
Monticello, New York
Navarre, Ohio
Lakeview, Ohio
Cresson, Pennsylvania
Orrville, Ohio
Taylor, Pennsylvania
Marysville, Ohio
New Middletown, Ohio
Nappanee, Indiana
Perrysburg, Ohio
Wooster, Ohio
Wooster, Ohio
Memphis, Tennessee
Jonestown, Pennsylvania
Avoca, Pennsylvania
Mount Pleasant, Pennsylvania
Narvon, Pennsylvania
Elkhart, Indiana
Tunkhannock, Pennsylvania
Olmsted Township, Ohio
West Grove, Pennsylvania
Elkhart, Indiana
Perrysburg, Ohio
Elyria, Ohio
Carlisle, Pennsylvania
Apollo, Pennsylvania
Bloomsburg, Pennsylvania
Belle Vernon, Pennsylvania
Anderson, Indiana
Marion, Ohio
Carlisle, Pennsylvania
Belle Vernon, Pennsylvania
-67-
MANUFACTURED HOME COMMUNITY
LOCATION
Sandy Valley Estates
Shady Hills
Somerset Estates/Whispering Pines
Southern Terrace
Southwind Village
Spreading Oaks Village
Springfield Meadows
Suburban Estates
Summit Estates
Summit Village
Sunny Acres
Sunnyside
Trailmont
Twin Oaks I & II
Twin Pines
Valley High
Valley Hills
Valley Stream
Valley View I
Valley View II
Valley View Honeybrook
Voyager Estates
Waterfalls Village
Wayside
Weatherly Estates
Wellington Estates
Woodland Manor
Woodlawn Village
Woods Edge
Wood Valley
Worthington Arms
Youngstown Estates
Magnolia, Ohio
Nashville, Tennessee
Somerset, Pennsylvania
Columbiana, Ohio
Jackson, New Jersey
Athens, Ohio
Springfield, Ohio
Greensburg, Pennsylvania
Ravenna, Ohio
Marion, Indiana
Somerset, Pennsylvania
Eagleville, Pennsylvania
Goodlettsville, Tennessee
Olmsted Township, Ohio
Goshen, Indiana
Ruffs Dale, Pennsylvania
Ravenna, Ohio
Mountaintop, Pennsylvania
Ephrata, Pennsylvania
Ephrata, Pennsylvania
Honey Brook, Pennsylvania
West Newton, Pennsylvania
Hamburg, New York
Bellefontaine, Ohio
Lebanon, Tennessee
Export, Pennsylvania
West Monroe, New York
Eatontown, New Jersey
West Lafayette, Indiana
Caledonia, Ohio
Lewis Center, Ohio
Youngstown, New York
Basis of Presentation and Principles of Consolidation
The Company prepares its financial statements under the accrual basis of accounting, in conformity with
accounting principles generally accepted in the United States of America (“GAAP”). The Company’s subsidiaries
are all 100% wholly-owned. The consolidated financial statements of the Company include all of these subsidiaries.
All intercompany transactions and balances have been eliminated in consolidation. The Company does not have a
majority or minority interest in any other company, either consolidated or unconsolidated.
Use of Estimates
In preparing the consolidated financial statements in accordance with GAAP, management is required to
make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as contingent assets
and liabilities as of the dates of the consolidated balance sheets and revenue and expenses for the years then ended.
These estimates and assumptions include the allowance for doubtful accounts, valuation of inventory, depreciation,
valuation of securities, reserves and accruals, and stock compensation expense. Actual results could differ from these
estimates and assumptions.
Investment Property and Equipment and Depreciation
Property and equipment are carried at cost less accumulated depreciation. Depreciation for Sites and
Buildings is computed principally on the straight-line method over the estimated useful lives of the assets (ranging
from 15 to 27.5 years). Depreciation of Improvements to Sites and Buildings, Rental Homes and Equipment and
Vehicles is computed principally on the straight-line method over the estimated useful lives of the assets (ranging
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from 3 to 27.5 years). Land Development Costs are not depreciated until they are put in use, at which time they are
capitalized as Site and Land Improvements. Interest Expense pertaining to Land Development Costs are capitalized.
Maintenance and Repairs are charged to expense as incurred and improvements are capitalized. The costs and related
accumulated depreciation of property sold or otherwise disposed of are removed from the financial statements and
any gain or loss is reflected in the current year’s results of operations.
The Company applies Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 360-10, Property, Plant & Equipment (“ASC 360-10”) to measure impairment in real estate investments.
Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is
probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property
is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors
such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other
factors. Upon determination that an other than temporary impairment has occurred, rental properties are reduced to
their fair value. 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 there is a
commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported
at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property
is held for disposition, depreciation expense is not recorded.
The Company conducted a comprehensive review of all real estate asset classes in accordance with ASC
360-10-35-21. The process entailed the analysis of property for instances where the net book value exceeded the
estimated fair value. The Company utilizes the experience and knowledge of its internal valuation team to derive
certain assumptions used to determine an operating property’s cash flow. Such assumptions include lease-up rates,
rental rates, rental growth rates, and capital expenditures. The Company reviewed its operating properties in light of
the requirements of ASC 360-10 and determined that, as of December 31, 2018, the undiscounted cash flows over the
expected holding period for these properties were in excess of their carrying values and, therefore, no impairment
charges were required.
Acquisitions
The Company accounts for acquisitions in accordance with ASC 805, Business Combinations (“ASC 805”)
and allocates the purchase price of the property based upon the fair value of the assets acquired, which generally
consist of land, site and land improvements, buildings and improvements and rental homes. The Company allocates
the purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal
of the property obtained in conjunction with the purchase.
Effective January 1, 2017, the Company adopted Accounting Standards Update (“ASU”) 2017-01, “Business
Combinations (Topic 805), Clarifying the Definition of a Business”. The Company evaluated its acquisitions and has
determined that its acquisitions of manufactured home communities during 2017 should be accounted for as
acquisitions of assets. As such, transaction costs, such as broker fees, transfer taxes, legal, accounting, valuation, and
other professional and consulting fees, related to acquisitions are capitalized as part of the cost of the acquisitions,
which is then subject to a purchase price allocation based on relative fair value. See “Recently Adopted Accounting
Pronouncements” below for additional information regarding the adoption of this ASU.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and investments with an original maturity of three months or less.
The Company maintains its cash in bank accounts in amounts that may exceed federally insured limits. The Company
has not experienced any losses in these accounts in the past. The fair value of cash and cash equivalents approximates
their current carrying amounts since all such items are short-term in nature.
Marketable Securities
Investments in marketable securities consist of marketable common and preferred stock securities of other
REITs, which the Company generally limits to no more than approximately 15% of its undepreciated assets. These
marketable securities are all publicly-traded and purchased on the open market, through private transactions or through
dividend reinvestment plans. The Company normally holds REIT securities on a long-term basis and has the ability
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and intent to hold securities to recovery, therefore as of December 31, 2018 and 2017, gains or losses on the sale of
securities are based on average cost and are accounted for on a trade date basis.
On January 1, 2018, the Company adopted ASU 2016-01, “Financial Instruments – Overall: Recognition and
Measurement of Financial Assets and Financial Liabilities”. ASU 2016-01 requires changes in the fair value of our
marketable securities to be recorded in current period earnings. Previously, changes in the fair value of marketable
securities were recognized in "Accumulated Other Comprehensive Income" on our Consolidated Balance Sheets. As
a result, on January 1, 2018 the Company recorded an increase to beginning undistributed income (accumulated
deficit) of $11,519,582 to recognize the unrealized gains previously recorded in "Accumulated Other Comprehensive
Income" on our Consolidated Balance Sheets. Subsequent changes in the fair value of the Company’s marketable
securities are recorded in "Other Investment Income (Loss), net" on our Consolidated Statements of Income (Loss).
See “Recently Adopted Accounting Pronouncements” below for additional information regarding the adoption of this
ASU.
Inventory of Manufactured Homes
Inventory of manufactured homes is valued at the lower of cost or net realizable value and is determined by
the specific identification method. All inventory is considered finished goods.
Accounts and Notes Receivables
The Company’s accounts, notes and other receivables are stated at their outstanding balance reduced by an
allowance for uncollectible accounts. The Company evaluates the recoverability of its receivables whenever events
occur or there are changes in circumstances such that management believes it is probable that it will be unable to
collect all amounts due according to the contractual terms of the notes receivable or lease agreements. The
collectability of notes receivable is measured based on the present value of the expected future cash flow discounted
at the notes receivable effective interest rate or the fair value of the collateral if the notes receivable is collateral
dependent. Total notes receivables at December 31, 2018 and 2017 was $29,773,009 and $24,066,567,
respectively. At December 31, 2018 and 2017, the reserves for uncollectible accounts, notes and other receivables
were $1,088,137 and $1,206,767, respectively. For the years ended December 31, 2018, 2017 and 2016, the provisions
for uncollectible notes and other receivables were $1,231,112, $1,273,535 and $909,397, respectively. Charge-offs
and other adjustments related to repossessed homes for the years ended December 31, 2018, 2017 and 2016 amounted
to $1,349,742, $1,205,050 and $811,530, respectively.
The Company’s notes receivable primarily consists of installment loans collateralized by manufactured
homes with principal and interest payable monthly. The average interest rate on these loans is approximately 8.3%
and the average maturity is approximately 5 years.
Unamortized Financing Costs
Costs incurred in connection with obtaining mortgages and other financings and refinancings are deferred
and presented in the consolidated balance sheet as a direct deduction from the carrying amount of that debt liability.
These costs are amortized on a straight-line basis over the term of the related obligations, and included as a component
of interest expense. Unamortized costs are charged to expense upon prepayment of the obligation. Upon amendment
of the line of credit or refinancing of mortgage debt, unamortized deferred financing fees are accounted for in
accordance with ASC 470-50-40, Modifications and Extinguishments. As of December 31, 2018 and 2017,
accumulated amortization amounted to $4,372,307 and $3,746,862, respectively. The Company estimates that
aggregate amortization expense will be approximately $706,000 for 2019, $649,000 for 2020, $726,000 for 2021,
$489,000 for 2022 and $400,000 for 2023.
Derivative Instruments and Hedging Activities
In the normal course of business, the Company is exposed to financial market risks, including interest rate
risk on our variable rate debt. We attempt to limit these risks by following established risk management policies,
procedures and strategies, including the use of derivative financial instruments. The Company's primary strategy in
entering into derivative contracts is to minimize the variability that changes in interest rates could have on its future
cash flows. The Company generally employs derivative instruments that effectively convert a portion of its variable
rate debt to fixed rate debt. The Company does not enter into derivative instruments for speculative purposes. The
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Company had entered into various interest rate swap agreements that have had the effect of fixing interest rates relative
to specific mortgage loans. As of December 31, 2018 and 2017, these agreements have expired and the Company no
longer had any interest rate swap agreements in effect.
Revenue Recognition
The Company derives its income primarily from the rental of manufactured homesites. The Company also
owns approximately 6,500 rental units which are rented to residents. Rental and related income is recognized on the
accrual basis over the term of the lease, which is typically one year or less.
Sale of manufactured homes is recognized on the full accrual basis when certain criteria are met. These
criteria include the following: (a) initial and continuing payment by the buyer must be adequate: (b) the receivable, if
any, is not subject to future subordination; (c) the benefits and risks of ownership are substantially transferred to the
buyer; and (d) the Company does not have a substantial continued involvement with the home after the sale.
Alternatively, when the foregoing criteria are not met, the Company recognizes gains by the installment method.
Interest income on loans receivable is not accrued when, in the opinion of management, the collection of such interest
appears doubtful.
Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number
of common shares outstanding during the period (36,871,322, 32,675,650 and 27,808,895 in 2018, 2017 and 2016,
respectively). Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average
number of common shares outstanding plus the weighted average number of net shares that would be issued upon
exercise of stock options pursuant to the treasury stock method. For the years ended December 31, 2018, 2017 and
2016, employee stock options to purchase 2,252,600, 1,778,100 and 1,760,000, respectively, shares of common stock
were excluded from the computation of Diluted Net Income (Loss) per Share as their effect would be anti-dilutive.
Stock Compensation Plan
The Company accounts for awards of stock, stock options and restricted stock in accordance with ASC 718-
10, Compensation-Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be
calculated and amortized over the service period (generally equal to the vesting period). The compensation cost for
stock option grants is determined using option pricing models, intended to estimate the fair value of the awards at the
grant date less estimated forfeitures. The compensation expense for restricted stock is recognized based on the fair
value of the restricted stock awards less estimated forfeitures. The fair value of restricted stock awards is equal to the
fair value of the Company’s stock on the grant date. Compensation costs, which is included in General and
Administrative Expenses, of $1,613,110, $1,314,491 and $1,064,678 have been recognized in 2018, 2017 and 2016,
respectively. During 2018, 2017 and 2016, compensation costs included a one-time charge of $209,617, $200,907
and $312,400, respectively, for restricted stock and stock option grants awarded to one participant who is of retirement
age and therefore the entire amount of measured compensation cost has been recognized at grant date. Included in
Note 6 to these consolidated financial statements are the assumptions and methodology used to calculate the fair value
of stock options and restricted stock awards.
Income Tax
The Company has elected to be taxed as a REIT under the applicable provisions of Sections 856 to 860 of
the Internal Revenue Code. Under such provisions, the Company will not be taxed on that portion of its income which
is distributed to shareholders, provided it distributes at least 90% of its taxable income, has at least 75% of its assets
in real estate or cash-type investments and meets certain other requirements for qualification as a REIT. The Company
has and intends to continue to distribute all of its income currently, and therefore no provision has been made for
income or excise taxes. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal
income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years.
The Company is also subject to certain state and local income, excise or franchise taxes. In addition, the Company
has a taxable REIT Subsidiary (“TRS”) which is subject to federal and state income taxes at regular corporate tax rates
(See Note 11).
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The Company follows the provisions of ASC Topic 740, Income Taxes, that, among other things, defines a
recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. Based on its evaluation,
the Company determined that it has no uncertain tax positions and no unrecognized tax benefits as of December 31,
2018. The Company records interest and penalties relating to unrecognized tax benefits, if any, as interest
expense. As of December 31, 2018, the tax years 2015 through and including 2018 remain open to examination by
the Internal Revenue Service. There are currently no federal tax examinations in progress.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net income and other comprehensive income (loss). Other
comprehensive income (loss) consists of the change in unrealized gains or losses on marketable securities through
December 31, 2017 and the change in the fair value of derivatives.
Reclassifications
Certain amounts in the consolidated financial statements for the prior years have been reclassified to conform
to the financial statement presentation for the current year.
Recently Adopted Accounting Pronouncements
Adopted 2018
In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope
of Modification Accounting.” ASU 2017-09 clarifies which changes to the terms or conditions of a share based
payment award are subject to the guidance on modification accounting under FASB Accounting Standards
Codification Topic 718. Entities would apply the modification accounting guidance unless the value, vesting
requirements and classification of a share based payment award are the same immediately before and after a change
to the terms or conditions of the award. ASU No. 2017-09 is effective for fiscal years beginning after December 15,
2017, including interim periods within those fiscal years. The Company adopted this standard effective January 1,
2018, and it did not have a material impact on our financial position, results of operations or cash flows.
In February 2017, the FASB issued ASU No. 2017-05, “Other Income-Gains and Losses from the
Derecognition of Nonfinancial Assets.” ASU 2017-05 provides guidance for recognizing gains and losses from the
transfer of nonfinancial assets and in-substance non-financial assets in contracts with non-customers, unless other
specific guidance applies. The standard requires a company to derecognize nonfinancial assets once it transfers control
of a distinct nonfinancial asset or distinct in substance nonfinancial asset. Additionally, when a company transfers its
controlling interest in a nonfinancial asset, but retains a noncontrolling ownership interest, the company is required to
measure any non-controlling interest it receives or retains at fair value. The guidance requires companies to recognize
a full gain or loss on the transaction. As a result of the new guidance, the guidance specific to real estate sales in ASC
360-20 is eliminated. As such, sales and partial sales of real estate assets is now subject to the same derecognition
model as all other nonfinancial assets. The guidance is effective for annual periods beginning after December 15,
2017, including interim periods within that reporting period. The Company adopted this standard effective January
1, 2018, and it did not have a material impact on our financial position, results of operations or cash flows.
In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash.”
ASU 2016-18 requires inclusion of restricted cash and restricted cash equivalents with cash and cash equivalents when
reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The
guidance is effective for annual periods beginning after December 15, 2017, including interim periods within that
reporting period. The Company adopted this standard effective January 1, 2018. The Company’s restricted cash
consists of amounts primarily held in deposit for tax, insurance and repair escrows held by lenders in accordance with
certain debt agreements. Restricted cash is included in Prepaid Expenses and Other Assets on the Consolidated
Balance Sheets. Previously, changes in restricted cash are reported on the Consolidated Statements of Cash Flows as
operating, investing or financing activities based on the nature of the underlying activity.
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The following table reconciles beginning of period and end of period balances of cash, cash equivalents and
restricted cash for the periods shown:
12/31/18
12/31/17
12/31/16
Cash and Cash Equivalents
Restricted Cash
Cash, Cash Equivalents
And Restricted Cash
$7,433,470
5,343,941
$23,242,090
4,649,159
$4,216,592
5,132,897
$12,777,411
$27,891,249
$9,349,489
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification
of Certain Cash Receipts and Cash Payments.” ASU 2016-15 makes eight targeted changes to how cash receipts and
cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual
reporting periods, including interim reporting periods within those periods, beginning after December 15, 2017. Early
adoption is permitted. The Company adopted this standard effective January 1, 2018, and it did not have a material
impact on our financial position, results of operations or cash flows.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and
Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments (except those
accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be
measured at fair value with changes in fair value recognized in net income, requires public business entities to use the
exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate
presentation of financial assets and financial liabilities by measurement category and form of financial asset, and
eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to
estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU
2016-01 is effective for annual reporting periods, including interim reporting periods within those periods, beginning
after December 15, 2017. The Company adopted this standard effective January 1, 2018. The Company previously
classified its marketable securities as available-for-sale and carried at fair value with unrealized holding gains and
losses excluded from earnings and reported as a separate component of Shareholders’ Equity until realized. The
change in the unrealized net holding gains (losses) was reflected in the Company’s Comprehensive Income (Loss).
As a result of adoption, these securities will continue to be measured at fair value; however, the change in the
unrealized net holding gains and losses is now recognized through net income. As of January 1, 2018, unrealized net
holding gains of $11,519,582 were reclassed to beginning undistributed income (accumulated deficit) to recognize the
unrealized gains previously recorded in "accumulated other comprehensive income" on our consolidated balance
sheets. For the year ended December 31, 2018, the Company recorded a $51,675,396 decrease in the fair value of
these marketable securities, which is included in "Other Investment Income (Loss), net" on our Consolidated
Statements of Income (Loss).
In May 2014, the FASB issued ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)" (ASC
606). The objective of this amendment is to establish a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers and will supersede most of the existing revenue recognition
guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will
perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment
applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An
entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative
effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued
ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning
after December 15, 2017, including interim periods within that reporting period. The Company adopted this standard
effective January 1, 2018. For transactions in the scope of ASU 2014-09, we recognize revenue when control of goods
or services transfers to the customer, in the amount that we expect to receive for the transfer of goods or provision of
services. The adoption of ASU 2014-09 did not result in any change to our accounting policies for revenue recognition.
Accordingly, retrospective application to prior periods or a cumulative catch-up adjustment was unnecessary.
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Our primary source of revenue is generated from lease agreements for our sites and homes. Resident leases
are generally for one-year or month-to-month terms, and are renewable by mutual agreement from us and the resident,
or in some cases, as provided by jurisdictional statute. The lease component of these agreements is accounted for
under ASC 840 “Leases.” The non-lease components of our lease agreements consist primarily of utility
reimbursements, which are accounted for with the site lease as a single lease under ASC 840.
Prior to the adoption of ASC 606, sales of manufactured homes was recognized under ASC 605 “Revenue
Recognition” since these homes are not permanent fixtures or improvements to the underlying real estate. In
accordance with the core principle of ASC 606, we recognize revenue from home sales at the time of closing when
control of the home transfers to the customer. After closing of the sale transaction, we have no remaining performance
obligation.
Interest income is primarily from notes receivables for the previous sales of manufactured homes. Interest
income on these receivables is accrued based on the unpaid principal balances of the underlying loans on a level yield
basis over the life of the loans. Interest income is not in the scope of ASC 606.
Dividend income and gain on sales of marketable securities, net are from our investments in marketable
securities and are presented separately but are not in the scope of ASC 606.
Other income primarily consists of brokerage commissions for arranging for the sale of a home by a third
party, service and marketing agreements with cable providers, and in 2017 included an upfront oil and gas bonus
payment. This income is recognized when the transactions are completed and our performance obligations have been
fulfilled.
As of December 31, 2018 and 2017, the Company had notes receivable of $29,773,009 and $24,066,567,
respectively. Notes receivables are presented as a component of Notes and Other Receivables, net on our Consolidated
Balance Sheets. These receivables represent balances owed to us for previously completed performance obligations
for sales of manufactured homes. Due to the nature of our revenue from contacts with customers, we do not have
material contract assets or liabilities that fall under the scope of ASC 606.
Other Recent Accounting Pronouncements
In August 2018, the Securities and Exchange Commission adopted the final rule under SEC Release No. 33-
10532, “Disclosure Update and Simplification”, amending certain disclosure requirements that were redundant,
duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements
on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes
in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement.
The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which
a statement of comprehensive income is required to be filed. The Company anticipates its first presentation of changes
in stockholders' equity will be included in its Form 10-Q for the quarter ending March 31, 2019.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that entities use a new forward
looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The
measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and
supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for annual
reporting periods, including interim reporting periods within those periods, beginning after December 15, 2019. The
Company is currently evaluating the potential impact this standard may have on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 amends the existing accounting
standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets as a right-
of-use asset and a corresponding liability. ASU 2016-02 also makes targeted changes to lessor accounting. The
standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date
of initial application, with an option to use certain transition relief. ASU 2016-02 will be effective for annual reporting
periods beginning after December 15, 2018. In July 2018, the FASB issued ASU No. 2018-10, “Codification
Improvements to Topic 842, Leases”, which included amendments to clarify certain aspects of the new lease standard.
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In July 2018, the FASB also issued ASU No. 2018-11, “Leases (Topic 842) – Target Improvements.” ASU No. 2018-
11 provides a new transition method and a practical expedient to separating contract components as required by ASU
2016-02. Under ASU 2018-11, an entity applying the new lease accounting standard may record a cumulative
adjustment to the opening balance of undistributed income (accumulated deficit) in the period of adoption, instead of
having to restate comparative results, as initially required. Additionally, ASU No. 2018-11 provide lessors with a
practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease
component and, instead, to account for those components as a single component if the non-lease components otherwise
would be accounted for under the new revenue guidance if both 1. the timing and pattern of transfer of the non-lease
component(s) and associated lease component are the same (instead of the timing and pattern of revenue recognition,
as proposed); and 2. the lease component, if accounted for separately, would be classified as an operating lease. In
December 2018, the FASB issued ASU 2018-20, “Leases (Topic 842) – Narrow-Scope Improvements for Lessors.”
ASU 2018-20 allow lessors to make an accounting policy election not to evaluate whether sales taxes and similar
taxes imposed by a governmental authority on a specific lease revenue-producing transaction are the primary
obligation of the lessor as owner of the underlying leased asset. The amendments also require a lessor to exclude lessor
costs paid directly by a lessee to third parties on the lessor’s behalf from variable payments and include lessor costs
that are paid by the lessor and reimbursed by the lessee in the measurement of variable lease revenue and the associated
expense. In addition, the amendments clarify that when lessors allocate variable payments to lease and non-lease
components they are required to follow the recognition guidance in the new lease standard for the lease component
and other applicable guidance, such as the new revenue standard, for the non-lease component.
The Company adopted this standard effective January 1, 2019, and it is not expected to have a material impact
on our financial position, results of operations or cash flows. Our primary source of revenue is generated from lease
agreements for our sites and homes, where we are the lessor. The non-lease components of our lease agreements
consist primarily of utility reimbursements. We have elected the lessor practical expedient to combine the lease and
non-lease components. We are the lessee in other arrangements, primarily for our corporate office and a ground lease
at one community. For leases with a term greater than one year, right-of-use assets and corresponding liabilities will
be included on the Consolidated Balance Sheet. The right-of-use asset and corresponding lease liabilities are measured
as the estimated present value of minimum lease payments at the commencement of the lease agreement and
discounted by our borrowing rate. As of January 1, 2019, we expect to recognize right-of-use assets and corresponding
lease liabilities of $2.0 million to $4.0 million. Additionally, for all leases, we have elected the package of practical
expedients, which permits the Company not to reassess expired or existing contracts containing a lease, the lease
classification for expired or existing contracts, and measurement of initial direct costs for any existing leases.
Management does not believe that any other recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying Consolidated Financial Statements.
NOTE 3 – INVESTMENT PROPERTY AND EQUIPMENT
Acquisitions in 2018
On May 30, 2018, the Company acquired two manufactured home communities, Camelot Village and
Redbud Estates, located in Anderson, Indiana, for approximately $20,500,000. These all-age communities contain a
total of 669 developed homesites that are situated on approximately 231 total acres. At the date of acquisition, the
average occupancy for these communities was approximately 91%. In conjunction with this acquisition, the Company
drew down $20 million on its unsecured line of credit. On July 13, 2018, the Company obtained a 10-year,
$13,442,000 mortgage on these properties with an interest rate of 4.27% and a 30-year amortization (see Note 5).
On August 31, 2018, the Company acquired Summit Village, a manufactured home community located in
Marion, Indiana, for approximately $3,500,000. This all-age community contains a total of 134 developed homesites
that are situated on approximately 58 total acres. At the date of acquisition, the occupancy for this community was
approximately 60%. This acquisition was funded by a drawdown from the Company’s margin line.
On November 30, 2018, the Company acquired Pikewood Manor, a manufactured home community located
in Elyria, Indiana, for approximately $23,000,000. This all-age community contains a total of 488 developed
homesites that are situated on approximately 117 total acres. At the date of acquisition, the average occupancy for
this community was approximately 67%. In conjunction with this acquisition, the Company obtained a 10-year,
$14,750,000 mortgage with an interest rate of 5.0% and a 25-year amortization (see Note 5).
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On December 19, 2018, the Company acquired two manufactured home communities, Perrysburg Estates
and Meadows of Perrysburg, located in Perrysburg, Ohio, for approximately $12,093,000. These all-age communities
contain a total of 324 developed homesites that are situated on approximately 88 total acres. At the date of acquisition,
the average occupancy for these communities was approximately 79%. In conjunction with this acquisition, the
Company assumed two mortgages of approximately $4,624,000 on these properties (see Note 5).
Acquisitions in 2017
On January 20, 2017, the Company acquired two manufactured home communities, Hillcrest Estates and
Marysville Estates, located in Ohio, for approximately $9,588,000. These all-age communities contain a total of 532
developed homesites that are situated on approximately 149 total acres. At the date of acquisition, the average
occupancy for these communities was approximately 57%.
On January 20, 2017, the Company also acquired two manufactured home communities located in Indiana
for approximately $24,437,000. This acquisition consists of Boardwalk, an age restricted community containing 195
homesites, and Parke Place, an all-age community containing 364 homesites. These communities are situated on
approximately 155 total acres. At the date of acquisition, the average occupancy for these communities was
approximately 77%. In conjunction with this acquisition, the Company obtained a 10-year, $14,250,000 mortgage
with an interest rate of 4.56% and a 30-year amortization (See Note 5).
On January 24, 2017, the Company acquired Hillcrest Crossing, a manufactured home community located in
Pennsylvania, for approximately $2,485,000. This all-age community contains a total of 200 developed homesites that
are situated on approximately 78 total acres. At the date of acquisition, the occupancy for this community was
approximately 40%.
On May 31, 2017, the Company acquired Cinnamon Woods, a manufactured home community located in
Maryland, for $4,000,000. This age restricted community contains a total of 63 developed homesites that are situated
on approximately 79 total acres, of which approximately 61 acres are available for expansion. At the date of
acquisition, the occupancy for this community was approximately 92%.
On December 22, 2017, the Company acquired five communities located in Pennsylvania for approximately
$22,780,000. This acquisition consists of three all-age communities and two age-restricted communities containing a
total of 643 developed homesites. These communities are situated on approximately 141 acres. At the date of
acquisition, the average occupancy for these communities was approximately 72%. In conjunction with this
acquisition, the Company assumed a mortgage loan with a balance of approximately $2,418,000. The interest rate on
this mortgage is fixed at 6.35%. This mortgage matures on January 1, 2023 (See Note 5).
The Company has evaluated these acquisitions and has determined that they should be accounted for as
acquisitions of assets. As such, we have allocated the total cash consideration, including transaction costs of
approximately $829,000, to the individual assets acquired on a relative fair value basis. The following table
summarizes our purchase price allocation for the assets acquired for the years ended December 31, 2018 and 2017,
respectively:
Assets Acquired:
Land
Depreciable Property
Notes Receivable and Other
Total Assets Acquired
2018 Acquisitions
2017 Acquisitions
$
$
6,463,100
53,206,300
835,400
60,504,800
$
$
13,601,000
46,416,000
4,070,000
64,087,000
-76-
Total Income, Community Net Operating Income (“Community NOI”)* and Net Income (Loss) for
communities acquired in 2018 and 2017, which are included in our Consolidated Statements of Income (Loss) for the
years ended December 31, 2018 and 2017, are as follows:
2018 Acquisitions
2018
2017 Acquisitions
2018
2017
Total Income
Community NOI *
Net Income (Loss)
$
$
$
1,634,307
932,017
(311,227)
$
$
$
8,618,471
4,572,510
394,179
$
$
$
4,732,307
2,398,652
211,468
*Community NOI is defined as rental and related income less community operating expenses.
See Note 5 for additional information relating to Loans and Mortgages Payable and Note 16 for the Unaudited
Pro Forma Financial Information relating to these acquisitions.
Accumulated Depreciation
The following is a summary of accumulated depreciation by major classes of assets:
Site and Land Improvements
Buildings and Improvements
Rental Homes and Accessories
Equipment and Vehicles
Total Accumulated Depreciation
Other
December 31, 2018
December 31, 2017
$ 132,121,312
6,689,648
44,337,715
14,059,688
$ 197,208,363
$ 114,617,282
5,779,146
33,621,420
12,426,664
$ 166,444,512
Many oil and gas companies compete for the opportunity to acquire sub surface mineral rights, including oil
and gas. Successful bidders pay an upfront purchase price (“bonus payment”). In May 2017, the Company received
a bonus payment of $251,680 for the right to allow a company to extract oil and gas at one of its communities. The
bonus payment is not refundable and the Company has no further obligations related to it. Therefore, this bonus
payment received by the Company is considered earned by the Company and has been recorded as Other Income in
the accompanying Consolidated Statements of Income (Loss). In addition to this upfront bonus payment, the
Company entered into an agreement (“Lease”) whereby the oil and gas company may remove the oil and gas from the
property, provided that it pays the Company an 18% royalty fee based on the amount of the oil and gas removed. The
term of the Lease is for five years.
NOTE 4 – MARKETABLE SECURITIES
The Company’s marketable securities primarily consist of common and preferred stock of other REITs. The
Company does not own more than 10% of the outstanding shares of any of these securities, nor does it have controlling
financial interest. The Company generally limits its investment in marketable securities to no more than approximately
15% of its undepreciated assets. The REIT securities portfolio provides the Company with additional liquidity and
additional income and serves as a proxy for real estate when more favorable risk adjusted returns are not available.
-77-
The following is a listing of marketable securities at December 31, 2018:
Interest
Series Rate
Number
of Shares
Cost
Market
Value
Equity Securities:
Preferred Stock:
CBL & Associates Properties, Inc.
CBL & Associates Properties, Inc.
Cedar Realty Trust, Inc.
Cedar Realty Trust, Inc.
Colony Capital Inc.
Investors Real Estate Trust
Pennsylvania Real Estate Investment Trust
Pennsylvania Real Estate Investment Trust
Urstadt Biddle Properties, Inc.
Urstadt Biddle Properties, Inc.
Total Preferred Stock
Common Stock:
CBL & Associates Properties, Inc.
Franklin Street Properties Corporation
Government Properties Income Trust
Industrial Logistics Properties Trust
Kimco Realty Corporation
Monmouth Real Estate Investment Corporation (1)
Pennsylvania Real Estate Investment Trust
Senior Housing Properties Trust
Tanger Factory Outlet
Urstadt Biddle Properties, Inc.
Vereit, Inc.
Washington Prime Group
Total Common Stock
D
E
B
C
I
C
B
D
G
H
7.375%
6.625%
7.250%
6.500%
7.150%
6.625%
7.375%
6.875%
6.750%
6.250%
2,000
62,724
8,111
20,000
20,000
20,000
40,000
20,000
5,000
12,500
1,600,000
220,000
2,246,000
502,258
910,000
2,446,054
210,000
170,911
180,000
100,000
1,410,000
800,000
$ 50,269
1,487,145
188,005
494,407
500,000
500,000
1,000,000
498,207
125,000
312,500
5,155,533
16,692,139
2,219,219
36,418,264
9,951,185
17,052,180
22,292,408
2,226,089
2,919,572
4,228,627
2,048,516
12,058,590
6,489,228
134,596,017
$ 21,160
599,641
187,023
379,600
369,000
461,684
654,400
310,800
123,750
292,500
3,399,558
3,072,000
1,370,600
15,430,020
9,879,415
13,331,500
30,331,065
1,247,400
2,003,078
3,639,600
1,922,000
10,081,500
3,888,000
96,196,178
Total Marketable Securities
$139,751,550
$99,595,736
(1) Related entity – See Note 8.
-78-
The following is a listing of marketable securities at December 31, 2017:
Interest
Series Rate
Number
of Shares
Cost
Market
Value
Equity Securities:
Preferred Stock:
CBL & Associates Properties, Inc.
CBL & Associates Properties, Inc.
Cedar Realty Trust, Inc.
Cedar Realty Trust, Inc.
Colony Northstar, Inc.
Investors Real Estate Trust
Pennsylvania Real Estate Investment Trust
Pennsylvania Real Estate Investment Trust
Urstadt Biddle Properties, Inc.
Urstadt Biddle Properties, Inc.
Total Preferred Stock
Common Stock:
CBL & Associates Properties, Inc.
Franklin Street Properties Corporation
Government Properties Income Trust
Kimco Realty Corporation
Monmouth Real Estate Investment Corporation (1)
Pennsylvania Real Estate Investment Trust
Select Income Real Estate Investment Trust
Senior Housing Properties Trust
Tanger Factory Outlet
Urstadt Biddle Properties, Inc.
Vereit, Inc.
Washington Prime Group
Total Common Stock
D
E
B
C
I
C
B
D
G
H
7.375%
6.625%
7.250%
6.500%
7.150%
6.625%
7.375%
6.875%
6.750%
6.250%
2,000
62,724
18,269
20,000
20,000
20,000
40,000
20,000
5,000
12,500
1,500,000
150,000
1,020,000
750,000
2,335,930
150,000
775,000
160,911
120,000
100,000
1,300,000
500,000
$ 50,269
1,487,145
422,544
494,407
500,000
500,000
1,000,000
498,207
125,000
312,500
5,390,072
$ 43,720
1,383,064
458,755
500,800
503,600
520,308
1,007,200
502,200
131,000
326,875
5,377,522
16,157,749
1,659,118
19,430,983
14,475,908
20,698,562
1,602,636
18,649,691
2,739,069
2,941,621
2,048,516
11,253,514
4,397,255
116,054,622
8,490,000
1,611,000
18,910,800
13,612,500
41,579,558
1,783,500
19,475,750
3,081,446
3,181,200
2,174,000
10,127,000
3,560,000
127,586,754
Total Marketable Securities
$121,444,694 $132,964,276
(1) Related entity – See Note 8.
On January 1, 2018, the Company adopted ASU 2016-01, which requires changes in the fair value of our
marketable securities to be recorded in current period earnings. Previously, changes in the fair value of marketable
securities were recognized in "Accumulated Other Comprehensive Income" on our Consolidated Balance Sheets. As
a result, on January 1, 2018 the Company recorded an increase to beginning undistributed income (accumulated
deficit) of $11,519,582 to recognize the unrealized gains previously recorded in "Accumulated Other Comprehensive
Income" on our Consolidated Balance Sheets. Subsequent changes in the fair value of the Company’s marketable
securities is recorded in "Other Investment Income (Loss), net" on our Consolidated Statements of Income (Loss).
The Company normally holds REIT securities long term and has the ability and intent to hold securities to
recovery. As of December 31, 2018, 2017 and 2016, the securities portfolio had net unrealized holding gains (losses)
of $(40,155,814), $11,519,582 and $16,717,171, respectively.
-79-
During the years ended December 31, 2018, 2017 and 2016, the Company received proceeds of $268,675,
$17,416,146 and $14,831,737, on sales or redemptions of marketable securities, respectively. The Company recorded
the following Gain (Loss) on Sale of Securities, net:
Gross realized gains
Gross realized losses
2018
2017
2016
$20,107
-0-
$1,749,034
(1,506)
$2,287,454
(2,153)
Total Gain on Sales of Marketable Securities, net
$20,107
$1,747,528
$2,285,301
The Company had margin loan balances of $31,975,086 and $37,157,467 at December 31, 2018 and 2017,
respectively, which were collateralized by the Company’s securities portfolio.
NOTE 5 – LOANS AND MORTGAGES PAYABLE
Loans Payable
The Company may purchase securities on margin. The interest rates charged on the margin loans at
December 31, 2018 and 2017 was 2.75% and 2.0%, respectively. These margin loans are due on demand. At
December 31, 2018 and 2017, the margin loans amounted to $31,975,086 and $37,157,467, respectively, and are
collateralized by the Company’s securities portfolio. The Company must maintain a coverage ratio of approximately
2 times.
The Company has revolving credit agreements totaling $28,500,000 with 21st Mortgage Corporation (“21st
Mortgage”), Customers Bank and Northpoint Commercial Finance to finance inventory purchases. Interest rates on
these agreements range from prime with a minimum of 6% to LIBOR plus 7.75% after 2 years. As of December 31,
2018 and 2017, the total amount outstanding on these lines was $15,928,350 and $2,239,315, respectively, with a
weighted average interest rate of 7.04% and 6.74%, respectively.
In June 2017, the Company entered into an amended and restated revolving line of credit with OceanFirst
Bank (“OceanFirst Line”), secured by the Company’s eligible notes receivable. The maximum availability on the
OceanFirst Line is $10 million. Interest was reduced from prime plus 50 basis points to prime plus 25 basis points.
The new maturity date is June 1, 2020. As of December 31, 2018 and 2017, the amount outstanding on this revolving
line of credit was $4 million, and the interest rate was 5.50% and 4.75%, respectively.
The Company has an agreement with 21st Mortgage to finance the Company’s purchase of rental units. These
loans are at an interest rate of 6.99%, with an origination fee of 2% on new units and 3% on existing units. These
loans will have a 10 year term from the date of the borrowing. The amount outstanding on this loan was $373,499 and
$421,930, as of December 31, 2018 and 2017, respectively.
The Company has a $4,000,000 loan from Two River Community Bank, secured by 1,000,000 shares of
Monmouth Real Estate Investment Corporation common stock. This loan is at an interest rate of 4.625%, with interest
only payments through October 2017, and matures on October 30, 2019. The amount outstanding on this loan was
$3,779,477 and $3,969,329 as of December 31, 2018 and 2017, respectively. The Company also has $2,361,066 in
automotive loans with a weighted average interest rate of 4.43%.
Unsecured Line of Credit
On November 29, 2018, UMH Properties, Inc. (“UMH” or the “Company”) entered into a First Amendment
to Amended and Restated Credit Agreement (the “Amendment”) to expand and extend its existing unsecured revolving
credit facility (the “Facility”). The Facility is syndicated with two banks led by BMO Capital Markets Corp. (“BMO”),
as sole lead arranger and sole book runner, with Bank of Montreal as administrative agent, and includes JPMorgan
Chase Bank, N.A. (“J.P. Morgan”) as the sole syndication agent. The Amendment provides for an increase from $50
million in available borrowings to $75 million in available borrowings with a $50 million accordion feature, bringing
the total potential availability up to $125 million, subject to certain conditions including obtaining commitments from
additional lenders. The Amendment also extends the maturity date of the Facility from March 27, 2020 to November
29, 2022, with a one-year extension available at the Company’s option, subject to certain conditions including payment
-80-
of an extension fee. Availability under the Facility is limited to 60% of the value of the unencumbered communities
which the Company has placed in the Facility’s unencumbered asset pool (“Borrowing Base”). The Amendment
increased the value of the Borrowing Base communities by reducing the capitalization rate applied to the Net
Operating Income (“NOI”) generated by the communities in the Borrowing Base from 7.5% to 7.0%.
Interest rates on borrowings are based on the Company’s overall leverage ratio and decreased from LIBOR
plus 1.75% to 2.50% or BMO’s prime lending rate plus 0.75% to 1.50%, at the Company’s option, to LIBOR plus
1.50% to 2.20%, or BMO’s prime lending rate plus 0.50% to 1.20%. Based on the Company’s current leverage ratio,
borrowings under the Facility will bear interest at LIBOR plus 1.60% or at BMO’s prime lending rate plus 0.60%.
As of December 31, 2018 and 2017, the amount outstanding under this Facility was $50 million and $35
million, respectively.
The aggregate principal payments of all loans payable, including the Credit Facility, are scheduled as follows:
Year Ended December 31,
2019
2020
2021
2022
2023
Thereafter
Total Loans Payable
Unamortized Debt Issuance Costs
Total Loans Payable, net of
Unamortized Debt Issuance Costs
Mortgages Payable
$ 19,767,278
4,215,285
378,318
51,130,884
568,692
32,357,022
108,417,479
(432,126)
$ 107,985,353
Mortgages Payable represents the principal amounts outstanding, net of unamortized debt issuance costs.
Interest is payable on these mortgages at fixed rates ranging from 3.71% to 6.5%. The weighted average interest rate
was 4.3% as of December 31, 2018 and December 31, 2017, respectively, including the effect of unamortized debt
issuance costs. The weighted average interest rate as of December 31, 2018 was 4.3%, compared to 4.2% as of
December 31, 2017, not including the effect of unamortized debt issuance costs. The weighted average loan maturity
of the Mortgage Notes Payable was 6.3 years at December 31, 2018 and 6.9 years at December 31, 2017.
-81-
The following is a summary of mortgages payable at December 31, 2018 and 2017:
Property
Allentown
Brookview Village
Candlewick Court
Catalina
Cedarcrest Village
Clinton Mobile Home Resort
Cranberry Village
D & R Village
Fairview Manor
Forest Park Village
Hayden Heights
Heather Highlands
Highland Estates
Holiday Village
Holiday Village- IN
Holly Acres Estates
Kinnebrook Village
Lake Sherman Village
Meadows of Perrysburg
Olmsted Falls
Oxford Village
Perrysburg Estates
Pikewood Manor
Shady Hills
Somerset Estates and Whispering Pines
Springfield Meadows
Suburban Estates
Sunny Acres
Southwind Village
Trailmont
Twin Oaks
Valley Hills
Waterfalls
Weatherly Estates
Wellington Estates
Woods Edge
Worthington Arms
Various (2 properties)
Various (2 properties)
Various (4 properties)
Various (5 properties)
Various (5 properties)
Various (6 properties)
Various (13 properties)
Total Mortgages Payable
Unamortized Debt Issuance Costs
Total Mortgages Payable, net of
Unamortized Debt Issuance Costs
At December 31, 2018
Due Date
Interest Rate
Balance at December 31,
2017
2018
$13,133,031
2,722,314
4,383,031
5,318,941
11,772,098
3,446,832
7,466,333
7,526,804
15,710,739
8,172,870
2,051,518
-0-
16,353,252
7,777,408
8,349,008
2,157,664
3,966,082
5,404,640
3,002,368
2,051,221
6,526,306
1,615,470
14,722,561
4,891,221
31,555
3,088,505
5,475,710
6,095,121
5,213,023
3,260,814
2,333,022
3,348,290
4,558,525
7,956,386
2,367,059
6,476,902
9,163,406
13,821,208
13,353,881
7,926,365
13,412,679
7,007,404
13,068,415
47,931,443
$13,390,559
2,778,698
4,468,826
5,533,771
12,024,840
3,514,421
7,620,974
7,685,346
16,010,749
8,332,848
2,094,009
16,606
16,640,165
7,929,646
8,514,837
2,194,312
4,048,226
5,510,432
-0-
2,093,269
6,751,511
-0-
-0-
4,992,527
217,770
3,141,199
5,583,084
6,214,642
5,392,911
3,328,351
2,415,894
3,408,438
4,639,515
8,121,177
2,414,621
6,728,792
9,342,775
14,049,088
-0-
8,079,960
13,749,838
7,154,380
13,296,207
49,035,572
334,411,425
(3,318,362)
308,460,786
(3,565,669)
$331,093,063
$304,895,117
4.06%
3.92%
4.10%
4.20%
3.71%
4.06%
3.92%
3.85%
3.85%
4.10%
3.92%
Prime + 1.0%
4.12%
4.10%
3.96%
6.50%
3.92%
4.10%
5.413%
3.98%
5.94%
4.98%
5.00%
3.92%
4.89%
4.83%
4.06%
4.06%
5.94%
3.92%
5.75%
4.32%
4.38%
3.92%
6.35%
4.30%
4.10%
4.56%
4.27%
4.975%
4.25%
4.75%
4.18%
4.065%
10/01/25
04/01/25
09/01/25
08/19/25
04/01/25
10/01/25
04/01/25
03/01/25
11/01/26
09/01/25
04/01/25
08/28/18
06/01/27
09/01/25
11/01/25
10/05/21
04/01/25
09/01/25
10/06/23
04/01/25
01/01/20
09/06/25
11/29/28
04/01/25
02/26/19
10/06/25
10/01/25
10/01/25
01/01/20
04/01/25
12/01/19
06/01/26
06/01/26
04/01/25
01/01/23
01/07/26
09/01/25
02/01/27
08/01/28
07/01/23
01/01/22
12/06/22
08/01/27
03/01/23
-82-
At December 31, 2018 and 2017, mortgages were collateralized by real property with a carrying value of
$614,306,362 and $538,249,737, respectively, before accumulated depreciation and amortization. Interest costs
amounting to $1,036,307, $500,859 and $359,906 were capitalized during 2018, 2017 and 2016, respectively, in
connection with the Company’s expansion program.
Recent Transactions
During the year ended December 31, 2018
On July 13, 2018, the Company obtained a $13,442,000 Federal Home Loan Mortgage Corporation (“Freddie
Mac”) mortgage through Wells Fargo Bank, N.A. (“Wells Fargo”) on Camelot Village and Redbud Estates. This
mortgage is at a fixed rate of 4.27% and matures on August 1, 2028. Principal repayments are based on a 30-year
amortization schedule.
On November 30, 2018, the Company obtained a $14,750,000 mortgage on Pikewood Manor from
OceanFirst Bank. This mortgage is at a fixed rate of 5.0% and matures on November 29, 2028. The interest rate will
be reset after five years to the weekly average yield on U.S. Treasury Securities plus 2.25%. Principal repayments are
based on a 25-year amortization schedule.
On December 18, 2018, the Company assumed a mortgage loan with a balance of approximately $3,000,000,
in conjunction with its acquisition of Meadows of Perrysburg. The interest rate on this mortgage is fixed at 5.4125%.
This mortgage matures on October 6, 2023.
On December 18, 2018, the Company assumed a mortgage loan with a balance of approximately $1,600,000,
in conjunction with its acquisition of Perrysburg Estates. The interest rate on this mortgage is fixed at 4.98%. This
mortgage matures on September 6, 2025.
During the year ended December 31, 2017
On January 20, 2017, the Company obtained a $14,250,000 Freddie Mac mortgage through Wells Fargo on
Boardwalk and Parke Place in connection with the Company’s acquisition of these communities. This mortgage is at
a fixed rate of 4.56% and matures on February 1, 2027. Principal repayments are based on a 30-year amortization
schedule.
On May 31, 2017, the Company obtained a $16,800,000 Freddie Mac mortgage through Wells Fargo on
Highland Estates. This mortgage is at a fixed rate of 4.12% and matures on June 1, 2027. Principal repayments are
based on a 30-year amortization schedule. Proceeds from this mortgage was used to repay the existing $9,000,000
mortgage with an interest rate of 6.175%.
On August 28, 2017, the Company obtained a $13,370,000 mortgage loan on six communities from Sun
National Bank. This mortgage is at a fixed rate of 4.18% and matures on August 1, 2027. Principal repayments are
based on a 30-year amortization schedule. Proceeds from this mortgage was used to repay the existing $10,000,000
mortgage, secured by eleven communities with an interest rate of LIBOR plus 3%, which was fixed at 3.89% with an
interest rate swap.
On December 22, 2017, the Company assumed a mortgage loan with a balance of approximately $2,418,000,
in conjunction with its acquisition of Wellington Estates. The interest rate on this mortgage is fixed at 6.35%. This
mortgage matures on January 1, 2023.
-83-
The aggregate principal payments of all mortgages payable are scheduled as follows:
Year Ended December 31,
2019
2020
2021
2022
2023
Thereafter
$ 21,140,538
7,307,273
22,006,149
13,894,653
61,174,801
208,888,011
Total
$ 334,411,425
NOTE 6 – STOCK COMPENSATION PLAN
On June 13, 2013, the shareholders approved and ratified the Company's 2013 Stock Option and Stock Award
Plan (the “2013 Plan”) authorizing the grant of stock options or restricted stock awards to directors, officers and key
employees of options to purchase up to 3,000,000 shares of common stock. The 2013 Plan replaced the Company's
2003 Stock Option Plan (the “2003 Plan”), which, pursuant to its terms, terminated in 2013. The outstanding options
under the 2003 Stock Option and Award Plan, as amended, remain outstanding until exercised, forfeited or expired.
On June 14, 2018, the shareholders approved and ratified an amendment and restatement (and renaming) of
the Company's Amended and Restated 2013 Incentive Award Plan (formerly 2013 Stock Option and Stock Award
Plan). The amendment and restatement made two substantive changes: (1) provide an additional 2,000,000 common
shares for future grant of option awards, restricted stock awards, or other stock-based awards; and (2) allow for the
issuance of other stock-based awards.
The Compensation Committee has the exclusive authority to administer and construe the 2013 Plan and shall
determine, among other things: persons eligible for awards and who shall receive them; the terms and conditions of
the awards; the time or times and conditions subject to which awards may become vested, deliverable, exercisable, or
as to which any may apply, be accelerated or lapse; and amend or modify the terms and conditions of an award with
the consent of the participant.
Generally, the term of any stock option may not be more than 10 years from the date of grant. The option
price may not be below the fair market value at date of grant. If and to the extent that an award made under the 2013
Plan is forfeited, terminated, expires or is canceled unexercised, the number of shares associated with the forfeited,
terminated, expired or canceled portion of the award shall again become available for additional awards under the
2013 Plan.
The Company accounts for stock options and restricted stock in accordance with ASC 718-10,
Compensation-Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be calculated
and amortized over the service period (generally equal to the vesting period).
Stock Options
During the year ended December 31, 2018, forty employees were granted options to purchase a total of
605,000 shares. During the year ended December 31, 2017, thirty-four employees were granted options to purchase a
total of 576,000 shares. During the year ended December 31, 2016, thirty-four employees were granted options to
purchase a total of 527,000 shares. The fair value of these options for the years ended December 31, 2018, 2017 and
2016 was approximately $1,243,000, $1,042,000 and $425,000, respectively, based on assumptions noted below and
is being amortized over the 1-year vesting period. The remaining unamortized stock option expense was $318,552 as
of December 31, 2018, which will be expensed in 2019.
The Company calculates the fair value of each option grant on the grant date using the Black-Scholes option-
pricing model which requires the Company to provide certain inputs, as follows:
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• The assumed dividend yield is based on the Company’s expectation of an annual dividend rate for regular
dividends over the estimated life of the option.
• Expected volatility is based on the historical volatility of the Company’s stock over a period relevant to the
related stock option grant.
• The risk-free interest rate utilized is the interest rate on U.S. Government Bonds and Notes having the same
life as the estimated life of the Company’s option awards.
• Expected life of the options granted is estimated based on historical data reflecting actual hold periods.
• Estimated forfeiture is based on historical data reflecting actual forfeitures.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in the following years:
Dividend yield
Expected volatility
Risk-free interest rate
Expected lives
Estimated forfeitures
2018
2017
2016
4.79%
25.78%
2.74%
10
-0-
5.80%
26.30%
2.37%
10
-0-
7.32%
26.30%
1.49%
8
-0-
During the year ended December 31, 2018, options to eight employees to purchase a total of 128,500 shares
were exercised. During the year ended December 31, 2017, options to twenty seven employees to purchase a total of
547,900 shares were exercised. During the year ended December 31, 2016, options to twenty employees to purchase
a total of 277,500 shares were exercised. During the year ended December 31, 2018, options to one employee to
purchase a total of 2,000 shares were forfeited. During the year ended December 31, 2017, options to one employee
to purchase a total of 10,000 shares were forfeited. During the year ended December 31, 2016, options to one employee
to purchase a total of 50,000 shares expired.
A summary of the status of the Company’s stock option plans as of December 31, 2018, 2017 and 2016 and
changes during the years then ended are as follows:
2018
2017
2016
Weighted-
Average
Exercise
Price
Shares
1,778,100
605,000
(128,500)
(2,000)
-0-
$11.60
13.26
10.78
12.41
-0-
Shares
1,760,000
576,000
(547,900)
(10,000)
-0-
2,252,600
12.09
1,778,100
1,647,600
1,202,100
Weighted-
Average
Exercise
Price
$9.97
14.96
9.92
9.77
-0-
11.60
Weighted-
Average
Exercise
Price
$9.92
9.77
8.96
-0-
11.97
9.97
Shares
1,560,500
527,000
(277,500)
-0-
(50,000)
1,760,000
1,233,000
$2.05
$1.81
$0.81
Outstanding at
beginning of year
Granted
Exercised
Forfeited
Expired
Outstanding at end of
year
Options exercisable at
end of year
Weighted average fair
value of options
granted during the year
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The following is a summary of stock options outstanding as of December 31, 2018:
Date of Grant
Number of
Employees
Number of
Shares
Option Price
Expiration
Date
07/05/11
08/29/12
06/26/13
06/11/14
06/24/15
04/05/16
01/19/17
04/04/17
04/02/18
07/09/18
12/10/18
* Unexercisable
3
6
10
9
11
19
2
32
40
4
1
22,000
44,000
228,600
151,000
268,000
369,000
60,000
505,000
540,000 *
40,000 *
25,000 *
2,252,600
11.16
11.29
10.08
9.85
9.82
9.77
14.25
15.04
13.09
15.75
12.94
07/05/19
08/29/20
06/26/21
06/11/22
06/24/23
04/05/24
01/19/27
04/04/27
04/02/28
07/09/28
12/10/28
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
awards and the quoted price of the Company’s common stock for the options that were in-the-money. The aggregate
intrinsic value of options outstanding as of December 31, 2018, 2017 and 2016 was $2,047,176, $5,935,112 and
$8,939,488, respectively, of which $2,047,176, $5,896,112 and $6,156,928 relate to options exercisable. The intrinsic
value of options exercised in 2018, 2017 and 2016 was $509,770, $3,030,119 and $1,018,730, respectively,
determined as of the date of option exercise. The weighted average remaining contractual term of the above options
was 7.9, 6.8 and 5.6 years as of December 31, 2018, 2017 and 2016, respectively. For the years ended December 31,
2018, 2017 and 2016, amounts charged to stock compensation expense relating to stock option grants, which is
included in General and Administrative Expenses, totaled $1,115,395, $928,977 and $463,864, respectively.
Restricted Stock
On April 2, 2018, the Company awarded a total of 45,000 shares of restricted stock to two participants,
pursuant to their employment agreements. During 2018, the Company also awarded 2,000 shares of restricted stock
to our ten directors as additional directors’ fees. On April 4, 2017, the Company awarded 45,000 shares of restricted
stock to two participants. On September 27, 2017, the Company awarded 11,000 shares of restricted stock to our ten
directors as additional directors’ fees. On April 5, 2016, the Company awarded 40,500 shares of restricted stock to
two participants. On September 14, 2016, the Company awarded 20,000 shares of restricted stock to one participant.
The grant date fair value of restricted stock grants awarded to participants was $616,200, $845,870 and $627,085 for
the years ended December 31, 2018, 2017 and 2016, respectively. These grants primarily vest in equal installments
over five years. As of December 31, 2018, there remained a total of $1,296,604 of unrecognized restricted stock
compensation related to outstanding non-vested restricted stock grants awarded and outstanding at that
date. Restricted stock compensation is expected to be expensed over a remaining weighted average period of 3.4
years. For the years ended December 31, 2018, 2017 and 2016, amounts charged to stock compensation expense
related to restricted stock grants, which is included in General and Administrative Expenses, totaled $497,715,
$385,514 and $600,814, respectively.
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A summary of the status of the Company’s non-vested restricted stock awards as of December 31, 2018,
2017 and 2016, and changes during the year ended December 31, 2018, 2017 and 2016 are presented below:
Non-vested at
beginning of year
Granted
Dividend Reinvested Shares
Forfeited
Vested
Shares
146,953
47,000
8,378
-0-
(41,827)
2018
2017
2016
Weighted-
Average
Grant Date
Fair Value
Weighted-
Average
Grant Date
Fair Value
Shares
Shares
Weighted-
Average
Grant Date
Fair Value
$11.98
13.11
13.37
-0-
11.76
133,315
56,000
6,867
-0-
(49,229)
$10.04
15.10
14.83
-0-
10.67
121,242
60,500
8,430
(2,160)
(54,697)
$9.83
10.37
10.82
9.83
10.07
Non-vested at end of year
160,504
$12.44
146,953
$11.98
133,315
$10.04
Other Stock-Based Awards
Effective June 20, 2018, a portion of our quarterly directors’ fee was paid with our unrestricted common
stock. During 2018, 2,000 unrestricted shares of common stock were granted with a weighted average fair value on
the grant date of $15.13 per share.
As of December 31, 2018, there were 1,961,500 shares available for grant as stock options, restricted stock
or other stock-based awards under the 2013 Plan.
NOTE 7 – 401(k) PLAN
All full-time employees who are over 21 years old are eligible for the Company’s 401(k) Plan (“Plan”).
Under this Plan, an employee may elect to defer his/her compensation, subject to certain maximum amounts, and have
it contributed to the Plan. Employer contributions to the Plan are at the discretion of the Company. During 2018,
2017 and 2016, the Company made matching contributions to the Plan of up to 100% of the first 3% of employee
salary and 50% of the next 2% of employee salary. The total expense relating to the Plan, including matching
contributions amounted to $343,959, $330,020 and $245,057 in 2018, 2017 and 2016, respectively.
NOTE 8 – RELATED PARTY TRANSACTIONS AND OTHER MATTERS
Transactions with Monmouth Real Estate Investment Corporation
There are five Directors of the Company who are also Directors and shareholders of Monmouth Real Estate
Investment Corporation (“MREIC”). The Company holds common stock of MREIC in its securities portfolio. As of
December 31, 2018, the Company owns a total of 2,446,054 shares of MREIC common stock, representing 2.6% of
the total shares outstanding at December 31, 2018 (See Note 4). The Company shares 1 officer (Chairman of the
Board) with MREIC.
Employment Agreements and Compensation
The Company has three year employment agreements with Mr. Eugene W. Landy, Mr. Samuel A. Landy and
Ms. Anna T. Chew. The agreements provide for base compensation aggregating approximating $1.4 million. In
addition, the agreements call for incentive bonuses, and an extension of services and severance payments upon certain
future events, such as a change in control.
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Other Matters
Mr. Eugene W. Landy, the Founder and Chairman of the Board of the Company, owns a 24% interest in the
entity that is the landlord of the property where the Company’s corporate office space is located. The Company is
also responsible for its proportionate share of real estate taxes and common area maintenance. On May 1, 2015, the
Company renewed this lease for additional space and an additional seven-year term with monthly lease payments of
$14,900 through April 30, 2020 and $15,300 through April 30, 2022. On July 1, 2017, the Company entered into a
lease for additional office space adjacent to its existing corporate office space requiring monthly lease payments of
$1,275 through April 30, 2020 and $1,310 through April 30, 2022. On February 14, 2018, the Company entered into
a lease for additional office space adjacent to its existing corporate office space requiring monthly lease payments of
$1,800 through April 30, 2020 and $1,850 through April 30, 2022. Management believes that the aforesaid rents are
no more than what the Company would pay for comparable space elsewhere.
NOTE 9 – SHAREHOLDERS’ EQUITY
Common Stock
The Company has a Dividend Reinvestment and Stock Purchase Plan (“DRIP”), as amended. Under the
terms of the DRIP, shareholders who participate may reinvest all or part of their dividends in additional shares of the
Company at a discounted price (approximately 95% of market value) directly from the Company, from authorized but
unissued shares of the Company common stock. Shareholders may also purchase additional shares at this discounted
price by making optional cash payments monthly. Optional cash payments must be not less than $500 per payment
nor more than $1,000 unless a request for waiver has been accepted by the Company.
Amounts received in connection with the DRIP for the years ended December 31, 2018, 2017 and 2016 were
as follows:
2018
2017
2016
Amounts Received
Less: Dividends Reinvested
Amounts Received, net
$35,113,713
(5,075,547)
$30,038,166
$60,365,190
(2,859,174)
$57,506,016
$22,400,945
(2,388,552)
$20,012,393
Number of Shares Issued
2,654,846
4,095,357
1,966,133
On June 5, 2017, the Company issued and sold 1,400,000 shares of its Common Stock in a registered direct
placement at a sale price of $16.60 per share. The Company received net proceeds from the offering after expenses of
approximately $22.5 million and used the net proceeds for general corporate purposes, which included purchase of
manufactured homes for sale or lease to customers, expansion of its existing communities, acquisitions of additional
properties and repayment of indebtedness on a short-term basis.
Preferred Stock
8.25% Series A Cumulative Redeemable Preferred Stock
On August 31, 2017, the Company redeemed all 3,663,800 issued and outstanding shares of its 8.25% Series
A Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00 per share (“Series A Preferred Stock”) at
a redemption price of $25.00 per share, totaling $91,595,000. Unpaid dividends on the Series A Preferred Stock
accruing for the period from June 1, 2017 through the redemption date, totaling $1,889,147 (or $0.515625 per share)
were paid on September 15, 2017 to holders of record as of the August 15, 2017 record date previously established by
the Company’s Board of Directors and accordingly such dividends were not included in the redemption price. The
Company recognized a deemed dividend of $3,502,000 on the Consolidated Statement of Income for the year ended
December 31, 2017, which represents the difference between the redemption value and the carrying value net of
original deferred issuance costs.
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8.0% Series B Cumulative Redeemable Preferred Stock
On October 20, 2015, the Company issued and sold 1,801,200 shares of its 8.0% Series B Cumulative
Redeemable Preferred Stock (“Series B Preferred Stock”) in a registered direct placement at a sale price of $25.00 per
share. The Company received net proceeds from the offering of approximately $43 million, after deducting offering
related expenses. Dividends on the Series B Preferred Stock are cumulative from October 20, 2015 at an annual rate
of $2.00 per share and will be payable quarterly in arrears at March 15, June 15, September 15, and December 15.
The first quarterly dividend payment date for the Series B Preferred Stock was payable March 15, 2016 and was for
the dividend period from October 20, 2015 to February 29, 2016. A portion of the dividend to be paid on March 15,
2016, covering the period October 20, 2015 to December 31, 2016, amounting to $710,610 is included in the
computation of net loss attributable to common shareholders in the accompanying consolidated financial statements
for the year ended December 31, 2016.
The Series B Preferred Stock, par value $0.10, has no maturity and will remain outstanding indefinitely unless
redeemed or otherwise repurchased. Except in limited circumstances relating to the Company’s qualification as a
REIT, and as described below, the Series B Preferred Stock is not redeemable prior to October 20, 2020. On and after
October 20, 2020, the Series B Preferred Stock will be redeemable at the Company’s option for cash, in whole or,
from time to time, in part, at a price per share equal to $25.00, plus all accrued and unpaid dividends (whether or not
declared) to the date of redemption.
Upon the occurrence of a Delisting Event or Change of Control, as defined in the Prospectus of the Preferred
Offering, each holder of the Series B Preferred Stock will have the right to convert all or part of the shares of the
Series B Preferred Stock held, unless the Company elects to redeem the Series B Preferred Stock.
Holders of the Series B Preferred Stock generally have no voting rights, except if the Company fails to pay
dividends for six or more quarterly periods, whether or not consecutive, or with respect to certain specified events.
In conjunction with the issuance of the Company’s Series B Preferred Stock, the Company filed with the
Maryland State Department of Assessments and Taxation (the “Maryland SDAT”), an amendment to the Company’s
charter to increase the authorized number of shares of the Company’s common stock by 22,000,000 shares. As a
result of this amendment, the Company’s total authorized shares were increased from 48,663,800 shares (classified as
42,000,000 shares of common stock, 3,663,800 shares of 8.25% Series A Cumulative Redeemable Preferred Stock
and 3,000,000 shares of excess stock) to 70,663,800 shares (classified as 64,000,000 shares of common stock,
3,663,800 shares of 8.25% Series A Cumulative Redeemable Preferred Stock and 3,000,000 shares of excess
stock). Immediately following this amendment, the Company filed with the Maryland SDAT Articles Supplementary
setting forth the rights, preferences and terms of the Series B Preferred Stock and reclassifying 2,000,000 shares of
Common Stock as shares of Series B Preferred Stock. After the reclassification, the Company’s authorized stock
consisted of 62,000,000 shares of common stock, 3,663,800 shares of 8.25% Series A Cumulative Redeemable
Preferred Stock, 2,000,000 shares of 8% Series B Cumulative Redeemable Preferred Stock and 3,000,000 shares of
excess stock.
On April 5, 2016, the Company issued an additional 2,000,000 shares of its Series B Preferred Stock in a
registered direct placement at a sale price of $25.50 per share, including accrued dividends. The Company received
net proceeds from the offering after expenses of approximately $49.1 million and used the net proceeds for general
corporate purposes, which included purchase of manufactured homes for sale or lease to customers, expansion of its
existing communities, acquisitions of additional properties and repayment of indebtedness on a short-term basis.
In conjunction with the issuance of the Company’s Series B Preferred Stock, on April 4, 2016, the Company
filed with the Maryland SDAT an amendment to the Company’s charter to increase the authorized number of shares
of the Company’s common stock by 11,000,000 shares. As a result of this amendment, the Company’s total authorized
shares were increased from 70,663,800 shares (classified as 62,000,000 shares of common stock, 3,663,800 shares of
Series A Preferred stock, 2,000,000 shares of Series B Preferred stock and 3,000,000 shares of excess stock) to
81,663,800 shares (classified as 73,000,000 shares of common stock, 3,663,800 shares of Series A Preferred stock,
2,000,000 shares of Series B Preferred stock and 3,000,000 shares of excess stock). Immediately following this
amendment, the Company filed with the Maryland SDAT Articles Supplementary reclassifying 2,000,000 shares of
Common Stock as shares of Series B Preferred stock. After the reclassification, the Company’s authorized stock
consisted of 71,000,000 shares of common stock, 3,663,800 shares of Series A Preferred stock, 4,000,000 shares of
Series B Preferred stock and 3,000,000 shares of excess stock.
-89-
On August 11, 2016, the Company filed with the Maryland SDAT a further amendment to the Company’s
charter to increase the authorized number of shares of the Company’s common stock by 4,000,000 shares. As a result
of this amendment, the Company’s total authorized shares were increased from 81,663,800 shares (classified as
71,000,000 shares of common stock, 3,663,800 shares of Series A Preferred stock, 4,000,000 shares of Series B
Preferred stock and 3,000,000 shares of excess stock) to 85,663,800 shares (classified as 75,000,000 shares of common
stock, 3,663,800 shares of Series A Preferred stock, 4,000,000 shares of Series B Preferred stock and 3,000,000 shares
of excess stock). Additionally, on June 2, 2017, the Company filed with the Maryland SDAT a further amendment to
the Company’s charter to increase the authorized number of shares of the Company’s common stock by 10,000,000
shares
6.75% Series C Cumulative Redeemable Preferred Stock
On July 26, 2017, the Company issued 5,000,000 shares of its new 6.75% Series C Cumulative Redeemable
Preferred Stock, Liquidation Preference $25.00 per share (“Series C Preferred Stock”) at an offering price of $25.00
per share in an underwritten registered public offering. The Company received net proceeds from the sale of these
5,000,000 shares, after deducting the underwriting discount and other estimated offering expenses, of approximately
$120,800,000. On August 2, 2017, the Company issued an additional 750,000 shares of Series C Preferred Stock
pursuant to the underwriters’ exercise of their overallotment option and received additional net proceeds of
approximately $18,200,000.
The Company used a portion of the net proceeds from the sale of Series C Preferred Stock to redeem all of
the 3,663,800 outstanding shares of our Series A Preferred Stock. The balance of the offering proceeds will be used
for general corporate purposes, which may include purchase of manufactured homes for sale or lease to customers,
expansion of our existing communities, potential acquisitions of additional properties and possible repayment of
indebtedness on a short-term basis.
Dividends on the Series C Preferred shares are cumulative from July 26, 2017 at an annual rate of $1.6875
per share and will be payable quarterly in arrears on March 15, June 15, September 15, and December 15. The first
quarterly dividend on the Series C Preferred was payable September 15, 2017 and amounted to $970,312 or $0.16875
per share for the dividend period from July 26, 2017 to August 31, 2017.
The Series C Preferred Stock, par value $0.10 per share, has no maturity and will remain outstanding
indefinitely unless redeemed or otherwise repurchased. Except in limited circumstances relating to the Company’s
qualification as a REIT, and as described below, the Series C Preferred Stock is not redeemable prior to July 26, 2022.
On and after July 26, 2022, the Series C Preferred Stock will be redeemable at the Company’s option for cash, in
whole or, from time to time, in part, at a price per share equal to $25.00, plus all accrued and unpaid dividends (whether
or not declared) to the date of redemption. The Series C Preferred Stock ranks on a parity with the Company’s Series
B Preferred Stock with respect to dividend rights and rights upon liquidation, dissolution or winding up.
Upon the occurrence of a Delisting Event or Change of Control, each as defined in the Prospectus pursuant
to which the shares of Series C Preferred Stock were offered, each holder of the Series C Preferred Stock will have
the right to convert all or part of the shares of the Series C Preferred Stock held into common stock of the Company,
unless the Company elects to redeem the Series C Preferred Stock.
Holders of the Series C Preferred Stock generally have no voting rights, except if the Company fails to pay
dividends for nine or more quarterly periods, whether or not consecutive, or with respect to certain specified events.
In conjunction with the issuance of the Company’s Series C Preferred, the Company filed with the Maryland
SDAT, an amendment to the Company’s charter to increase the authorized number of shares of the Company’s
common stock by 30,750,000 shares. As a result of this amendment, the Company’s total authorized shares were
increased from 95,663,800 shares (classified as 85,000,000 shares of Common Stock, 3,663,800 shares of Series A
Preferred, 4,000,000 shares of Series B Preferred and 3,000,000 shares of excess stock) to 126,413,800 shares
(classified as 115,750,000 shares of Common Stock, 3,663,800 shares of Series A Preferred, 4,000,000 shares of
Series B Preferred and 3,000,000 shares of excess stock). Immediately following this amendment, the Company filed
with the Maryland SDAT Articles Supplementary setting forth the rights, preferences and terms of the Series C
Preferred and reclassifying 5,750,000 shares of Common Stock as shares of Series C Preferred. After the
reclassification, the Company’s authorized stock consisted of 110,000,000 shares of Common Stock, 3,663,800 shares
of Series A Preferred, 4,000,000 shares of Series B Preferred, 5,750,000 shares of Series C Preferred and 3,000,000
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shares of excess stock. Additionally, upon the redemption on August 31, 2017 of all 3,663,800 outstanding shares of
the Series A Preferred, the authorized shares of Series A Preferred automatically converted to authorized Common
Stock, which increased our authorized Common Stock to 113,663,800 shares.
6.375% Series D Cumulative Redeemable Preferred Stock
On January 22, 2018, the Company issued 2,000,000 shares of its new 6.375% Series D Cumulative
Redeemable Preferred Stock, Liquidation Preference $25.00 Per Share (“Series D Preferred”) at an offering price of
$25.00 per share in an underwritten registered public offering. The Company received net proceeds from the sale of
these 2,000,000 shares, after deducting the underwriting discount and other estimated offering expenses, of
approximately $48.2 million and has used and plans to use the net proceeds of the offering for general corporate
purposes, which includes the purchase of manufactured homes for sale or lease to customers, expansion of its existing
communities, potential acquisitions of additional properties and possible repayment of indebtedness on a short-term
basis.
Dividends on the Series D Preferred shares are cumulative from January 22, 2018 and are payable quarterly
in arrears on March 15, June 15, September 15, and December 15 at an annual rate of $1.59375 per share. On
September 17, 2018, the Company paid $796,876 in dividends or $0.3984375 per share for the period from June 1,
2018 through August 31, 2018 to holders of record as of the close of business on August 15, 2018 of our Series D
Preferred. Total dividends paid to our Series D Preferred shareholders for the nine months ended September 30, 2018
amounted to $1,947,918.
The Series D Preferred, par value $0.10 per share, has no maturity and will remain outstanding indefinitely
unless redeemed or otherwise repurchased. Except in limited circumstances relating to the Company’s qualification
as a REIT, and as described below, the Series D Preferred is not redeemable prior to January 22, 2023. On and after
January 22, 2023, the Series D Preferred will be redeemable at the Company’s option for cash, in whole or, from time
to time, in part, at a price per share equal to $25.00, plus all accrued and unpaid dividends (whether or not declared)
to the date of redemption. The Series D Preferred shares rank on a parity with the Company’s Series B Preferred
shares and the Company’s Series C Preferred shares with respect to dividend rights and rights upon liquidation,
dissolution or winding up.
Upon the occurrence of a Delisting Event or Change of Control, each as defined in the Prospectus pursuant
to which the shares of Series D Preferred were offered, each holder of the Series D Preferred will have the right to
convert all or part of the shares of the Series D Preferred held into common stock of the Company, unless the Company
elects to redeem the Series D Preferred.
Holders of the Series D Preferred generally have no voting rights, except if the Company fails to pay
dividends for nine or more quarterly periods, whether or not consecutive, or with respect to certain specified events.
In conjunction with the issuance of the Company’s Series D Preferred, the Company filed with the Maryland
SDAT Articles Supplementary setting forth the rights, preferences and terms of the Series D Preferred shares and
reclassifying 2,300,000 shares of Common Stock as shares of Series D Preferred. After the reclassification, the
Company’s authorized stock consists of 111,363,800 shares of Common Stock, 4,000,000 shares of Series B Preferred,
5,750,000 shares of Series C Preferred, 2,300,000 shares of Series D Preferred and 3,000,000 shares of excess stock.
Issuer Purchases of Equity Securities
On January 15, 2019, the Board of Directors reaffirmed its Share Repurchase Program (the “Repurchase
Program”) that authorizes the Company to purchase up to $25,000,000 in the aggregate of the Company's common
stock. The Repurchase Program was originally created in June 2008 and is intended to be implemented through
purchases made from time to time using a variety of methods, which may include open market purchases, privately
negotiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider
trading and other securities laws and regulations. The size, scope and timing of any purchases will be based on
business, market and other conditions and factors, including price, regulatory and contractual requirements or
consents, and capital availability. The Repurchase Program does not require the Company to acquire any particular
amount of common stock, and the Repurchase Program may be suspended, modified or discontinued at any time at
the Company's discretion without prior notice. There have been no purchases under the Repurchase Program to date.
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NOTE 10 – DISTRIBUTIONS
Common Stock
The following cash distributions, including dividends reinvested, were paid to common shareholders during
the three years ended December 31, 2018, 2017 and 2016:
Quarter Ended
Amount
Per Share
Amount
Per Share
Amount
Per Share
2018
2017
2016
March 31
June 30
September 30
December 31
$6,492,774
6,600,506
6,693,069
6,824,288
$0.18
0.18
0.18
0.18
$5,416,827
5,700,036
6,188,961
6,333,573
$0.18
0.18
0.18
0.18
$4,879,009
4,903,286
5,031,818
5,204,709
$26,610,637
$0.72
$23,639,397
$0.72
$20,018,822
These amounts do not include the discount on shares purchased through the Company’s DRIP.
$0.18
0.18
0.18
0.18
$0.72
On January 15, 2019, the Company declared a cash dividend of $0.18 per share to be paid on March 15, 2019
to shareholders of record as of the close of business on February 15, 2019.
Preferred Stock
The following dividends were paid to holders of our Series A Preferred Stock during the year ended
December 31, 2017 and 2016:
Declaration
Date
Record Date
1/19/2017
4/3/2017
7/3/2017
2/15/2017
5/15/2017
8/15/2017
Payment
Date
3/15/2017
6/15/2017
9/15/2017
Dividend
Dividend per
Share
$1,889,147
1,889,147
1,889,147
$0.515625
0.515625
0.515625
$5,667,441
$1.546875
1/15/2016
4/4/2016
7/1/2016
10/3/2016
2/16/2016
5/16/2016
8/15/2016
11/17/2016
3/15/2016
6/15/2016
9/15/2016
12/15/2016
$1,889,147
1,889,147
1,889,147
1,889,147
$0.515625
0.515625
0.515625
0.515625
$7,556,588
$2.0625
-92-
The following dividends were paid to holders of our Series B Preferred Stock during the year ended
December 31, 2018, 2017 and 2016:
Declaration
Date
1/15/2018
4/1/2018
7/1/2018
10/1/2018
1/19/2017
4/3/2017
7/3/2017
10/2/2017
1/15/2016
4/4/2016
7/1/2016
10/3/2016
Record Date
Payment Date
Dividend
Dividend
per Share
2/15/2018
5/15/2018
8/15/2018
11/15/2018
2/15/2017
5/15/2017
8/15/2017
11/15/2017
2/16/2016
5/16/2016
8/15/2016
11/17/2016
3/15/2018
6/15/2018
9/17/2018
12/17/2018
3/15/2017
6/15/2017
9/15/2017
12/15/2017
3/15/2016
6/15/2016
9/15/2016
12/15/2016
$1,900,600
1,900,600
1,900,600
1,900,600
$7,602,400
$1,900,600
1,900,600
1,900,600
1,900,600
$7,602,400
$0.50
0.50
0.50
0.50
$2.00
$0.50
0.50
0.50
0.50
$2.00
$1,305,257
1,900,600
1,900,600
1,900,600
$0.72466
0.50
0.50
0.50
$7,007,057
$2.22466
On January 15, 2019, the Board of Directors declared a quarterly dividend of $0.50 per share for the period
from December 1, 2018 through February 28, 2019, on the Company's Series B Preferred Stock payable March 15,
2019 to shareholders of record as of the close of business on February 15, 2019.
The following dividends were paid to holders of our Series C Preferred Stock during the year ended
December 31, 2018 and 2017:
Declaration
Date
1/15/2018
4/1/2018
7/1/2018
10/1/2018
Record Date
Payment Date
Dividend
2/15/2018
5/15/2018
8/15/2018
11/15/2018
3/15/2018
6/15/2018
9/17/2018
12/17/2018
$2,425,781
2,425,781
2,425,781
2,425,781
Dividend
per Share
$0.421875
0.421875
0.421875
0.421875
$9,703,124
$1.68750
7/3/2017
10/2/2017
8/15/2017
11/15/2017
9/15/2017
12/15/2017
$970,313
2,425,781
$0.168750
0.421875
$3,396,094
$0.590625
-93-
On January 15, 2019, the Board of Directors declared a quarterly dividend of $0.421875 per share for the
period from December 1, 2018 through February 28, 2019, on the Company's Series C Preferred Stock payable March
15, 2019 to shareholders of record as of the close of business on February 15, 2019.
The following dividends were paid to holders of our Series D Preferred Stock during the year ended
December 31, 2018:
Declaration
Date
1/15/2018
4/1/2018
7/1/2018
10/1/2018
Record Date
Payment Date
Dividend
2/15/2018
5/15/2018
8/15/2018
11/15/2018
3/15/2018
6/15/2018
9/17/2018
12/17/2018
$354,166
796,876
796,876
796,876
Dividend
per Share
$0.1770830
0.3984375
0.3984375
0.3984375
On January 15, 2019, the Board of Directors declared a quarterly dividend of $0.3984375 per share for the
period from December 1, 2018 through February 28, 2019, on the Company's Series D Preferred Stock payable March
15, 2019 to shareholders of record as of the close of business on February 15, 2019.
$2,744,794
$1.372397
NOTE 11 – FEDERAL INCOME TAXES
Characterization of Distributions
The following table characterizes the distributions paid per common share for the years ended December 31,
2018, 2017 and 2016:
2018
2017
2016
Amount
Percent
Amount
Percent
Amount
Percent
$
Ordinary income
Capital gains
Return of capital
0.00000
0.00000
0.72000
$
0.00%
0.00%
100.00%
0.00000
0.00000
0.72000
0.00% $
0.00%
100.00%
0.09549
0.01425
0.61026
13.26%
1.98%
84.76%
$
0.72
100%
$
0.72
100%
$
0.72
100%
For the year ended December 31, 2017, total distributions paid by the Company for its Series A Preferred
Stock, amounted to $5,667,441 or $1.546875 per share (for income tax purposes, $0.494148 characterized as ordinary
income, $0.138204 characterized as capital gains and $0.914523 characterized as return of capital). For the year ended
December 31, 2016, total distributions paid by the Company for its Series A Preferred Stock, amounted to $7,556,588
or $2.0625 per share (for income tax purposes, $1.79472 characterized as ordinary income and $0.26778 characterized
as capital gains).
For the year ended December 31, 2018, total distributions paid by the Company for its Series B preferred
stock, amounted to $7,602,400 or $2.00 per share (for income tax purposes, $1.288868 characterized as ordinary
income and $0.711132 characterized as return of capital). For the year ended December 31, 2017, total distributions
paid by the Company for its Series B preferred stock, amounted to $7,602,400 or $2.00 per share (for income tax
purposes, $0.638896 characterized as ordinary income, $0.178688 characterized as capital gains and $1.182416
characterized as return of capital).
For the year ended December 31, 2018, total distributions paid by the Company for its Series C preferred
stock, amounted to $9,703,124 or $1.68750 per share (for income tax purposes, $1.087484 characterized as ordinary
income and $0.600016 characterized as return of capital). For the year ended December 31, 2017, total distributions
paid by the Company for its Series C preferred stock, amounted to $3,396,094 or $0.590625 per share (for income tax
-94-
purposes, $0.188674 characterized as ordinary income, $0.052769 characterized as capital gains and $0.349182
characterized as return of capital).
For the year ended December 31, 2018, total distributions paid by the Company for its Series D preferred
stock, amounted to $2,744,794 or $1.372397 per share (for income tax purposes, $0.884419 characterized as ordinary
income and $0.487978 characterized as return of capital).
In addition to the above, taxable income from non-REIT activities conducted by S&F, a Taxable REIT
Subsidiary (“TRS”), is subject to federal, state and local income taxes. Deferred income taxes pertaining to S&F are
accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for
temporary differences between the financial reporting bases of assets and liabilities and their respective tax bases and
for operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts
are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not
that they will be realized based on consideration of available evidence, including tax planning strategies and other
factors. For the years ended December 31, 2018, 2017 and 2016, S&F had operating losses for financial reporting
purposes of $1,203,926, $2,066,587 and $2,307,104, respectively. Therefore, a valuation allowance has been
established against any deferred tax assets relating to S&F. For the years ended December 31, 2018, 2017 and 2016,
S&F recorded $8,000, $0 and $5,000, respectively, in federal, state and franchise taxes.
NOTE 12 – COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS
The Company is subject to claims and litigation in the ordinary course of business. Management does not
believe that any such claim or litigation will have a material adverse effect on the business, assets, or results of
operations of the Company.
The Company entered into a contract to purchase two communities for a purchase price of approximately
$45,287,000. This acquisition is expected to close in the second or third quarter of 2019.
Included in the Company’s Community Operating Expenses for the year ended December 31, 2016 is
$125,000 for the settlement of the Memphis Mobile City lawsuit. The Company is redeveloping this community and
completed Phase I in 2017. Once fully developed, the community will contain a total of 144 developed homesites.
In November 2013, the Company entered into an agreement with 21st Mortgage under which 21st Mortgage
can provide financing for home purchasers in the Company’s communities. The Company does not receive referral
fees or other cash compensation under the agreement. If 21st Mortgage makes loans to purchasers and those
purchasers default on their loans and 21st Mortgage repossesses the homes securing such loans, the Company has
agreed to purchase from 21st Mortgage each such repossessed home for a price equal to 80% to 95% of the amount
under each such loan, subject to certain adjustments. This agreement may be terminated by either party with 30 days
written notice. As of December 31, 2018, the total loan balance was approximately $2.9 million. Additionally, 21st
Mortgage previously made loans to purchasers in certain communities we acquired. In conjunction with these
acquisitions, the Company has agreed to purchase from 21st Mortgage each repossessed home, if those purchasers
default on their loans. The purchase price ranges from 55% to 100% of the amount under each such loan, subject to
certain adjustments. As of December 31, 2018, the total loan balance was approximately $3.1 million. Although this
agreement is still active, this program is not being utilized by the Company’s new customers as a source of financing.
S&F entered into a Chattel Loan Origination, Sale and Servicing Agreement (“COP Program”) with Triad
Financial Services, effective January 1, 2016. Neither the Company, nor S&F, receive referral fees or other cash
compensation under the agreement. Customer loan applications are initially submitted to Triad for consideration by
Triad’s portfolio of outside lenders. If a loan application does not meet the criteria for outside financing, the
application is then considered for financing under the COP Program. If the loan is approved under the COP Program,
then it is originated by Triad, assigned to S&F and then assigned by S&F to the Company. Included in Notes and
Other Receivables is approximately $16,365,000 of loans that the Company acquired under the COP Program as of
December 31, 2018.
-95-
NOTE 13 - FAIR VALUE MEASUREMENTS
The Company follows ASC 825, Fair Value Measurements, for financial assets and liabilities recognized at
fair value on a recurring basis. The Company measures certain financial assets and liabilities at fair value on a recurring
basis, including marketable securities. The fair value of these certain financial assets and liabilities was determined
using the following inputs at December 31, 2018 and 2017:
Fair Value Measurements at Reporting Date Using
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
December 31, 2018:
Equity Securities - Preferred Stock
Equity Securities - Common Stock
Total
$3,399,558
96,196,178
$99,595,736
$3,399,558
96,196,178
$99,595,736
December 31, 2017:
Equity Securities - Preferred Stock
Equity Securities - Common Stock
Total
$5,377,522
127,586,754
$132,964,276
$5,377,522
127,586,754
$132,964,276
$-0-
-0-
$-0-
$-0-
-0-
$-0-
$-0-
-0-
$-0-
$-0-
-0-
$-0-
In addition to the Company’s investment in Marketable Securities at Fair Value, the Company is required to
disclose certain information about fair values of its other financial instruments, as defined in ASC 825-10, Financial
Instruments. Estimates of fair value are made at a specific point in time, based upon, where available, relevant market
prices and information about the financial instrument. Such estimates do not include any premium or discount that
could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. All
of the Company’s marketable securities have quoted market prices. However, for a portion of the Company's other
financial instruments, no quoted market value exists. Therefore, estimates of fair value are necessarily based on a
number of significant assumptions (many of which involve events outside the control of management). Such
assumptions include assessments of current economic conditions, perceived risks associated with these financial
instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties
surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared
to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly
different fair value estimates.
The fair value of cash and cash equivalents and notes receivables approximates their current carrying amounts
since all such items are short-term in nature. The fair value of marketable securities is primarily based upon quoted
market values. The fair value of variable rate mortgages payable and loans payable approximate their current carrying
amounts since such amounts payable are at approximately a weighted average current market rate of interest. The
estimated fair value of fixed rate mortgage notes payable is based on discounting the future cash flows at a year-end
risk adjusted borrowing rate currently available to the Company for issuance of debt with similar terms and remaining
maturities. These fair value measurements fall within level 2 of the fair value hierarchy. As of December 31, 2018,
the fair and carrying value of fixed rate mortgages payable amounted to $332,130,838 and $334,411,425, respectively.
As of December 31, 2017, the fair and carrying value of fixed rate mortgages payable amounted to $303,741,677 and
$308,444,180, respectively. Prior to 2017, if the Company acquired a property that was considered an acquisition of
a business, the Company was required to fair value all of the acquired assets and liabilities, including intangible assets
and liabilities (See Note 1). Those fair value measurements fell within level 3 of the fair value hierarchy.
-96-
NOTE 14 – SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the years ended December 31, 2018, 2017 and 2016 was $16,439,700,
$15,656,251 and $15,058,016, respectively.
During the years ended December 31, 2018 and 2017, the Company assumed mortgages totaling $4,624,300
and $2,418,198, respectively for the acquisition of communities.
During the years ended December 31, 2018, 2017 and 2016, land development costs of $10,107,951,
$7,832,450 and $170,925, respectively were transferred to investment property and equipment and placed in service.
During the years ended December 31, 2018, 2017 and 2016, the Company had dividend reinvestments of
$5,075,547, $2,859,174 and $2,388,552, respectively which required no cash transfers.
NOTE 15 – SUBSEQUENT EVENTS
Management has evaluated subsequent events for disclosure and/or recognition in the financial statements
through the date that the financial statements were issued.
NOTE 16 – PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma condensed financial information reflects the 2018 and 2017 acquisitions
that have closed. This information has been prepared utilizing the historical financial statements of the Company and
the effect of additional revenue and expenses from the properties acquired during 2018 and 2017 assuming that the
acquisitions had occurred as of January 1, 2017, after giving effect to certain adjustments including (a) rental and
related income; (b) community operating expenses; (c) interest expense resulting from the assumed increase in
mortgages and loans payable related to the new acquisitions and (d) depreciation expense related to the new
acquisitions. The unaudited pro forma condensed financial information is not indicative of the results of operations
that would have been achieved had the acquisitions reflected herein been consummated on the dates indicated or that
will be achieved in the future.
For the years ended December 31,
2018
2017
Rental and Related Income
Community Operating Expenses
Net Loss Attributable to Common Shareholders
Net Loss Attributable to Common Shareholders per Share:
Basic and Diluted
$118,499,000
54,216,000
(56,890,000)
$111,003,000
51,149,000
(8,362,000)
(1.54)
(0.26)
-97-
NOTE 17 – SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
2018
March 31
June 30
September 30
December 31
$29,795,964
25,492,249
(26,496,347)
Total Income
Total Expenses
Other Income (Expense)
Net Income (Loss) from
continuing operations
Net Income (Loss) Attributable
To Common Shareholders
Net Income (Loss) Attributable to Common
Shareholders per Share –
Basic and Diluted
(22,208,337)
(27,154,510)
(0.76)
$32,098,550
27,761,189
15,799,550
$33,447,114
28,436,258
(11,332,720)
$34,245,065
29,319,854
(32,632,068)
20,071,984
(6,349,343)
(27,729,875)
14,948,727
(11,472,600)
(32,943,132)
0.41
(0.31)
(0.87)
2017
March 31
June 30
September 30
December 31
Total Income
Total Expenses
Other Income (Expense)
Net Income from continuing
operations
Net Loss Attributable to
Common Shareholders
Net Loss Attributable to Common
Shareholders per Share –
Basic and Diluted
$26,448,549
22,485,487
(1,653,136)
$28,817,848
24,858,243
(383,472)
$28,684,937
24,704,729
(699,309)
2,285,546
3,589,871
3,262,001
(1,504,201)
(199,876)
(5,179,423)
$28,696,585
24,567,878
(546,701)
3,530,616
(795,765)
(0.05)
(0.01)
(0.15)
(0.03)
-98-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Column B
Name
Location
Encumbrances
Land
Column C
Initial Cost
Site, Land
Column D
& Building
Improvements
and Rental Homes
Capitalization
Subsequent to
Acquisition
Memphis, TN
Doylestown, PA
Orrville, OH
Birch Run, MI
Elkhart, IN
Goshen, IN
Berwick, PA
Greenfield Ctr, NY
Anderson, IN
Owosso, MI
Chambersburg, PA
Middletown, OH
Vineland, NJ
Chambersburg, PA
Sayre, PA
Conowingo, MD
Lewistown, PA
Tiffin, OH
Horseheads, NY
Wintersville, OH
Muncie, IN
Ravenna, OH
Columbia, TN
Cranberry Twp, PA
Athens, PA
Duncansville, PA
Mount Pleasant, PA
Clifton Park, NY
Allentown
Arbor Estates
Auburn Estates
Birchwood Farms
Boardwalk
Broadmore Estates
Brookside
Brookview
Camelot Village
Candlewick Court
Carsons
Catalina
Cedarcrest Village
Chambersburg
Chelsea
Cinnamon Woods
City View
Clinton
Collingwood
Colonial Heights
Countryside Estates
Countryside Estates
Countryside Village
Cranberry
Crestview
Cross Keys
Crossroads Village
D&R
Dallas Mobile Home Toronto,OH
Deer Meadows
Evergreen Estates
Evergreen Manor
Evergreen Village
Fairview Manor
Forest Creek
Forest Park
Fox Chapel Village
Frieden Manor
Green Acres
Gregory Courts
Hayden Heights
Heather Highlands
High View Acres
Highland
Highland Estates
Hillcrest Crossing
Hillcrest Estates
Hillside Estates
Holiday Village
Holiday Village
Holly Acres
New Springfield,OH
Lodi,OH
Bedford, OH
Mantua, OH
Millville, NJ
Elkhart, IN
Cranberry Twp, PA
Cheswick, PA
Schuylkill Haven, PA
Chambersburg, PA
Honey Brook, PA
Dublin,OH
Inkerman, PA
Apollo, PA
Elkhart, IN
Kutztown, PA
Lower Burrell, PA
Marysville, OH
Greensburg,PA
Nashville, TN
Elkhart, IN
Erie, PA
Hudson Estates
Peninsula, OH
$
13,133,031
$
(1)
(4)
(1)
13,821,208 (6)
47,931,444 (1)
(3)
2,722,314
(7)
(2)
(1)
4,383,031
-0-
5,318,941
11,772,098
-0-
-0-
-0-
3,446,832
-0-
-0-
-0-
-0-
7,466,333
-0-
-0-
-0-
7,526,804
-0-
-0-
-0-
-0-
-0-
15,710,739
(1)
8,172,870
-0-
13,068,415 (2)
-0-
(1)
(1)
(5)
2,051,518
-0-
-0-
16,353,252
-0-
-0-
7,777,408
8,349,008
2,157,664
-0-
-99-
250,000 $
2,650,000
114,000
70,000
1,796,000
1,120,000
372,000
37,500
824,000
159,200
176,000
1,008,000
320,000
108,000
124,000
1,884,000
137,000
142,000
196,000
67,000
174,000
205,000
394,000
181,930
188,000
60,774
183,000
391,724
275,600
226,000
99,000
49,000
105,000
216,000
440,000
75,000
372,000
643,000
63,000
370,000
248,100
572,500
825,000
510,000
145,000
961,000
1,277,000
483,600
1,632,000
490,600
194,000
2,569,101 $
8,266,000
1,174,000
2,797,000
4,767,792
11,136,000
4,776,000
232,547
2,479,800
7,087,221
2,411,000
11,734,640
1,866,323
2,397,000
2,049,000
2,116,000
613,000
3,301,800
2,317,500
2,383,000
1,926,000
2,895,997
6,916,500
1,922,931
2,258,000
378,093
1,403,400
704,021
2,728,503
2,299,275
1,121,300
2,372,258
1,277,001
1,166,517
7,004,000
977,225
4,081,700
5,293,500
584,000
1,220,000
2,147,700
2,151,569
4,263,500
7,084,000
1,695,041
1,463,825
3,033,500
2,678,525
5,618,000
13,808,269
3,591,000
10,831,942
1,602,825
543,446
3,391,201
(52,763)
9,666,155
2,359,676
7,917,752
306,825
3,844,480
1,243,813
4,484,348
2,779,464
632,313
1,522,493
237,063
1,380,464
335,425
1,657,063
4,593,810
3,987,985
4,636,557
8,944,748
4,174,783
1,882,996
3,924,145
67,848
3,270,304
1,876,192
2,566,163
466,101
1,108,091
903,348
9,993,787
1,781,776
8,094,900
640,702
2,334,370
111,538
497,919
698,384
11,567,292
156,053
4,672,942
12,280,519
3,463,057
1,999,860
2,290,513
6,923,774
5,053,122
795,309
141,000
3,515,878
5,189,298
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Column B
Name
Location
Encumbrances
Land
Column C
Initial Cost
Column D
Site, Land
& Building
Improvements
and Rental Homes
Capitalization
Subsequent to
Acquisition
Wooster, OH
Wooster, OH
Memphis, TN
Jonestown, PA
Avoca, PA
Narvon, PA
Elkhart, IN
Tunkhannock, PA
Olmsted Township, OH
West Grove, PA
Elkhart, IN
Perrysburg, OH
Elyria, OH
Tarrs, PA
Clinton, PA
Monticello, NY
Navarre, OH
Lakeview, OH
Cresson, PA
Orrville, OH
Taylor, PA
Marysville, OH
New Middletown, OH
Nappanee, IN
Huntingdon Pointe
Independence Park
Kinnebrook
Lake Sherman
Lakeview Meadows
Laurel Woods
Little Chippewa
Maple Manor
Marysville Estates
Meadowood
Meadows
Meadows of Perrysburg Perrysburg, OH
Melrose Village
Melrose West
Memphis Blues
Monroe Valley
Moosic Heights
Mount Pleasant Village Mount Pleasant, PA
Mountaintop
Oak Ridge
Oakwood Lake
Olmsted Falls
Oxford
Parke Place
Perrysburg Estates
Pikewood Manor
Pine Ridge/Pine Manor Carlisle, PA
Apollo, PA
Pine Valley
Bloomsburg, PA
Pleasant View
Belle Vernon, PA
Port Royal
Anderson, IN
Redbud Estates
Marion, OH
River Valley
Carlisle, PA
Rolling Hills Estates
Belle Veron, PA
Rostraver Estates
Magnolia, OH
Sandy Valley
Nashville, TN
Shady Hills
Somerset, PA
Somerset/Whispering
Columbiana, OH
Southern Terrace
Jackson, NJ
Southwind
Athens, OH
Spreading Oaks
Springfield, OH
Springfield Meadows
Greensburg, PA
Suburban Estates
Ravenna, OH
Summit Estates
Marion, IN
Summit Village
Somerset, PA
Sunny Acres
Eagleville, PA
Sunnyside
Goodlettsville, TN
Trailmont
Olmsted Township, OH
Twin Oaks
Goshen, IN
Twin Pines
Ruffs Dale, PA
Valley High
Ravenna, OH
Valley Hills
Mountaintop, PA
Valley Stream
Honeybrook, PA
Valley View HB
Ephrata, PA
Valley View I
Ephrata, PA
Valley View II
West Newton, PA
Voyager Estates
Hamburg, NY
Waterfalls
Bellefontaine, OH
Wayside
$
$
-0-
7,926,365 (5)
3,966,082
5,404,640
-0-
-0-
(4)
13,412,679 (3)
-0-
(1)
-0-
3,002,368
7,007,404 (4)
(4)
-0-
-0-
2,051,221
6,526,306
1,615,470
14,722,561
-0-
-0-
(2)
(3)
(2)
(1)
(3)
(6)
(3)
-0-
13,353,880 (7)
-0-
-0-
(5)
(1)
(1)
(1)
(5)
(1)
(2)
(2)
-0-
4,891,221
31,555
5,213,023
-0-
3,088,505
5,475,710
-0-
-0-
6,095,121
3,260,814
2,333,022
3,348,290
-0-
-0-
4,558,525
-0-
-100-
$
399,000
686,400
235,600
290,000
574,000
432,700
113,000
674,000
810,000
152,000
548,600
2,146,000
767,000
94,000
78,435
114,000
330,000
280,000
134,000
500,000
379,000
569,000
175,000
4,317,000
399,000
1,053,000
37,540
670,000
282,000
150,000
1,739,000
236,000
301,000
813,600
270,000
337,000
1,485,000
63,000
100,095
67,000
1,230,000
299,000
198,000
522,000
287,000
450,000
411,000
823,000
650,000
284,000
996,000
323,000
1,380,000
191,000
72,000
742,000
424,000
196,000
865,450 $
2,783,633
1,402,572
1,457,673
1,103,600
2,070,426
1,135,000
9,432,800
4,555,800
3,191,000
6,720,900
5,541,184
5,429,000
1,040,000
810,477
994,000
3,794,100
3,501,600
1,665,000
7,524,000
1,639,000
3,031,000
990,515
10,340,950
4,047,152
22,067,668
198,321
1,336,600
2,174,800
2,491,796
15,090,530
785,293
1,419,013
2,203,506
1,941,430
3,379,000
2,050,400
3,387,000
602,820
1,326,800
3,092,706
5,837,272
2,779,260
2,820,930
6,113,528
2,674,000
1,867,000
3,527,000
6,307,000
2,266,750
6,542,178
3,190,550
5,348,000
4,359,000
1,746,000
3,142,725
3,812,000
1,080,050
1,543,265
2,836,351
14,068,534
10,414,673
1,664,314
4,072,417
1,895,702
5,761,225
2,472,458
3,388,490
4,666,623
221,029
4,962,517
58,858
5,505,291
447,621
2,909,537
805,019
606,928
2,003,904
892,401
1,762,146
2,474,849
4,178,437
72,261
474,536
9,649,277
5,597,054
1,535,569
12,566,769
1,152,432
6,772,137
1,593,092
2,051,995
8,763,519
4,271,425
7,614,819
518,360
2,762,659
3,466,223
715,410
2,940,987
3,468,173
183,943
2,157,506
458,164
3,622,958
2,059,563
3,900,683
1,398,477
7,197,765
728,395
1,686,339
1,332,367
6,555
2,595,400
3,838,817
576,742
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Column B
Name
Location
Encumbrances
Land
Column C
Initial Cost
Column D
Site, Land
& Building
Improvements
and Rental Homes
Capitalization
Subsequent to
Acquisition
Weatherly Estates
Wellington Estates
Wood Valley
Woodland Manor
Woodlawn
Woods Edge
Worthington Arms
Youngstown Estates
Lebanon, TN
Export, PA
Caledonia, OH
West Monroe, NY
Eatontown, NJ
West Lafayette, IN
Lewis Center, OH
Youngstown, NY
$
7,956,386
2,367,059
-0-
-0-
-0-
6,476,902
9,163,406
$
$
1,184,000
896,000
260,000
77,000
157,421
1,808,100
436,800
269,000
(4)
4,034,480 $
6,179,000
1,753,206
841,000
280,749
13,321,318
12,705,530
1,606,000
4,407,917
336,258
4,585,697
3,316,606
1,517,426
3,940,627
2,366,871
1,235,090
$
334,411,425
$
61,114,819 $
428,804,793 $
384,681,623
-101-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Column E (8) (9)
Gross Amount at Which Carried at 12/31/18
Column F
Site, Land
& Building
Improvements
Accumulated
Name
Location
Land
and Rental Homes
Total
Depreciation
$
Allentown
Arbor Estates
Auburn Estates
Birchwood Farms
Boardwalk
Broadmore Estates
Brookside
Brookview
Camelot Village
Candlewick Court
Carsons
Catalina
Cedarcrest Village
Chambersburg
Chelsea
Cinnamon Woods
City View
Clinton
Collingwood
Colonial Heights
Countryside Estates
Countryside Estates
Countryside Village
Cranberry
Crestview
Cross Keys
Crossroads Village
D&R
Dallas Mobile Home
Deer Meadows
Evergreen Estates
Evergreen Manor
Evergreen Village
Fairview Manor
Forest Creek
Forest Park
Fox Chapel Village
Frieden Manor
Green Acres
Gregory Courts
Hayden Heights
Heather Highlands
High View Acres
Highland
Highland Estates
Hillcrest Crossing
Hillcrest Estates
Hillside Estates
Holiday Village
Holiday Village
Holly Acres
Hudson Estates
Memphis, TN
Doylestown, PA
Orrville, OH
Birch Run, MI
Elkhart, IN
Goshen, IN
Berwick, PA
Greenfield Ctr, NY
Anderson, IN
Owosso, MI
Chambersburg, PA
Middletown, OH
Vineland, NJ
Chambersburg, PA
Sayre, PA
Conowingo, MD
Lewistown, PA
Tiffin, OH
Horseheads, NY
Wintersville, OH
Muncie, IN
Ravenna, OH
Columbia, TN
Cranberry Twp, PA
Athens, PA
Duncansville, PA
Mount Pleasant, PA
Clifton Park, NY
Toronto,OH
New Springfield,OH
Lodi,OH
Bedford, OH
Mantua, OH
Millville, NJ
Elkhart, IN
Cranberry Twp, PA
Cheswick, PA
Schuylkill Haven, PA
Chambersburg, PA
Honey Brook, PA
Dublin,OH
Inkerman, PA
Apollo, PA
Elkhart, IN
Kutztown, PA
Lower Burrell, PA
Marysville, OH
Greensburg,PA
Nashville, TN
Elkhart, IN
Erie, PA
Peninsula, OH
13,171,043 $
9,868,825
1,717,446
6,188,201
4,715,029
20,802,155
7,135,676
8,064,934
2,782,525
10,931,701
3,654,813
16,218,988
4,557,581
3,019,049
3,571,493
2,353,063
1,993,464
3,637,225
3,974,563
6,976,810
5,913,985
7,532,554
15,646,248
6,097,714
3,967,496
4,302,238
1,471,247
3,974,325
4,604,695
4,865,438
1,567,401
3,480,349
2,180,349
8,841,412
8,785,776
9,072,125
4,722,402
7,627,870
695,538
1,717,919
2,846,084
13,718,861
4,419,553
11,756,942
13,716,321
4,926,882
5,033,360
4,969,038
12,541,774
18,861,391
4,386,309
8,705,176
$
480,000
2,650,000
114,000
70,000
1,796,000
1,120,000
372,000
122,865
828,100
159,200
176,000
1,008,000
408,206
118,264
124,000
1,884,000
137,000
142,000
196,000
67,000
174,000
205,000
609,000
181,930
361,500
60,774
183,000
391,724
275,600
226,000
119,000
49,000
105,000
2,534,892
440,000
75,000
372,000
643,000
63,000
370,000
248,100
572,500
825,000
510,000
404,239
961,000
1,277,000
483,600
1,632,000
490,600
194,000
141,000
-102-
13,651,043
12,518,825
1,831,446
6,258,201
6,511,029
21,922,155
7,507,676
8,187,799
3,610,625
11,090,901
3,830,813
17,226,988
4,965,787
3,137,313
3,695,493
4,237,063
2,130,464
3,779,225
4,170,563
7,043,810
6,087,985
7,737,554
16,255,248
6,279,644
4,328,996
4,363,012
1,654,247
4,366,049
4,880,295
5,091,438
1,686,401
3,529,349
2,285,349
11,376,304
9,225,776
9,147,125
5,094,402
8,270,870
758,538
2,087,919
3,094,184
14,291,361
5,244,553
12,266,942
14,120,560
5,887,882
6,310,360
5,452,638
14,173,774
19,351,991
4,580,309
8,846,176
$
6,061,532
1,961,510
294,948
1,106,577
342,529
3,913,331
1,642,483
2,605,919
56,255
1,386,022
723,884
2,087,498
2,878,861
651,987
630,684
143,918
399,586
932,453
782,316
1,318,442
985,711
989,768
3,559,995
3,055,333
690,843
1,421,552
66,486
2,158,380
622,630
648,893
250,816
503,807
339,636
5,287,479
2,117,501
3,470,969
194,191
1,634,960
151,664
343,737
454,361
5,490,732
173,866
2,224,591
7,137,391
275,828
297,160
665,360
2,294,271
2,163,511
581,544
1,165,368
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Column E (8) (9)
Gross Amount at Which Carried at 12/31/18
Column F
Name
Location
Land
and Rental Homes
Total
Site, Land
& Building
Improvements
Huntingdon Pointe
Independence Park
Kinnebrook
Lake Sherman
Lakeview Meadows
Laurel Woods
Little Chippewa
Maple Manor
Marysville Estates
Meadowood
Meadows
Meadows of Perrysburg
Melrose Village
Melrose West
Memphis Blues
Monroe Valley
Moosic Heights
Mount Pleasant Village
Mountaintop
Oak Ridge
Oakwood Lake
Olmsted Falls
Oxford
Parke Place
Perrysburg Estates
Pikewood Manor
Pine Ridge/Pine Manor
Pine Valley
Pleasant View
Port Royal
Redbud Estates
River Valley
Rolling Hills Estates
Rostraver Estates
Sandy Valley
Shady Hills
Somerset/Whispering
Southern Terrace
Southwind
Spreading Oaks
Springfield Meadows
Suburban Estates
Summit Estates
Summit Village
Sunny Acres
Sunnyside
Trailmont
Twin Oaks
Twin Pines
Valley High
Valley Hills
Valley Stream
Valley View HB
$
Tarrs, PA
Clinton, PA
Monticello, NY
Navarre, OH
Lakeview, OH
Cresson, PA
Orrville, OH
Taylor, PA
Marysville, OH
New Middletown, OH
Nappanee, IN
Perrysburg, OH
Wooster, OH
Wooster, OH
Memphis, TN
Jonestown, PA
Avoca, PA
Mount Pleasant, PA
Narvon, PA
Elkhart, IN
Tunkhannock, PA
Olmsted Township, OH
West Grove, PA
Elkhart, IN
Perrysburg, OH
Elyria, OH
Carlisle, PA
Apollo, PA
Bloomsburg, PA
Belle Vernon, PA
Anderson, IN
Marion, OH
Carlisle, PA
Belle Veron, PA
Magnolia, OH
Nashville, TN
Somerset, PA
Columbiana, OH
Jackson, NJ
Athens, OH
Springfield, OH
Greensburg, PA
Ravenna, OH
Marion, IN
Somerset, PA
Eagleville, PA
Goodlettsville, TN
Olmsted Township, OH
Goshen, IN
Ruffs Dale, PA
Ravenna, OH
Mountaintop, PA
Honeybrook, PA
399,000
686,400
352,972
290,000
725,663
432,700
113,000
674,000
817,668
152,000
548,600
2,176,529
767,000
94,000
335,935
114,000
330,000
280,000
134,000
500,000
379,000
569,000
155,000
4,317,000
403,000
1,071,000
145,473
732,089
282,000
505,000
1,752,567
236,000
301,000
813,600
270,000
337,000
1,488,600
63,000
100,095
67,000
1,230,000
299,000
198,000
522,000
287,000
450,000
411,000
998,000
650,000
284,000
996,000
323,000
1,380,000
$
2,807,715
6,306,384
15,706,705
12,162,345
3,341,915
6,575,543
3,143,702
15,868,025
7,838,258
6,731,490
11,936,123
7,908,214
11,158,517
1,192,858
6,394,203
1,555,621
7,033,637
4,586,619
2,405,928
10,027,904
2,910,401
5,362,146
3,640,364
18,836,387
4,518,413
23,595,204
9,885,138
7,603,654
3,992,369
15,208,565
17,981,963
7,793,430
3,313,105
5,069,101
10,974,949
7,987,425
11,150,219
3,968,360
3,465,574
4,860,023
5,038,116
9,077,259
6,445,433
3,526,873
8,558,034
3,582,164
5,900,958
6,409,563
10,857,683
3,949,227
14,735,943
4,241,945
8,414,339
$ 2,408,715
5,619,984
15,353,733
11,872,345
2,616,252
6,142,843
3,030,702
15,194,025
7,020,590
6,579,490
11,387,523
5,731,685
10,391,517
1,098,858
6,058,268
1,441,621
6,703,637
4,306,619
2,271,928
9,527,904
2,531,401
4,793,146
3,485,364
14,519,387
4,115,413
22,524,204
9,739,665
6,871,565
3,710,369
14,703,565
16,229,396
7,557,430
3,012,105
4,255,501
10,704,949
7,650,425
9,661,619
3,905,360
3,365,479
4,793,023
3,808,116
8,778,259
6,247,433
3,004,873
8,271,034
3,132,164
5,489,958
5,411,563
10,207,683
3,665,227
13,739,943
3,918,945
7,034,339
-103-
Accumulated
Depreciation
$
185,100
737,027
5,423,713
4,309,552
185,129
2,273,762
391,452
3,595,183
433,409
1,235,754
1,216,687
17,592
1,642,618
200,866
1,578,693
304,954
1,430,738
180,327
492,869
2,227,654
637,805
894,819
2,110,778
1,002,185
15,486
77,936
3,425,498
2,913,131
846,983
6,960,757
337,387
3,620,481
759,610
603,977
4,932,016
1,637,067
3,504,553
853,752
2,044,387
1,847,482
264,955
2,183,939
822,706
70,085
2,137,312
610,935
1,215,962
1,117,091
1,999,012
529,572
2,043,849
501,340
1,508,178
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Column E (8) (9)
Gross Amount at Which Carried at 12/31/18
Column F
Site, Land
& Building
Improvements
Name
Location
Land
and Rental Homes
Total
Valley View I
Valley View II
Voyager Estates
Waterfalls
Wayside
Weatherly Estates
Wellington Estates
Wood Valley
Woodland Manor
Woodlawn
Woods Edge
Worthington Arms
Youngstown Estates
Ephrata, PA
Ephrata, PA
West Newton, PA
Hamburg, NY
Bellefontaine, OH
Lebanon, TN
Export, PA
Caledonia, OH
West Monroe, NY
Eatontown, NJ
West Lafayette, IN
Lewis Center, OH
Youngstown, NY
$
279,632
72,000
742,000
424,000
261,372
1,184,000
896,000
260,000
77,000
135,421
1,808,100
436,800
269,000
$ 5,602,735
1,752,555
5,738,125
7,650,817
1,591,420
8,442,397
6,515,258
6,338,903
4,157,606
1,820,175
17,261,945
15,072,401
2,841,090
$
5,882,367
1,824,555
6,480,125
8,074,817
1,852,792
9,626,397
7,411,258
6,598,903
4,234,606
1,955,596
19,070,045
15,509,201
3,110,090
Accumulated
Depreciation
$
1,225,431
408,958
669,843
3,949,840
122,455
3,317,864
305,556
2,971,523
1,166,127
868,194
1,970,822
1,782,822
406,123
$
65,935,310
$
808,665,925
$
874,601,235
$
182,598,732
-104-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Name
Location
Allentown
Arbor Estates
Auburn Estates
Birchwood Farms
Boardwalk
Broadmore Estates
Brookside
Brookview
Camelot Village
Candlewick Court
Carsons
Catalina
Cedarcrest Village
Chambersburg
Chelsea
Cinnamon Woods
City View
Clinton
Collingwood
Colonial Heights
Countryside Estates
Countryside Estates
Countryside Village
Cranberry
Crestview
Cross Keys
Crossroads Village
D&R
Dallas Mobile Home
Deer Meadows
Evergreen Estates
Evergreen Manor
Evergreen Village
Fairview Manor
Forest Creek
Forest Park
Fox Chapel Village
Frieden Manor
Green Acres
Gregory Courts
Hayden Heights
Heather Highlands
High View Acres
Highland
Highland Estates
Hillcrest Crossing
Hillcrest Estates
Hillside Estates
Holiday Village
Holiday Village
Holly Acres
Hudson Estates
Huntingdon Pointe
Memphis, TN
Doylestown, PA
Orrville, OH
Birch Run, MI
Elkhart, IN
Goshen, IN
Berwick, PA
Greenfield Ctr, NY
Anderson, IN
Owosso, MI
Chambersburg, PA
Middletown, OH
Vineland, NJ
Chambersburg, PA
Sayre, PA
Conowingo, MD
Lewistown, PA
Tiffin, OH
Horseheads, NY
Wintersville, OH
Muncie, IN
Ravenna, OH
Columbia, TN
Cranberry Twp, PA
Athens, PA
Duncansville, PA
Mount Pleasant, PA
Clifton Park, NY
Toronto,OH
New Springfield,OH
Lodi,OH
Bedford, OH
Mantua, OH
Millville, NJ
Elkhart, IN
Cranberry Twp, PA
Cheswick, PA
Schuylkill Haven, PA
Chambersburg, PA
Honey Brook, PA
Dublin,OH
Inkerman, PA
Apollo, PA
Elkhart, IN
Kutztown, PA
Lower Burrell, PA
Marysville, OH
Greensburg,PA
Nashville, TN
Elkhart, IN
Erie, PA
Peninsula, OH
Tarrs, PA
Column G
Column H
Column I
Date
Acquired
Depreciable
Life
1986
2013
2013
2013
2017
2013
2010
1977
2018
2015
2012
2015
1986
2012
2012
2017
2011
2011
2012
2012
2012
2014
2011
1986
2012
1979
2017
1978
2014
2014
2014
2014
2014
1985
2013
1982
2017
2012
2012
2013
2014
1992
2017
2013
1979
2017
2017
2014
2013
2015
2015
2014
2015
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
Date of
Construction
prior to 1980
1959
1971/1985/1995
1976-1977
1995-1996
1950/1990
1973-1976
prior to 1970
1998
1975
1963
1968-1976
1973
1955
1972
2005
prior to 1980
1968/1987
1970
1972
1996
1972
1988/1992
1974
1964
1961
1955/2004
1972
1950-1957
1973
1965
1960
1960
prior to 1980
1996-1997
prior to 1980
1975
1969
1978
1970
1973
1970
1984
1969
1971
1971
1995
1980
1967
1966
1977/2007
1956
2000
-105-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Name
Location
Independence Park
Kinnebrook
Lake Sherman
Lakeview Meadows
Laurel Woods
Little Chippewa
Maple Manor
Marysville Estates
Meadowood
Meadows
Meadows of Perrysburg
Melrose Village
Melrose West
Memphis Blues
Monroe Valley
Moosic Heights
Mount Pleasant Village
Mountaintop
Oak Ridge
Oakwood Lake
Olmsted Falls
Oxford
Parke Place
Perrysburg Estates
Pikewood Manor
Pine Ridge/Pine Manor
Pine Valley
Pleasant View
Port Royal
Redbud Estates
River Valley
Rolling Hills Estates
Rostraver Estates
Sandy Valley
Shady Hills
Somerset/Whispering
Southern Terrace
Southwind
Spreading Oaks
Springfield Meadows
Suburban Estates
Summit Estates
Summit Village
Sunny Acres
Sunnyside
Trailmont
Twin Oaks
Twin Pines
Valley High
Valley Hills
Valley Stream
Valley View HB
Valley View I
Valley View II
Voyager Estates
Waterfalls
Clinton, PA
Monticello, NY
Navarre, OH
Lakeview, OH
Cresson, PA
Orrville, OH
Taylor, PA
Marysville, OH
New Middletown, OH
Nappanee, IN
Perrysburg, OH
Wooster, OH
Wooster, OH
Memphis, TN
Jonestown, PA
Avoca, PA
Mount Pleasant, PA
Narvon, PA
Elkhart, IN
Tunkhannock, PA
Olmsted Township, OH
West Grove, PA
Elkhart, IN
Perrysburg, OH
Elyria, OH
Carlisle, PA
Apollo, PA
Bloomsburg, PA
Belle Vernon, PA
Anderson, IN
Marion, OH
Carlisle, PA
Belle Veron, PA
Magnolia, OH
Nashville, TN
Somerset, PA
Columbiana, OH
Jackson, NJ
Athens, OH
Springfield, OH
Greensburg, PA
Ravenna, OH
Marion, IN
Somerset, PA
Eagleville, PA
Goodlettsville, TN
Olmsted Township, OH
Goshen, IN
Ruffs Dale, PA
Ravenna, OH
Mountaintop, PA
Honeybrook, PA
Ephrata, PA
Ephrata, PA
West Newton, PA
Hamburg, NY
Column G
Column H
Column I
Date
Acquired
Depreciable
Life
2014
1988
1987
2016
2001
2013
2010
2017
2012
2015
2018
2013
2013
1985
2012
2010
2017
2012
2013
2010
2012
1974
2017
2018
2018
1969
1995
2010
1983
2018
1986
2013
2014
1985
2011
2004
2012
1969
1996
2016
2010
2014
2018
2010
2013
2011
2012
2013
2014
2014
2015
2013
2012
2012
2015
1997
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
Date of
Construction
1987
1972
prior to 1980
1995
prior to 1980
1968
1972
1960s to 2015
1957
1965-1973
1998
1970-1978
1995
1955
1969
1972
1977-1986
1972
1990
1972
1953/1970
1971
1995-1996
1972
1962
1961
prior to 1980
1960's
1973
1966/1998/2003
1950
1972-1975
1970
prior to 1980
1954
prior to 1980
1983
1969
prior to 1980
1970
1968/1980
1969
2000
1970
1960
1964
1952/1997
1956/1990
1974
1960-1970
1970
1970
1961
1999
1968
prior to 1980
-106-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
Column A
Description
Name
Location
Wayside
Weatherly Estates
Wellington Estate
Wood Valley
Woodland Manor
Woodlawn
Woods Edge
Worthington Arms
Youngstown Estates
Bellefontaine, OH
Lebanon, TN
Export, PA
Caledonia, OH
West Monroe, NY
Eatontown, NJ
West Lafayette, IN
Lewis Center, OH
Youngstown, NY
Column G
Column H
Column I
Date of
Construction
Date
Acquired
1960’s
1997
1970/1996
prior to 1980
prior to 1980
1964
1974
1968
1963
2016
2006
2017
1996
2003
1978
2015
2015
2013
Depreciable
Life
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
5 to 27.5
-107-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2018
(1) Represents one mortgage note payable secured by thirteen properties.
(2) Represents one mortgage note payable secured by six properties.
(3) Represents one mortgage note payable secured by five properties.
(4) Represents one mortgage note payable secured by five properties.
(5) Represents one mortgage note payable secured by four properties.
(6) Represents one mortgage note payable secured by two properties.
(7) Represents one mortgage note payable secured by two properties.
(8) Reconciliation
Balance – Beginning of Year
$758,487,025
$636,576,955
$574,283,574
12/31/18
/----------FIXED ASSETS-----------/
12/31/17
12/31/16
Additions:
Acquisitions
Improvements
Total Additions
Deletions
58,730,264
61,102,376
119,832,640
59,308,067
65,458,396
124,766,463
7,276,356
56,417,927
63,694,283
(3,718,430)
(2,856,393)
(1,400,902)
Balance – End of Year
$874,601,235
$758,487,025
$636,576,955
/-----ACCUMULATED DEPRECIATION-----/
12/31/17
12/31/16
12/31/18
Balance – Beginning of Year
$153,591,917
$128,780,501
$107,453,972
Additions:
Depreciation
Total Additions
Deletions
335,356,545
335,356,545
25,307,453
25,307,453
21,625,264
21,625,264
(834,104)
(496,037)
(298,735)
Balance – End of Year
$182,598,732
$153,591,917
$128,780,501
(9)
The aggregate cost for Federal tax purposes approximates historical cost.
-108-
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
UMH PROPERTIES, INC.
BY: /s/Samuel A. Landy
SAMUEL A. LANDY
President, Chief Executive Officer and Director
(Principal Executive Officer)
BY: /s/Anna T. Chew
ANNA T. CHEW
Vice President, Chief Financial and Accounting Officer,
Treasurer and Director
(Principal Financial and Accounting Officer)
Dated: March 7, 2019
Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, this report has been duly signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/Eugene W. Landy
EUGENE W. LANDY
/s/Samuel A. Landy
SAMUEL A. LANDY
/s/Anna T. Chew
ANNA T. CHEW
/s/Jeffrey A. Carus
JEFFREY A. CARUS
/s/Matthew Hirsch
MATTHEW HIRSCH
/s/Michael P. Landy
MICHAEL P. LANDY
/s/Stuart Levy
STUART LEVY
/s/James E. Mitchell
JAMES E. MITCHELL
/s/Kenneth K. Quigley, Jr.
KENNETH K. QUIGLEY
/s/Stephen B. Wolgin
STEPHEN B. WOLGIN
Title
Date
Chairman of the Board
March 7, 2019
President, Chief Executive Officer
and Director
March 7, 2019
Vice President,
Chief Financial and Accounting
Officer, Treasurer and Director
Director
Director
Director
Director
Director
Director
Director
-109-
March 7, 2019
March 7, 2019
March 7, 2019
March 7, 2019
March 7, 2019
March 7, 2019
March 7, 2019
March 7, 2019
BOARD OF DIRECTORS
JEFFREY A. CARUS
Founder and Managing Partner of JAC Partners, LLC
ANNA T. CHEW
Vice President, Chief Financial and Accounting Officer
and Treasurer
MATTHEW I. HIRSCH
Attorney-At-Law
Law Office of Matthew I. Hirsch
EUGENE W. LANDY
Chairman of the Board
MICHAEL P. LANDY
President and Chief Executive Officer of
Monmouth Real Estate Investment Corporation
SAMUEL A. LANDY
President and Chief Executive Officer
STUART LEVY
Vice President of Real Estate Finance of
Helaba-Landesbank Hessen-Thüringen
JAMES E. MITCHELL
Attorney-At-Law
General Partner of Mitchell Portfolio Management, L.P.
General Partner of Mitchell Partners, L.P.
President of Mitchell Partners Capital Management, Inc.
KENNETH K. QUIGLEY, JR.
Attorney-At-Law
President of Curry College
STEPHEN B. WOLGIN
Managing Director of U.S. Real Estate Advisors, Inc.
OFFICERS & EXECUTIVE
MANAGEMENT
EUGENE W. LANDY
Chairman of the Board
SAMUEL A. LANDY
President and Chief Executive Officer
ANNA T. CHEW
Vice President, Chief Financial and Accounting Officer
and Treasurer
CRAIG KOSTER
General Counsel and Secretary
BRETT TAFT
Vice President
REGINA BEASLEY
Vice President
AYAL DREIFUSS
Vice President of Rental Division
CHRISTINE LINDSEY
Vice President of Sales
ROBERT VAN SCHUYVER
Vice President
JEFFREY WOLFE
Vice President of Operations
JEFFREY V. YORICK
Vice President of Engineering
KRISTIN LANGLEY
Controller
BRITTNEE SPERLING
Assistant Controller
NELLI MADDEN
Director of Investor Relations
DANIEL LANDY
Assistant to the President
CORPORATE INFORMATION
CORPORATE OFFICE
3499 Route 9 North, Freehold NJ 07728
TRANSFER AGENT & REGISTRAR
American Stock Transfer & Trust Company
6201 15th Avenue Brooklyn, NY 11219
COMMON STOCK LISTING
NYSE:UMH
INDEPENDENT AUDITORS
PKF O’Connor Davies, LLP
665 Fifth Avenue New York, NY 10022
WEBSITE ADDRESS
www.umh.reit
EMAIL ADDRESS
ir@umh.com
UMH PROPERTIES, INC.
Established in 1968
3499 Route 9 North | Freehold NJ 07728
www.umh.reit 732.577.9997 NYSE: UMH