NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION, ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST
UMH Properties, Inc. (the Company) owns and operates twenty-eight manufactured home communities containing approximately 6,800 sites. The communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee.
The Company has elected to be taxed as a real estate investment trust (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 Company was incorporated in the state of New Jersey in 1968. On September 29, 2003, the Company changed its state of incorporation from New Jersey to Maryland.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
The Company owns and operates twenty-eight manufactured home communities containing approximately 6,800 sites. These communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee.
These manufactured home communities are listed by trade names as follows:
|
|
MANUFACTURED HOME COMMUNITY
|
LOCATION
|
|
|
Allentown
|
Memphis, Tennessee
|
Brookview Village
|
Greenfield Center, New York
|
Cedarcrest
|
Vineland, New Jersey
|
Cranberry Village
|
Cranberry Township, Pennsylvania
|
Cross Keys Village
|
Duncansville, Pennsylvania
|
D& R Village
|
Clifton Park, New York
|
Fairview Manor
|
Millville, New Jersey
|
Forest Park Village
|
Cranberry Township, Pennsylvania
|
Heather Highlands
|
Inkerman, Pennsylvania
|
Highland Estates
|
Kutztown, Pennsylvania
|
Kinnebrook
|
Monticello, New York
|
Lake Sherman Village
|
Navarre, Ohio
|
Laurel Woods
|
Cresson, Pennsylvania
|
Memphis Mobile City
|
Memphis, Tennessee
|
Oxford Village
|
West Grove, Pennsylvania
|
Pine Ridge Village/Pine Manor
|
Carlisle, Pennsylvania
|
Pine Valley Estates
|
Apollo, Pennsylvania
|
Port Royal Village
|
Belle Vernon, Pennsylvania
|
River Valley Estates
|
Marion, Ohio
|
Sandy Valley Estates
|
Magnolia, Ohio
|
Southwind Village
|
Jackson, New Jersey
|
Somerset Estates/Whispering Pines
|
Somerset, Pennsylvania
|
Spreading Oaks Village
|
Athens, Ohio
|
Waterfalls Village
|
Hamburg, New York
|
Weatherly Estates
|
Lebanon, Tennessee
|
Woodlawn Manor
|
West Monroe, New York
|
Woodlawn Village
|
Eatontown, New Jersey
|
Wood Valley
|
Caledonia, Ohio
|
-50-
Effective April 1, 2001, the Company, through its wholly-owned taxable REIT subsidiary, UMH Sales and Finance, Inc., (S&F), began to conduct manufactured home sales and the financing of these sales in its communities. Inherent in the operation of manufactured home communities is site vacancies. S&F was established to fill these vacancies and potentially enhance the value of the communities.
Basis of Presentation
The Companys subsidiaries are all 100% wholly-owned. The consolidated financial statements of the Company include all of these subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company does not have a majority or minority interest in any other Company, either consolidated or unconsolidated.
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as contingent assets and liabilities as of the dates of the consolidated balance sheets and revenue and expenses for the years then ended. Actual results could differ significantly from these estimates and assumptions.
Investment Property and Equipment and Depreciation
Property and equipment are carried at cost. Depreciation for Sites and Building (15 to 27.5 years) is computed principally on the straight-line method over the estimated useful lives of the assets. Depreciation of Improvements to Sites and Buildings, Rental Homes and Equipment and Vehicles (3 to 27.5 years) is computed principally on the straight-line method. Land Development Costs are not depreciated until they are put in use, at which time they are capitalized as Sites or Site Improvements. Interest Expense pertaining to Land Development Costs are capitalized. Maintenance and Repairs are charged to income as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the accounts and any gain or loss is reflected in the current years results of operations. If there is an event or change in circumstances that indicates that the basis of an investment property may not be recoverable, management assesses the possible impairment of value through evaluation of the estimated future cash flows of the property, on an undiscounted basis, as compared to the propertys current carrying value. If a property is determined to be impaired, it will be recorded at fair value.
Unamortized Financing Costs
Costs incurred in connection with obtaining mortgages and other financings and refinancings are deferred and are amortized on a straight-line basis over the term of the related obligations, which is not materially different than the effective interest method. Unamortized costs are charged to expense upon prepayment of the obligation. As of December 31, 2007 and 2006, accumulated amortization amounted to $848,405 and $670,769, respectively. The Company estimates that aggregate amortization expense will be approximately $136,000 for 2008, $107,000 for 2009, $59,000 for 2010, $58,000 for 2011, and $37,000 for 2012.
Cash and Cash Equivalents
Cash and cash equivalents include bank repurchase agreements with original maturities of 90 days or less. The Company maintains its cash in bank accounts in amounts that may exceed federally insured limits. The Company has not experienced any losses in these accounts in the past and does not believe that it is exposed to significant credit risk.
Securities Available for Sale
The Companys securities consist primarily of debt securities and common and preferred stock of other REITs. These securities are all publicly-traded and purchased on the open market or through dividend reinvestment plans. These securities are classified among three categories: held-to-maturity, trading and available-for-sale. As of December 31, 2007 and 2006, the Companys securities are all classified as available-for-sale and are carried at
-51-
fair value based upon quoted market prices. Gains or losses on the sale of securities are based on identifiable cost and are accounted for on a trade date basis. Unrealized holding gains and losses are excluded from earnings and reported as a separate component of Shareholders Equity until realized. A decline in the market value of any security below cost that is deemed to be other-than-temporary results in a reduction in the carrying amount to fair value. Any impairment is charged to earnings and a new cost basis for the security established.
Derivative Instruments and Hedging Activities
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 has entered into three interest rate swap agreements.
The interest rate swap agreements have the effect of fixing interest rates relative to specific mortgage loans as follows:
|
|
|
|
|
Mortgage
|
Due Date
|
Mortgage
Interest Rate
|
Effective
Fixed Rate
|
Balance
12/31/2007
|
|
|
|
|
|
Cranberry Village
|
8/1/2008
|
LIBOR + 1.65%
|
5.17%
|
$1,839,464
|
Forest Park Village
|
8/1/2008
|
LIBOR + 1.65%
|
5.17%
|
2,943,142
|
Various
|
11/19/2009
|
LIBOR + 1.75%
|
5.82%
|
13,334,033
|
|
|
|
|
$18,116,639
|
Each of the Company's interest rate swaps is based upon 30-day LIBOR. The scheduled maturity dates, payment dates and the notional amounts of the interest rate swap agreements coincide with those of the underlying mortgages.
These interest rate swaps do not qualify for hedge accounting under Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities, as amended and, therefore, resulted in all fair value adjustments to the carrying value of the derivatives being recorded as a component of current period earnings. The Company has recorded as an addition to (deduction from) interest expense, non-cash fair value adjustments of $467,161, $67,655 and ($773,894) for the years ended December 31, 2007, 2006 and 2005, respectively, based upon the change in fair value of the Companys interest rate swaps. The recorded (liability) asset at December 31, 2007 and 2006 amounted to ($63,731) and $403,430, respectively. These non-cash valuation adjustments will only be settled for cash if the Company terminates the swaps prior to maturity.
The Company also invests in futures contracts of ten-year treasury notes to reduce exposure of the debt securities portfolio to market rate fluctuations. These futures contracts do not qualify for hedge accounting under Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138 and No. 149. The contracts are marked-to-market and the unrealized gain or loss is recorded in the income statement in gain on securities transactions, net with corresponding amounts recorded in other assets or other liabilities on the balance sheet. Gain or loss on settled futures contracts are also recorded as a component of gain on securities transactions, net.
Inventory of Manufactured Homes
Inventory of manufactured homes is valued at the lower of cost or market value and is determined by the specific identification method. All inventory is considered finished goods.
Accounts, Notes and Other Receivables
The Companys accounts, notes and other receivables are stated at their outstanding balance reduced by an allowance for uncollectible accounts. The Company evaluates the recoverability of its receivables whenever events
-52-
occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan or lease agreements. The collectibility of loans is measured based on the present value of the expected future cash flow discounted at the loans effective interest rate or the fair value of the collateral if the loan is collateral dependent. At December 31, 2007 and 2006, the reserves for uncollectible accounts, notes and other receivables were $1,492,651 and $1,427,900, respectively. For the years ended December 31, 2007, 2006 and 2005, the provisions for uncollectible notes and other receivables were $360,351, $599,634 and $571,216, respectively. Charge-offs for the years ended December 31, 2007, 2006 and 2005 amounted to $295,600, $238,549 and $268,942, respectively.
The Companys notes receivable primarily consists of installment loans collateralized by manufactured homes with principal and interest payable monthly. Interest rates on these loans range from 4% to 14%. The average maturity is approximately 11 years.
Revenue Recognition
The Company derives its income primarily from the rental of manufactured home sites. The Company also owns approximately 560 rental units which are rented to residents. Rental and related income is recognized on the accrual basis.
Sale of manufactured homes is recognized on the full accrual basis when certain criteria are met. These criteria include the following: (a) initial and continuing payment by the buyer must be adequate: (b) the receivable, if any, is not subject to future subordination; (c) the benefits and risks of ownership are substantially transferred to the buyer; and (d) the Company does not have a substantial continued involvement with the home after the sale. Alternatively, when the foregoing criteria are not met, the Company recognizes gains by the installment method. Interest income on loans receivable is not accrued when, in the opinion of management, the collection of such interest appears doubtful.
Net Income Per Share
Basic net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period (10,535,162, 10,093,546 and 9,473,155 in 2007, 2006 and 2005, respectively). Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding plus the weighted-average number of net shares that would be issued upon exercise of stock options pursuant to the treasury stock method (10,539,269, 10,110,567 and 9,504,449 in 2007, 2006 and 2005, respectively) (See Note 6). Options in the amount of 4,107, 17,021 and 31,294 for 2007, 2006, and 2005, respectively, are included in the diluted weighted average shares outstanding.
Stock Option Plans
The Company accounts for stock options in accordance with SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R). The Company has selected the prospective method of adoption under the provisions of SFAS No. 148, Accounting for Stock Based Compensation, Transition and Disclosure. SFAS 123R requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period). This compensation cost is determined using option pricing models, intended to estimate the fair value of the awards at the grant date. Compensation costs of $132,386, $130,285 and $102,580 have been recognized in 2007, 2006 and 2005, respectively. Included in Note 6 to these consolidated financial statements are the assumptions and methodology.
Comprehensive Income
Comprehensive income is comprised of net income and other comprehensive income (loss). Other comprehensive income (loss) includes items that are otherwise recorded directly in equity, such as changes in unrealized gains or losses on securities available for sale. Comprehensive income is presented in the consolidated statements of shareholders equity.
-53-
Reclassification
Certain amounts in the financial statements for the prior years have been reclassified to conform to the statement presentation for the current year.
New Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes how we should recognize, measure and present in our financial statements uncertain tax positions that have been taken or are expected to be taken in a tax return. Pursuant to FIN 48, we can recognize a tax benefit only if it is more likely than not that a particular tax position will be sustained upon examination or audit. To the extent the more likely than not standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50% likely of being realized upon settlement.
We are subject to U.S. federal income tax as well as income tax in multiple state and local jurisdictions but, as a REIT, we generally do not pay tax on our net income distributed as dividends to our shareholders. Our taxable subsidiary does not join in our consolidated REIT tax filings and as such is itself subject to federal income tax as well as income tax in multiple state and local jurisdictions. As required, we adopted FIN 48 effective January 1, 2007 and have concluded that the effect is not material to our consolidated financial statements. Accordingly, we did not record a cumulative effect adjustment related to the adoption of FIN 48.
In 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), SFAS 157 defines fair value, established a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. SFAS 157 does not expand or require any new fair value measures, however the application of this statement may change current practice. The requirements of SFAS 157 are first effective for our fiscal year beginning January 1, 2008. However, in February 2008 the FASB decided that an entity need not apply this standard to non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until the subsequent year. Accordingly, our adoption of this standard on January 1, 2008 is limited to financial assets and liabilities and we are currently assessing what impact, if any, the adoption of SFAS 157 will have on our financial position and results of operations.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis, with few exceptions. SFAS 159 also established presentation and disclosure requirements to facilitate comparisons between companies that choose different measurement attributes for similar assets and liabilities. The requirements of SFAS 159 are effective for our fiscal year beginning January 1, 2008. We do not believe that the adoption of this statement will have a material effect on our financial condition or results of operations.
NOTE 3 INVESTMENT PROPERTY AND EQUIPMENT
On March 10, 2006, the Company acquired (at auction) Weatherly Estates I, a 270-space manufactured home community in Lebanon, Tennessee, from Affordable Residential Communities Inc., an unrelated entity. The total purchase price was approximately $5,200,000.
-54-
The following is a summary of accumulated depreciation by major classes of assets:
|
|
|
|
|
December 31, 2007
|
|
December 31, 2006
|
|
|
|
|
Site and Land Improvements
|
$ 38,474,110
|
|
$ 36,237,301
|
Buildings and Improvements
|
2,057,355
|
|
1,963,878
|
Rental Homes and Accessories
|
3,390,920
|
|
3,338,859
|
Equipment and Vehicles
|
5,526,988
|
|
4,890,002
|
|
|
|
|
Total Accumulated Depreciation
|
$ 49,449,373
|
|
$ 46,430,040
|
NOTE 4 SECURITIES AVAILABLE FOR SALE
The Companys securities available for sale consist primarily of debt securities and common and preferred stock of other REITs. The Company does not own more than 10% of the outstanding shares of any of these securities, nor does it have controlling financial interest.
The following is a listing of securities available for sale at December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
Series
|
Interest
Rate
|
Number of
Shares
|
|
Cost
|
|
Market Value
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monmouth Capital Corporation *
|
|
|
|
|
|
|
|
|
Convertible Subordinated Debentures
Matures 10/23/2013
|
|
8.000%
|
1,000,000
|
$
|
1,000,000
|
$
|
1,000,000
|
|
Convertible Subordinated Debentures
Matures 3/30/2015
|
|
8.000%
|
5,000,000
|
|
5,000,000
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
Total Debt Securities
|
|
|
|
|
6,000,000
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Land Lease, Inc.
|
A
|
7.75%
|
41,800
|
|
1,045,580
|
|
758,670
|
|
Apartment Investment & Management Co.
|
G
|
9.38%
|
8,000
|
|
185,788
|
|
195,200
|
|
BRE Properties, Inc.
|
C
|
6.75%
|
1,000
|
|
25,000
|
|
19,550
|
|
Developers Diversified Realty Corporation
|
H
|
7.38%
|
5,000
|
|
125,000
|
|
102,500
|
|
Developers Diversified Realty Corporation
|
I
|
7.50%
|
4,000
|
|
100,000
|
|
82,960
|
|
Felcor Lodging Trust Incorporated
|
C
|
8.00%
|
15,000
|
|
361,107
|
|
280,348
|
|
HCP, Inc.
|
E
|
7.25%
|
8,000
|
|
200,000
|
|
156,881
|
|
HRPT Properties Trust
|
B
|
8.75%
|
2,335
|
|
58,375
|
|
58,282
|
|
iStar Financial Inc.
|
E
|
7.88%
|
6,100
|
|
152,502
|
|
119,072
|
|
LaSalle Hotel Properties
|
D
|
7.50%
|
8,000
|
|
200,004
|
|
145,200
|
|
Lexington Realty Trust
|
B
|
8.05%
|
18,000
|
|
450,000
|
|
375,300
|
|
Maguire Properties, Inc.
|
A
|
7.63%
|
5,000
|
|
69,700
|
|
69,700
|
|
Mid-America Apartment Communities, Inc.
|
H
|
8.30%
|
2,500
|
|
63,625
|
|
59,925
|
|
|
|
|
|
|
|
|
|
|
Total Preferred Stock
|
|
|
|
|
3,036,681
|
|
2,423,588
|
|
|
|
|
|
|
|
|
|
-55-
|
|
|
|
|
|
|
|
|
|
|
Series
|
Interest
Rate
|
Number of
Shares
|
|
Cost
|
|
Market Value
|
|
|
|
|
|
|
|
|
|
|
Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Champion Enterprises
|
|
|
40,000
|
|
409,986
|
|
376,800
|
|
Fleetwood Enterprises
|
|
|
90,000
|
|
538,200
|
|
538,200
|
|
Monmouth Real Estate Corporation *
|
|
|
1,487,105
|
|
12,394,254
|
|
12,045,549
|
|
Nobility Homes, Inc.
|
|
|
20,000
|
|
412,120
|
|
365,000
|
|
Sun Communities, Inc.
|
|
|
84,200
|
|
1,774,094
|
|
1,774,094
|
|
|
|
|
|
|
|
|
|
|
Total Common Stock
|
|
|
|
|
15,528,654
|
|
15,099,643
|
|
|
|
|
|
|
|
|
|
|
Total Equity Securities
|
|
|
|
|
18,565,335
|
|
17,523,231
|
|
|
|
|
|
|
|
|
|
|
Total Securities Available for Sale
|
|
|
|
$
|
24,565,335
|
$
|
23,523,231
|
The following is a listing of securities available for sale at December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
Series
|
Interest
Rate
|
Number of
Shares
|
|
Cost
|
|
Market Value
|
|
|
|
|
|
|
|
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monmouth Capital Corporation *
|
|
|
|
|
|
|
|
|
Convertible Subordinated Debentures
Matures 10/23/2013
|
|
8.000%
|
1,000,000
|
$
|
1,000,000
|
$
|
1,000,000
|
|
Convertible Subordinated Debentures
Matures 3/30/2015
|
|
8.000%
|
5,000,000
|
|
5,000,000
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
Total Debt Securities
|
|
|
|
|
6,000,000
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexandria Real Estate Equities, Inc.
|
B
|
9.100%
|
4,000
|
|
100,000
|
|
100,360
|
|
American Land Lease
|
A
|
7.750%
|
41,800
|
|
1,045,580
|
|
1,059,630
|
|
Apartment Investment & Management Co.
|
G
|
9.375%
|
8,000
|
|
185,788
|
|
210,400
|
|
BRE Properties, Inc.
|
C
|
6.750%
|
3,000
|
|
75,000
|
|
75,420
|
|
CBL & Associates Properties, Inc.
|
C
|
7.750%
|
2,000
|
|
50,000
|
|
51,320
|
|
Corporate Office Properties Trust
|
H
|
7.500%
|
4,500
|
|
112,500
|
|
113,310
|
|
Developers Diversified Realty Corporation
|
F
|
8.600%
|
4,000
|
|
100,000
|
|
101,560
|
|
Developers Diversified Realty Corporation
|
H
|
7.375%
|
15,000
|
|
375,000
|
|
378,900
|
|
Developers Diversified Realty Corporation
|
I
|
7.500%
|
4,000
|
|
100,000
|
|
101,680
|
|
Eagle Hospitality Properties Trust
|
A
|
8.250%
|
4,000
|
|
100,000
|
|
102,040
|
|
Felcor Lodging Trust Incorporated
|
C
|
8.000%
|
36,000
|
|
868,835
|
|
907,560
|
|
|
|
|
|
|
|
|
|
-56-
|
|
|
|
|
|
|
|
|
|
|
Series
|
Interest
Rate
|
Number of
Shares
|
|
Cost
|
|
Market Value
|
|
|
|
|
|
|
|
|
|
|
Health Care Property Investors, Inc.
|
E
|
7.250%
|
10,000
|
|
250,000
|
|
255,600
|
|
Health Care REIT, Inc.
|
D
|
7.875%
|
6,000
|
|
150,000
|
|
155,400
|
|
HRPT Properties Trust
|
B
|
8.750%
|
17,000
|
|
425,130
|
|
437,070
|
|
iStar Financial Inc.
|
E
|
7.875%
|
15,000
|
|
375,005
|
|
385,350
|
|
LaSalle Hotel Properties
|
D
|
7.500%
|
8,000
|
|
200,004
|
|
202,080
|
|
LaSalle Hotel Properties
|
A
|
10.250%
|
11,000
|
|
281,835
|
|
279,400
|
|
Lexington Corporate Properties Trust
|
B
|
8.050%
|
20,000
|
|
500,000
|
|
510,320
|
|
Maguire Properties, Inc.
|
A
|
7.625%
|
5,000
|
|
125,000
|
|
123,650
|
|
Mid-America Apartment Communities, Inc.
|
H
|
8.300%
|
22,000
|
|
559,900
|
|
578,600
|
|
Mills Corporation
|
G
|
7.875%
|
18,000
|
|
450,000
|
|
395,100
|
|
|
|
|
|
|
|
|
|
|
Total Preferred Stock
|
|
|
|
|
6,429,577
|
|
6,524,750
|
|
|
|
|
|
|
|
|
|
|
Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Champion Enterprises, Inc.
|
|
|
40,000
|
|
409,986
|
|
374,400
|
|
Fleetwood Enterprises, Inc.
|
|
|
185,000
|
|
1,394,895
|
|
1,463,347
|
|
Mission West Properties, Inc.
|
|
|
26,900
|
|
271,958
|
|
352,390
|
|
Monmouth Capital Corporation *
|
|
|
102,811
|
|
389,386
|
|
557,238
|
|
Monmouth Real Estate Corporation *
|
|
|
75,000
|
|
581,256
|
|
633,750
|
|
New Plan Excel Realty
|
|
|
14,000
|
|
373,037
|
|
384,720
|
|
Sun Communities, Inc.
|
|
|
50,000
|
|
1,673,610
|
|
1,618,000
|
|
|
|
|
|
|
|
|
|
|
Total Common Stock
|
|
|
|
|
5,094,128
|
|
5,383,845
|
|
|
|
|
|
|
|
|
|
|
Total Equity Securities
|
|
|
|
|
11,523,705
|
|
11,908,595
|
|
|
|
|
|
|
|
|
|
|
Total Securities Available for Sale
|
|
|
|
$
|
17,523,705
|
$
|
17,908,595
|
* Related entity See Note 8.
On July 31, 2007, Monmouth Real Estate Investment Corporation (MREIC) and Monmouth Capital Corporation (MCC), both related entities to the Company, completed a strategic combination whereby a wholly-owned subsidiary of MREIC merged with and into MCC, and MCC survived as a wholly-owned subsidiary of MREIC. Each outstanding share of MCCs common stock was converted into and exchanged for 0.655 shares of MREICs common stock. At the time of the merger, the Company had 107,403 shares of MCC common stock which was converted and exchanged for 70,349 shares of MREICs common stock. Additionally, the Companys $1,000,000 investment in MCCs outstanding 8% Convertible Subordinated Debentures due 2013 is now convertible into MREIC common stock at an adjusted conversion price of $9.16 per share. The Companys $5,000,000 investment in MCCs outstanding 8% Convertible Subordinated Debentures due 2015 is now convertible into MREIC common stock at an adjusted conversion price of $11.45 per share.
On September 13, 2007, the Company purchased 1,000,000 shares of MREIC common stock from Palisade Concentrated Equity Partnership, L.P.(Palisade), an unrelated entity. The total consideration for the purchase was $8,500,000. On November 23, 2007, the Company purchased an additional 325,704 shares of MREIC common stock from Palisade for a total consideration of $2,768,484. In addition to the convertible debentures, the Company now owns a total of 1,487,105 shares of MREIC common stock, representing 6.2% of the total shares outstanding at December 31, 2007.
-57-
The Company had fourteen securities that were temporarily impaired at December 31, 2007. The Company considers many factors in determining whether a security is other than temporarily impaired, including the nature of the security and the cause, severity and duration of the impairment. The following is a summary of temporarily impaired securities at December 31, 2007:
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Longer
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Value
|
|
Loss
|
|
Value
|
|
Loss
|
|
|
|
|
|
|
|
|
Preferred Stock
|
$2,158,688
|
|
$622,505
|
|
$-0-
|
|
$-0-
|
Common Stock
|
12,787,349
|
|
429,011
|
|
-0-
|
|
-0-
|
Total
|
$14,946,037
|
|
$1,051,516
|
|
$-0-
|
|
$-0-
|
The following is a summary of the range of the losses:
|
|
|
Number of
Individual Securities
|
Range of Loss
|
Time Period
|
|
|
|
4
|
Less than or equal to 10%
|
Less than 6 months
|
4
|
Less than or equal to 20%
|
Less than 6 months
|
6
|
Less than or equal to 30%
|
Less than 6 months
|
The Company normally holds REIT securities long term and has the ability and intent to hold securities to recovery.
During the years ended December 31, 2007, 2006 and 2005, the Company received proceeds of $4,298,838, $10,338,841 and $7,526,790, on sales or redemptions of securities available for sale, respectively. The Company recorded the following (Loss) Gain on Securities Transactions, net:
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
Gross realized gains
|
$ 362,626
|
|
$ 1,029,759
|
|
$ 1,187,658
|
Gross realized losses
|
(98,951)
|
|
(74,048)
|
|
-0-
|
Net (loss) gain on closed futures contracts
|
(704,509)
|
|
(29,443)
|
|
95,801
|
Unrealized gain (loss) on open futures contracts
|
40,781
|
|
163,828
|
|
(50,625)
|
Impairment loss
|
(998,324)
|
|
(823,249)
|
|
-0-
|
|
|
|
|
|
|
Total (Loss) Gain on Securities Transactions, net
|
($1,398,377)
|
|
$ 266,847
|
|
$ 1,232,834
|
|
|
|
|
|
|
The Company invests in futures contracts of ten-year treasury notes with the objective of reducing the exposure of the debt securities portfolio to market rate fluctuations. At December 31, 2007, 2006 and 2005, the notional amount of these contracts was $9,000,000. Changes in the market value of these derivatives have been recorded in gain on securities transactions, net with corresponding amounts recorded in other assets or other liabilities on the balance sheet. The fair value of the derivatives at December 31, 2007, 2006 and 2005 was a gain (loss) of $40,781, $163,828 and ($50,625), respectively and is included in gain on securities transactions, net.
During 2007, 2006 and 2005, the Company recorded a (loss) gain of ($704,509), ($29,443) and $95,801 on settled futures contracts, which is included in gain on securities transactions, net.
During 2007 and 2006, the Company recognized a loss of $998,324 and $823,249, respectively, due to write-downs to the carrying value of securities available for sale which were considered other than temporarily impaired.
-58-
Dividend income for the years ended December 31, 2007, 2006 and 2005 amounted to $871,327, $1,129,800 and $1,333,985, respectively. Interest income for the years ended December 31, 2007, 2006 and 2005 amounted to $2,486,197, $2,026,455 and $1,890,694, respectively.
The Company had margin loan balances of $5,530,942 and $3,259,796 at December 31, 2007 and 2006, respectively, which were collateralized by the Companys securities portfolio. Additionally, the Company also has a $2,500,000 loan with Two River Community Bank collateralized by the $5,000,000 Monmouth Capital Corporation 8% convertible subordinated debentures (See Note 5).
NOTE 5 LOANS AND MORTGAGES PAYABLE
Loans Payable
The Company purchases securities on margin. The interest rates charged on the margin loans at December 31, 2007 and 2006 was 6% and 7%, respectively. These loans are due on demand. At December 31, 2007 and 2006, the margin loans amounted to $5,530,942 and $3,259,796, respectively, and are collateralized by the Companys securities portfolio. The Company must maintain a coverage ratio of approximately 50%.
The Company has an $8,000,000 revolving credit agreement with GE Commercial Distribution Finance Corporation (GE) (formerly Transamerica Commercial Finance Corporation) to finance inventory purchases. The interest rates range from prime (with a minimum of 6%) for each advance to prime plus 2% after one year. The weighted average interest rate at December 31, 2007 and 2006 was 8.6% and 10.7%, respectively. This agreement originally terminated April 25, 2003, but automatically renews on an annual basis. Advances under this line of credit are secured by the manufactured homes for which the advances were made. As of December 31, 2007 and 2006, the amount outstanding with GE was $5,991,811 and $3,089,278, respectively.
In November 2007, the Company obtained a $2,500,000 loan with Two River Community Bank. The interest on this loan is 6.75%. This loan is due on November 8, 2009. Proceeds of this loan were used to purchase securities available for sale. This loan is collateralized by the $5,000,000 Monmouth Capital Corporation 8% convertible subordinated debentures.
The Company also has miscellaneous loans payable for equipment and vehicles totaling $-0- and $4,032 at December 31, 2007 and 2006, respectively.
Unsecured Lines of Credit
During 2007, the Company modified its unsecured line of credit with Bank of America (formerly Fleet Bank). The commitment amount was increased from $2,000,000 to $5,000,000. The interest rate was modified from prime to LIBOR plus 150 basis points. As of December 31, 2007 and 2006, $3,000,000 and $1,750,000, respectively, of this line of credit was utilized. The interest rate charged at December 31, 2007 and 2006 was 6.43% and 8.25%, respectively. This line of credit expires on June 30, 2008.
On April 15, 2007, the Companys $15,000,000 line of credit with PNC Bank matured.
-59-
Mortgages Payable
The following is a summary of mortgages payable:
|
|
|
|
|
|
|
At December 31, 2007
|
Balance at December 31,
|
Property
|
Due Date
|
Interest Rate
|
2007
|
|
2006
|
|
|
|
|
|
|
Allentown
|
12/01/11
|
6.36%
|
$5,112,246
|
|
$5,240,029
|
Cranberry Village
|
08/01/08
|
LIBOR + 1.65%
|
1,839,464
|
|
1,952,070
|
D & R Village
|
05/01/08
|
4.625%
|
2,388,419
|
|
2,564,294
|
Fairview Manor
|
02/01/17
|
5.785%
|
11,353,202
|
|
3,514,183
|
Forest Park Village
|
08/01/08
|
LIBOR + 1.65%
|
2,943,142
|
|
3,123,312
|
Heather Highlands
|
08/28/18
|
Prime + .5%
|
2,806,252
|
|
2,973,520
|
Highland Estates
|
09/01/17
|
6.175%
|
10,402,086
|
|
-0-
|
Laurel Woods
|
01/10/07
|
LIBOR + 1.55%
|
-0-
|
|
1,509,074
|
Port Royal Village
|
04/01/12
|
7.36%
|
5,053,403
|
|
5,117,549
|
Sandy Valley
|
03/01/09
|
4.75%
|
2,825,496
|
|
3,009,865
|
Somerset Estates/Whispering Pines
|
02/26/19
|
8.04%
|
1,642,302
|
|
1,732,117
|
Waterfalls Village
|
01/01/08
|
4.625%
|
2,049,655
|
|
2,205,859
|
Various (4 properties)
|
11/19/09
|
LIBOR + 1.75%
|
13,334,033
|
|
13,875,761
|
|
|
|
|
|
|
Total Mortgages
|
Payable
|
|
$61,749,700
|
|
$46,817,633
|
At December 31, 2007 and 2006, mortgages were collateralized by real property with a carrying value of $70,634,226 and $58,288,033, respectively, before accumulated depreciation and amortization. Interest costs amounting to $378,030, $225,800 and $167,400 were capitalized during 2007, 2006 and 2005, respectively, in connection with the Companys expansion program.
Recent Financing
In October 2006, the Company extended its mortgage on Laurel Woods to January 10, 2007. This mortgage was repaid in 2007.
On January 30, 2007, the Company obtained an $11,480,000 mortgage loan on Fairview Manor from Column Guaranteed LLC, a Credit Suisse company. This mortgage payable is due on February 1, 2017 with interest at a fixed rate of 5.785%. Proceeds from this mortgage were primarily used to pay off the existing mortgage on Fairview Manor and to pay down our margin loans and our lines of credit.
On August 2, 2007, the Company obtained a $10,439,000 mortgage loan on Highland Estates from Column Guaranteed LLC, a Credit Suisse company. This mortgage payable is due on September 1, 2017 with interest at a fixed rate of 6.175%. Proceeds from this mortgage were primarily used to pay down our margin loans and for other corporate purposes.
The aggregate principal payments of all mortgages payable are scheduled as follows:
|
|
2008
|
$10,708,593
|
2009
|
16,206,853
|
2010
|
852,768
|
2011
|
5,424,413
|
2012
|
796,100
|
Thereafter
|
27,760,973
|
|
|
Total
|
$61,749,700
|
-60-
NOTE 6 EMPLOYEE STOCK OPTIONS
On August 14, 2003, the shareholders approved and ratified the Companys 2003 Stock Option Plan (the 2003 Plan) authorizing the grant to officers and key employees of options to purchase up to 1,500,000 shares of common stock. All options are exercisable one year from the date of grant. The option price shall not be below the fair market value at date of grant. If options granted under the 2003 Plan expire or terminate for any reason without having been exercised in full, the Shares subject to, but not delivered under, such options shall become available for additional option grants under the 2003 Plan. This Plan replaced the Companys 1994 Stock Option Plan which, pursuant to its terms, terminated December 31, 2003. The outstanding options under this plan remain outstanding until exercised, forfeited or expired.
The Company adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock Based Compensation on January 1, 2003. During the year ended December 31, 2007, fifteen employees were granted options to purchase a total of 108,000 shares. The fair value of those options was approximately $139,000 based on assumptions noted below and is being amortized over the 1-year vesting period.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in the following years:
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
Dividend yield
|
6.54%
|
|
6.33%
|
|
6.35%
|
|
Expected volatility
|
18.09%
|
|
18.5%
|
|
19.04%
|
|
Risk-free interest rate
|
4.79%
|
|
4.63%
|
|
4.01%
|
|
Expected lives
|
8
|
|
8
|
|
8
|
A summary of the status of the Companys stock option plans as of December 31, 2007, 2006 and 2005 and changes during the years then ended are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Average
|
|
|
Average
|
|
|
Average
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Exercise
|
|
Shares
|
Price
|
|
Shares
|
Price
|
|
Shares
|
Price
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
348,000
|
$15.09
|
|
296,000
|
$14.40
|
|
349,000
|
$12.04
|
Granted
|
108,000
|
14.83
|
|
90,000
|
15.51
|
|
90,000
|
15.48
|
Exercised
|
(18,812)
|
13.51
|
|
(38,000)
|
10.73
|
|
(138,000)
|
9.18
|
Expired
|
(11,188)
|
15.10
|
|
-0-
|
-0-
|
|
(5,000)
|
13.05
|
Outstanding at end of year
|
426,000
|
15.10
|
|
348,000
|
15.09
|
|
296,000
|
14.40
|
Options exercisable at end of year
|
318,000
|
|
|
258,000
|
|
|
206,000
|
|
Weighted-average fair value of options granted during the year
|
|
1.29
|
|
|
1.44
|
|
|
1.33
|
-61-
The following is a summary of stock options outstanding as of December 31, 2007:
|
|
|
|
|
|
Date of Grant
|
Number of Employees
|
Number of Shares
|
|
Option Price
|
Expiration Date
|
|
|
|
|
|
|
10/04/01
|
2
|
6,000
|
|
10.60
|
10/04/09
|
01/04/02
|
1
|
25,000
|
|
12.95
|
01/04/10
|
06/20/02
|
5
|
13,000
|
|
12.60
|
06/20/10
|
08/18/03
|
1
|
25,000
|
|
16.92
|
08/18/11
|
08/25/03
|
7
|
26,000
|
|
15.00
|
08/25/11
|
01/16/04
|
1
|
25,000
|
|
18.62
|
01/16/12
|
07/06/04
|
7
|
30,000
|
|
13.05
|
07/06/12
|
02/01/05
|
1
|
43,600
|
|
15.62
|
02/01/13
|
02/01/05
|
1
|
6,400
|
|
17.19
|
02/01/13
|
07/18/05
|
9
|
34,000
|
|
15.05
|
07/18/13
|
01/09/06
|
1
|
44,200
|
|
15.62
|
01/09/14
|
01/09/06
|
1
|
5,800
|
|
17.21
|
01/09/14
|
07/21/06
|
9
|
34,000
|
|
15.15
|
07/21/14
|
01/03/07
|
1
|
44,200
|
*
|
15.51
|
01/03/15
|
01/03/07
|
1
|
5,800
|
*
|
17.06
|
01/03/15
|
07/19/07
|
12
|
51,000
|
*
|
14.21
|
07/16/15
|
09/20/07
|
2
|
7,000
|
*
|
13.19
|
09/20/15
|
|
|
|
|
|
|
|
|
426,000
|
|
|
|
* Unexercisable
During the year ended December 31, 2007, two employees exercised their stock options and purchased 18,812 shares for a total of $254,121.
As of December 31, 2007, there were 1,100,188 shares available for grant under the 2003 Plan.
NOTE 7 401(k) PLAN
All full-time employees who are over 21 years old and have completed one year of service (as defined) are eligible for the Companys 401(k) Plan (Plan). Under this Plan, an employee may elect to defer his/her compensation (up to a maximum of $15,500, annually adjusted) and have it contributed to the Plan. Employer contributions to the Plan are at the discretion of the Company. During 2007, 2006 and 2005, the Company made matching contributions to the Plan of up to 50% of the first 6% of employee salary. The total expense relating to the Plan, including matching contributions, amounted to $135,849, $54,000 and $54,215 in 2007, 2006 and 2005, respectively.
NOTE 8 RELATED PARTY TRANSACTIONS AND OTHER MATTERS
On July 31, 2007, Monmouth Real Estate Investment Corporation (MREIC) and Monmouth Capital Corporation (MCC), both related entities to the Company, completed a strategic combination whereby a wholly-owned subsidiary of MREIC merged with and into MCC, and MCC survived as a wholly-owned subsidiary of MREIC. Each outstanding share of MCCs common stock was converted into and exchanged for 0.655 shares of MREICs common stock. At the time of the merger, the Company had 107,403 shares of MCC common stock which was converted and exchanged for 70,349 shares of MREICs common stock. Additionally, the Companys $1,000,000 investment in MCCs outstanding 8% Convertible Subordinated Debentures due 2013 is now convertible into MREIC common stock at an adjusted conversion price of $9.16 per share. The Companys $5,000,000 investment in MCCs outstanding 8% Convertible Subordinated Debentures due 2015 is now convertible into MREIC common stock at an adjusted conversion price of $11.45 per share.
Prior to the merger of MREIC and MCC, the Company operated as part of a group of three public companies (all REITs) which includes the Company, MREIC and MCC, (collectively the affiliated companies). Some general and administrative expenses were allocated among the affiliated companies based on use or services
-62-
provided. Allocations of salaries and benefits are made based on the amount of the employees time dedicated to each affiliated company. Subsequent to the merger, shared expenses are allocated between the Company and MREIC.
There are five Directors of the Company who are also Directors and shareholders of MREIC. The Company holds common stock and convertible debentures of MREIC in its securities portfolio (See Note 4 for current holdings).
Transactions with Monmouth Real Estate Investment Corporation
The Company has purchased shares of MREIC common stock primarily through MREICs Dividend Reinvestment and Stock Purchase Plan (See Note 4). During 2004, the Company sold in the open market 745,250 shares of MREIC and recorded a gain on sale of $1,499,332. On September 13, 2007, the Company purchased 1,000,000 shares of MREIC common stock from Palisade Concentrated Equity Partnership, L.P.(Palisade), an unrelated entity. The total consideration for the purchase was $8,500,000. On November 23, 2007, the Company purchased an additional 325,704 shares of MREIC common stock from Palisade for a total consideration of $2,768,484. In addition to the convertible debentures, the Company now owns a total of 1,487,105 shares of MREIC common stock, representing 6.2% of the total shares outstanding at December 31, 2007.
Transactions with Monmouth Capital Corporation
During 2005, the Company invested $5,000,000 in the convertible debenture private placement offering of MCC (the MCC 2005 Debenture). The MCC 2005 Debenture pays interest at 8% and is now convertible into 436,681 shares of common stock of MREIC at any time prior to redemption or maturity. The MCC 2005 convertible debenture matures on March 30, 2015.
During 2007, 2006 and 2005, the Company purchased from MCC at its cost, 2, 1 and 4 homes, respectively totaling $29,932, $20,361 and $79,305, respectively to be used as rental homes.
During 2005, the Company financed/refinanced certain loans on sales made by MCC to third parties. These loans are secured by manufactured homes. The total amount financed amounted to $10,500.
Salary, Directors, Management And Legal Fees
The Company has an Employment Agreement with Mr. Eugene W. Landy, Chairman of the Board. Under this agreement, Mr. Landy received an annual base compensation of $150,000 (as amended) plus bonuses and customary fringe benefits, including health insurance, participation in the Companys 401(k) Plan, stock options, five weeks vacation and use of an automobile. Additionally, there may be bonuses voted by the Board of Directors. The Employment Agreement is terminable by either party at any time subject to certain notice requirements. On severance of employment by the Company, Mr. Landy will receive severance of $450,000, payable $150,000 on severance and $150,000 on the first and second anniversaries of severance. In the event of disability, Mr. Landys compensation will continue for a period of three years, payable monthly. On retirement, Mr. Landy will receive a pension of $50,000 a year for ten years, payable in monthly installments. In the event of death, Mr. Landys designated beneficiary will receive $450,000, $100,000 thirty days after death and the balance one year after death. The Employment Agreement automatically renews each year for successive one-year periods. Effective January 1, 2004, this agreement was amended to increase Mr. Landy's annual base compensation to $175,000. Additionally, Mr. Landy's pension benefit of $50,000 per year has been extended for an additional three years.
Effective January 1, 2005, the Company and Samuel A. Landy entered into a three-year Employment Agreement under which Mr. Samuel Landy receives an annual base salary of $329,922 for 2005, $346,418 for 2006 and $363,739 for 2007 plus bonuses and customary fringe benefits. Bonuses are at the discretion of the Board of Directors and are based on certain guidelines. Mr. Samuel Landy will also receive four weeks vacation, use of an automobile, and stock options for 50,000 shares in each year of the contract. On severance by the Company, Mr. Samuel Landy is entitled to one years salary. In the event of disability, Mr. Samuel Landy will receive lost wages from a disability insurance policy. In the event a merger of the Company, sale or change of control, Mr. Landy shall have the right to extend and renew this Employment Agreement so that the expiration date will be three years from the date of merger, sale or change of control. During 2005, the Company had loans outstanding from Mr. Samuel A.
-63-
Landy. These loans were repaid during 2005. The interest rate on these loans ranged from 6.36% to 7.86%. Interest earned on these loans during 2005 amounted to $12,108.
Effective January 1, 2006, the Company and Anna T. Chew entered into a three-year Employment Agreement. Ms. Chew will receive an annual base salary of $225,133 for 2006, plus bonuses and customary fringe benefits. Each year Ms. Chew will receive a 5% increase in her base salary. Ms. Chew will also receive four weeks vacation, use of an automobile, and stock options for 10,000 shares in each year of the contract. On severance by the Company, Ms. Chew is entitled to an additional one years salary. In the event of disability, Ms. Chew will receive lost wages from a disability insurance policy. In the event of a merger of the Corporation, sale or change of control, Ms. Chew shall have the right to extend and renew this Employment Agreement so that the expiration date will be three years from the date of merger, sale or change of control.
Other Matters
The Company has employment agreements with certain executive officers, which in addition to base compensation, bonuses and fringe benefits, provides for specified retirement benefits. The Company has accrued these benefits on a present value basis over the terms of the agreements. Amounts accrued under these agreements were $597,058 and $647,058 at December 31, 2007 and 2006, respectively.
In August, 1999, the Company entered into a lease for its corporate offices. The lease is for a five-year term at market rates with monthly lease payments of $12,000, plus its proportionate share of real estate taxes and common area maintenance. The lessor of the property is owned by certain officers and directors of the Company. The lease payments and the resultant lease term commenced on May 1, 2000. Approximately 50% of the monthly lease payment of $12,000, plus its proportionate share of real estate taxes and common area maintenance is reimbursed by other related entities utilizing the leased space (MREIC and MCC). On May 1, 2005, the Company renewed this lease for an additional five-year term. The monthly lease payment was increased to $15,000, plus its proportionate share of real estate taxes and common area maintenance.
NOTE 9 DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has a Dividend Reinvestment and Stock Purchase Plan (DRIP). Under the terms of the DRIP, shareholders who participate may reinvest all or part of their dividends in additional shares of the Company at approximately 95% of the market price. Shareholders may also purchase additional shares at approximately 95% of their market price by making optional cash payments. Generally, dividend reinvestments and purchases of shares are made quarterly on March 15, June 15, September 15 and December 15.
Effective June 24, 1998, the Company amended the Dividend Reinvestment and Stock Purchase Plan. Shareholders were no longer able to purchase additional shares by making optional cash payments. The dividend reinvestment feature of the Plan remained unchanged.
On March 19, 2003, the Company amended the Dividend Reinvestment and Stock Purchase Plan to provide for monthly optional cash payments of not less than $500 per payment nor more than $1,000 unless a request for waiver has been accepted by the Company.
Amounts received, including dividends reinvested of $1,840,527, $1,783,177 and $1,931,172 respectively, and shares issued in connection with the DRIP for the years ended December 31, 2007, 2006 and 2005 were as follows:
|
|
|
|
|
2007
|
2006
|
2005
|
Amounts Received/Dividends
|
|
|
|
Reinvested
|
$5,306,062
|
$6,912,430
|
$9,188,271
|
Number of Share Issued
|
399,454
|
474,001
|
620,516
|
-64-
NOTE 10 DISTRIBUTIONS
The following cash distributions, including dividends reinvested, were paid to shareholders during the three years ended December 31, 2007, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
2006
|
2005
|
Quarter Ended
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
$2,592,423
|
|
$.25
|
|
$2,429,773
|
|
$.245
|
|
$2,247,637
|
|
$.2425
|
June 30
|
2,626,332
|
|
.25
|
|
2,470,173
|
|
.245
|
|
2,307,619
|
|
.2450
|
September 30
|
2,653,584
|
|
.25
|
|
2,491,306
|
|
.245
|
|
2,347,579
|
|
.2450
|
December 31
|
2,671,263
|
|
.25
|
|
2,566,579
|
|
.250
|
|
2,384,314
|
|
.2450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$10,543,602
|
|
$1.00
|
|
$9,957,831
|
|
$.985
|
|
$9,287,149
|
|
$.9775
|
These amounts do not include the discount on shares purchased through the Companys Dividend Reinvestment and Stock Purchase Plan.
On January 16, 2008, the Company declared a cash dividend of $.25 per share to be paid on March 17, 2008 to shareholders of record February 15, 2008.
NOTE 11 FEDERAL INCOME TAXES
The Company elected to be taxed as a real estate investment trust (REIT) in accordance with the Internal Revenue Code, commencing with its taxable year ended December 31, 1992. In order to qualify as a REIT, the Company must meet a number of organizational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to its stockholders. It is managements current intention to adhere to these requirements and maintain the Companys REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state, and local income taxes.
Federal Excise Tax
The Company does not have a Federal excise tax liability for the 2007, 2006 and 2005, since it intends to or has distributed all of its annual income.
-65-
Reconciliation Between GAAP Net Income and Taxable Income
The following table reconciles GAAP net income to taxable income for the years ended December 31, 2007, 2006, and 2005:
|
|
|
|
|
|
|
|
|
2007
Estimate
(unaudited)
|
|
2006
Actual
|
|
2005
Actual
|
|
|
|
|
|
|
|
GAAP net income
|
$
|
2,632,741
|
$
|
5,840,277
|
$
|
6,990,342
|
Add (less) GAAP net loss (gain) of taxable REIT subsidiaries included above
|
|
1,382,748
|
|
693,520
|
|
261,087
|
GAAP net income from REIT operations
|
|
4,015,489
|
|
6,533,797
|
|
7,251,429
|
Book / tax difference on gains / losses from capital transactions
|
|
280,129
|
|
(177,365)
|
|
(296,069)
|
Stock option expense
|
|
132,386
|
|
130,285
|
|
102,580
|
Non-qualified stock options exercised
|
|
(27,025)
|
|
(40,227)
|
|
(583,614)
|
Other book / tax differences, net
|
|
1,766
|
|
(85,774)
|
|
400,345
|
Taxable income before adjustments
|
|
4,402,745
|
|
6,360,716
|
|
6,874,671
|
Less capital gains
|
|
-0-
|
|
(1,108,389)
|
|
(1,415,329)
|
Adjusted taxable income subject to 90% dividend requirement
|
$
|
4,402,745
|
$
|
5,252,327
|
$
|
5,459,342
|
|
|
|
|
|
|
|
Reconciliation Between Cash Dividends Paid and Dividends Paid Deduction
The following table reconciles cash dividends paid with the dividends paid deduction for the years ended December 31, 2007, 2006, and 2005:
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Cash dividends paid
|
$
|
10,543,602
|
$
|
9,957,831
|
$
|
9,287,149
|
Less: Dividends designated to prior year
|
|
-0-
|
|
-0-
|
|
-0-
|
Less: Portion designated capital gains
distribution
|
|
-0-
|
|
(1,108,389)
|
|
(1,415,329)
|
Less: Return of capital
|
|
5,374,204
|
|
(1,930,611)
|
|
(1,250,278)
|
Dividends paid deduction
|
$
|
5,169,398
|
$
|
6,918,831
|
$
|
6,621,542
|
|
|
|
|
|
|
|
Characterization of Distributions
The following table characterizes the distributions paid per common share for the years ended December 31, 2007, 2006, and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
2006
|
|
|
|
2005
|
|
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
$
|
.49029
|
|
49.0288%
|
$
|
0.68433
|
|
69.4749%
|
$
|
0.69605
|
|
71.2077%
|
Return of capital
|
|
.50971
|
|
50.9712%
|
|
0.19099
|
|
19.3900%
|
|
0.13143
|
|
13.4454%
|
Capital gains
|
|
-0-
|
|
-0-%
|
|
0.10968
|
|
11.1351%
|
|
0.15002
|
|
15.3469%
|
|
$
|
1.0000
|
|
100.000%
|
$
|
0.98500
|
|
100.000%
|
$
|
0.97750
|
|
100.000%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-66-
In addition to the above, taxable income from non-REIT activities conducted by S&F, a taxable REIT subsidiary, is subject to federal, state and local income taxes. Deferred income taxes pertaining to S&F are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial reporting bases of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors. For the years ended December 31, 2007, 2006 and 2005, S&F had operating losses for financial reporting purposes of $1,382,748, $693,520 and $261,087, respectively. Therefore, a valuation allowance has been established against any deferred tax assets relating to S&F. For the years ended December 31, 2007, 2006 and 2005, S&F recorded $201,000, $27,000 and $88,000, respectively, in federal, state and franchise taxes which have been included in general and administrative expenses.
NOTE 12 COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS
The Company is subject to claims and litigation in the ordinary course of business. Management does not believe that any such claim or litigation will have a material adverse effect on the business, assets, or results of operations of the Company.
NOTE 13 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose certain information about fair values of financial instruments, as defined in SFAS No. 107, Disclosures About Fair Value of Financial Instruments.
Limitations
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. Almost all of the Companys securities available for sale have quoted market prices. However, for a portion of the Company's other financial instruments, no quoted market value exists. Therefore, estimates of fair value are necessarily based on a number of significant assumptions (many of which involve events outside the control of management). Such assumptions include assessments of current economic conditions, perceived risks associated with these financial instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly different fair value estimates.
The fair value of cash and cash equivalents and notes receivables approximates their current carrying amounts since all such items are short-term in nature. The fair value of securities available for sale is primarily based upon quoted market values. The fair value of variable rate mortgages payable and loans payable approximate their current carrying amounts since such amounts payable are at approximately a weighted-average current market rate of interest. For 2007, the fair and carrying values of fixed rate mortgages payable amounted to $41,428,086 and $40,826,809 respectively. For 2006, the fair and carrying value of fixed rate mortgages payable amounted to $20,000,738 and $19,869,713, respectively. The fair value of mortgages payable is based upon discounted cash flows at current market rates for instruments with similar remaining terms.
NOTE 14 SUPPLEMENTAL CASH FLOW AND COMPREHENSIVE INCOME INFORMATION
Cash paid during the years ended December 31, 2007, 2006 and 2005 for interest was $3,965,090, $3,704,853, and $2,793,166, respectively.
During the years ended December 31, 2007, 2006 and 2005, land development costs of $6,056,385, $3,094,939 and $5,596,310, respectively were transferred to investment property and equipment and placed in service.
-67-
During the years ended December 31, 2007, 2006 and 2005, the Company had dividend reinvestments of $1,840,527, $1,783,177 and $1,931,172, respectively which required no cash transfers.
The following are the reclassification adjustments related to securities available for sale included in Other Comprehensive Income:
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
Unrealized holding loss arising
during the year
|
($2,161,643)
|
|
($399,217)
|
|
($1,038,718)
|
Less: reclassification adjustment
for net gains realized in income
|
734,649
|
|
(132,462)
|
|
(1,187,658)
|
|
|
|
|
|
|
Net unrealized holding loss
|
($1,426,994)
|
|
($531,679)
|
|
($2,226,376)
|
NOTE 15 SUBSEQUENT EVENTS
On February 27, 2008, the Company increased and refinanced its mortgage loans on D&R Village and Waterfalls Village with Bank of America. The new principal balance is $8,700,000. This mortgage payable is due on February 27, 2013 with interest at a fixed rate of 5.614%. Proceeds were primarily used to pay off the existing mortgages on D&R Village and Waterfalls Village and to pay down our margin loans.
NOTE 16 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
|
|
|
|
|
|
|
|
2007
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
|
|
|
|
|
|
|
Total Revenues
|
$8,800,346
|
|
$11,351,020
|
|
$9,971,274
|
|
$8,718,061
|
Total Expenses
|
7,995,017
|
|
9,457,305
|
|
9,884,271
|
|
8,970,685
|
Net Income (1)
|
837,241
|
|
1,928,327
|
|
110,239
|
|
(243,066)
|
Net Income per Share
Basic
|
.08
|
|
.18
|
|
.01
|
|
(.02)
|
Diluted
|
.08
|
|
.18
|
|
.01
|
|
(.02)
|
|
|
|
|
|
|
|
|
2006
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
|
|
|
|
|
|
|
Total Revenues
|
$9,512,201
|
|
$10,343,852
|
|
$9,894,006
|
|
$12,894,551
|
Total Expenses
|
7,388,513
|
|
9,168,697
|
|
9,658,698
|
|
10,746,828
|
Net Income (1)
|
2,140,525
|
|
1,217,949
|
|
276,075
|
|
2,205,728
|
Net Income per Share
Basic
|
.22
|
|
.12
|
|
.03
|
|
.22
|
Diluted
|
.22
|
|
.12
|
|
.03
|
|
.22
|
|
|
|
|
|
|
|
|
(1)
Fluctuations are primarily due to changes in the fair value of interest rate swaps and Gain on Securities Transactions, net.
-68-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
Column A
|
|
Column B
|
|
|
Column C
|
|
Column D
|
|
|
|
|
|
Initial Cost
|
|
|
Description
|
|
Encumbrances
|
|
|
Land
|
|
Site, Land & Building Improvements and Rental Homes
|
|
Capitalization
Subsequent to Acquisition
|
|
|
|
|
|
|
|
|
|
|
Memphis, TN
|
$
|
5,112,246
|
|
$
|
250,000
|
$
|
2,569,101
|
$
|
1,936,380
|
Greenfield Ctr, NY
|
|
-0-
|
|
|
37,500
|
|
232,547
|
|
2,563,639
|
Vineland, NJ
|
|
|
(1)
|
|
320,000
|
|
1,866,323
|
|
1,037,173
|
Duncansville, PA
|
|
-0-
|
|
|
60,774
|
|
378,093
|
|
811,321
|
Cranberry Twp, PA
|
|
1,839,464
|
|
|
181,930
|
|
1,922,931
|
|
525,595
|
Clifton Park, NY
|
|
2,388,419
|
|
|
391,724
|
|
704,021
|
|
1,476,967
|
Apollo, PA
|
|
-0-
|
|
|
670,000
|
|
1,336,600
|
|
1,246,774
|
Cranberry Twp, PA
|
|
2,943,142
|
|
|
75,000
|
|
977,225
|
|
1,456,883
|
Millville, NJ
|
|
11,353,202
|
|
|
216,000
|
|
1,166,517
|
|
7,938,015
|
Kutztown, PA
|
|
10,402,086
|
|
|
145,000
|
|
1,695,041
|
|
7,370,110
|
Inkerman, PA
|
|
2,806,252
|
|
|
572,500
|
|
2,151,569
|
|
3,461,326
|
Monticello, NY
|
|
-0-
|
|
|
235,600
|
|
1,402,572
|
|
3,656,655
|
Navarre, OH
|
|
-0-
|
|
|
290,000
|
|
1,457,673
|
|
1,953,727
|
Cresson, PA
|
|
-0-
|
|
|
432,700
|
|
2,070,426
|
|
1,308,247
|
Memphis, TN
|
|
-0-
|
|
|
78,435
|
|
810,477
|
|
1,212,913
|
West Grove, PA
|
|
|
(1)
|
|
175,000
|
|
990,515
|
|
1,013,562
|
Carlisle, PA
|
|
-0-
|
|
|
37,540
|
|
198,321
|
|
4,181,017
|
Belle Vernon, PA
|
|
5,053,403
|
|
|
150,000
|
|
2,491,796
|
|
4,695,014
|
Marion, OH
|
|
-0-
|
|
|
236,000
|
|
785,293
|
|
3,395,349
|
Somerset, PA
|
|
1,642,302
|
|
|
1,485,000
|
|
2,050,400
|
|
3,902,125
|
Athens, OH
|
|
-0-
|
|
|
67,000
|
|
1,326,800
|
|
575,474
|
Magnolia, OH
|
|
2,825,496
|
|
|
270,000
|
|
1,941,430
|
|
2,770,838
|
Jackson, NJ
|
|
|
(1)
|
|
100,095
|
|
602,820
|
|
1,495,389
|
Hamburg, NY
|
|
2,049,655
|
|
|
424,000
|
|
3,812,000
|
|
957,241
|
West Monroe, NY
|
|
-0-
|
|
|
77,000
|
|
841,000
|
|
589,812
|
Lebanon, TN
|
|
-0-
|
|
|
1,184,000
|
|
4,034,480
|
|
383,969
|
Eatontown, NJ
|
|
|
(1)
|
|
157,421
|
|
280,749
|
|
461,498
|
Caledonia, OH
|
|
-0-
|
|
|
260,000
|
|
1,753,206
|
|
1,815,869
|
Coxsackie, NY
|
|
-0-
|
|
|
1,757,800
|
|
-0-
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
48,415,667
|
|
$
|
10,338,019
|
$
|
41,849,926
|
$
|
64,192,882
|
Various
|
|
13,334,033
|
(1)
|
|
|
|
|
|
|
|
$
|
61,749,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents one mortgage note payable secured by four properties.
-69-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
Column A
|
|
Column E (2) (3)
|
|
Column F (2)
|
|
|
Gross Amount at Which Carried
at 12/31/07
|
|
|
Description
|
|
Land
|
|
Site, Land & Building Improvements and Rental Homes
|
|
Total
|
|
Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
Memphis, TN
|
$
|
250,000
|
$
|
4,505,481
|
$
|
4,755,481
|
$
|
3,186,884
|
Greenfield Ctr, NY
|
|
122,865
|
|
2,710,821
|
|
2,833,686
|
|
1,367,016
|
Vineland, NJ
|
|
408,206
|
|
2,815,290
|
|
3,223,496
|
|
2,220,351
|
Duncansville, PA
|
|
60,774
|
|
1,189,414
|
|
1,250,188
|
|
661,258
|
Cranberry Twp, PA
|
|
181,930
|
|
2,448,526
|
|
2,630,456
|
|
2,058,533
|
Clifton Park, NY
|
|
391,724
|
|
2,180,988
|
|
2,572,712
|
|
1,217,790
|
Apollo, PA
|
|
732,089
|
|
2,521,285
|
|
3,253,374
|
|
989,287
|
Cranberry Twp, PA
|
|
75,000
|
|
2,434,108
|
|
2,509,108
|
|
1,885,853
|
Millville, NJ
|
|
2,534,891
|
|
6,785,641
|
|
9,320,532
|
|
2,649,333
|
Kutztown, PA
|
|
404,239
|
|
8,805,912
|
|
9,210,151
|
|
2,787,895
|
Inkerman, PA
|
|
572,500
|
|
5,612,895
|
|
6,185,395
|
|
2,403,357
|
Monticello, NY
|
|
318,472
|
|
4,976,355
|
|
5,294,827
|
|
1,883,336
|
Navarre, OH
|
|
290,000
|
|
3,411,400
|
|
3,701,400
|
|
569,080
|
Cresson, PA
|
|
432,700
|
|
3,378,673
|
|
3,811,373
|
|
1,599,581
|
Memphis, TN
|
|
78,435
|
|
2,023,390
|
|
2,101,825
|
|
1,311,783
|
West Grove, PA
|
|
155,000
|
|
2,024,077
|
|
2,179,077
|
|
1,611,489
|
Carlisle, PA
|
|
145,473
|
|
4,271,405
|
|
4,416,878
|
|
1,058,219
|
Belle Vernon, PA
|
|
150,000
|
|
7,186,810
|
|
7,336,810
|
|
3,727,917
|
Marion, OH
|
|
236,000
|
|
4,180,642
|
|
4,416,642
|
|
1,830,016
|
Somerset, PA
|
|
1,485,000
|
|
5,952,525
|
|
7,437,525
|
|
406,839
|
Athens, OH
|
|
67,000
|
|
1,902,274
|
|
1,969,274
|
|
631,717
|
Magnolia, OH
|
|
270,000
|
|
4,712,268
|
|
4,982,268
|
|
2,790,401
|
Jackson, NJ
|
|
100,095
|
|
2,098,209
|
|
2,198,304
|
|
1,600,060
|
Hamburg, NY
|
|
424,000
|
|
4,769,241
|
|
5,193,241
|
|
1,522,979
|
West Monroe, NY
|
|
77,000
|
|
1,430,812
|
|
1,507,812
|
|
224,723
|
Lebanon, TN
|
|
1,184,000
|
|
4,418,449
|
|
5,602,449
|
|
276,987
|
Eatontown, NJ
|
|
135,421
|
|
764,247
|
|
899,668
|
|
417,308
|
Caledonia, OH
|
|
260,000
|
|
3,569,075
|
|
3,829,075
|
|
1,032,391
|
Coxsackie, NY
|
|
1,757,800
|
|
-0-
|
|
1,757,800
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
$
|
13,300,614
|
$
|
103,080,213
|
$
|
116,380,827
|
$
|
43,922,385
|
(2)
See reconciliation.
(3)
The aggregate cost for Federal tax purposes approximates historical cost.
-70-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2007
|
|
|
|
|
|
Column A
|
Column G
|
|
Column H
|
|
Column I
|
|
|
|
|
|
|
Description
|
Date of
Construction
|
|
Date
Acquired
|
|
Life
|
|
|
|
|
|
|
Memphis, TN
|
prior to 1980
|
|
1986
|
|
3 to 27.5
|
Greenfield Ctr, NY
|
prior to 1970
|
|
1977
|
|
3 to 27.5
|
Vineland, NJ
|
1973
|
|
1986
|
|
3 to 27.5
|
Duncansville, PA
|
1961
|
|
1979
|
|
3 to 27.5
|
Cranberry Twp, PA
|
1974
|
|
1986
|
|
5 to 27.5
|
Clifton Park, NY
|
1972
|
|
1978
|
|
3 to 27.5
|
Apollo, PA
|
prior to 1980
|
|
1995
|
|
5 to 27.5
|
Cranberry Twp, PA
|
prior to 1980
|
|
1982
|
|
3 to 27.5
|
Millville, NJ
|
prior to 1980
|
|
1985
|
|
3 to 27.5
|
Kutztown, PA
|
1971
|
|
1979
|
|
5 to 27.5
|
Inkerman, PA
|
1970
|
|
1992
|
|
5 to 27.5
|
Monticello, NY
|
1972
|
|
1988
|
|
5 to 27.5
|
Navarre, OH
|
prior to 1980
|
|
1987
|
|
5 to 27.5
|
Cresson, PA
|
prior to 1980
|
|
2001
|
|
5 to 27.5
|
Memphis, TN
|
1955
|
|
1985
|
|
3 to 27.5
|
West Grove, PA
|
1971
|
|
1974
|
|
5 to 27.5
|
Carlisle, PA
|
1961
|
|
1969
|
|
3 to 27.5
|
Belle Vernon, PA
|
1973
|
|
1983
|
|
3 to 27.5
|
Marion, OH
|
1950
|
|
1986
|
|
3 to 27.5
|
Somerset, PA
|
prior to 1980
|
|
2004
|
|
5 to 27.5
|
Athens, OH
|
prior to 1980
|
|
1996
|
|
5 to 27.5
|
Magnolia, OH
|
prior to 1980
|
|
1985
|
|
5 to 27.5
|
Jackson, NJ
|
1969
|
|
1969
|
|
3 to 27.5
|
Hamburg, NY
|
prior to 1980
|
|
1997
|
|
5 to 27.5
|
West Monroe, NY
|
prior to 1980
|
|
2003
|
|
5 to 27.5
|
Lebanon, TN
|
1997
|
|
2006
|
|
5 to 27.5
|
Eatontown, NJ
|
1964
|
|
1978
|
|
3 to 27.5
|
Caledonia, OH
|
prior to 1980
|
|
1996
|
|
5 to 27.5
|
Coxsackie, NY
|
N/A
|
|
2005
|
|
N/A
|
-71-
UMH PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
/----------FIXED ASSETS-----------/
|
(2)
|
Reconciliation:
|
12/31/07
|
|
12/31/06
|
|
12/31/05
|
|
|
|
|
|
|
|
|
Balance Beginning of Year
|
$105,139,224
|
|
$96,241,037
|
|
$84,825,549
|
|
|
|
|
|
|
|
|
Additions:
|
|
|
|
|
|
|
Acquisitions
|
-0-
|
|
5,218,480
|
|
3,661,555
|
|
Improvements
|
12,731,558
|
|
5,012,850
|
|
8,317,782
|
|
Depreciation
|
-0-
|
|
-0-
|
|
-0-
|
|
|
|
|
|
|
|
|
Total Additions
|
12,731,558
|
|
10,231,330
|
|
11,979,337
|
|
|
|
|
|
|
|
|
Deletions
|
1,489,955
|
|
1,333,143
|
|
563,849
|
|
|
|
|
|
|
|
|
Balance End of Year
|
$116,380,827
|
|
$105,139,224
|
|
$96,241,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/-----ACCUMULATED DEPRECIATION-----/
|
|
Reconciliation:
|
12/31/07
|
|
12/31/06
|
|
12/31/05
|
|
|
|
|
|
|
|
|
Balance Beginning of Year
|
$41,540,038
|
|
$39,296,286
|
|
$36,852,889
|
|
|
|
|
|
|
|
|
Additions:
|
|
|
|
|
|
|
Acquisitions
|
-0-
|
|
-0-
|
|
-0-
|
|
Improvements
|
-0-
|
|
-0-
|
|
-0-
|
|
Depreciation
|
2,936,037
|
|
2,649,013
|
|
2,662,104
|
|
|
|
|
|
|
|
|
Total Additions
|
2,936,037
|
|
2,649,013
|
|
2,662,104
|
|
|
|
|
|
|
|
|
Deletions
|
553,690
|
|
405,261
|
|
218,707
|
|
|
|
|
|
|
|
|
Balance End of Year
|
$43,922,385
|
|
$41,540,038
|
|
$39,296,286
|
|
|
|
|
|
|
|
-72-