UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended SeptemberJune 30, 20192020

[  ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to ___________

Commission File Number001-12690

UMH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Maryland22-1890929
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)identification number)

Juniper Business Plaza, 3499 Route 9 North, Suite 3-C, Freehold, NJ07728
(Address of Principal Executive Offices)0ffices)(Zip Code)

Registrant’s telephone number, including area code(732) (732) 577-9997

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $.10 par valueUMHNew York Stock Exchange
8.0% Series B Cumulative Redeemable Preferred Stock, $.10 par valueUMH PRBNew York Stock Exchange
6.75% Series C Cumulative Redeemable Preferred Stock, $.10 par valueUMH PRCNew York Stock Exchange
6.375% Series D Cumulative Redeemable Preferred Stock, $.10 par valueUMH PRDNew York Stock Exchange

NYSE 

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. Yes [X] ☒ 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).

Yes [X] ☒ No [  ]☐

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[  ]☐Accelerated filer[X]☒
Non-accelerated filer[  ]☐Smaller reporting company[  ]☐
Emerging growth company[  ]☐

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 [  ] ☐ No [X] ☒

Indicate the number of shares outstanding of each issuer’s class of common stock, as of the latest practicable date:

ClassOutstanding Common Shares as of NovemberAugust 1, 20192020
Common Stock, $.10 par value per share40,852,63641,341,656

 

 

 

UMH PROPERTIES, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBERJUNE 30, 20192020

Table of Contents

PART I - FINANCIAL INFORMATION
 
Item 1.Financial Statements
 
Consolidated Balance Sheets3
 
Consolidated Statements of Income (Loss)5
 
Consolidated Statements of Shareholders’ Equity7
 
Consolidated Statements of Cash Flows119
 
Notes To Consolidated Financial Statements1210
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations2724
Item 3.Quantitative and Qualitative Disclosures About Market Risk3835
Item 4.Controls and Procedures3835
PART II - OTHER INFORMATION36
 
Item 1.Legal Proceedings3936
Item 1A.Risk Factors3936
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds3936
Item 3.Defaults Upon Senior Securities3936
Item 4.Mine Safety Disclosures3936
Item 5.Other Information3936
Item 6.Exhibits40
Item 6.Exhibits37
SIGNATURES4138

2

 

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBERJUNE 30, 20192020 AND DECEMBER 31, 20182019

  September 30, 2019  December 31, 2018 
  (Unaudited)    
- ASSETS -        
         
Investment Property and Equipment        
Land $72,349,068  $68,154,110 
Site and Land Improvements  596,123,002   533,547,154 
Buildings and Improvements  26,229,356   25,156,183 
Rental Homes and Accessories  287,909,455   254,598,641 
Total Investment Property  982,610,881   881,456,088 
Equipment and Vehicles  20,497,633   18,791,688 
Total Investment Property and Equipment  1,003,108,514   900,247,776 
Accumulated Depreciation  (223,185,106)  (197,208,363)
Net Investment Property and Equipment  779,923,408   703,039,413 
         
Other Assets        
Cash and Cash Equivalents  11,111,055   7,433,470 
Marketable Securities at Fair Value  116,437,477   99,595,736 
Inventory of Manufactured Homes  30,515,698   23,703,322 
Notes and Other Receivables, net  37,270,024   31,493,555 
Prepaid Expenses and Other Assets  11,722,083   6,195,596 
Land Development Costs  23,172,483   9,441,025 
Total Other Assets  230,228,820   177,862,704 
         
TOTAL ASSETS $1,010,152,228  $880,902,117 

(in thousands except per share amounts)

  June 30, 2020  December 31, 2019 
  (Unaudited)    
- ASSETS -        
Investment Property and Equipment        
Land $72,575  $72,459 
Site and Land Improvements  626,574   618,041 
Buildings and Improvements  27,403   27,380 
Rental Homes and Accessories  323,641   297,401 
Total Investment Property  1,050,193   1,015,281 
Equipment and Vehicles  21,784   21,145 
Total Investment Property and Equipment  1,071,977   1,036,426 
Accumulated Depreciation  (252,436)  (232,783)
Net Investment Property and Equipment  819,541   803,643 
         
Other Assets        
Cash and Cash Equivalents  10,970   12,902 
Marketable Securities at Fair Value  91,694   116,186 
Inventory of Manufactured Homes  27,758   31,967 
Notes and Other Receivables, net  40,614   37,995 
Prepaid Expenses and Other Assets  13,205   10,762 
Land Development Costs  19,455   11,998 
Total Other Assets  203,696   221,810 
         
TOTAL ASSETS $1,023,237  $1,025,453 

See Accompanying Notes to Consolidated Financial Statements

3

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS – CONTINUED

AS OF SEPTEMBERJUNE 30, 20192020 AND DECEMBER 31, 20182019

  September 30, 2019  December 31, 2018 
  (Unaudited)    
- LIABILITIES AND SHAREHOLDERS’ EQUITY -        
         
LIABILITIES:        
Mortgages Payable, net of unamortized debt issuance costs $375,483,776  $331,093,063 
         
Other Liabilities:        
Accounts Payable  5,015,806   3,873,445 
Loans Payable, net of unamortized debt issuance costs  76,481,701   107,985,353 
Accrued Liabilities and Deposits  9,938,967   7,410,055 
Tenant Security Deposits  6,597,639   5,842,161 
Total Other Liabilities  98,034,113   125,111,014 
Total Liabilities  473,517,889   456,204,077 
         
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 September 30, 2019 and December 31, 2018		  95,030,000   95,030,000 
Series C – 6.75% Cumulative Redeemable Preferred Stock, par value $0.10 per share, 9,750,000 and 5,750,000 shares authorized, issued and outstanding as of September 30, 2019 and December 31, 2018, respectively  243,750,000   143,750,000 
Series D – 6.375% Cumulative Redeemable Preferred Stock, par value $0.10 per share, 2,300,000 shares authorized; 2,000,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018  50,000,000   50,000,000 
Common Stock - $0.10 par value per share; 123,363,800 and 111,363,800 shares authorized; 40,810,874 and 38,320,414 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively  4,081,087   3,832,041 
Excess Stock - $0.10 par value per share; 3,000,000 shares authorized; no shares issued or outstanding as of September 30, 2019 and December 31, 2018  -0-   -0- 
Additional Paid-In Capital  169,137,034   157,449,781 
Undistributed Income (Accumulated Deficit)  (25,363,782)  (25,363,782)
Total Shareholders’ Equity  536,634,339   424,698,040 
         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,010,152,228  $880,902,117 

(in thousands except per share amounts)

  June 30, 2020  December 31, 2019 
  (Unaudited)    
- LIABILITIES AND SHAREHOLDERS’ EQUITY -        
         
LIABILITIES:        
Mortgages Payable, net of unamortized debt issuance costs $369,715  $373,658 
         
Other Liabilities:        
Accounts Payable  4,287   4,572 
Loans Payable, net of unamortized debt issuance costs  66,050   83,686 
Accrued Liabilities and Deposits  11,396   10,575 
Tenant Security Deposits  7,059   6,623 
Total Other Liabilities  88,792   105,456 
Total Liabilities  458,507   479,114 
         
Commitments and Contingencies        
         
Shareholders’ Equity:        
Series B – 8.0% Cumulative Redeemable Preferred Stock, par value $0.10 per share; 4,000 shares authorized; 3,801 shares issued and outstanding as of June 30, 2020 and December 31, 2019  95,017   95,030 
Series C – 6.75% Cumulative Redeemable Preferred Stock, par value $0.10 per share, 13,750 shares authorized; 9,750 shares issued and outstanding as of June 30, 2020 and December 31, 2019  243,750   243,750 
Series D – 6.375% Cumulative Redeemable Preferred Stock, par value $0.10 per share, 6,000 shares authorized; 5,211 and 2,651 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively  130,267   66,268 
Common Stock - $0.10 par value per share; 143,664 and 123,664 shares authorized; 41,301 and 41,130 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively  4,130   4,113 
Excess Stock - $0.10 par value per share; 3,000 shares authorized; 0 shares issued or outstanding as of June 30, 2020 and December 31, 2019  0   0 
Additional Paid-In Capital  116,930   162,542 
Undistributed Income (Accumulated Deficit)  (25,364)  (25,364)
Total Shareholders’ Equity  564,730   546,339 
         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,023,237  $1,025,453 

See Accompanying Notes to Consolidated Financial Statements

4

 

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

FOR THE THREE AND NINESIX MONTHS ENDED

SEPTEMBERJUNE 30, 20192020 AND 20182019

(in thousands) 

 

 June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 
 THREE MONTHS ENDED NINE MONTHS ENDED  THREE MONTHS ENDED SIX MONTHS ENDED 
 September 30,
2019		 September 30,
2018		 September 30,
2019		 September 30,
2018		  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 
                  
INCOME:                                
Rental and Related Income $32,947,667  $28,728,078  $94,979,807  $84,236,326  $35,051  $31,388  $69,409  $62,032 
Sales of Manufactured Homes  4,381,223   4,719,036   13,866,552   11,105,302   5,033   5,842   8,248   9,485 
Total Income  37,328,890   33,447,114   108,846,359   95,341,628   40,084   37,230   77,657   71,517 
                                
EXPENSES:                                
Community Operating Expenses  15,771,602   13,288,715   45,885,560   38,758,711   15,438   14,970   30,946   30,114 
Cost of Sales of Manufactured Homes  3,271,260   3,512,705   10,117,068   8,406,701   3,617   4,257   6,018   6,846 
Selling Expenses  1,374,932   1,024,188   3,802,894   2,913,504   1,279   1,337   2,376   2,428 
General and Administrative Expenses  2,579,348   2,559,023   7,910,248   8,200,261   2,742   3,156   5,328   5,331 
Depreciation Expense  9,390,236   8,051,627   27,009,888   23,410,519   10,272   8,869   20,499   17,620 
Total Expenses  32,387,378   28,436,258   94,725,658   81,689,696   33,348   32,589   65,167   62,339 
                                
OTHER INCOME (EXPENSE):                                
Interest Income  650,767   563,549   1,787,390   1,569,955   691   622   1,408   1,137 
Dividend Income  1,858,831   2,704,255   5,734,390   7,603,575   1,555   1,939   3,298   3,876 
Gain on Sales of Marketable Securities, net  -0-   -0-   -0-   20,107 
Increase (Decrease) in Fair Value of Marketable Securities  9,234,252   (10,487,430)  15,477,833   (19,762,579)  13,411   (2,352)  (25,182)  6,244 
Other Income  170,593   134,761   423,639   334,740   166   133   329   253 
Interest Expense  (4,395,806)  (4,247,855)  (13,288,994)  (11,795,315)  (4,195)  (4,246)  (8,620)  (8,893)
Total Other Income (Expense)  7,518,637   (11,332,720)  10,134,258   (22,029,517)  11,628   (3,904)  (28,767)  2,617 
                                
Income (Loss) before Loss on Sales of Investment Property and Equipment  12,460,149   (6,321,864)  24,254,959   (8,377,585)
Loss on Sales of Investment Property and Equipment  (27,341)  (27,479)  (36,055)  (108,111)
Income (Loss) before Gain (Loss) on Sales of Investment Property and Equipment  18,364   737   (16,277)  11,795 
Gain (Loss) on Sales of Investment Property and Equipment  (39)  12   (146)  (9)
Net Income (Loss)  12,432,808   (6,349,343)  24,218,904   (8,485,696)  18,325   749   (16,423)  11,786 
Less: Preferred Dividends  6,810,756   5,123,257   18,219,769   15,192,687   (8,090)  (6,286)  (16,180)  (11,409)
Net Income (Loss) Attributable to Common Shareholders $5,622,052  $(11,472,600) $5,999,135  $(23,678,383) $10,235  $(5,537) $(32,603) $377 

See Accompanying Notes to Consolidated Financial Statements

5

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) – CONTINUED (UNAUDITED)

FOR THE THREE AND NINESIX MONTHS ENDED

SEPTEMBERJUNE 30, 20192020 AND 20182019

  THREE MONTHS ENDED  NINE MONTHS ENDED 
  September 30,
2019		  September 30,
2018		  September 30,
2019		  September 30,
2018		 
             
Basic and Diluted Income (Loss) Per Share:                
                 
Net Income (Loss) $0.31  $(0.17) $0.61  $(0.23)
Less: Preferred Dividends  0.17   0.14   0.46   0.42 
Net Income (Loss) Attributable to Common Shareholders $0.14  $(0.31) $0.15  $(0.65)
                 
Weighted Average Common Shares Outstanding:                
                 
Basic  40,513,150   37,151,432   39,591,565   36,542,855 
Diluted  40,753,553   37,151,432   39,829,716   36,542,855 

(in thousands except per share amounts) 

  June 30, 2020  June 30, 2019  June 30, 2020  June 30, 2019 
  THREE MONTHS ENDED  SIX MONTHS ENDED 
  June 30, 2020  June 30, 2019  June 30, 2020  June 30, 2019 
             
Basic Income (Loss) Per Share:                
                 
Net Income (Loss) $0.44  $0.01  $(0.40) $0.31 
Less: Preferred Dividends  0.19   0.16   0.39   0.29 
Net Income (Loss) Attributable to Common Shareholders $0.25  $(0.15) $(0.79) $0.02 
                 
Diluted Income (Loss) Per Share:                
                 
Net Income (Loss) $0.44  $0.01  $(0.40) $0.30 
Less: Preferred Dividends  0.19   0.16   0.39   0.29 
Net Income (Loss) Attributable to Common Shareholders $0.25  $(0.15) $(0.79) $0.01 
                 
Weighted Average Common Shares Outstanding:                
                 
Basic  41,210   39,649   41,195   39,145 
Diluted  41,526   39,649   41,195   39,390 

See Accompanying Notes to Consolidated Financial Statements

6

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND NINESIX MONTHS ENDED

SEPTEMBERJUNE 30, 20192020 AND 20182019

  Common Stock  Preferred  Preferred 
  Issued and Outstanding  Stock  Stock 
  Number  Amount  Series B  Series C 
             
Balance December 31, 2018  38,320,414  $3,832,041  $95,030,000  $143,750,000 
                 
Common Stock Issued with the DRIP  836,847   83,685   -0-   -0- 
Common Stock Issued through Restricted/Unrestricted Stock Awards  1,000   100   -0-   -0- 
Common Stock Issued through Stock Options  -0-   -0-   -0-   -0- 
Preferred Stock Issued through Underwritten Registered Public Offering, net  -0-   -0-   -0-   -0- 
Distributions  -0-   -0-   -0-   -0- 
Stock Compensation Expense  -0-   -0-   -0-   -0- 
Net Income (Loss)  -0-   -0-   -0-   -0- 
                 
Balance March 31, 2019  39,158,261   3,915,826   95,030,000   143,750,000 
                 
Common Stock Issued with the DRIP  834,258   83,426   -0-   -0- 
Common Stock Issued through Restricted/Unrestricted Stock Awards  119,600   11,960   -0-   -0- 
Common Stock Issued through Stock Options  42,000   4,200   -0-   -0- 
Preferred Stock Issued through Underwritten Registered Public Offering, net  -0-   -0-   -0-   100,000,000 
Distributions  -0-   -0-   -0-   -0- 
Stock Compensation Expense  -0-   -0-   -0-   -0- 
Net Income (Loss)  -0-   -0-   -0-   -0- 
                 
Balance June 30, 2019  40,154,119   4,015,412   95,030,000   243,750,000 
                 
Common Stock Issued with the DRIP  644,755   64,475   -0-   -0- 
Common Stock Issued through Stock Options  32,000   3,200   -0-   -0- 
Repurchase of Common Stock  (20,000)  (2,000)  -0-   -0- 
Distributions  -0-   -0-   -0-   -0- 
Stock Compensation Expense  -0-   -0-   -0-   -0- 
Net Income (Loss)  -0-   -0-   -0-   -0- 
                 
Balance September 30, 2019  40,810,874  $4,081,087  $95,030,000  $243,750,000 

(in thousands) 

  Number  Amount  Series B  Series C 
  Common Stock  Preferred  Preferred 
  Issued and Outstanding  Stock  Stock 
  Number  Amount  Series B  Series C 
             
Balance December 31, 2019  41,130  $4,113  $95,030  $243,750 
                 
Common Stock Issued with the DRIP*  133   13   0   0 
Common Stock Issued through Restricted Stock Awards  26   3   0   0 
Common Stock Issued through Stock Options  29   3   0   0 
Repurchase of Preferred Stock  0   0   (13)  0 
Repurchase of Common Stock  (152)  (15)  0   0 
Preferred Stock Issued in connection with At-The-Market Offerings, net  0   0   0   0 
Preferred Stock Issued through Underwritten Registered Public Offering, net                
Distributions  0   0   0   0 
Stock Compensation Expense  0   0   0   0 
Net Loss  0   0   0   0 
                 
Balance March 31, 2020  41,166   4,117   95,017   243,750 
Balance March 31, 2020  41,166   4,117   95,017   243,750 
Common Stock Issued with the DRIP*  157   15   0   0 
Repurchase of Common Stock  (22)  (2)  0   0 
Distributions  0   0   0   0 
Stock Compensation Expense  0   0   0   0 
Net Income (Loss)  0   0   0   0 
                 
Balance June 30, 2020  41,301  $4,130  $95,017  $243,750 
                 
Balance December 31, 2018  38,320  $3,832  $95,030  $143,750 
                 
Common Stock Issued with the DRIP*  837   84   0   0 
Common Stock Issued through Restricted Stock Awards  1   0   0   0 
Distributions  0   0   0   0 
Stock Compensation Expense  0   0   0   0 
Net Income  0   0   0   0 
                 
Balance March 31, 2019  39,158   3,916   95,030   143,750 
Balance March 31, 2019  39,158   3,916   95,030   143,750 
Common Stock Issued with the DRIP*  834   83   0   0 
Common Stock Issued through Restricted Stock Awards  120   12   0   0 
Common Stock Issued through Stock Options  42   4   0   0 
Preferred Stock Issued through Underwritten Registered Public Offering, net  0   0   0   100,000 
Distributions  0   0   0   0 
Stock Compensation Expense  0   0   0   0 
Net Income  0   0   0   0 
                 
Balance June 30, 2019  40,154  $4,015  $95,030  $243,750 

See Accompanying Notes to Consolidated Financial Statements

 

7

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – CONTINUED (UNAUDITED)

FOR THE THREE AND NINESIX MONTHS ENDED

SEPTEMBERJUNE 30, 20192020 AND 20182019

  Common Stock  Preferred  Preferred 
  Issued and Outstanding  Stock  Stock 
  Number  Amount  Series B  Series C 
             
Balance December 31, 2017  35,488,068  $3,548,807  $95,030,000  $143,750,000 
                 

Unrealized Net Holding Gain on Securities Available for Sale, Net of Reclassification Adjustment

  -0-   -0-   -0-   -0- 
Common Stock Issued with the DRIP  809,076   80,907   -0-   -0- 
Common Stock Issued through Restricted Stock Awards  2,000   200   -0-   -0- 
Common Stock Issued through Stock Options  12,000   1,200   -0-   -0- 
Preferred Stock Issued through Underwritten Registered Public Offering, net  -0-   -0-   -0-   -0- 
Distributions  -0-   -0-   -0-   -0- 
Stock Compensation Expense  -0-   -0-   -0-   -0- 
Net Income (Loss)  -0-   -0-   -0-   -0- 
                 
Balance March 31, 2018  36,311,144   3,631,114   95,030,000   143,750,000 
                 
Unrealized Net Holding Gain on Securities Available for Sale, Net of Reclassification Adjustment  -0-   -0-   -0-   -0- 
Common Stock Issued with the DRIP  472,825   47,283   -0-   -0- 
Common Stock Issued through Restricted Stock Awards  46,000   4,600   -0-   -0- 
Common Stock Issued through Stock Options  67,000   6,700   -0-   -0- 
Distributions  -0-   -0-   -0-   -0- 
Stock Compensation Expense  -0-   -0-   -0-   -0- 
Net Income (Loss)  -0-   -0-   -0-   -0- 
                 
Balance June 30, 2018  36,896,969   3,689,697   95,030,000   143,750,000 
                 
Unrealized Net Holding Gain on Securities Available for Sale, Net of Reclassification Adjustment  -0-   -0-   -0-   -0- 
Common Stock Issued with the DRIP  517,571   51,757   -0-   -0- 
Common Stock Issued through Restricted Stock Awards  1,000   100   -0-   -0- 
Common Stock Issued through Stock Options  50,500   5,050   -0-   -0- 
Distributions  -0-   -0-   -0-   -0- 
Stock Compensation Expense  -0-   -0-   -0-   -0- 
Net Income (Loss)  -0-   -0-   -0-   -0- 
                 
Balance September 30, 2018  37,466,040  $3,746,604  $95,030,000  $143,750,000 

(in thousands)

  Series D  Capital  (Deficit)  Equity 
  

 

Preferred

Stock

  

 

Additional

Paid-In

  

Undistributed

Income

(Accumulated

  Total
Shareholders’		 
  Series D  Capital  Deficit)  Equity 
             
Balance December 31, 2019 $66,268  $162,542  $(25,364) $546,339 
                 
Common Stock Issued with the DRIP*  0   1,588   0   1,601 
Common Stock Issued through Restricted Stock Awards  0   (3)  0   0 
Common Stock Issued through Stock Options  0   303   0   306 
Repurchase of Preferred Stock  0   1   0   (12)
Repurchase of Common Stock  0   (1,589)  0   (1,604)
Preferred Stock Issued in connection with At-The-Market Offerings, net  63,999   (867)  0   63,132 
Preferred Stock Issued through Underwritten Registered Public Offering, net                
Distributions  0   (50,255)  34,748   (15,507)
Stock Compensation Expense  0   574   0   574 
Net Loss  0   0   (34,748)  (34,748)
                 
Balance March 31, 2020  130,267   112,294   (25,364)  560,081 
Balance March 31, 2020  130,267   112,294   (25,364)  560,081 
Common Stock Issued with the DRIP*  0   1,728   0   1,743 
Repurchase of Common Stock  0   (223)  0   (225)
Distributions  0   2,818   (18,325)  (15,507)
Stock Compensation Expense  0   313   0   313 
Net Income (Loss)  0   0   18,325   18,325 
                 
Balance June 30, 2020 $130,267  $116,930  $(25,364) $564,730 
                 
Balance December 31, 2018 $50,000  $157,450  $(25,364) $424,698 
                 
Common Stock Issued with the DRIP*  0   10,587   0   10,671 
Common Stock Issued through Restricted Stock Awards  0   0   0   0 
Distributions  0   (1,066)  (11,037)  (12,103)
Stock Compensation Expense  0   391   0   391 
Net Income  0   0   11,037   11,037 
                 
Balance March 31, 2019  50,000   167,362   (25,364)  434,694 
Balance March 31, 2019  50,000   167,362   (25,364)  434,694 
Common Stock Issued with the DRIP*  0   10,641   0   10,724 
Common Stock Issued through Restricted Stock Awards  0   (12)  0   0 
Common Stock Issued through Stock Options  0   431   0   435 
Preferred Stock Issued through Underwritten Registered Public Offering, net  0   (3,312)  0   96,688 
Distributions  0   (13,221)  (749)  (13,970)
Stock Compensation Expense  0   668   0   668 
Net Income (Loss)  0   0   749   749 
                 
Balance June 30, 2019 $50,000  $162,557  $(25,364) $529,988 

Undistributed Income (Accumulated Deficit) [Member]

See Accompanying Notes to Consolidated Financial Statements

8

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – CONTINUEDCASH FLOWS (UNAUDITED)

FOR THE THREESIX MONTHS ENDED

JUNE 30, 2020 AND NINE MONTHS ENDED2019

SEPTEMBER 30, 2019 AND 2018(in thousands)  

  June 30, 2020  June 30, 2019 
  SIX MONTHS ENDED 
  June 30, 2020  June 30, 2019 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income (Loss) $(16,423) $11,786 
Non-Cash items included in Net Income (Loss):        
Depreciation  20,499   17,620 
Amortization of Financing Costs  410   365 
Stock Compensation Expense  887   1,059 
Provision for Uncollectible Notes and Other Receivables  740   623 
(Increase) Decrease in Fair Value of Marketable Securities  25,182   (6,244)
Loss on Sales of Investment Property and Equipment  146   9 
Changes in Operating Assets and Liabilities:        
Inventory of Manufactured Homes  4,209   (4,586)
Notes and Other Receivables  (3,359)  (4,551)
Prepaid Expenses and Other Assets  (2,270)  (6,273)
Accounts Payable  (285)  459 
Accrued Liabilities and Deposits  820   1,109 
Tenant Security Deposits  436   273 
Net Cash Provided by Operating Activities  30,992   11,649 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of Investment Property and Equipment  (37,666)  (27,326)
Proceeds from Sales of Investment Property and Equipment  1,124   1,400 
Additions to Land Development Costs  (7,457)  (7,604)
Purchase of Marketable Securities  (690)  (934)
Net Cash Used in Investing Activities  (44,689)  (34,464)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Net Payments on Short Term Borrowings  (17,733)  (69,330)
Principal Payments of Mortgages  (4,256)  (3,766)
Financing Costs on Debt  0   (15)
Proceeds from At-The-Market Preferred Equity Program, net of offering costs  63,132   0 
Proceeds from Issuance of Preferred Stock, net of offering costs  0   96,688 
Proceeds from Issuance of Common Stock in the DRIP, net of Dividend Reinvestments reinvestments  1,670   17,705 
Repurchase of Preferred Stock, net  (12)  0 
Repurchase of Common Stock, net  (1,830)  0 
Proceeds from Exercise of Stock Options  306   435 
Preferred Dividends Paid  (16,180)  (11,934)
Common Dividends Paid, net of Dividend Reinvestments  (13,159)  (10,449)
Net Cash Provided by Financing Activities  11,938   19,334 
         
Net Decrease in Cash, Cash Equivalents and Restricted Cash  (1,759)  (3,481)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period  18,996   12,777 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

AT END OF PERIOD

 $17,237  $9,296 

  

Preferred

Stock

  

Additional

Paid-In

  

Accumulated

Other

Comprehensive

  

Undistributed

Income

(Accumulated

  Total Shareholders’ 
  Series D  Capital  Income (Loss)  Deficit)  Equity 
                
Balance December 31, 2018 $50,000,000  $157,449,781  $            -0-  $(25,363,782) $424,698,040 
                     
Common Stock Issued with the DRIP  -0-   10,588,019   -0-   -0-   10,671,704 
Common Stock Issued through Restricted Stock Awards  -0-   (100)  -0-   -0-   -0- 
Common Stock Issued through Stock Options  -0-   -0-   -0-   -0-   -0- 
Preferred Stock Issued through Underwritten Registered Public Offering, net  -0-   -0-   -0-   -0-   -0- 
Distributions  -0-   (1,065,916)  -0-   (11,037,393)  (12,103,309)
Stock Compensation Expense  -0-   390,683   -0-   -0-   390,683 
Net Income (Loss)  -0-   -0-   -0-   11,037,393   11,037,393 
                     
Balance March 31, 2019  50,000,000   167,362,467   -0-   (25,363,782)  434,694,511 
                     
Common Stock Issued with the DRIP  -0-   10,640,131   -0-   -0-   10,723,557 
Common Stock Issued through Restricted Stock Awards  -0-   (11,960)  -0-   -0-   -0- 
Common Stock Issued through Stock Options  -0-   430,460   -0-   -0-   434,660 
Preferred Stock Issued through Underwritten Registered Public Offering, net  -0-   (3,311,782)  -0-   -0-   96,688,218 
Distributions  -0-   (13,221,385)  -0-   (748,703)  (13,970,088)
Stock Compensation Expense  -0-   668,190   -0-   -0-   668,190 
Net Income (Loss)  -0-   -0-   -0-   748,703   748,703 
                     
Balance June 30, 2019  50,000,000   162,556,121   -0-   (25,363,782)  529,987,751 
                     
Common Stock Issued with the DRIP  -0-   7,756,949   -0-   -0-   7,821,424 
Common Stock Issued through Stock Options  -0-   326,120   -0-   -0-   329,320 
Repurchase of Common Stock   -0-   (235,314)  -0-   -0-   (237,314)
Distributions  -0-   (1,699,679)  -0-   (12,432,808)  (14,132,487)
Stock Compensation Expense  -0-   432,837   -0-   -0-   432,837 
Net Income (Loss)  -0-   -0-   -0-   12,432,808   12,432,808 
                     
Balance September 30, 2019 $50,000,000  $169,137,034  $-0-  $(25,363,782) $536,634,339 

See Accompanying Notes to Consolidated Financial Statements

9

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – CONTINUED (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2019 AND 2018

  Preferred
Stock		  Additional
Paid-In		  Accumulated
Other
Comprehensive		  Undistributed
Income
(Accumulated		  Total Shareholders’ 
  Series D  Capital  Income (Loss)  Deficit)  Equity 
                
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  -0-   -0-   (11,519,582)  11,519,582   -0- 
Common Stock Issued with the DRIP  -0-   9,970,592   -0-   -0-   10,051,499 
Common Stock Issued through Restricted Stock Awards  -0-   (200)  -0-   -0-   -0- 
Common Stock Issued through Stock Options  -0-   132,720   -0-   -0-   133,920 
Preferred Stock Issued through Underwritten Registered Public Offering, net  50,000,000   (1,752,720)  -0-   -0-   48,247,280 
Distributions  -0-   (11,173,321)  -0-   -0-   (11,173,321)
Stock Compensation Expense  -0-   282,062   -0-   -0-   282,062 
Net Income (Loss)  -0-   -0-   -0-   (22,208,337)  (22,208,337)
                     
Balance March 31, 2018  50,000,000   165,494,001   -0-   (11,356,548)  446,548,567 
                     
Unrealized Net Holding Gain on Securities Available
for Sale, Net of Reclassification Adjustment		  -0-   -0-   -0-   -0-   -0- 
Common Stock Issued with the DRIP  -0-   6,309,047   -0-   -0-   6,356,330 
Common Stock Issued through Restricted Stock Awards  -0-   (4,600)  -0-   -0-   -0- 
Common Stock Issued through Stock Options  -0-   694,500   -0-   -0-   701,200 
Distributions  -0-   (11,723,764)  -0-   -0-   (11,723,764)
Stock Compensation Expense  -0-   571,492   -0-   -0-   571,492 
Net Income (Loss)  -0-   -0-   -0-   20,071,984   20,071,984 
                     
Balance June 30, 2018  50,000,000   161,340,676   -0-   8,715,436   462,525,809 
                     
Unrealized Net Holding Gain on Securities Available for Sale, Net of Reclassification Adjustment  -0-   -0-   -0-   -0-   -0- 
Common Stock Issued with the DRIP  -0-   7,757,624   -0-   -0-   7,809,381 
Common Stock Issued through Restricted Stock Awards  -0-   (100)  -0-   -0-   -0- 
Common Stock Issued through Stock Options  -0-   544,830   -0-   -0-   549,880 
Distributions  -0-   (8,782,440)  -0-   (3,033,886)  (11,816,326)
Stock Compensation Expense  -0-   394,168   -0-   -0-   394,168 
Net Income (Loss)  -0-   -0-   -0-   (6,349,343)  (6,349,343)
                     
Balance September 30, 2018 $50,000,000  $161,254,758  $-0-  $(667,793) $453,113,569 

See Accompanying Notes to Consolidated Financial Statements

10

UMH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2019 AND 2018

  NINE MONTHS ENDED 
  September 30, 2019  September 30, 2018 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income (Loss) $24,218,904  $(8,485,696)
Non-Cash items included in Net Income (Loss):        
Depreciation  27,009,888   23,410,519 
Amortization of Financing Costs  559,325   462,604 
Stock Compensation Expense  1,491,710   1,247,722 
Provision (Benefit) for Uncollectible Notes and Other Receivables  971,873   (835,102)
Gain on Sales of Marketable Securities, net  -0-   (20,107)
(Increase) Decrease in Fair Value of Marketable Securities  (15,477,833)  19,762,579 
Loss on Sales of Investment Property and Equipment  36,055   108,111 
Changes in Operating Assets and Liabilities:        
Inventory of Manufactured Homes  (6,812,376)  (7,521,803)
Notes and Other Receivables, net of Notes Acquired with Acquisitions  (6,748,342)  (3,280,881)
Prepaid Expenses and Other Assets  (3,814,046)  (1,995,025)
Accounts Payable  1,142,361   722,344 
Accrued Liabilities and Deposits  2,528,912   666,513 
Tenant Security Deposits  755,478   485,706 
Net Cash Provided by Operating Activities  25,861,909   24,727,484 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of Manufactured Home Communities, net of mortgages assumed  (37,308,285)  (24,549,398)
Purchase of Investment Property and Equipment  (49,343,862)  (38,562,274)
Proceeds from Sales of Investment Property and Equipment  2,129,383   1,956,785 
Additions to Land Development Costs  (13,731,458)  (8,504,424)
Purchase of Marketable Securities  (1,363,908)  (17,978,715)
Proceeds from Sales of Marketable Securities  -0-   268,675 
Net Cash Used in Investing Activities  (99,618,130)  (87,369,351)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from Mortgages, net of mortgages assumed  44,850,000   13,442,000 
Net (Payments) Proceeds on Short Term Borrowings  (31,576,000)  2,331,831 
Principal Payments of Mortgages  (19,566,703)  (5,094,625)
Financing Costs on Debt  (786,735)  (290,852)
Proceeds from Issuance of Preferred Stock, net of offering costs  96,688,218   48,247,280 
Proceeds from Issuance of Common Stock in the DRIP, net of Dividend Reinvestments  23,578,603   21,292,003 
Repurchase of Common Stock  (237,314)  -0- 
Proceeds from Exercise of Stock Options  763,980   1,385,000 
Preferred Dividends Paid  (18,744,771)  (14,927,062)
Common Dividends Paid, net of Dividend Reinvestments  (15,823,031)  (16,861,142)
Net Cash Provided by Financing Activities  79,146,247   49,524,433 
         
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash  5,390,026   (13,117,434)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period  12,777,411   27,891,249 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 $18,167,437  $14,773,815 

See Accompanying Notes to Consolidated Financial Statements

11

UMH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBERJUNE 30, 20192020 (UNAUDITED)

NOTE 1 – ORGANIZATION AND ACCOUNTING POLICIES

UMH Properties, Inc., a Maryland corporation, together with its subsidiaries (“we”, “our”, “us” or “the Company”) operates as a real estate investment trust (“REIT”) deriving its income primarily from real estate rental operations. The Company owns and operates 122 manufactured home communities containing approximately 23,00023,100 developed homesites as of SeptemberJune 30, 2019.2020. These communities are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan and Maryland. The Company, through its wholly-owned taxable subsidiary, UMH Sales and Finance, Inc. (“S&F”), conductsalso sells manufactured home saleshomes to residents and prospective residents in its 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%15% of its undepreciated assets. The consolidated financial statements of the Company include S&F and all of its other wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

On March 11, 2020, the World Health Organization declared COVID-19, a respiratory illness caused by the novel coronavirus, a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The Company’s 122 residential communities remain open and operational. The effects of the COVID-19 pandemic did not significantly impact the Company’s operating results for the first six months of 2020. However, the future effects of the evolving impact of the COVID-19 pandemic are uncertain.

The Company has elected to be taxed as a REIT under Sections 856-860 of the Internal Revenue Code (the “Code”) 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 is subject to franchise taxes in some of the states in which the Company owns property.

The interim Consolidated Financial Statements furnished herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) applicable to interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and ninesix months ended SeptemberJune 30, 20192020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018.2019.

10

Use of Estimates

In preparing the consolidated financial statements in accordance with U.S. 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 the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates and assumptions.

 

12

Reclassifications

Certain amounts in the financial statements for the prior periods have been reclassified to conform to the statement presentation for the current periods.

Derivative Instruments and Hedging Activities

In the normal course of business, the Company is exposed to financial market risks, including interest rate risk on its variable rate debt. The Company attempts 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 Company previously entered into various interest rate swap agreements that have had the effect of fixing interest rates relative to specific mortgage loans. As of SeptemberDecember 31, 2019 and June 30, 2019,2020, these agreements havehad expired and the Company does not have any interest rate swap agreements in effect.

Recently Adopted Accounting PronouncementsLeases

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 first presentation of changes in stockholders’ equity was included in the Form 10-Q for the quarter ended March 31, 2019.

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 is 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. 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, toWe account for those components as a single component if the non-lease components otherwise would be accounted forour leases 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.ASC 842, “Leases.” 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.

13

The Company adopted this standard effective January 1, 2019, and it did not have a material impact on the Company’s 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 electedThese leases are generally for one-year or month-to-month terms and renewable by mutual agreement from us and the lessor practical expedient to combine the lease and non-lease components. resident, or in some cases, as provided by jurisdictional statute.

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 are 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 SeptemberJune 30, 2019,2020, the right-of-use assets and corresponding lease liabilities of $2,750,245$3.8 million is included in Prepaid Expenses and Other Assets and Accrued Liabilities and Deposits on the Consolidated Balance Sheets.

11

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Future minimum lease payments under these leases over the remaining lease terms are as follows:follows (in thousands):

2019 $91,313 
   Jun. 30, 2020 
2020  369,135   $213 
2021  371,076    427 
2022  212,171    417 
2023  104,662    384 
2024   384 
Thereafter  7,954,333    8,432 
         
Total Lease Payments $9,102,690   $10,257 

The weighted average remaining lease term for these leases is 165.0144.4 years. The right of use assets and lease liabilities was calculated using an interest rate of 5%5%. 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.

In November 2016, the FASB issued ASU 2016-18 “Statement ofRestricted 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 were reported on the Consolidated Statements of Cash Flows as operating, investing or financing activities based on the nature of the underlying activity.

The following table reconciles beginning of period and end of period balances of cash, cash equivalents and restricted cash for the periods shown:shown (in thousands):

  9/30/19  12/31/18  9/30/18  12/31/17 
             
Cash and Cash Equivalents $11,111,055  $7,433,470  $8,879,883  $23,242,090 
Restricted Cash  7,056,382   5,343,941   5,893,932   4,649,159 
Cash, Cash Equivalents And Restricted Cash $18,167,437  $12,777,411  $14,773,815  $27,891,249 

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 ofSCHEDULE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

  6/30/20  12/31/19  6/30/19  12/31/18 
             
Cash and Cash Equivalents $10,970  $12,902  $3,725  $7,433 
Restricted Cash  6,267   6,094   5,571   5,344 
Cash, Cash Equivalents And Restricted Cash $17,237  $18,996  $9,296  $12,777 

Revenue

On 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.

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In May 2014, the FASB issuedCompany adopted 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,ASC 606, 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.

Our primary source of revenueRental and related income 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 842840 “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 842.840.

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Prior to the adoption of ASC 606,Revenue from sales of manufactured homes wereis recognized under ASC 605 “Revenue Recognition” since these homes are not permanent fixtures or improvements to the underlying real estate. Inin 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 generally 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.

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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.other miscellaneous income. This income is recognized when the transactions are completed and our performance obligations have been fulfilled.

As of September 30, 2019 and 2018, the Company had notes receivable of $35,370,466 and $28,094,814, 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 contracts with customers, we do not have material contract assets or liabilities that fall under the scope of ASC 606.

Other RecentRecently Adopted Accounting Pronouncements

In SeptemberJune 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. As of January 1, 2020, we adopted the fair value option for our notes receivable and there was not a material impact. As of June 30, 2020 and 2019, the Company had notes receivable of $38.3 million and $33.1 million, net the fair value adjustment of $0.8 million and $0.7 million, respectively. Notes receivable 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.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” which removes, modifies, and adds certain disclosure requirements related to fair value measurements in ASC 820. This guidance is effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within that year. The Company is currently evaluating the potential impactadopted this standard mayeffective with its financial statements for the quarter ended March 31, 2020, and it did not have a material impact on the consolidated financial statements.its fair value disclosures.

Other Recent Accounting Pronouncements

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.

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NOTE 2 – NET INCOME (LOSS) PER SHARE

Basic Net Income (Loss) per Share is calculated by dividing Net Income (Loss) by the weighted average shares outstanding for the period. Diluted Net Income (Loss) per Share is calculated by dividing Net Income (Loss) by the weighted average number of common shares outstanding, plusand when dilutive, the weighted average number ofpotential net shares that would be issued upon exercise of stock options pursuant to the treasury stock method. In periods with a net loss, the diluted loss per share equals the basic loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive.

For the threesix months ended SeptemberJune 30, 2019,2020, common stock equivalents resulting from employee stock options to purchase 1,068,600 shares of common stock amounted to 240,403 shares, which were included in the computation of Diluted Net Income (Loss) per Share. For the nine months ended September 30, 2019, common stock equivalents resulting from employee stock options to purchase 1,068,600 shares of common stock amounted to 238,151 shares, which were included in the computation of Diluted Net Income (Loss) per Share. For the three and nine months ended September 30, 2018, employee stock options to purchase 2,227,6003.3 million shares of common stock were excluded from the computation of Diluted Net Income (Loss) per Share as their effect would be anti-dilutive.

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NOTE 3 – INVESTMENT PROPERTY AND EQUIPMENT

Acquisitions

On July 3, 2019, For the Company acquired Friendly Village, located in Perrysburg, Ohio, for approximately $19,386,000. This all-age community contains a totalthree months ended June 30, 2020, common stock equivalents resulting from employee stock options to purchase 3.3 million shares of 824 developed homesites that are situated on approximately 101 total acres. At the date of acquisition, the average occupancy for this community was approximately 46%. In conjunction with this acquisition, the Company assumed a mortgage of approximately $7,300,000 on this property (See Note 5).

On July 30, 2019, the Company acquired two communities, New Colony and 51 Estates, located in Pennsylvania, for approximately $11,650,000. These communities contain a total of 285 developed homesites that are situated on approximately 60 acres. At the date of acquisition, the average occupancy for these communities was approximately 76%.

On August 27, 2019, the Company acquired Northtowne Meadows, located in Erie, Michigan, for approximately $25,201,000. This community contains a total of 386 developed homesites that are situated on approximately 85 total acres. At the date of acquisition, the average occupancy for this community was approximately 88%. In conjunction with this acquisition, the Company assumed a mortgage of approximately $12,100,000 on this property (See Note 5).

These acquisitions have been accounted for utilizing the acquisition method of accounting in accordance with ASC 805, Business Combinations, and accordingly, the results of the acquired assets arecommon stock amounted to 316,000 shares, which were included in the statementscomputation of income (loss)Diluted Net Income (Loss) per Share. For the three months ended June 30, 2019, common stock equivalents resulting from employee stock options to purchase 2.9 million shares of common stock were excluded from the datecomputation of acquisition. The following table summarizesDiluted Net Income (Loss) per Share as their effect would be anti-dilutive. For the estimated fair value of the assets acquired, including transaction costs of approximately $606,000, for the ninesix months ended SeptemberJune 30, 2019:

  At Acquisition Date 
Assets Acquired:    
Land $4,185,790 
Depreciable Property  52,529,669 
Notes Receivable and Other  127,286 
Total Assets Acquired $56,842,745 

See Note 12 for2019, common stock equivalents resulting from employee stock options to purchase 2.9 million shares of common stock amounted to 245,000 shares, which were included in the Unaudited Pro Forma Financial Information relating to these acquisitions.computation of Diluted Net Income (Loss) per Share.

NOTE 43 – MARKETABLE SECURITIES

The Company’s marketable securities consists primarily of marketable common and preferred stock of other REITs with a fair value of $116,437,477$91.7 million as of SeptemberJune 30, 2019.2020, which represents 7.2% of undepreciated assets. The Company generally limits its investment in marketable securities to no more than approximately 15%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.

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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 will be recorded to “Increase (Decrease) in Fair Value of Marketable Securities” on our Consolidated Statements of Income (Loss).

During the ninesix months ended SeptemberJune 30, 2019,2020, the Company made purchases of $1,363,908$690,000 in marketable securities. Of this amount, the Company made total purchases of 96,12954,000 common shares of Monmouth Real Estate Investment Corporation (“MREIC”), a related REIT, through MREIC’s Dividend Reinvestment and Stock Purchase Plan for a total cost of $1,263,079$637,000 or weighted average cost of $13.14$11.72 per share. The Company owned a total of 2,542,1822.6 million MREIC common shares as of SeptemberJune 30, 20192020 at a total cost of $23,555,487$24.6 million and a fair value of $36,632,846.$38.1 million.

As of SeptemberJune 30, 2019,2020, the Company had total net unrealized losses of $(24,677,981)$50.4 million in its REIT securities portfolio. For the three and ninesix months ended SeptemberJune 30, 2019,2020, the Company recorded a $9,234,252$13.4 million increase and a $15,477,833 increase,$25.2 million decrease, respectively, in the fair value of these marketable securities. The Company held thirteeneighteen securities that had unrealized losses as of SeptemberJune 30, 2019.2020. The Company normally holds REIT securities long-term and has the ability and intent to hold these securities to recovery.

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NOTE 54 – LOANS AND MORTGAGES PAYABLE

Unsecured Line of Credit

On November 29, 2018, 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 provided for an increase from $50$50 million in available borrowings to $75$75 million in available borrowings with a $50$50 million accordion feature, bringing the total potential availability up to $125$125 million, subject to certain conditions including obtaining commitments from additional lenders. The Amendment also extended 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 (“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%. As of SeptemberJune 30, 2019, $5,000,0002020, the amount outstanding under the Facility was outstanding on this Facility.$15 million and the interest rate was 1.68%.

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Loans Payable

Loans Payable includes unamortized debt issuance costs of $359,692$261,000 and $432,126$358,000 at SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively. The weighted average interest rate was 3.8%2.0% and 4.2%3.7% at SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively, not including the effect of unamortized debt issuance costs. At SeptemberJune 30, 2019, $40,606,8622020, $32.8 million was outstanding on the margin loan at an interest rate of 2.5%0.75%.

On AprilJune 30, 2019,2020, the Company expanded itsentered into an amended and restated revolving line of credit for the financing of homes, increasing total availability from $10 $15 million to $15 $20 million. Interest was reduced from prime plus 25 basis points to prime with a floor of 3.25%. The amendment also extended the maturity date from June 1, 2020 to June 1, 2022, with a one yearextension at the Bank’s option. As of June 30, 2020, $5 million was outstanding on the revolving line of credit at an interest rate of 3.25%.

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Mortgages Payable

The following is a summary of our mortgages payable as of SeptemberJune 30, 20192020 and December 31, 2018:2019 (in thousands):

  9/30/2019  12/31/2018 
  Amount  Rate  Amount  Rate 
             
Fixed rate mortgages before unamortized debt issuance costs $379,101,982   4.1%  334,411,425   4.3%
Unamortized debt issuance costs  (3,618,206)      (3,318,362)    
Mortgages, net of unamortized debt issuance costs $375,483,776   4.2% $331,093,063   4.3%

SUMMARY OF MORTGAGES PAYABLE

  6/30/2020  12/31/2019 
  Amount  Rate  Amount  Rate 
             
Fixed rate mortgages $372,788   4.14% $377,045   4.14%
Unamortized debt issuance costs  (3,073)      (3,387)    
Mortgages, net of unamortized debt issuance costs $369,715   4.17% $373,658   4.18%

As of SeptemberJune 30, 20192020 and December 31, 2018,2019, the weighted average loan maturity of mortgages payable was 6.25.5 years and 6.36.0 years, respectively.

On July 1, 2019, the Company obtained two Federal National Mortgage Association (“Fannie Mae”) mortgages totaling $38,775,000 through Wells Fargo Bank, N.A. (“Wells Fargo”) on Oxford Village, Southwind Village and Woodlawn Village. The interest rate on these mortgages are fixed at 3.41%. These mortgages mature on July 1, 2029, with principal repayments based on a 30-year amortization schedule. Proceeds from these mortgages were used to repay the existing Oxford Village and Southwind Village mortgages of approximately $11.5 million, which had a weighted average interest rate of 5.94%.

On July 3, 2019, the Company assumed a mortgage loan with a balance of approximately $7,300,000, in conjunction with its acquisition of Friendly Village. The interest rate on this mortgage is fixed at 4.6175%. This mortgage matures on May 6, 2023.

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On August 27, 2019, the Company assumed a mortgage loan with a balance of approximately $12,100,000, in conjunction with its acquisition of Northtowne Meadows. The interest rate on this mortgage is fixed at 4.45%. This mortgage matures on September 6, 2026.

On September 30, 2019, the Company obtained a $6,075,000 Fannie Mae mortgage through Wells Fargo on Twin Oaks I & II. The interest rate on this mortgage is fixed at 3.37%. This mortgage matures on October 1, 2029, with principal repayments based on a 30-year amortization schedule. Proceeds from this mortgage was used to repay the existing Twin Oaks I & II mortgage of approximately $2.3 million, which had an interest rate of 5.75%.

NOTE 65 - SHAREHOLDERS’ EQUITY

Common Stock

On September 16, 2019,June 15, 2020, the Company paid total cash dividends of $7,321,730$7.4 million or $0.18$0.18 per share to common shareholders of record as of the close of business on AugustMay 15, 2019,2020, of which $1,948,084$771,000 was reinvested in the Dividend Reinvestment and Stock Purchase Plan (“DRIP”). Total dividends paid to our common shareholders for the ninesix months ended SeptemberJune 30, 20192020 amounted to $21,461,113$14.8 million of which $5,638,082$1.7 million was reinvested. On October 3, 2019,July 1, 2020, the Company declared a dividend of $0.18$0.18 per share to be paid December 16, 2019September 15, 2020 to common shareholders of record as of the close of business on November 15, 2019.August 17, 2020.

During the ninesix months ended SeptemberJune 30, 2019, the2020, the Company received, including dividends reinvested of $5,638,082,$1.7 million, a total of $29,216,685$3.3 million from its DRIP. There were 2,315,860290,000 new shares issued under the DRIP during this period.

On August 14, 2019, the Company announced that it has discontinued granting waivers to the $1,000 monthly maximum for the purchase of shares for cash under its DRIP, which will result in less capital being raised through the DRIP going forward.

Issuer Purchases of Equity Securities

On January 15, 2019,2020, the Board of Directors reaffirmed its Shareour Common Stock Repurchase Program (the “Repurchase Program”) that authorizes the Companyus to purchaserepurchase up to $25,000,000$25 million in the aggregate of the Company’s common stock. Purchases under the Repurchase Program may be made 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. During the ninefirst six months ended September 30, 2019,of 2020, the Company repurchased 20,000 approximately 174,000 shares of common stock at an aggregate cost of $237,314,$1.8 million, or a weighted average price of $11.87 $10.50 per share. The last repurchase was made on May 14, 2020.

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8.0% Series B Cumulative Redeemable Preferred Stock

On September 16, 2019,June 15, 2020, the Company paid $1,900,600$1.9 million in dividends or $0.50$0.50 per share for the period from JuneMarch 1, 20192020 through AugustMay 31, 20192020 to holders of record as of the close of business on AugustMay 15, 20192020 of our 8.0%8.0% Series B Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00$25.00 per share (“Series B Preferred”Preferred Stock”). Dividends on our Series B Preferred Stock shares are cumulative and payable quarterly at an annual rate of $2.00$2.00 per share. Total dividends paid to our Series B Preferred Stock shareholders for the ninesix months ended SeptemberJune 30, 20192020 amounted to $5,701,800.$3.8 million.

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On October 3, 2019,July 1, 2020, the Company declareda dividend of $0.50$0.50 per share for the period from SeptemberJune 1, 20192020 through November 30, 2019August 31, 2020 to be paid on December 16, 2019September 15, 2020 to Series B Preferred Stock shareholders of record as of the close of business on November 15, 2019.August 17, 2020.

On March 13, 2020, the Board of Directors approved our Series B Preferred Stock Repurchase Program (the “Series B Repurchase Program”) that authorizes us to repurchase up to $5 million in the aggregate of the Company’s Series B Preferred Stock. Purchases under the Series B Repurchase Program may be made 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 Series B Repurchase Program does not require the Company to acquire any particular amount of Series B Preferred Stock and may be suspended, modified or discontinued at any time at the Company’s discretion without prior notice. During March 2020, the Company repurchased 531 shares of our Series B Preferred Stock for approximately $12,000.

 

6.75% Series C Cumulative Redeemable Preferred Stock

 

On April 29, 2019, the Company issued and sold a total of 4,000,000 shares, including as a result of the underwriters’ exercise in full of their overallotment option of 400,000 shares, of our 6.75% Series C Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00 per share (“Series C Preferred”) at an offering price of $25.00 per share in an underwritten registered public offering. The additional shares of Series C Preferred form a single series with, have the same terms as, and vote as a single class with, the 5,750,000 previously outstanding shares of Series C Preferred issued in July 2017 and rank on a parity with the Company’s outstanding 8.0% Series B Cumulative Redeemable Preferred Stock and its outstanding 6.375% Series D Cumulative Redeemable Preferred Stock. As of September 30, 2019, after giving effect to the offering, the Company had a total of 9,750,000 shares of Series C Preferred outstanding.

The Company received net proceeds from the sale of the 4,000,000 shares of Series C Preferred of approximately $96.7 million, after deducting the underwriting discount and other estimated offering expenses, and intends to use the proceeds for general corporate purposes, which may include 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.

In conjunction with the issuance of the Company’s Series C Preferred, on April 26, 2019 the Company filed with the Maryland State Department of Assessments and Taxation (the “Maryland SDAT”)June 15, 2020, an amendment to the Company’s charter to increase the authorized number of shares of the Company’s common stock by 16,000,000 shares. As a result of this amendment, the Company’s total authorized shares were increased from 126,413,800 shares (classified as 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) to 142,413,800 shares (classified as 127,363,800 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).

Immediately following this amendment, the Company filed with the Maryland SDAT Articles Supplementary reclassifying 4,000,000 shares of Common Stock as shares of Series C Preferred. After this amendment, the Company’s authorized stock consisted of 123,363,800 shares of Common Stock, 4,000,000 shares of Series B Preferred, 9,750,000 shares of Series C Preferred, 2,300,000 shares of Series D Preferred and 3,000,000 shares of excess stock (See Note 11).

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On September 16, 2019, the Company paid $4,113,281$4.1 million in dividends or $0.421875$0.421875 per share for the period from JuneMarch 1, 20192020 through AugustMay 31, 20192020 to holders of record as of the close of business on AugustMay 15, 20192020 of our 6.75% Series C Preferred.Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00 per share (“Series C Preferred Stock”). Dividends on our Series C Preferred Stock shares are cumulative and payable quarterly at an annual rate of $1.6875$1.6875 per share. Total dividends paid to our Series C Preferred Stock shareholders for the ninesix months ended SeptemberJune 30, 20192020 amounted to $10,652,344.$8.2 million.

On October 3, 2019,July 1, 2020, the Company declareda dividend of $0.421875$0.421875 per share for the period from SeptemberJune 1, 20192020 through November 30, 2019August 31, 2020 to be paid on December 16, 2019September 15, 2020 to Series C Preferred Stock shareholders of record as of the close of business on November 15, 2019.August 17, 2020.

 

6.375% Series D Cumulative Redeemable Preferred Stock

On September 16, 2019,June 15, 2020, the Company paid $796,876$2.1 million in dividends or $0.3984375$0.3984375 per share for the period from JuneMarch 1, 20192020 through AugustMay 31, 20192020 to holders of record as of the close of business on AugustMay 15, 20192020 of our 6.375%6.375% Series D Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00$25.00 per share (“Series D Preferred”Preferred Stock”). Dividends on our Series D Preferred Stock shares are cumulative and payable quarterly at an annual rate of $1.59375$1.59375 per share. Total dividends paid to our Series D Preferred Stock shareholders for the ninesix months ended SeptemberJune 30, 20192020 amounted to $2,390,628.$4.2 million.

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On October 3, 2019,July 1, 2020, the Company declareda dividend of $0.3984375$0.3984375 per share for the period from SeptemberJune 1, 20192020 through November 30, 2019August 31, 2020 to be paid on December 16, 2019September 15, 2020 to Series D Preferred Stock shareholders of record as of the close of business on NovemberAugust 17, 2020.

Common Stock At-The-Market Sales Program

On May 14, 2020, the Company filed with the State Department of Assessments and Taxation of the State of Maryland (the “Maryland SDAT”) an amendment to the Company’s charter to increase the Company’s authorized shares of common stock, par value $0.10 per share (“Common Stock”), by 20 million shares.

On June 30, 2020, the Company entered into an Equity Distribution Agreement (“Common ATM Program”) with BMO Capital Markets Corp., B. Riley FBR, Inc., Compass Point Research & Trading, LLC, D.A. Davidson & Co., Janney Montgomery Scott LLC, and J.P. Morgan Securities LLC, as distribution agents (the “Distribution Agents”) under which the Company may offer and sell shares of the Company’s Common Stock, having an aggregate sales price of up to $100 million from time to time through the Distribution Agents. Sales of the shares of Common Stock under the Common ATM Program, if any, will be in “at the market offerings” as defined in Rule 415 under the Securities Act, including, without limitation, sales made directly on or through the NYSE or on any other existing trading market for the Common Stock, as applicable, or to or through a market maker or any other method permitted by law, including, without limitation, negotiated transactions and block trades. Shares of Common Stock sold under the Common ATM Program are offered pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-238321), filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2019.2020, and declared effective on June 1, 2020 (the “2020 Registration Statement”), and the prospectus dated June 1, 2020 included in the 2020 Registration Statement and the related prospectus supplement dated June 30, 2020. The Company has not sold any shares under this program as of June 30, 2020.

Preferred Stock At-The-Market Sales Program

 

On October 21, 2019, the Company entered into a Preferred Stock At-The-Market Sales Program (“2019 Preferred ATM Program”) with B. Riley FBR, Inc. (“B. Riley”), as distribution agent, under which the Company may offer and sell shares of the Company’s Series C Preferred Stock and/or Series D Preferred Stock, having an aggregate sales price of up to $100,000,000 (See Note 11).

In conjunction with$100 million. Sales of shares under the 2019 Preferred ATM Program are “at the market offerings” as defined in Rule 415 under the Securities Act, including, without limitation, sales made directly on or through the NYSE, or on any other existing trading market for the Series C Preferred Stock or Series D Preferred Stock, as applicable, or to or through a market maker or any other method permitted by law, including, without limitation, negotiated transactions and block trades. The Company began selling shares under the 2019 Preferred ATM Program on October 21,22, 2019 and through June 30, 2020, 3.2 million shares of Series D Preferred Stock were sold at a weighted average price of $25.09 per share, generating gross proceeds of $80.5 million and net proceeds of $79.1 million, after offering expenses. Of these amounts, during the six months ended June 30 2020, we sold 2.6 million shares at a weighted average price of $25.06 per share, generating gross proceeds of $64.1 million and net proceeds after offering expenses of $63.1 million. As of June 30, 2020, $19.5 million in shares of Series C Preferred Stock and/or Series D Preferred Stock remained eligible for sale under the 2019 Preferred ATM Program.

On July 15, 2020, the Company filed with the Maryland SDAT an amendment to the Company’s charter to increase the authorized numberState Department of shares of the Company’s common stock by 8,000,000 shares. Immediately following this amendment, the Company filed with the Assessments and Taxation (“Maryland SDATSDAT”) Articles Supplementary reclassifying (i) 4,000,000 shares of the Company’s Common Stock as shares of Series C Preferred and (ii) 3,700,000designating 3.3 million shares of the Company’s Common Stock as shares of Series D Preferred (See Note 11)10).

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On July 22, 2020, the Company entered into a new Preferred Stock At-The-Market Sales Program (“New Preferred ATM Program”) with B. Riley, as distribution agent, under which the Company may offer and sell shares of the Company’s Series C Preferred Stock and/or Series D Preferred Stock, having an aggregate sales price of up to $100million. The New Preferred ATM Program replaced the 2019 Preferred ATM Program (See Note 10).

NOTE 76 – STOCK BASED COMPENSATION

The Company accounts for awards of 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 of $432,837$313,000 and $1,491,710$887,000 have been recognized for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, and $394,168$668,000 and $1,247,722$1.1 million have been recognized for the three and ninesix months ended SeptemberJune 30, 2018,2019, respectively.

On January 2, 2019,8, 2020, the Company awarded a total of 15,000 shares of restricted stock to three employees. The grant date fair value of these restricted stock grants was $233,000. These grants vest ratably over five years.

On January 15, 2020, the Company awarded a total of 11,000 shares of common stock to the members of our Board of Directors. The grant date fair value of these awards was $177,000.

On January 17, 2020, the Company granted options to purchase 60,00010,000 shares of common stock to one participant in the Company’s Amended and Restated 2013 Incentive Award Plan. The grant date fair value of these options amounted to $16,000. This grant vests ratably over three years.

On March 25, 2020, the Company granted options to purchase 690,000 shares of common stock to forty participants in the Company’s Amended and Restated 2013 Incentive Award Plan. The grant date fair value of these options amounted to $653,000. These grants vest ratably over five years. Compensation costs for grants issued to a participant who is of retirement age is recognized at the time of the grant.

On May 20, 2020, the Company granted options to purchase 15,000 shares of common stock to two participants in the Company’s Amended and Restated 2013 Incentive Award Plan. The grant date fair value of these options amounted to $95,332. These grants vest over one year.

On April 2, 2019, the Company awarded a total of 117,600 shares of restricted stock to Samuel A. Landy and Anna T. Chew, pursuant to their employment agreements. The grant date fair value of these restricted stock grants was $1,634,640.$17,000. These grants vest ratably over 5 years.five years.

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On April 2, 2019, the Company granted options to purchase 584,000 shares of common stock to forty participants in the Company’s Amended and Restated 2013 Incentive Award Plan. The grant date fair value of these options amounted to $1,012,293. These grants vest over one year. Compensation costs for grants issued to a participant who is of retirement age is recognized at the time of the grant.

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 during the ninesix months ended SeptemberJune 30, 20192020 and 2018:2019:

  2019  2018 
       
Dividend yield  5.13%  4.78%
Expected volatility  24.04%  25.82%
Risk-free interest rate  2.50%  2.74%
Expected lives  10   10 
Estimated forfeitures  -0-   -0- 

SCHEDULE OF FAIR VALUE OF OPTION GRANT OF WEIGHTED-AVERAGE ASSUMPTIONS

  2020  2019 
       
Dividend yield  5.33%  5.13%
Expected volatility  24.57%  24.04%
Risk-free interest rate  0.89%  2.50%
Expected lives  10   10 
Estimated forfeitures  0   0 

The weighted-average fair value of options granted during the ninesix months ended SeptemberJune 30, 2020 and 2019 was $0.96and 2018 was $1.72 and $2.06$1.72 per share, respectively.

During the ninesix months ended SeptemberJune 30, 2019, six2020, three participants exercised options to purchase a total of 74,00029,000 shares of common stock at a weighted-average exercise price of $10.32$10.55 per share for total proceeds of $763,980. $306,000. The aggregate intrinsic value of options exercised was $175,000.

As of SeptemberJune 30, 2019,2020, there were options outstanding to purchase 2,822,600 shares.3.3 million shares, with an aggregate intrinsic value of $2.7 million. There were 1,196,900455,000 shares available for grant under the Amended and Restated 2013 Incentive Award Plan. The aggregate intrinsic value of options outstanding as of September 30, 2019 was $4,729,040 and the aggregate intrinsic value of options exercised during the nine months ended September 30, 2019 was $214,480.

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NOTE 87 - FAIR VALUE MEASUREMENTS

In accordance with ASC 820-10, Fair Value Measurements and Disclosures, the Company measures certain financial assets and liabilities at fair value on a recurring basis, including marketable securities. The fair value of these financial assets and liabilities was determined using the following inputs at SeptemberJune 30, 20192020 and December 31, 2018:2019 (in thousands):

  Fair Value Measurements at Reporting Date Using 
     Quoted Prices  Significant    
     In Active  Other  Significant 
     Markets for  Observable  Unobservable 
     Identical Assets  Inputs  Inputs 
  Total  (Level 1)  (Level 2)  (Level 3) 
As of September 30, 2019:                
Marketable Securities - Preferred stock $3,891,465  $3,891,465  $-0-  $-0- 
Marketable Securities - Common stock  112,546,012   112,546,012   -0-   -0- 
Total $116,437,477  $116,437,477  $-0-  $-0- 
                 
As of December 31, 2018:                
Marketable Securities - Preferred stock $3,399,558  $3,399,558  $-0-  $-0- 
Marketable Securities - Common stock  96,196,178   96,196,178   -0-   -0- 
Total $99,595,736  $99,595,736  $-0-  $-0- 

SUMMARY OF FINANCIAL ASSETS AND LIABILITIES RECOGNIZED AT FAIR VALUE ON A RECURRING BASIS

  Fair Value Measurements at Reporting Date Using 
     Quoted Prices  Significant    
     In Active  Other  Significant 
     Markets for  Observable  Unobservable 
     Identical Assets  Inputs  Inputs 
  Total  (Level 1)  (Level 2)  (Level 3) 
As of June 30, 2020:                
Marketable Securities - Preferred stock $2,172  $2,172  $0  $0 
Marketable Securities - Common stock  89,522   89,522   0   0 
Total $91,694  $91,694  $0  $0 
                 
As of December 31, 2019:                
Marketable Securities - Preferred stock $3,516  $3,516  $0  $0 
Marketable Securities - Common stock  112,670   112,670   0   0 
Total $116,186  $116,186  $0  $0 

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In addition to the Company’s investments in marketable securities, the Company is required to disclose certain information about the 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 and traded in active markets and are therefore classified in Level 1 of the fair value hierarchy.

The fair value of Cash and Cash Equivalents and Notes Receivable approximates their current carrying amounts since all such items are short-term in nature. 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. As of SeptemberJune 30, 2019,2020, the fair value of Fixed Rate Mortgages Payable amounted to $386,282,094$383.5 million and the carrying value of Fixed Rate Mortgages Payable amounted to $379,101,982.$372.8 million.

NOTE 98 – CONTINGENCIES, COMMITMENTS AND OTHER MATTERS

From time to time, the Company may be subject to claims and litigation in the ordinary course of business. Management does not believe that any such claims or litigation will have a material adverse effect on the financial position or results of operations.

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On May 7, 2020, the Company entered into contracts to purchase two communities, one in New York and one in Pennsylvania, for a total purchase price of approximately $8.0 million. These all-age communities contain a total of 315 developed homesites with a weighted-average occupancy of 63%. The purchase of one community closed subsequent to quarter end (see Note 10) and the purchase of the remaining community is expected to close later in the third quarter of 2020.

The Company has an agreement with 21st MortgageCorporation (“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%80% to 95%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 SeptemberJune 30, 2019,2020, the total loan balance under this agreement was approximately $2.6 $2.3 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%55% to 100%100% of the amount under each such loan, subject to certain adjustments. As of SeptemberJune 30, 2019,2020, the total loan balance owed to 21st Mortgage with respect to homes in these acquired communities was approximately $2.6 $2.2 million. Although this agreement is still active,in effect, this program is not being utilized by the Company’s new customers as a source of financing.

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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 $23,696,000$29.2 million of loans that the Company acquired under the COP Program as of SeptemberJune 30, 2019.2020.

NOTE 109 - SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest during the ninesix months ended SeptemberJune 30, 2020 and 2019 was $8.8 million and 2018 was $13,667,710 and $11,881,714$9.2 million, respectively. Interest cost capitalized to Land Development was $1,017,304$547,000 and $532,640$614,000 for the ninesix months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively.

During the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, the Company had Dividend Reinvestments of $5,638,082$1.7 million and $2,925,207$3.7 million respectively, which required no cash transfers.

NOTE 1110 – 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.

Effective October 1, 2019,On July 15, 2020, the Company filed with the Maryland SDAT Articles Supplementary reclassifying and designating 3.3 million shares of the Company’s Common Stock as shares of Series D Preferred. Following the filing of the Articles Supplementary, the authorized capital stock of the Company consists of 140.4 million shares of Common Stock, 4 million shares of Series B Preferred Stock, 13.8 million shares of Series C Preferred Stock, 9.3 million shares of Series D Preferred Stock and 3 million shares of excess stock, par value $0.10per share.

On July 22, 2020, the Company entered into a new lease for its executive offices in Freehold,the New Jersey which combines the existing corporate office space with additional adjacent office space. This new lease extends our existing lease through April 30, 2027 and requires monthly lease payments of $23,098 through April 30, 2022 and $23,302 from May 1, 2022 through April 30, 2027. The Company is also responsible for its proportionate share of real estate taxes and common area maintenance. In conjunction with this new lease, the Company terminated the additional office space leases dated July 1, 2017 and February 14, 2018. 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 rents are no more than what the Company would pay for comparable space elsewhere.

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On October 21, 2019, the Company entered into anPreferred ATM Program with B. Riley, as distribution agent, under which the Company may offer and sell shares of the Company’s Series C Preferred Stock and/or Series D Preferred Stock, having an aggregate sales price of up to $100,000,000.$100 million. Sales of shares under the New Preferred ATM Program are “at the market offerings” as defined in Rule 415 under the Securities Act, including, without limitation, sales made directly on or through the NYSE, or on any other existing trading market for the Series C Preferred Stock or Series D Preferred Stock, as applicable, or to or through a market maker or any other method permitted by law, including, without limitation, negotiated transactions and block trades. We began selling shares under the ATM Program on October 22, 2019 and through October 30, 2019, 349,767 shares of our Series D Preferred were sold at a weighted average price of $25.32 per share, generating net proceeds of $8,714,713, after offering expenses.

In conjunction with the ATM Program, on October 21, 2019, 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 8,000,000 shares. As a result of this amendment, the Company’s total authorized shares were increased from 142,413,800 shares (classified as 123,363,800 shares of Common Stock, 4,000,000 shares of Series B Preferred, 9,750,000 sharesShares of Series C Preferred 2,300,000 shares ofStock and/or Series D Preferred and 3,000,000 shares of excess stock)Stock sold under the New Preferred ATM Program are offered pursuant to 150,413,800 shares (classified as 131,363,800 shares of Common Stock, 4,000,000 shares of Series B Preferred, 9,750,000 shares of Series C Preferred, 2,300,000 shares of Series D Preferred and 3,000,000 shares of excess stock).

Immediately following this amendment, the Company filed with the Maryland SDAT Articles Supplementary reclassifying and designating (i) 4,000,000 shares of the Company’s Common Stock as shares of Series C Preferred2020 Registration Statement and (ii) 3,700,000 shares ofare sold and issued pursuant to the Company’s Common Stock as shares of Series D Preferred. After giving effect toprospectus dated June 1, 2020 included in the filing of the Articles of Amendment2020 Registration Statement and the Articles Supplementary,related prospectus supplement dated July 22, 2020. The New Preferred ATM Program replaced the authorized capital stock of the Company consists of 150,413,800 shares, classified as 123,663,800 shares of Common Stock, 4,000,000 shares of Series B2019 Preferred 13,750,000 shares of Series C Preferred, 6,000,000 shares of Series D Preferred and 3,000,000 shares of excess stock.ATM Program.

On October 25, 2019,July 23, 2020, the Company drew down an additional $10,000,000$5 million on its unsecured revolving credit facility.

On October 25, 2019,July 24, 2020, the Company repaid its loan from Two River Community Bank. The balance outstanding atacquired Camelot Woods, located in Pennsylvania, for approximately $3.3 million. This community contains a total of 147 developed homesites that are situated on approximately 27 total acres. At the timedate of repaymentacquisition, the average occupancy for this community was approximately $3,631,000.56%.

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In October, the Company reduced the balance of its margin loan by approximately $10,000,000.

NOTE 1211 – PROFORMA FINANCIAL INFORMATION (UNAUDITED)

The following unaudited pro forma condensed financial information reflects the acquisitions during 20182019 and through September 30, 2019.July 24, 2020. 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 this period assuming that the acquisitions had occurred as of the first day of the applicable period, 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.future (in thousands).

SUMMARY OF PRO FORMA FINANCIAL INFORMATION

 Three Months Ended Nine Months Ended  Three Months Ended Six Months Ended 
 9/30/19 9/30/18 9/30/19 9/30/18  6/30/20 6/30/19 6/30/20 6/30/19 
                  
Rental and Related Income $33,450,000  $31,252,000  $98,404,000  $92,815,000  $35,145  $32,878  $69,597  $65,012 
Community Operating Expenses  15,913,000   14,323,000   46,965,000   47,060,000   15,476   15,636   31,021   31,446 
Net Income (Loss) Attributable to Common Shareholders  5,510,000   (11,759,000)  5,895,000   (29,411,000)  10,289   (5,600)  (32,503)  252 
Net Income (Loss) Attributable to Common Shareholders Per Share – Basic and Diluted $0.14  $(0.32) $0.15  $(0.80)
Net Income (Loss) Attributable to Common Shareholders Per Share – Basic $0.25  $(0.14) $(0.79) $0.01 
Net Income (Loss) Attributable to Common Shareholders Per Share –Diluted $0.25  $(0.14) $(0.79) $0.01 

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management’s DiscussionImpact of COVID-19

The following discussion is intended to provide certain information regarding the impact of the COVID-19 pandemic on our business and Analysismanagement’s efforts to respond to those impacts.

We continue to closely monitor our operations and government recommendations and have taken steps to make the safety, security and welfare of Financial Conditionour employees, their families and Resultsour residents a top priority.

We have complied with government “stay-at-home” orders and “social distancing” practices. We have implemented remote working arrangements for our non-essential employees. Our IT system and website allow for virtual tours of Operationsour homes for sale or rent, online execution of applications and lease agreements, online payment of rent, and other enhancements. We are experiencing high demand for our rental homes and fewer move-outs. We continue to maintain our communities and deliver essential services to our residents while following social distancing protocols. We have suspended the mailing of rent increase notifications in March and April which will delay these increases. These increases would have been effective May 1, 2020 and June 1, 2020. This affected May’s rental income by approximately $24,000 and June’s rental income by an additional $20,000. We have suspended eviction actions and have instituted deferred payment plans, as needed, to our residents who have experienced financial hardship related to COVID-19. Less than 100 residents (less than 1%) have executed these payment plans. Rent collections for April through July are at pre-pandemic levels. We have collected 95% of July’s rent compared to 95% of the same time last year. We anticipate many of our residents have or will receive unemployment benefits and/or economic stimulus payments under the Coronavirus Aid, Relief, and Economic Security (CARES) Act which will assist our residents with paying rent.

OverviewThe significance, extent and duration of the impact of COVID-19 remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time. We will continue to monitor these rapidly evolving developments and respond in the best interests of our employees, residents and shareholders. At this time, we believe that the fallout from COVID-19 will not have a material adverse effect on our operations.

Overview

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included elsewhere herein and in the Company’s annual report on Form 10-K for the year ended December 31, 2018.2019.

The Company is a self-administered, self-managed Real Estate Investment Trust (“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 homeowners. The Company also leases homes to residents and, through its taxable REIT subsidiary, UMH Sales and Finance, Inc. (“S&F”), sells and finances the sale of manufactured homes to qualified residents and prospective residents of our communities.communities and for placement on customers’ privately-owned land.

As of SeptemberJune 30, 2019,2020, the Company owned and operated 122 manufactured home communities containing approximately 23,00023,100 developed homesites.home sites. These communities are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan and Maryland. The Company acquired an additional community located in Pennsylvania in July 2020.

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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. The Company also invests in marketable securities of other REITs, which the Company generally limits to no more than approximately 15% of its undepreciated assets. As of June 30, 2020, the securities portfolio represented 7.2% of undepreciated assets.

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The Company believes that its capital structure, which allows for the ownership of assets using a balanced combination of equity obtained through the issuance of common stock, preferred stock and debt, will enhance shareholder returns as the properties appreciate over time.

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 investing in physical improvements, including adding rental homes onto otherwise vacant sites. This has resulted in increased occupancy rates and improved operating results. For the three months ended SeptemberJune 30, 2019,2020, total income increased 12%8% from the prior year period and Community Net Operating Income (“NOI”), as defined below, increased 11%19%. For the ninesix months ended SeptemberJune 30, 2019,2020, total income increased 14%9% from the prior year period and Community NOINet Operating Income (“NOI”), as defined below, increased 8%21%. Same property occupancy,NOI, which includes communities owned and operated as of January 1, 2018,2019, increased by 170 basis points to 84.0%14% for the six months ended June 30, 2020 over the prior year period. Same property NOI for the three months ended September 30, 2019 increased 6.0% over the prior year period.period driven by a 250 basis point increase in occupancy to 85.8%. We have been positioning ourselves for future growth and will continue to seek opportunistic investments. There is no assurance that the Company can continue to buyacquire existing manufactured home communities that meet the requirements of the business plan or that the demand for rental homes will continue in the future.

Sales of manufactured homes decreased 7% for13% during the threesix months ended SeptemberJune 30, 2019 as compared to2020 from the prior year period primarily due to timingthe impact of closingsCOVID-19 and a strong third quarter 2018. Forgovernmental stay-at-home orders and social distancing. We anticipate that sales will improve as the nine months ended September 30, 2019, sales increased 25% fromimpact of the prior year period.virus is reduced. Demand for quality affordable 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-salewhile inventory remains limited, a large share of housing demand will be looking at alternative forms of housing.is scarce. 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. 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 strong demand for rental homes. We have added an additional 768367 rental homes including 188 acquired through acquisitions, during the first ninesix months of 2019.2020. This brings the total number of rental homes to approximately 7,3007,800 rental homes, or 31.9%33.6% of total sites. Occupied rental homes represent approximately 35.5%38.0% of total occupied sites at quarter end. Occupancy in rental homes continues to be strong and is at 92.4%95.2% as of SeptemberJune 30, 2019.2020. 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. WeAlthough COVID-19 delayed our rental home purchases, we continue to anticipate adding a total of approximately 750 - 800 rental homes in 2019, not including those acquired through acquisitions.2020.

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During the nine months ended September 30, 2019, the Company acquired four all-age communities containing a total of 1,495 homesites on 246 acres for an aggregate purchase price of approximately $56,237,000.

The following is a summary of the communities acquired as of September 30, 2019:

Community Date of Acquisition  State  

Number of

Sites

  Purchase Price  Number of
Acres		  Occupancy at Acquisition 
                  
Friendly Village  July 3, 2019   OH   824  $19,386,000   101   46%
                         
Fifty-One Estates and New Colony  July 30, 2019   PA   285   11,650,000   60   76%
                         
Northtowne Meadows  August 27, 2019   MI   386   25,201,000   85   88%
                         
Total as of September 30, 2019          1,495  $56,237,000   246   63%

See PART I, Item 1 – Business in the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 for a more complete discussion of the economic and industry-wide factors relevant to the Company and the opportunities and challenges, and risks on which the Company is focused.

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Significant 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 accounting principles generally accepted in the United States of America (“U.S. 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.

On a regular basis, management evaluates our assumptions, judgments and estimates. Management believes there have been no material changes to the items that we disclosed as our significant accounting policies and estimates under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.

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 NOI, Funds from Operations Attributable to Common Shareholders (“FFO”), and Normalized Funds from Operations Attributable to Common Shareholders (“Normalized FFO”).

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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.

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The Company’s Community NOI for the three and ninesix months ended SeptemberJune 30, 20192020 and 20182019 is calculated as follows:follows (in thousands):

 Three Months Ended Nine Months Ended  Three Months Ended Six Months Ended 
 9/30/19 9/30/18 9/30/19 9/30/18  6/30/20 6/30/19 6/30/20 6/30/19 
                  
Rental and Related Income $32,947,667  $28,728,078  $94,979,807  $84,236,326  $35,051  $31,388  $69,409  $62,032 
Less: Community Operating Expenses  15,771,602   13,288,715   45,885,560   38,758,711   15,438   14,970   30,946   30,114 
Community NOI $17,176,065  $15,439,363  $49,094,247  $45,477,615  $19,613  $16,418  $38,463  $31,918 

We also assess and measure our overall operating results based upon an industry performance measure referred to as Funds from Operations Attributable to Common Shareholders (“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 The National Association of Real Estate Investment Trusts (“NAREIT”), represents net income (loss) attributable to common shareholders, as defined by accounting principles generally accepted in the United StatesU.S. of America (“U.S. GAAP”), excluding extraordinary items, as defined under U.S. GAAP, gains or losses from sales of previously depreciated real estate assets, impairment charges related to depreciable real estate assets, and the change in the fair value of marketable securities plus certain non-cash items such as real estate asset depreciation and amortization. Included in the NAREIT FFO White Paper - 2018 Restatement, is an option pertaining to assets incidental to our main business in the calculation of NAREIT FFO to make an election to include or exclude gains and losses on the sale of these assets, such as marketable equity securities and include or exclude mark-to-market changes in the value recognized on these marketable equity securities. In conjunction with ourthe adoption of the FFO White Paper - 2018 Restatement, for all periods presented, we have elected to exclude the change in the fair value of marketable securities from our FFO calculation. Prior to the adoption of the FFO White Paper – 2018 Restatement, we utilized Core Funds from Operations (Core FFO), which we defined as FFO, excluding the change in the fair value of marketable securities. NAREIT created FFO as a non-U.S. GAAP supplemental measure of REIT operating performance. We define Normalized Funds from Operations Attributable to Common Shareholders (“Normalized FFO”), as FFO, excluding gains and losses realized on marketable securities investments and certain one-time charges. FFO and Normalized FFO should be considered as supplemental measures of operating performance used by REITs. FFO and Normalized FFO exclude historical cost depreciation as an expense and may facilitate the comparison of REITs which have a different cost basis. However, other REITs may use different methodologies to calculate FFO and Normalized FFO and, accordingly, our FFO and Normalized FFO may not be comparable to certainall other REITs. The items excluded from FFO and Normalized FFO are significant components in understanding the Company’s financial performance.

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FFO and Normalized FFO (i) do not represent Cash Flow from Operations as defined by U.S. GAAP; (ii) should not be considered as alternatives 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.

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The reconciliation of the Company’s U.S. GAAP Net Income (Loss) to the Company’s FFO and Normalized FFO for the three and ninesix months ended SeptemberJune 30, 20192020 and 20182019 are calculated as follows:follows (in thousands):

 Three Months Ended Nine Months Ended  Three Months Ended Six Months Ended 
 9/30/19 9/30/18 9/30/19 9/30/18  6/30/20 6/30/19 6/30/20 6/30/19 
                  
Net Income (Loss) Attributable to Common Shareholders $5,622,052  $(11,472,600) $5,999,135  $(23,678,383) $10,235  $(5,537) $(32,603) $377 
Depreciation Expense  9,390,236   8,051,627   27,009,888   23,410,519   10,272   8,869   20,499   17,620 
Loss on Sales of Depreciable Assets  27,341   27,479   36,055   108,111 
(Gain) Loss on Sales of Depreciable Assets  39   (12)  146   9 
(Increase) Decrease in Fair Value of Marketable Securities(1)  (9,234,252)  10,487,430   (15,477,833)  19,762,579   (13,411)  2,352   25,182   (6,244)
FFO Attributable to Common Shareholders  5,805,377   7,093,936   17,567,245   19,602,826   7,135   5,672   13,224   11,762 
                                
Adjustments:                                
Non-Recurring Expenses(2)  206,111   -0-   581,361   525,000 
Gain on Sales of Marketable Securities, net  -0-   -0-   -0-   (20,107)
Settlement of utility billing dispute over a prior 10-year period  0   0   0   375 
Normalized FFO Attributable to Common Shareholders $6,011,488  $7,093,936  $18,148,606  $20,107,719  $7,135  $5,672  $13,224  $12,137 

(1) (Increase) Decrease in Fair Value of Marketable Securities, if any, were previously recorded in Core FFO.

(2) Consists of utility billing dispute over a prior 10-year period ($375,250), emergency windstorm tree removal expenses in two adjacent communities ($126,000) and costs associated with acquisitions not completed ($80,111) in 2019 and one-time payroll expenditures ($525,000) in 2018.

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The following are the cash flows provided (used) by operating, investing and financing activities for the ninesix months ended SeptemberJune 30, 2020 and 2019 and 2018:(in thousands):

 Nine Months Ended  Six Months Ended 
 9/30/19 9/30/18  6/30/20 6/30/19 
          
Operating Activities $25,861,909  $24,727,484  $30,992  $11,649 
Investing Activities  (99,618,130)  (87,369,351)  (44,689)  (34,464)
Financing Activities  79,146,247   49,524,433   11,938   19,334 

Changes In Results Of Operations

Rental and Related Income increased 15%12% from $28,728,078$31.4 million for the three months ended SeptemberJune 30, 20182019 to $32,947,667$35.1 million for the three months ended SeptemberJune 30, 2019.2020. Rental and Related Income increased 13%12% from $84,236,326$62.0 million for the ninesix months ended SeptemberJune 30, 20182019 to $94,979,807$69.4 million for the ninesix months ended SeptemberJune 30, 2019.2020. These increases were primarily due to the acquisitions made during 2018 and 2019, as well as increases in rental rates and same property occupancy and additional rental homes. The Company has been raising rental rates by approximately 3% to 5% annually at most communities. Same property occupancy has increased 170250 basis points from 82.3%83.3% as of SeptemberJune 30, 20182019 to 84.0%85.8% at quarter-end. Occupied rental homes increased 16%15% from approximately 5,8006,400 homes at SeptemberJune 30, 20182019 to 6,7007,400 homes at SeptemberJune 30, 2019.2020.

Community Operating Expenses increased 19%remained relatively stable increasing 3% from $13,288,715$15.0 million for the three months ended SeptemberJune 30, 20182019 to $15,771,602$15.4 million for the three months ended SeptemberJune 30, 2019. Community Operating Expenses increased 18%2020 and 3% from $38,758,711$30.1 million for the ninesix months ended SeptemberJune 30, 20182019 to $45,885,560$30.9 million for the ninesix months ended SeptemberJune 30, 2019. These increases were primarily due to an increase in water and sewer costs, tree removal, rental home expenses and payroll and personnel costs primarily from2020. For the acquisitions made during 2018 and 2019 and the increase in rental homes. In addition, for the threesix months ended SeptemberJune 30, 2019, we incurred emergency windstorm tree removal expenses totaling $126,000. Also included in Community Operating Expenses for the nine months ended September 30, 2019,there was a one-time settlement of $375,250$375,000 for a utility billing dispute over a prior 10-year period.

 

Community NOI increased 11%19% from $15,439,363$16.4 million for the three months ended SeptemberJune 30, 20182019 to $17,176,065$19.6 million for the three months ended SeptemberJune 30, 2019.2020. Community NOI increased 8%21% from $45,477,615$31.9 million for the ninesix months ended SeptemberJune 30, 20182019 to $49,094,247$38.5 million for the ninesix months ended SeptemberJune 30, 2019.2020. These increases were primarily due to the acquisitions during 2018 and 2019, and increases in rental rates, occupancy and rental homes. The Company’s Operating Expense Ratio (defined as Community Operating Expenses divided by Rental and Related Income) was 46.3%47.7% and 47.5%, excluding non-recurring operating expenses,44.0% for the three months ended SeptemberJune 30, 20182019 and 2019,2020, respectively. The Company’s Operating Expense Ratio was 46.0%48.5% and 47.8%, excluding non-recurring operating expenses,44.6% for the ninesix months ended SeptemberJune 30, 20182019 and 2019,2020, respectively. Many recently acquired communities have deferred maintenance requiring higher than normal expenditures in the first few years of ownership. Because most of the community expenses consist of fixed costs, as occupancy rates increase, these expense ratios are expected to continue to improve. Since the Company has the 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.

 

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Sales of manufactured homes decreased 7%14% from $4,719,036$5.8 million, or 93 homes, for the three months ended SeptemberJune 30, 20182019 to $4,381,223$5.0 million, or 82 homes, for the three months ended SeptemberJune 30, 2019. This decrease was primarily due to delays in closing certain transactions, as well as a strong third quarter 2018.2020. Sales of manufactured homes increased 25%decreased 13% from $11,105,302$9.5 million, or 159 homes, for the ninesix months ended SeptemberJune 30, 20182019 to $13,866,552$8.2 million, or 144 homes, for the ninesix months ended SeptemberJune 30, 2019. The Company has seen a 13% increase in the number of homes sold from 204 homes sold for the nine months ended September 30, 2018 to 230 homes sold for the nine months ended September 30, 2019.2020. Cost of sales of manufactured homes amounted to $3,271,260$3.6 million and $3,512,705$4.3 million for the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. Cost of sales of manufactured homes amounted to $10,117,068$6.0 million and $8,406,701$6.8 million for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. The gross profit percentage was 25%28% and 26%27% for the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. The gross profit percentage was 27% and 24%28% for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. Selling expenses, which includes salaries, commissions, advertising and other miscellaneous expenses, amounted to $1,374,932 and $1,024,188$1.3 million for both the three months ended SeptemberJune 30, 20192020 and 2018, respectively.2019. Selling expenses amounted to $3,802,894 and $2,913,504$2.4 million for both the ninesix months ended SeptemberJune 30, 20192020 and 2018, respectively. Loss2019. Income (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) amounted to $317,034,income of $118,000 or 7%2% of total sales and $69,963,income of $178,000 or 1%3% of total sales for the three months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively. LossIncome (Loss) from the sales operations amounted to $241,532,a loss of $197,000 or 2% of total sales and $650,924,income of $75,000 or 6%1% of total sales for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. Many of the costs associated with sales, such as salaries, and to an extent, advertising and promotion, are fixed.

The U.S. homeownership rate was 64.8% inimpact of COVID-19 has also taken its toll on the third quarterconventional housing market. The National Association of 2019, according to the U.S. Census. This is downRealtors reported that as of June, sales of existing homes fell 11.3% from 69.2% at its peak at the end of 2004. Conventionala year ago. However, home prices continue to rise.their rise as fewer sellers are listing homes and inventories decline. 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 produces new rental revenue and is an investment in the upgrading of our communities.

General and Administrative Expenses decreased 13% from $3.2 million for the three months ended June 30, 2019 to $2.7 million for the three months ended June 30, 2020. General and Administrative Expenses remained relatively stable at $5.3 million for the three and ninesix months ended SeptemberJune 30, 2020 and 2019, respectively. Personnel costs decreased due to a decrease in our stock price which decreased the fair value of stock options granted. The weighted-average fair value of options granted decreased from $1.72 per share for the six months ended June 30, 2019 compared to $0.96 for the three and ninesix months ended SeptemberJune 30, 2018.2020. General and Administrative expenses, excluding non-recurring operating expenses as a percentage of gross revenue (Total Income plus Interest, Dividend and Other Income) was 6.2%6.5% and 6.7%6.4% for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared toand 7.9% and 6.9% and 7.3% for the three and ninesix months ended SeptemberJune 30, 2018,2019, respectively.

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Depreciation Expense increased 17%16% from $8,051,627$8.9 million for the three months ended SeptemberJune 30, 20182019 to $9,390,236$10.3 million for the three months ended SeptemberJune 30, 2019.2020. Depreciation Expense increased 15%16% from $23,410,519$17.6 million for the ninesix months ended SeptemberJune 30, 20182019 to $27,009,888$20.5 million for the ninesix months ended SeptemberJune 30, 2019.2020. This increase was primarily due to the acquisitions in 2019 and the increase in rental homes during 20182019 and 2019.2020.

Interest Income increased 15%11% from $563,549$622,000 for the three months ended SeptemberJune 30, 20182019 to $650,767$691,000 for the three months ended SeptemberJune 30, 2019.2020. Interest Income increased 14%24% from $1,569,955$1.1 million for the ninesix months ended SeptemberJune 30, 20182019 to $1,787,390$1.4 million for the ninesix months ended SeptemberJune 30, 2019. These increases were2020. This increase was primarily due to an increase in the average balance of notes receivable. The average balance for the nine months ended Septemberreceivable from $31.8 million at June 30, 2019 and 2018 was approximately $32.6to $35.2 million and $25.3 million, respectively.at June 30, 2020.

Dividend Income decreased 31%20% from $2,704,255$1.9 million for the three months ended SeptemberJune 30, 20182019 to $1,858,831$1.6 million for the three months ended SeptemberJune 30, 2019.2020. Dividend Income decreased 25%15% from $7,603,575$3.9 million for the ninesix months ended SeptemberJune 30, 20182019 to $5,734,390$3.3 million for the ninesix months ended SeptemberJune 30, 2019. These decreases were primarily2020. This decrease was due to a reduction inreduced dividends from two securities. It is the Company’s intent to hold its marketable securities long-term.our holdings. Dividends received from our marketable securities investments were at a weighted average yield of approximately 6.3%5.5% and 8.2%7.4%, at SeptemberJune 30, 2020 and 2019, and 2018, respectively, and continuerespectively. It is the Company’s intent to meet our expectations.hold these marketable securities long-term.

Increase (Decrease) in Fair Value of Marketable Securities increased from an unrealizeda loss of $(10,487,430)$2.4 million for the three months ended SeptemberJune 30, 20182019 to an unrealizeda gain of $9,234,252$13.4 million for the three months ended SeptemberJune 30, 2019.2020. Increase (Decrease) in Fair Value of Marketable Securities increaseddecreased from an unrealizeda gain of $6.2 million for the six months ended June 30, 2019 to a loss of $(19,762,579)$25.2 million for the ninesix months ended SeptemberJune 30, 20182020. This decrease was due to an unrealized gainthe effects of $15,477,833 for the nine months ended September 30, 2019.COVID-19 pandemic on prices in the securities market. As of SeptemberJune 30, 2019,2020, the Company had total net unrealized losses of $24,677,981$50.4 million in its REIT securities portfolio.

Interest Expense, including Amortization of Financing Costs, increased 3% from $4,247,855was $4.2 million for both the three months ended SeptemberJune 30, 2018 to $4,395,8062019 and 2020. Interest Expense decreased 3% from $8.9 million for the threesix months ended SeptemberJune 30, 2019. Interest Expense increased 13% from $11,795,3152019 to $8.6 million for the ninesix months ended SeptemberJune 30, 20182020. This decrease was primarily due to $13,288,994 fora decrease in the nine months ended Septemberweighted average interest rate on our mortgages payable from 4.3% at June 30, 2019. The2019 to 4.1% at June 30, 2020, not including the effect of unamortized debt issuance costs. This was partially offset by an increase in the weighted average balance of our mortgages payable increased from approximately $309$329 million for the nine months ended Septemberas of June 30, 20182019 to approximately $353$372 million for the nine months ended Septemberas of June 30, 2019.2020.

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Changes in Financial Condition

Total Investment Property and Equipment increased 11%3% or $102,860,738$34.9 million during the ninesix months ended SeptemberJune 30, 2019.2020. The Company added 768367 rental homes to its communities. The Company’s occupancy rate on its rental homes portfolio increased 290 basis points and was 92.4%95.2% at SeptemberJune 30, 20192020 as compared to 92.3% at December 31, 2018.2019.

Marketable Securities increased 17%decreased 21% or $16,841,741$24.5 million during the ninesix months ended SeptemberJune 30, 2019.2020. This increasedecrease was due to a net increasedecrease in the fair value of $15,477,833$25.2 million and purchases of $1,363,908.$690,000.

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Mortgages Payable, net of unamortized debt issuance costs, increased 13%decreased 1% or $44,390,713$3.9 million during the ninesix months ended SeptemberJune 30, 2019. This increase2020. The decrease was primarily due to new mortgages totaling $64,257,174, including $19,407,174 of mortgages assumed in conjunction with acquisitions and amortization expense of $441,928, partially offset by principal repayments of $19,566,703 and costs of the new mortgages totaling $741,686.payments.

Loans Payable, net of unamortized debt issuance costs, decreased 29%21% or $31,503,652$17.6 million during the ninesix months ended SeptemberJune 30, 2019.2020. This decrease was primarily due to a decrease of $45$7.4 million on our revolving lines of credit facilityfor the financing of home sales and the purchase of inventory, a decrease of $1.2 million in other loans payable, partially offset by an increase of $8.6$4.8 million on our margin loan and an increasea decrease of $6$5 million on our revolving line of credit secured by the Company’s eligible notes receivable.

Liquidity and Capital Resources

The Company’s focus is on real estate investments, including investment in rental homes. Additionally, the Company invests in marketable debt and equity securities of other REITs. The REIT securities portfolio provides the Company with liquidity and additional 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.

The Company’s principal liquidity demands have historically been, and are expected to continue to be, distributions to the Company’s stockholders,shareholders, acquisitions, capital improvements, development and expansions of properties, debt service, purchases of manufactured home inventory and rental homes, investment in marketable securities of other REITs, financing of manufactured home sales and payments of expenses relating to real estate operations. We may also use capital resources to repurchase additional shares of our common stock under our Share Repurchase Program when we believe the stock is trading at a significant discount to net asset value. We anticipate that the liquidity demands of the recent properties acquired will be met by the operations of these acquisitions. The Company’s ability to generate cash adequate to meet these demands is dependent primarily on income from its real estate investments and marketable securities portfolio, the sale of real estate investments and marketable securities, refinancing of mortgage debt, leveraging of real estate investments, availability of bank borrowings, lines of credit, proceeds from the DRIP, and access to the capital markets, including proceeds from our recently adopted ATM Program.markets.

In addition to cash generated through operations, the Company uses a variety of sources to fund its cash needs, including acquisitions. The Company may sell marketable securities from its investment portfolio, borrow on its unsecured credit facility or lines of credit, finance and refinance its properties, and/or raise capital through the DRIP and capital markets, including through the Company’s recently adoptedATM Programs. In order to provide financial flexibility to opportunistically access the capital markets, the Company has implemented both a Common ATM Program and subsequent to quarter end, a New Preferred ATM Program. The Common ATM Program allows the Company to offer and sell shares of the Company’s Common Stock, having an aggregate sales price of up to $100 million from time to time through the Distribution Agents. The New Preferred ATM Program allows the Company to offer and sell shares of the Company’s Series C Preferred Stock and/or Series D Preferred Stock, having an aggregate sales price of up to $100 million. To date, the Company has not sold any shares under the Common ATM Program or the New Preferred ATM Program.

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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 investing in physical improvements, including adding rental homes onto otherwise vacant sites. There is no guarantee that any of these 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. To the extent that funds or appropriate communities are not available, fewer acquisitions will be made.

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The Company continues to strengthen its capital and liquidity positions. On April 29, 2019,During the six months ended June 30, 2020, the Company issued and sold an additional 4,000,000 shares, including as a result of the underwriters’ exercise in full of their overallotment option of 400,0002.6 million shares of itsour Series CD Preferred Stock through our 2019 Preferred ATM Program at an offeringa weighted average price of $25.00$25.06 per share, in an underwritten registered public offering. The Company receivedgenerating gross proceeds of $64.1 million and net proceeds from the sale of the 4,000,000 shares of Series C Preferred of approximately $96.7 million, after deducting the underwriting discount and other estimated offering expenses and intends to use the proceeds for general corporate purposes, which may include 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.$63.1 million. The 2019 Preferred ATM Program was subsequently replaced by our New Preferred ATM Program.

The Company also raised $29,216,685$3.3 million from the issuance of common stock in the DRIP during the ninesix months ended SeptemberJune 30, 2019,2020, which included dividend reinvestmentsDividend Reinvestments of $5,638,082.$1.7 million. Dividends paid on the common stock for the ninesix months ended SeptemberJune 30, 20192020 were $21,461,113,$14.8 million, of which $5,638,082$1.7 million were reinvested. Dividends paid on the Series B Preferred shares,Stock, the Series C Preferred sharesStock and the Series D Preferred sharesStock for the ninesix months ended SeptemberJune 30, 20192020 totaled $18,744,771. On August 14, 2019, the Company announced that it has discontinued granting waivers to the $1,000 monthly maximum for the purchase of shares for cash under its DRIP, which will result in less capital being raised through the DRIP going forward.$16.2 million.

Subsequent to quarter end, the Company entered into the ATM Program with B. Riley, under which the Company may offer and sell shares of our Series C Preferred and/or Series D Preferred having an aggregate sales price of up to $100,000,000. We began selling shares under the ATM Program on October 22, 2019 and through October 30, 2019, 349,767 shares of our Series D Preferred were sold at a weighted average price of $25.32 per share, generating net proceeds of approximately $8,714,713, after offering expenses.

Net Cash provided by Operating Activities amounted to $25,861,909$31.0 million and $24,727,484$11.6 million for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. As of SeptemberJune 30, 2019,2020, the Company had Cash and Cash Equivalents of $11.1$11.0 million, Marketable Securities of $116.4$91.7 million, encumbered by $40.6$32.8 million in margin loan,loans, approximately $18.3$31.5 million available on itsour revolving lines of credit facilities for the financing of home sales and the purchasepurchases of inventory and $70$60 million available on our unsecured credit facility, with an additional $50 million potentially available pursuant to an accordion feature. Subsequent to quarter end, we drew down an additional $5 million on our unsecured credit facility for an acquisition.

The extent to which COVID-19 and related actions impact our operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with any degree of confidence, including the scope, severity, duration and geographies of the outbreak, the actions taken to contain the COVID-19 pandemic or mitigate its impact requested or mandated by governmental authorities or otherwise voluntarily taken by individuals or businesses, the success of governmental actions undertaken to support the economy during the pandemic and the duration and severity of direct and indirect economic effects of the illness and containment measures, among others. As previously discussed, at this time, we believe that the fallout from COVID-19 will not have a material adverse effect on our financial condition.

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As of SeptemberJune 30, 2019,2020, the Company owned 122 communities, of which 47 were unencumbered. Except for 1415 communities in the borrowing base for our unsecured credit facility, these unencumbered communities can be used to raise additional funds. Our marketable securities, unencumbered properties, and lines of credit provide the Company with additional liquidity.

As of SeptemberJune 30, 2019,2020, the Company had total assets of $1,010,152,228$1.0 billion and total liabilities of $473,517,889.$458.5 million. The Company’s net debt (net of unamortized debt issuance costs and cash and cash equivalents) to total market capitalization as of SeptemberJune 30, 20192020 was approximately 31%30% and the Company’s net debt, less securities to total market capitalization as of SeptemberJune 30, 20192020 was approximately 23%. As of SeptemberJune 30, 2019,2020, the Company hashad no mortgages due inwithin the next 12 months. The Company believes that it has the ability to meet its obligations and to generate funds for new investments.

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Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Cautionary Statement Regarding Forward-Looking Statements

Statements contained in this Form 10-Q, 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.

 

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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;
●risks and uncertainties related to the ongoing global outbreak of the novel coronavirus (COVID-19);
●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;

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●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 made in a timely mademanner in accordance with all rules and regulations, and any potential fraud or embezzlement is thwarted or detected;
●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 real estate investment trust for federal income tax purposes; and,
●those risks and uncertainties referenced under the heading “Risk Factors” contained in this Form 10-Q and the Company’s other filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2018.2019.

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-Q 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.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to information required regarding quantitative and qualitative disclosures about market risk from the end of the preceding year to the date of this Quarterly Report on Form 10-Q.

Item 4.Controls and Procedures

Item 4. Controls and Procedures

The Company’s President and Chief Executive Officer (principal executive officer) and the Company’s Vice President and Chief Financial Officer (principal financial and accounting officer), with the assistance of other members of the Company’s management, have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s President and Chief Executive Officer and Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of the end of such period.

Changes In Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarterly period ended SeptemberJune 30, 20192020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.Legal Proceedings

Item 1. Legal ProceedingsNone.

None.

Item 1A.Risk Factors

Item 1A. Risk Factors

There have been no material changes to information required regarding risk factors from the end of the preceding year to the date of this Quarterly Report on Form 10-Q. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A – “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, which could materially affect the Company’s business, financial condition or future results. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results. There have been no material changes to the Risk Factors except as set forth below:

We face various risks and uncertainties related to public health crises, including the recent and ongoing global outbreak of the novel coronavirus (COVID-19). The COVID-19 pandemic is growing and its impact is uncertain and hard to measure, but may have a material adverse effect on us.

We face various risks and uncertainties related to public health crises, including the recent and ongoing global COVID-19 pandemic, which has disrupted financial markets and significantly impacted worldwide economic activity to date and is likely to continue to do so.

The COVID-19 pandemic and social and governmental responses to the pandemic have caused, and are likely to continue to cause, severe economic, market and other disruptions in the United States and worldwide, including unprecedented job losses and an economic downturn. The extent to which COVID-19 and related actions impact our operations will depend on future developments, which are highly uncertain and cannot be predicted with any degree of confidence, including the scope, severity, duration and geographies of the outbreak, the actions taken to contain the COVID-19 pandemic or mitigate its impact requested or mandated by governmental authorities or otherwise voluntarily taken by individuals or businesses, the success of governmental actions undertaken to support the economy during the pandemic and the duration and severity of direct and indirect economic effects of the illness and containment measures, among others. In response to the outbreak, the United States, like many countries around the world, has taken a variety of countermeasures, such as quarantines, “shelter in place” and stay-at-home orders and restrictions on business activities, group gatherings and travel, which have caused disruptions in the U.S. and global economy, financial markets and supply chains and have adversely impacted many businesses and industries and created significant economic uncertainty. Residents in our communities have lost jobs or experienced financial hardship related to COVID-19, which may adversely affect their ability to make rent payments in full or on a timely basis. In addition, individual states and localities have adopted or may consider adopting policies requiring temporary rent freezes and forbearance with respect to delinquent rent and mortgage payments, evictions and foreclosures, and the nature, timing and impact of any future public policy decisions and actions with respect to these matters cannot be predicted. The pandemic and related governmental orders may also cause us to incur increased costs, require us to provide employees with additional time off and increase our vulnerability to cyber-attacks while employees work from home. In addition, an economic downturn due to the pandemic may adversely affect the market values of our communities and our portfolio of REIT securities as well as our stock price and may impair our access to capital and our ability to incur indebtedness. As a result, while the extent and duration of the COVID-19 pandemic and the direct and indirect impacts of the pandemic on us are uncertain and will depend on numerous factors beyond our control, the pandemic and the actions taken in response could have a material adverse effect on our business, financial condition, results of operations, liquidity, and prospects.

To the extent the COVID-19 pandemic or the actions taken in response adversely affect our business, financial condition, results of operations, liquidity or prospects, this may also have the effect of heightening many of the other risks described in our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Risk Factors”.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of ProceedsNone.

None.

Item 3.Defaults Upon Senior Securities

Item 3. Defaults Upon Senior SecuritiesNone.

None.

Item 4.Mine Safety Disclosures

Item 4. Mine Safety DisclosuresNone.

None.

Item 5.Other Information

Item 5. Other Information

 (a)Information Required to be Disclosed in a Report on Form 8-K, but not Reported – None.
  
 (b)

Material Changes to the Procedures by which Security Holders may Recommend Nominees to the Board of Directors – None.

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Item 6.Exhibits

Item 6. Exhibits

31.1Certification of Samuel A. Landy, President and Chief Executive Officer of the Company, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (Filed herewith).
31.2Certification of Anna T. Chew, Chief Financial Officer of the Company, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (Filed herewith).
32Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Samuel A. Landy, President and Chief Executive Officer, and Anna T. Chew, Chief Financial Officer (Furnished herewith).
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The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 20192020 formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (Loss), (iii) the Consolidated Statements of Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UMH PROPERTIES, INC.
DATE: November 7, 2019August 5, 2020By/s/ Samuel A. Landy
Samuel A. Landy
President and Chief Executive Officer
(Principal Executive Officer)

DATE: November 7, 2019August 5, 2020By/s/ Anna T. Chew
Anna T. Chew
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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