MONOPOLY I, LLC (M1) is off to a great start in 2011! Our management team is focused on growing our family, increasing our securities portfolio, and reducing our short-term debt. During the quarter we attracted five new families, increased our securities portfolio by $38,815 and decreased our short-term debt by $202,500 through share purchases and refinancing.
Company Operations
-1Q Revenue was $55,577, 3.7% higher than 1Q 2010.
-Interest expense was reduced by 6.8% YOY through debt refinancing.
-Net taxable loss was $24,838 after property depreciation.
-Property value increased to $3,113,000, a $23k increase due to property
renovations.
-Our securities portfolio increased $38,815 through share acquisitions
and generated a 3.11% rate of return during the quarter.
-Our share price increased to $13.43.
-We grew our M1 family by five new share members.
Revenue: M1’s first quarter rental revenue was $53,542 compared to $53,258 in the same quarter of 2010, a slight increase. Our securities portfolio generated $2,034 in dividends compared to $314 during 1Q 2010. We expect dividend income to continue to increase as we focus on growing our securities portfolio. In addition, our rental income will remain level until we finish our current renovation projects which are scheduled to be completed by year-end.
Net Operating Income (NOI): M1’s NOI was $7,070 during the quarter. During the first quarter we always experience higher accounting, property insurance, and gas/electric bills and we plan our budget accordingly. We will see a leveling off and limited one-time costs going forward. 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 the quarter were $48,507. Again, accounting, property insurance, and utilities were the main drivers to an increase in operating expenses. However, we have compensated by managing our repair/maintenance expense under budget during the quarter. For the remainder of the year we will continue to invest money to improve our properties, thus maintaining our “pre-dividend” goal of reinvesting funds from operations (FFO) into property improvements. Depreciation accounted for $22,665 of operating expenses.
Funds From Operations (FFO): M1’s taxable net loss for the quarter was $24,838; however by backing out property depreciation the company experienced a nominal negative cash flow of $2,173, compared to $1,300 for 1Q 2010.
Balance sheet: Cash, cash equivalents, and short-term investments as of March 31, 2011 were $284,644. Short-term investments account for $280,915. The company’s total liabilities decreased to $1,807,510, a reduction of $33,832, through share purchases and mortgage reduction. Share members’ equity increased $95,513 to $1,590,134 reflecting member share purchases, property renovations and appreciation in market securities. During 1Q 2011, M1 issued 6,470 member shares. No shares were repurchased by the company.
OTHER DEVELOPMENTS DURING 1Q 2011
Securities portfolio: As of March 31, 2011, M1’s securities portfolio was valued at $280,915, approximately 8.2% of total assets. The portfolio comprises of real estate investment trusts and mutual funds, allocating 8.4% in residential REITs, 12.1% in office and industrial REITs, 11.6% in specialty REITs, 16.9% in retail REITs, 3.5% in student housing REITs, and 47.5% in CGM Realty fund. Our three largest holdings were in the following mutual fund/REITs: CGM Realty Fund, Realty Income (retail), and Mack-Cali Realty (office/industrial). During the 1Q, we added to our positions in Mack-Cali Realty, Annaly Capital, and Washington Real Estate Trust. Our securities portfolio performance during the quarter was 3.11%; since inception our portfolio has returned 20.99%.
Property management: During the quarter, we initiated two renovation projects in Macomb, IL. We are currently 50% complete. We have an additional nine apartment renovation projects scheduled to be completed during 2011- one in Macomb and the remainder in Joplin, MO. In Macomb, we have signed 2011-12 school year leases for all of our apartments at or above market rental rates. In Joplin, our rental revenue has been steady; we expect to rent our current vacant apartments at higher rental rates once we complete our scheduled renovations. Joplin continues to be a stronger rental market than most around the country, however it is not without challenges. We continue to experience higher than normal turn-over, resulting in loss rents. Fortunately, demand continues to be high for rental property as many ex-homeowners become renters again and Joplin’s population continues to grow. During 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.
Acquisition: No property acquisitions during this quarter.
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.
As always thank you for your continued support.
God bless,
BILL
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