Company Operations
2Q Revenue was $45,404, 18.3% lower than 1Q 2011
Interest expense decreased 21.8% YOY, due to debt reduction
Net taxable loss was $13,130 before property depreciation
Property value is $3,010,000, an $80,000 decrease
Securities portfolio increased $40,492 during 2Q to $321,408
Long-term liabilities have decreased $128,664 YTD to $1,685,798
Share price decreased to $12.15
Member shares issued YTD: 14,136
Revenue: M1’s second quarter rental revenue was $42,756 compared to $53,542 during 1Q11. Apartment vacancies (units becoming uninhabitable due to tornado damage) and tenant job loss are the main contributors to the reduction in rental income. Our securities portfolio generated $2,648 in dividends compared to $2,034 during 1Q11. We expect dividend income to continue to increase as we focus on growing our securities portfolio. In addition, our rental income will increase and normalize as we finish our current renovation projects which are scheduled to be completed by the end of third quarter.
Net Operating Income (NOI): M1’s NOI was $543 during the quarter.
Operating expenses: Our operating expenses for the quarter were $54,158. During the second quarter we experienced higher than normal repair costs and we will continue to experience this until all renovation projects are complete. We do expect to receive insurance proceeds to reimburse the majority of the expenses incurred during this 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 $35,795; however by backing out property depreciation the company experienced a negative FFO of $13,130.
Balance sheet: Cash, cash equivalents, and short-term investments as of June 30, 2011 were $330,216. Short-term investments account for $321,408. Property value decreased $80,000 to $3,010,000 as a result of lower rental income due to 15 uninhabitable apartments. Rental property’s value is based on rents received. We anticipate that once these apartments are renovated and able to be rented the value of the properties will return to pre-tornado values. The company’s total liabilities are $1,808,354, a reduction of $32,515 YTD through bond and mortgage reduction. Share members’ equity increased $37,241 YTD to $1,531,862 reflecting member share purchases and appreciation in market securities. During the first half of 2011, M1 issued 14,136 member shares. No shares were repurchased by the company.
Property management: During the quarter, we continued our two renovation projects in Macomb, IL. We are currently 95% complete. We have fifteen apartment renovation projects scheduled to be completed during 2011 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 decreased during the quarter, however we expect a sharp rebound as demand is high and we expect to rent all apartments once we complete our renovations. During 2011 we will continue to improve the overall quality and appearance of our properties with a goal of returning to a 95% or higher occupancy rate.
Acquisition: No property acquisitions during this quarter.
Guidance for 2011: M1’s 2011 revenue goal is reduced to $225,000 due to unrecoverable lost rents during the 2Q. We expect our rental income to grow through apartment availability upon renovation completion, 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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