MONOPOLY I, LLC (M1) continued to deliver on our business plan in 2010. We met our annual growth, revenue, net income, and capital investment goals. With increased capital we were able to make three property purchases and increase our securities portfolio by 173%. In addition to solid financial results we also attracted six new families to join our MONOPOLY family, increasing our membership to fifty-five.
Company Operations
Revenue was $219,612, 21% higher than 2009.
Funds from operations were $2,951, compared to a net loss of $14,095 in 2009.
Net taxable loss was $81,439 after property depreciation.
Property value increased to $3,090,000, a 26% increase over 2009 -positioning the company ahead of our “revised goal” of $2,250,000.
Share price increased to $13.36, a $.30 increase during 2010.
Capital raised since inception of the company is $1,386,084.
Revenue: M1’s fourth quarter revenue was $57,295 compared to $44,743 in the same quarter of 2009, an increase of 28%. We have increased our revenue each of the five years we have been in business. Higher revenue is a direct result of the improved rental environment in Joplin as well as our additional properties purchased in Macomb on 8/1/10.
Net Operating Income (NOI): M1’s NOI was $56,102 during 2010, a 72% increase over 2009. Additionally, our 4Q10 NOI was $36,156, a 9% increase over 3Q10. NOI continues to improve as we capitalize property improvements and expense routine repairs. Our short-term goal remains: Improve our units to increase rental rates. Success of our short-term goal will lead to longer tenant retention and consistent dividends in the future.
Operating expenses: Our operating expenses for 2010 were $163,510, a 10% increase over 2009. An increase in property insurance, utilities, real estate taxes and the addition of Macomb properties were the main drivers to an increase in operating expenses. To compensate, we managed our repair/maintenance budget expense to $17,806, 28% under our 2010 budget of $25,000. We are continuing to invest money to improve our properties, thus maintaining our “pre-dividend” goal of reinvesting funds from operations (FFO) into property improvements.
Funds from Operations (FFO): M1’s taxable net loss for 2010 was $81,439; however by backing out property depreciation the company experienced a net positive cash flow of $2,951, compared to net negative cash flow for 2009 of $14,095.
Balance sheet: Cash, cash equivalents, and short-term investments as of December 31, 2010 were $246,273. Short-term investments account for $242,414, a 173% increase over 2009. The company’s total liabilities increased to $1,840,869 as a result of our three property acquisitions during the year. Share members’ equity increased 52% to $1,495,404 reflecting member share purchases, property renovations and appreciation in market securities. During 2010, M1 issued 36,432 member shares. No shares were repurchased by the company in 2010.
OTHER DEVELOPMENTS DURING 2010
Securities portfolio: As of December 31, 2010, M1’s portfolio was approximately 7.2% invested in real estate investment trusts and mutual funds, allocating 9.8% in residential REITs, 8.8% in office and industrial REITs, 11.6% in specialty REITs, 16.1% in retail REITs, 3.9% in student housing REITs, and 49.8% in CGM Realty fund. Our three largest holdings were in the following mutual fund/REITs: CGM Realty Fund, Realty Income (retail), and Home Properties (multi-housing). During the 4Q, we added two new positions to our portfolio: (1) Retail Investors Real Estate Trust http://www.iret.com and (2) Washington Real Estate Trust. http://www.writ.com. Our securities portfolio has generated a 20.46% return since inception.
Property management: During 2010, we completed seven apartment renovations and we were able to rent all of them within 30 days at a higher rental rate. We currently have six apartment renovation projects under construction, all scheduled to be completed during the first half of 2011. We will continue to improve the overall quality and appearance of our properties with a goal of maintaining a 93% or higher occupancy rate. In addition, we also completed the renovation of our office at 1505 Michigan Avenue in Joplin. This has greatly increased our presence in the community and has provided a more organized and professional appearance to our tenants. On the challenging side, the job market (although improving) continues to be difficult in Joplin, increasing our turn-over rate. Fortunately, demand continues to be high for rental property as many ex-homeowners become renters again and Joplin’s population continues to grow.
Acquisition: During 2010, we purchased three properties. During 1Q we acquired 218 Gray Street, Joplin, MO for $275,000. Gray street is an 8-unit apartment building with each unit consisting of 1 bedroom/1 bath and renting for $350 per month. The building was appraised for $285,000. On August 1, 2010, we purchased two buildings consisting of three units each in Macomb, IL for $300,000. The addresses are 308 W. Adams and 320 N. McArthur. The properties are located in the heart of the Western Illinois University campus and we have established a relationship with the ROTC unit at WIU to lease the units to cadets beginning in the fall of 2011. The properties appraised for $305,000.
Guidance for 2011: M1’s 2011 revenue goal is $235,000. We expect our rental income to grow through acquisitions, rental rate increases and a better tenancy rate due to improved economic conditions. Operating expenses are budged to be $178,000 as we continue to execute our property rehabilitation and preventive maintenance plans. Funds from operations are expected to be break even as we fully reinvest our funds from operations.
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