If we were considered to actually or constructively pay a “preferential dividend” to certain of our stockholders, our status as a REIT could be adversely affected. In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with U.S. GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain. In order for distributions to be counted as satisfying the annual distribution requirements for REITs, and to provide us with a REIT level tax deduction, the distributions must not be “preferential dividends.” A dividend is not a preferential dividend if the distribution is pro rata among all outstanding sharesof stock within a particular class, and in accordance with the

preferences among different classes of stock as set forth in our organizational documents. Currently, there is uncertainty as to the application of the law in certain circumstances and the IRS's position regarding whether certain arrangements that REITs have with their stockholders could give rise to the inadvertent payment of a preferential dividend (e.g., the pricing methodology for stock purchased under a distribution reinvestment plan inadvertently causing a greater than 5% discount on the price of such stock purchased). There is no de minimis exception with respect to preferential dividends; therefore, if the IRS were to take the position that we inadvertently paid a preferential dividend, we may be deemed to have failed the 90% distribution test, and our status as a REIT could be terminated for the year in which such determination is made if we were unable to cure such failure. While we believe that our operations have been structured in such a manner that we will not be treated as inadvertently paying preferential dividends, we can provide no assurance to this effect.

To qualify as a REIT, we must comply with certain highly technical and complex requirements. We cannot be certain we have complied, and will always be able to comply, with the requirements to qualify as a REIT because there are few judicial and administrative interpretations of these provisions. In addition, facts and circumstances that may be beyond our control may affect our ability to continue to qualify as a REIT. We cannot assure you that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to our qualification as a REIT or with respect to the Federal income tax consequences of qualification. We believe that we have qualified as a REIT since our inception and intend to continue to qualify as a REIT. However, we cannot assure you that we are qualified or will remain qualified.

There is a risk of changes in the tax law applicable to real estate investment trusts. Because the IRS, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us and/or our investors.

We may be unable to comply with the strict income distribution requirements applicable to REITs. To maintain qualification as a REIT under the Code, a REIT must annually distribute to its stockholders at least 90% of its REIT taxable income, excluding the dividends paid deduction and net capital gains. This requirement limits our ability to accumulate capital. We may not have sufficient cash or other liquid assets to meet the distribution requirements. Difficulties in meeting the distribution requirements might arise due to competing demands for our funds or to timing differences between tax reporting and cash receipts and disbursements, because income may have to be reported before cash is received, because expenses may have to be paid before a deduction is allowed, because deductions may be disallowed or limited or because the IRS may make a determination that adjusts reported income. In those situations, we might be required to borrow funds or sell properties on adverse terms in order to meet the distribution requirements and interest and penalties could apply which could adversely affect our financial condition. If we fail to make a required distribution, we could cease to be taxed as a REIT.

Notwithstanding our status as a REIT, we are subject to various federal, state and local taxes on our income and property. For example, we will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains; provided, however, that properly designated undistributed capital gains will effectively avoid taxation at the stockholder level. We may be subject to other Federal income taxes and may also have to pay some state income or franchise taxes because not all states treat REITs in the same manner as they are treated for Federal income tax purposes.

Item 1B – Unresolved Staff Comments

None

Item 2 – Properties

UMH Properties, Inc. is engaged in the ownership and operation of manufactured home communities located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana and Michigan. As of December 31, 2014, the Company owns eighty-eight manufactured home communities containing approximately 15,000 developed sites. The following is a brief description of the properties owned by the Company. There is a long-term trend toward larger manufactured homes. Manufactured home communities designed for older manufactured homes must be modified to accommodate modern, wider and longer manufactured homes. These changes may decrease the number of homes that may be accommodated in a manufactured home community. The rents collectible from the land ultimately depend on the value of the home and land. Therefore, fewer but more expensive homes can actually produce the same or greater rents. For this reason, the number of developed sites operated by the Company is subject to change, and the number of developed sites listed is always an approximate number.

* Community was closed due to an unusual flooding throughout the region in May 2011. We are currently working on plans for the redevelopment of this community.

** We are currently seeking site plan approvals for 253 sites for this property.

* Community subject to local rent control laws.

Exclusive of the vacant sites at Memphis Mobile City, the Company’s occupancy rate has increased from 81.5% at December 31, 2013 to 82.3% at December 31, 2014.

In connection with the operation of its communities, the Company operates approximately 2,600 rental units. These are homes owned by the Company and rented to residents. The Company engages in the rental of manufactured homes primarily in areas where the communities have existing vacancies. The rental homes produce income on both the home and the site which might otherwise be non-income producing. The Company sells the rental homes when the opportunity arises.

The Company has approximately 880 additional sites in various stages of engineering/construction. Due to the difficulties involved in the approval and construction process, it is difficult to predict the number of sites which will be completed in a given year.

Significant Properties

The Company operates approximately $448,000,000 (at original cost) in manufactured home properties. These consist of eighty-eight separate manufactured home communities and related improvements. No single community constitutes more than 10% of the total assets of the Company. Our larger properties consist of: Port Royal Village with 465 developed sites, Allentown with 435 developed sites, Heather Highlands with 404 developed sites, Broadmore Estates with 389 developed sites, Sandy Valley Estates with 364 developed sites, Countryside Village with 349 developed sites, Highland Estates with 318 developed sites, Fairview Manor with 318 developed sites, and Maple Manor with 316 developed sites.

Mortgages on Properties

The Company has mortgages on various properties. The maturity dates of these mortgages range from the years 2015 to 2023. Interest rates vary from fixed rates of 4.0% to 12.75% and variable rates of prime plus 1.0% to LIBOR plus 2.25%. The weighted-average interest rate on our mortgages was approximately 4.78% at December 31, 2014. The aggregate balances of these mortgages total $182,670,854 at December 31, 2014. (For additional information, see Part IV, Item 15(a) (1) (vi), Note 5 of the Notes to Consolidated Financial Statements – Loans and Mortgages Payable).

Item 3 – Legal Proceedings

Legal proceedings are incorporated herein by reference and filed as Part IV, Item 15(a)(1)(vi), Note 12 of the Notes to Consolidated Financial Statements – Commitments, Contingencies and Legal Matters.

Item 4 – Mine Safety Disclosures

Not Applicable.

PART II

Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Prior to March 2, 2012, the Company’s shares were listed on the NYSE Amex (symbol: UMH). The per share range of high and low quotes for the Company’s stock and distributions paid to shareholders for each quarter of the last two years are as follows:

On March 2, 2012, the Company transferred the listing of its common and preferred stock from the NYSE Amex to the New York Stock Exchange (NYSE). The Company has retained its stock symbols (UMH) for the common shares and (UMH-PA) for the preferred shares. 

On March 2, 2015, the closing price of the Company’s stock was $9.58.

As of March 2, 2015, there were approximately 1,028 registered shareholders of the Company’s common stock based on the number of record owners.

For the years ended December 31, 2014 and 2013, total distributions paid by the Company for common stock amounted to $16,285,828 or $0.72 per share ($0.01114 taxed as ordinary income, $0.00265 taxed as capital gains and $0.70621 as a return of capital) and $13,563,471 or $0.72 per share ($0.12844 taxed as ordinary income, $0.05835 taxed as capital gains and $0.53321 as a return of capital), respectively.

It is the Company’s intention to continue making comparable quarterly distributions. On January 21, 2015, the Board of Directors declared a cash dividend of $0.18 per share to be paid on March 16, 2015 to common shareholders of record as of the close of business on February 17, 2015. Future dividend policy will depend on the Company’s earnings, capital requirements, REIT requirements, financial condition, availability and cost of bank financing and other factors considered relevant by the Board of Directors.

As of December 31, 2014, the Company had outstanding 3,663,800 shares of 8.25% Series A Cumulative Redeemable Preferred Stock, par value $0.10 per share, with an aggregate liquidation preference of $91,595,000 (Series A Preferred Stock). The Series A Preferred Stock ranks, as to dividend rights and rights upon our liquidation, dissolution or winding up, senior to our common stock and equal to any equity securities that we may issue in the future, the terms of which specifically provide that such equity securities rank equal to the Series A Preferred Stock. We are required to pay cumulative dividends on the Series A Preferred Stock in the amount of $2.0625 per share each year, which is equivalent to 8.25% of the $25.00 liquidation value per share. The Series A Preferred Stock is traded on the NYSE.

The Series A Preferred Stock, par value $25.00, has no maturity and will remain outstanding indefinitely unless redeemed or otherwise repurchased. The Series A Preferred Stock is not redeemable prior to May 26, 2016, except pursuant to provisions relating to preservation of the Company’s qualification as a real estate investment trust (REIT) or upon the occurrence of a Delisting Event or a Change of Control. On and after May 26, 2016, the Series A Preferred Stock will be redeemable at the Company’s option for cash, in whole or, from time to time, in part, at a price per share equal to $25.00, plus all accrued and unpaid dividends (whether or not declared), if any, to, but not including, the redemption date, on each share of Series A Preferred Stock to be redeemed.

For the year ended December 31, 2014, total distributions paid by the Company for preferred stock, amounted to $7,556,588 or $2.0625 per share ($1.66551 taxed as ordinary income and $0.39699 taxed as capital gains). For the year ended December 31, 2013, total distributions paid by the Company for preferred stock, before accrued dividends, amounted to $7,556,588 or $2.0625 per share ($1.418164 taxed as ordinary income and $0.644336 taxed as capital gains).

On January 21, 2015, the Board of Directors declared a quarterly dividend of $0.515625 per share for the period from December 1, 2014 through February 28, 2015, on the Company's 8.25% Series A Cumulative Redeemable Preferred Stock payable March 16, 2015 to preferred shareholders of record as of the close of business on February 17, 2015. Series A preferred share dividends are cumulative and payable quarterly at an annual rate of $2.0625 per share.

Issuer Purchases of Equity Securities

On January 21, 2015, the Board of Directors reaffirmed its Share Repurchase Program (the repurchase program) that authorizes the Company to purchase up to $10,000,000 in the aggregate of the Company's common stock. The repurchase program was originally created in June 2008 and is intended to be implemented through purchases made from time to time 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 program may be suspended, modified or discontinued at any time at the Company's discretion without prior notice. There have been no purchases under the repurchase program to date.

Securities Authorized for Issuance Under Equity Compensation Plans

On June 13, 2013, the shareholders approved and ratified the Company's 2013 Stock Option and Stock Award Plan (the 2013 Plan) authorizing the grant to officers and key employees of options to purchase up to 3,000,000 shares of common stock. The 2013 Plan replaced the Company's 2003 Stock Option and Award Plan, as amended, which, pursuant to its terms, terminated in 2013. The outstanding options under the 2003 Stock Option and Award Plan, as amended, remain outstanding until exercised, forfeited or expired. See Note 6 in the Notes to the Consolidated Financial Statements for a description of the plans.

The following table summarizes information, as of December 31, 2014, relating to equity compensation plans of the Company (including individual compensation arrangements) pursuant to which equity securities of the Company are authorized for issuance.

Comparative Stock Performance

The following line graph compares the total return of the Company’s common stock for the last five years to the FTSE NAREIT All Equity REIT’s published by the National Association of Real Estate Investment Trusts (NAREIT) and to the S&P 500 Index for the same period. The graph assumes a $100 investment in our common stock and in each of the indexes listed below on December 31, 2009 and the reinvestment of all dividends. The total return reflects stock price appreciation and dividend reinvestment for all three comparative indices. The information herein has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness is guaranteed. Our stock performance shown in the graph below is not indicative of future stock performance.

Item 6 – Selected Financial Data

The following table sets forth selected financial and other information for the Company as of and for each of the years in the five year period ended December 31, 2014. This table should be read in conjunction with all of the financial statements and notes thereto included elsewhere herein.

(1) We assess and measure our overall operating results based upon an industry performance measure referred to as Funds From Operations (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 States 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, plus certain non-cash items such as real estate asset depreciation and amortization. NAREIT created FFO as a non-U.S. GAAP supplemental measure of REIT operating performance. We define Core Funds From Operations (Core FFO) as FFO plus acquisitions costs and Loss Relating to Flood. FFO and Core FFO should be considered as a supplemental measure of operating performance used by REITs. FFO and Core FFO excludes historical cost depreciation as an expense and may facilitate the comparison of REITs which have different cost basis. The items excluded from FFO and Core FFO are significant components in understanding the Company’s financial performance.

FFO and Core FFO (i) do not represent Cash Flow from Operations as defined by U.S. GAAP; (ii) should not be considered as an alternative to Net Income as a measure of operating performance or to Cash Flows from Operating, Investing and Financing Activities; and (iii) are not an alternative to cash flow as a measure of liquidity. FFO and Core FFO, as calculated by the Company, may not be comparable to similarly titled measures reported by other REITs.

The Company’s FFO and Core FFO Attributable to Common Shareholders are calculated as follows:

(1) Represents loss relating to flood at Memphis Mobile City.

Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

Statements contained in this Form 10-K, 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.

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:

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-K 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.

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 notes thereto elsewhere herein.

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 a month-to-month or annual basis to private manufactured home owners. The Company also leases homes to residents and, through its taxable REIT subsidiary, UMH Sales and Finance, Inc. (S&F), sells and finances homes to residents and prospective residents of our communities.

Our communities are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana and Michigan. UMH has continued to execute our growth strategy of purchasing well-located communities in our target markets, including the energy-rich Marcellus and Utica shale regions. During the year ended December 31, 2014, we have purchased fourteen manufactured home communities with ten located in Ohio and four located in Pennsylvania, for an aggregate purchase price of $42,550,000. These acquisitions added approximately 1,600 developed sites to our portfolio, bringing our total to eighty-eight communities containing approximately 15,000 developed sites. On January 21, 2015, we acquired an additional community located in Pennsylvania for approximately $3,800,000. With this purchase, we now own eighty-nine manufactured home communities consisting of approximately 15,200 developed sites.

The Company’s income primarily consists of rental and related income from the operation of its manufactured home communities.  Income also includes sales of manufactured homes.  In 2014, total income has increased 15% from the prior year and income from community operations has increased 24% from the prior year, primarily due to the acquisitions in 2013 and 2014.  Occupancy has increased from 81.5% at December 31, 2013 to 82.3% at December 31, 2014.  Same site occupancy has increased from 81.5% at December 31, 2013 to 83.2% at December 31, 2014. Sales of manufactured homes continue to be disappointing and have not yet returned to pre-recession levels.  Many of our customers still face difficulties in selling their existing homes. Despite historically low interest rates, tight underwriting standards have kept a number of potential buyers out of the site-built market. This, coupled with limited wage growth, has consumers gravitating toward renting versus owning. During 2014, we have added a net of approximately 800 rental units to selected communities as well as acquired approximately 100 rental units with fiscal 2014 community acquisitions. Rental home occupancy is at 91.5%. Occupied rental units represent approximately 19.6% of total occupied sites. We intend to convert renters to new homeowners in the future.

Revenues also include interest and dividend income and net gain on securities transactions. The Company holds a portfolio of securities of other REITs with a fair value of $63,555,961 at December 31, 2014. The Company generally limits its marketable securities investments to no more than approximately 15% of its undepreciated assets.   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 invests in these securities on margin from time to time when the Company can achieve an adequate yield spread. As of December 31, 2014, the Company has borrowings of $19,392,382 under its margin line at 2.0% interest. As of December 31, 2014, the Company’s portfolio consisted of 30% REIT preferred stocks and 70% REIT common stocks. The Company’s weighted-average yield on the securities portfolio was approximately 6.1% at December 31, 2014. The Company realized a net gain of $1,542,589 on sale of securities transactions in 2014 as compared to a net gain of $4,055,812 during 2013. At December 31, 2014, the Company had unrealized gains of $5,079,921 in its REIT securities portfolio.  The dividends received from our securities investments continue to meet our expectations. It is our intent to hold these securities for investment on a long-term basis.

The Company continues to strengthen its balance sheet. During 2014, the Company raised approximately $33 million in new capital through its Dividend Reinvestment and Stock Purchase Plan. This capital was used to purchase communities, purchase rental homes and pay down certain loans and mortgages. The weighted average interest rate on our mortgage debt was 4.8% at December 31, 2014 compared to 4.5% at December 31, 2013.

At December 31, 2014, the Company had approximately $8.1 million in cash and cash equivalents, and $15 million potentially available on our credit facility pursuant to an accordion feature. We also had $10.2 million available on our revolving lines of credit for the financing of home sales and the purchase of inventory, and the ability to finance approximately 500 rental units. In addition, we held $63.6 million in marketable REIT securities encumbered by $19.4 million in margin loans. In general, the Company may borrow up to 50% of the value of the marketable securities.

The Company intends to continue to increase its real estate investments. In 2013 and 2014, we have added a total of thirty-one manufactured home communities to our portfolio, encompassing approximately 4,300 developed sites. We have also entered into definitive agreements to purchase three manufactured home communities, including the community which was purchased in January 2015, with a total of approximately 465 developed home sites located in Pennsylvania for a purchase price of approximately $9.1 million.  We have been positioning ourselves for future growth and will continue to seek opportunistic investments in 2015.  The growth of our real estate portfolio depends on the availability of suitable properties which meet the Company’s investment criteria and appropriate financing.

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 Company believes that funds generated from operations, funds generated from the dividend reinvestment and stock purchase plan (DRIP), and the funds available on the credit facility and the lines of credit, together with the ability to finance and refinance its properties will provide sufficient funds to adequately meet its obligations over the next several years.

See PART I, Item 1- Business and Item 1A – Risk Factors for a more complete discussion of the economic and industry-wide factors relevant to the Company, the Company's lines of business and principal products and services, and the opportunities, challenges and risks on which the Company is focused.

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. 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.

Significant accounting policies are defined as those that involve significant judgment and potentially could result in materially different results under different assumptions and conditions. Management believes the following critical accounting policies are affected by our more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements. For a detailed description of these and other accounting policies, see Note 2 in the notes to the Company’s consolidated financial statements included in this Form 10-K.

Real Estate Investments

The Company applies Financial Accounting Standards Board Accounting Standards Codification (ASC) 360-10, Property, Plant & Equipment (ASC 360-10) to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded.

Upon acquisition of a property, the Company applies ASC 805, Business Combinations (ASC 805) and allocates the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, site and land improvements, buildings and improvements and rental homes. The Company allocates the purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal of the property obtained in conjunction with the purchase. Transaction costs, such as broker fees, transfer taxes, legal, accounting, valuation, and other professional and consulting fees, related to acquisitions are expensed as incurred.

The Company conducted a comprehensive review of all real estate asset classes in accordance with ASC 360-10-35-21, which indicates that asset values should be analyzed whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. The process entails the analysis of property for instances where the net book value exceeds the estimated fair value. In accordance with ASC 360-10-35-17, an impairment loss shall be recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair

value. The Company utilizes the experience and knowledge of its internal valuation team to derive certain assumptions used to determine an operating property’s cash flow. Such assumptions include lease-up rates, rental rates, rental growth rates, and capital expenditures. The Company reviewed its operating properties in light of the requirements of ASC 360-10 and determined that, as of December 31, 2014, the undiscounted cash flows over the holding period for these properties were in excess of their carrying values and, therefore, no impairment charges were required.

 Securities Available for Sale

Investments in non-real estate assets consist primarily of marketable securities. The Company individually reviews and evaluates our marketable securities for impairment on a quarterly basis or when events or circumstances that may indicate possible impairment occur. The Company considers, among other things, credit aspects of the issuer, amount of decline in fair value over cost and length of time in a continuous loss position. The Company has developed a general policy of evaluating whether an unrealized loss is other than temporary. On a quarterly basis, the Company makes an initial review of every individual security in its portfolio. If the security is impaired, the Company first determines our intent and ability to hold this investment for a period of time sufficient to allow for any anticipated recovery in market value. Next, the Company determines the length of time and the extent of the impairment. Barring other factors, including the downgrading of the security or the cessation of dividends, if the fair value of the security is below cost by less than 20% for less than 6 months and the Company has the intent and ability to hold the security, the security is deemed to not be other than temporarily impaired. Otherwise, the Company reviews additional information to determine whether the impairment is other than temporary. The Company discusses and analyzes any relevant information known about the security, such as:

The Company generally holds REIT securities long-term and has the ability and intent to hold securities to recovery. If a decline in fair value is determined to be other than temporary, an impairment charge is recognized in earnings and the cost basis of the individual security is written down to fair value as the new cost basis.

The Company’s securities consist primarily of common and preferred stock of other REITs. These securities are all publicly-traded and purchased on the open market, through private transactions or through dividend reinvestment plans. These securities are classified among three categories: Held-to-maturity, trading and available-for-sale. As of December 31, 2014 and 2013, the Company’s securities are all classified as available-for-sale and are carried at 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. The change in net unrealized holding gains and losses are reflected as comprehensive income.

Other

Estimates are used when accounting for the allowance for doubtful accounts for our rents and loans receivable, potentially excess and obsolete inventory and contingent liabilities, among others. These estimates are susceptible to change and actual results could differ from these estimates. The effects of changes in these estimates are recognized in the period they are determined.

Results of Operations

Acquisitions in 2014

On March 13, 2014, the Company acquired 8 Ohio manufactured home communities for a purchase price of $24,950,000. These 8 all-age communities contain a total 1,018 developed home sites situated on approximately 270 acres. The average occupancy for these communities at closing was approximately 70%. The Company assumed mortgages totaling approximately $18,100,000 in connection with this acquisition. The weighted average interest rate on these mortgages is fixed at 6.74%. Approximately $8.9 million matures on May 1, 2016 and the remaining balance matures on February 1, 2018.

On July 14, 2014, the Company acquired 4 Pennsylvania manufactured home communities for a purchase price of $12,200,000. These 4 all-age communities are located in the Pittsburgh metropolitan area and contain a total of 336 developed home sites situated on approximately 239 acres. The average occupancy for these communities at closing was approximately 84%. The Company assumed a mortgage loan with a balance of approximately $8,600,000 in connection with this acquisition. Interest is at a fixed rate of 4.975%. This mortgage matures on July 1, 2023.

On July 28, 2014, the Company acquired 2 Ohio manufactured home communities for a purchase price of $5,400,000. These 2 all age communities contain a total of 258 developed home sites situated on approximately 39 acres. The average occupancy for these communities at closing was approximately 91%.

Acquisitions in 2013

On March 1, 2013, the Company acquired 10 manufactured home communities for $67,500,000. These 10 all-age communities total 1,854 developed home sites situated on approximately 400 acres. There are five communities located in Indiana, four communities located in Pennsylvania, and one community located in Michigan. The average occupancy for these communities at closing was approximately 85%. The Company obtained a $53,760,000 mortgage loan. The Company also included 3 additional communities in this mortgage. Interest on the mortgage loan is fixed at 4.065%. This mortgage loan matures on March 1, 2023.

On April 2, 2013, the Company acquired Holiday Mobile Village, a 274-site manufactured home community situated on approximately 68 acres, located in Nashville, Tennessee, for a purchase price of $7,250,000. The occupancy for this community at closing was approximately 82%.

On October 1, 2013, the Company acquired Rolling Hills Estates, a 91-site manufactured home community situated on approximately 32 acres, located in Carlisle, Pennsylvania, for a purchase price of $1,720,000. The occupancy for this community at closing was approximately 91%.

On November 6, 2013, the Company acquired 5 manufactured home communities, 4 communities located in Ohio and 1 community located in New York, for an aggregate purchase price of $11,800,000. These five all-age communities contain a total of 519 developed home sites situated on approximately 200 total acres.  The average occupancy for these communities at closing was approximately 82%.  The Company assumed a $7,700,000 mortgage loan.  This mortgage is at a fixed interest rate of 4.75% and matures on December 6, 2022.

2014 vs. 2013

Rental and related income increased from $53,477,893 for the year ended December 31, 2013 to $63,886,010 for the year ended December 31, 2014, or 19%. This increase was due to the acquisitions during 2013 and 2014, and an increase in rental rates, occupancy and rental homes.

The Company has been raising rental rates by approximately 2% to 6% annually at certain communities. Other communities received no increases. Occupancy, as well as the ability to increase rental rates, directly affects revenues. Exclusive of the vacant sites at Memphis Mobile City, the Company’s occupancy rate has increased from 81.5% at December 31, 2013 to 82.3% at December 31, 2014. Same store occupancy has increased from 81.5% at December 31, 2013 to 83.2% at December 31, 2014. Some of the Company’s vacant sites resulted from expansions

completed before the downturn in the economy. The Company continues to evaluate further expansion at selected communities in order to increase the number of available sites, obtain efficiencies and generate increased revenues. In the current environment, the demand for rental homes is high. As of December 31, 2014, we had approximately 2,600 rental homes with an occupancy of 91.5%. We continue to evaluate the demand for rental homes and will invest in additional homes as demand dictates.

Sales of manufactured homes decreased from $8,727,214 for the year ended December 31, 2013 to $7,545,923 for the year ended December 31, 2014, or 14%. The number of homes sold decreased from 164 homes in 2013 to 134 homes in 2014. There were 69 new homes sold in 2014 as compared to 96 in 2013. Cost of sales of manufactured homes decreased from $7,204,410 for the year ended December 31, 2013 to $5,832,540 for the year ended December 31, 2014, or 19%. Selling expenses increased from $1,985,834 for the year ended December 31, 2013 to $2,983,376 for the year ended December 31, 2014, or 50%. 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) increased from $640,019 for the year ended December 31, 2013 to $1,881,936 for the year ended December 31, 2014. The losses on sales include selling expenses of approximately $3.0 million for the year ended December 31, 2014. Many of these costs, such as rent, salaries, and to an extent, advertising and promotion, are fixed. Selling expenses in 2014 also include additional costs associated with the opening of sales lots. Adverse conditions have continued to slow the manufactured housing industry and the broader housing market in the U.S.  The inability of our customers to sell their current homes, limited wage growth new licensing laws, including the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) and the Dodd–Frank Wall Street Reform and Consumer Protection, have all negatively impacted our sales. However, the Company is optimistic about future sales and rental prospects given the fundamental need for housing. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of our communities.

Community operating expenses increased from $29,140,920 for the year ended December 31, 2013 to $33,592,327 for the year ended December 31, 2014, or 15%. This increase was due to the acquisitions during 2013 and 2014. Additionally, the Company incurred additional non-recurring expenses relating to deferred maintenance at a number of our acquisitions.

General and administrative expenses remained relatively stable for the year ended December 31, 2014 as compared to the year ended December 31, 2013.

Acquisition costs, relating to the transaction, due diligence and other related costs associated with the acquisitions of communities, decreased from $1,455,542 for the year ended December 31, 2013 to $483,522 for the year ended December 31, 2014, or 67%. This decrease was due to the decrease in acquisitions in 2014 with an aggregate purchase price of $42,550,000 as compared to 2013 with an aggregate purchase price of $88,270,000.

Depreciation expense increased from $11,681,724 for the year ended December 31, 2013 to $15,163,420 for the year ended December 31, 2014, or 30%. This increase was primarily due to the acquisitions during 2013 and 2014.

Interest income remained relatively stable for the year ended December 31, 2014 as compared to the year ended December 31, 2013.

Dividend income increased from $3,481,514 for the year ended December 31, 2013 to $4,065,986 for the year ended December 31, 2014, or 17%. This increase is due to the increase in the balance of securities from $59,254,942 at December 31, 2013 to $63,555,961 at December 31, 2014. The Company’s weighted-average yield on the securities portfolio was approximately 6.1% and 7.0% as of December 31, 2014 and 2013, respectively.

Gain on sale of securities transactions, net consists of the following:

The Company had an accumulated net unrealized gain on its securities portfolio of $5,079,921 as of December 31, 2014.

Other income increased from $211,051 for the year ended December 31, 2013 to $328,888 for the year ended December 31, 2014, or 56%. This increase was primarily due to new contracts with cable companies at a number of communities where we received upfront fees from $75 to $125 for each occupied home site. The Company is also eligible to receive additional amounts based on the number of new customers generated by the cable company at the community.

Interest expense increased from $7,849,835 for the year ended December 31, 2013 to $10,194,472 for the year ended December 31, 2014, or 30%. This increase is primarily due to the new mortgage loans for the community acquisitions in 2014. The average balance of mortgages payable was approximately $172 million during 2014 as compared to approximately $135 million during 2013. The weighted-average interest rate on these mortgages was 4.8% at December 31, 2014 as compared to 4.5% at December 31, 2013.

Amortization of financing costs increased from $462,362 for the year ended December 31, 2013 to $522,250 for the year ended December 31, 2014, or 13%. This increase is primarily due to the assumption of mortgages associated with the acquisitions completed in 2013 and 2014.

Income from Community Operations (defined as Rental and Related Income less Community Operating Expenses) increased from $24,336,973 for the year ended December 31, 2013 to $30,293,683 for the year ended December 31, 2014, or 24%. This increase was due to the acquisitions during 2013 and 2014, and an increase in rental rates, occupancy and rental homes.

2013 vs. 2012

Rental and related income increased from $38,012,231 for the year ended December 31, 2012 to $53,477,893 for the year ended December 31, 2013, or 41%. This increase was due to the acquisitions during 2012 and 2013.

The Company has been raising rental rates by approximately 2% to 6% annually at certain communities. Other communities received no increases. Occupancy, as well as the ability to increase rental rates, directly affects revenues. Exclusive of the vacant sites at Memphis Mobile City, the Company’s occupancy rate has increased from 80% at December 31, 2012 to 81% at December 31, 2013. Some of the Company’s vacant sites resulted from expansions completed before the downturn in the economy. The Company continues to evaluate further expansion at selected communities in order to increase the number of available sites, obtain efficiencies and generate increased revenues.

Sales of manufactured homes decreased from $8,815,533 for the year ended December 31, 2012 to $8,727,214 for the year ended December 31, 2013, or 1%. The number of homes sold decreased from 210 homes in 2012 to 164 homes in 2013. There were 96 new homes sold in 2013 as compared to 98 in 2012. Cost of sales of manufactured homes decreased from $7,903,678 for the year ended December 31, 2012 to $7,204,410 for the year ended December 31, 2013, or 9%. Selling expenses decreased from $2,152,701 for the year ended December 31, 2012 to $1,985,834 for the year ended December 31, 2013, or 8%. 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) decreased from $1,425,772 for the year ended December 31, 2012 to $640,019 for the year ended December

31, 2013. The losses on sales include selling expenses of approximately $2.0 million for the year ended December 31, 2013. Many of these costs, such as rent, salaries, and to an extent, advertising and promotion, are fixed. Adverse conditions have continued to slow the manufactured housing industry and the broader housing market in the U.S.  Persistent high unemployment rates, the inability of our customers to sell their current homes and the decline in consumer confidence have all negatively impacted our sales and our gross profit percentage. New licensing laws, including the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), have also increased costs. However, the Company is optimistic about future sales and rental prospects given the fundamental need for housing. We have adjusted our inventory accordingly. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of our communities.

Community operating expenses increased from $20,564,286 for the year ended December 31, 2012 to $29,140,920 for the year ended December 31, 2013, or 42%. This increase was due to the acquisitions during 2012 and 2013. Additionally, the Company incurred additional non-recurring expenses relating to deferred maintenance at a number of our acquisitions.

General and administrative expenses increased from $5,374,516 for the year ended December 31, 2012 to $6,541,224 for the year ended December 31, 2013, or 22%. This was primarily due to an increase in personnel and personnel costs and directors fees. Over the past four years, the Company has doubled in size, based on total number of home sites. Additionally, compensation costs of $150,000 relating to pension costs and a one-time charge of $142,000 for a stock option grant of 100,000 shares to one participant who is of retirement age was recognized at time of approval and therefore the entire amount of measured compensation cost has been recognized. In addition, the Company granted an additional 292,000 of stock options to employees during 2013.

Acquisition costs, relating to the transaction, due diligence and other related costs associated with the acquisitions of communities increased from $862,169 for the year ended December 31, 2012 to $1,455,542 for the year ended December 31, 2013, or 69%. This increase was due to the increase in acquisitions in 2013 with an aggregate purchase price of $88,270,000 as compared to 2012 with an aggregate purchase price of $47,600,000.

Depreciation expense increased from $7,357,158 for the year ended December 31, 2012 to $11,681,724 for the year ended December 31, 2013, or 59%. This increase was primarily due to the acquisitions during 2012 and 2013.

Interest income remained relatively stable for the year ended December 31, 2013 as compared to the year ended December 31, 2012.

Dividend income increased from $3,243,592 for the year ended December 31, 2012 to $3,481,514 for the year ended December 31, 2013, or 7%. This increase is due to the increase in the balance of securities from $57,325,440 at December 31, 2012 to $59,254,942 at December 31, 2013. The Company’s weighted-average yield on the securities portfolio was approximately 7.0% and 6.5% as of December 31, 2013 and 2012, respectively.

Gain on sale of securities transactions, net consists of the following:

The Company had an accumulated net unrealized gain on its securities portfolio of $1,116,738 as of December 31, 2013.

Other income decreased from $643,588 for the year ended December 31, 2012 to $211,051 for the year ended December 31, 2013, or 67%. This decrease was due to the bonus payment received in the amount of $499,471 in 2012 for rights to drill for oil and gas in one of our communities.

Interest expense increased from $5,803,172 for the year ended December 31, 2012 to $7,849,835 for the year ended December 31, 2013, or 35%. This increase is primarily due to the new mortgage loans for the community acquisitions in 2013. The average balance of mortgages payable was approximately $135 million during 2013 as compared to approximately $100 million during 2012. The Company has reduced its weighted average interest rate on its mortgages from 5.2% at December 31, 2012 to 4.5% at December 31, 2013.

Amortization of financing costs increased from $302,280 for the year ended December 31, 2012 to $462,362 for the year ended December 31, 2013, or 53%. This was primarily due to the deferred financing related to the Credit Facility and the early payoff of two mortgages.

Income from Community Operations (defined as Rental and Related Income less Community Operating Expenses) increased from $17,447,945 for the year ended December 31, 2012 to $24,336,973 for the year ended December 31, 2013, or 39%. This increase was due to the acquisitions during 2012 and 2013.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company has not executed any off-balance sheet arrangements.

The following is a summary of the Company’s contractual obligations as of December 31, 2014:

Mortgages payable represents the principal amounts outstanding based on scheduled payments. The interest rates on these mortgages vary from fixed rates ranging from 4.0% to 12.75% and variable rates of prime plus 1.0% to LIBOR plus 2.25%. The weighted-average interest rate was approximately 4.78% at December 31, 2014.

Loans payable represents $35,000,000 outstanding on the Company’s unsecured line of credit with an interest rate ranging from LIBOR plus 2.00% to 2.75% or prime plus 1.00% to 1.75%, based on the Company’s overall leverage (interest rate of 2.91% as of December 31, 2014), $19,392,382 outstanding on its margin line with an interest rate of 2.0% at December 31, 2014, $8,323,300 outstanding on the Company’s revolving credit agreements to finance inventory with interest rates ranging from prime with a minimum of 6% to prime plus 2% with a minimum of 8% after 18 months (weighted average interest rate of 6.62% as of December 31, 2014), $723,548 loans outstanding for the finance of rental homes with an interest rate of 6.99% at December 31, 2014, $4,000,000 outstanding on its commercial term loan with an interest rate of 4.625% at December 31, 2014, and $10,000,000 outstanding on the Company’s revolving line of credit secured by eligible notes receivables with an interest rate of prime plus 50 basis points (interest rate of 3.75% as of December 31, 2014).

Operating lease obligations represent a lease, with a related party, for the Company’s corporate offices. On May 1, 2010, the Company renewed this lease for an additional five-year term with monthly lease payments of $13,600 through April 30, 2013 and $14,000 through April 30, 2015. The Company is also responsible for its proportionate share of real estate taxes and common area maintenance. Approximately 70% of the monthly lease payment plus its proportionate share of real estate taxes and common area maintenance was reimbursed by MREIC through 2014. Effective January 2015, MREIC obtained a separate lease and the Company will be responsible for 100% of the operating lease agreement.

Purchase of Properties represents the total purchase price of four communities under contract in Pennsylvania totaling 623 developed home sites. One acquisition of 141 home sites, with a purchase price of $3,800,000 was completed in January 2015. The remaining acquisitions are expected to close in the second quarter of 2015.

Retirement benefits represent the total future amount to be paid, on an undiscounted basis, relating to an executive officer. These benefits are based upon specific employment agreements. The agreements do not require the Company to separately fund the obligation and therefore will be paid from the general assets of the Company. The Company has accrued these benefits on a present value basis over the terms of the agreements (See Note 8 of the Notes to Consolidated Financial Statements).

Liquidity and Capital Resources

The Company operates as a real estate investment trust deriving its income primarily from real estate rental operations. The Company’s principal liquidity demands have historically been, and are expected to continue to be, distribution requirements, acquisitions, capital improvements, development and expansions of properties, debt service, purchases of manufactured home inventory, investment in debt and equity securities of other REITs, financing of manufactured home sales and payments of expenses relating to real estate operations.  The Company’s ability to generate cash adequate to meet these demands is dependent primarily on income from its real estate investments and securities portfolio, the sale of real estate investments and securities, refinancing of mortgage debt, leveraging of real estate investments, availability of bank borrowings, proceeds from the Dividend Reinvestment and Stock Purchase Plan (DRIP), and access to the capital markets.  

The Company has a DRIP, in which participants can purchase stock from the Company at a price of approximately 95% of market. During 2014, amounts received, including dividends reinvested of $1,858,491, totaled $32,792,239. During 2014, the Company distributed to our common shareholders a total of $16,285,828, including dividends reinvested. It is anticipated, although no assurances can be given, that the level of participation in the DRIP in 2015 will be comparable to 2014. In addition, the Company also paid $7,556,588 in preferred dividends.

The Company intends to operate its existing properties from the cash flows generated by the properties. However, the Company’s expenses are affected by various factors, including inflation. Increases in operating expenses raise the breakeven point for a property and, to the extent that they cannot be passed on through higher rents, reduce the amount of available cash flow which can adversely affect the market value of the property.

The Company has the ability to finance home sales, inventory purchases and rental home purchases. On October 6, 2014, the Company entered into an agreement with 21st Mortgage Corporation (21^st Mortgage) under which 21st Mortgage will finance the Company’s purchase of a maximum of 500 rental units. The Company also has a $10,000,000 revolving line of credit for the financing of homes, all of which was utilized at December 31, 2014, and revolving credit facilities totaling $18,500,000 to finance inventory purchases, of which $8,323,300 was utilized at December 31, 2014.

As of December 31, 2014, the Company had $8,082,792 of cash and cash equivalents and securities available for sale of $63,555,961 encumbered by $19,392,382 in margin loans and $15 million potentially available on our unsecured credit facility pursuant to an accordion feature. At December 31, 2014, the Company owns eighty-eight communities of which twenty-eight are unencumbered. The Company is in the process of financing/refinancing 10 communities for a total of approximately $55,000,000. Subsequent to year-end, the Company completed the financing/refinancing of 2 communities (See Note 15). The Company’s marketable securities, non-mortgaged properties, and lines of credit provide us with additional liquidity. The Company has been raising equity capital through its DRIP and through the issuance of preferred stock. The Company believes that funds generated from operations, the DRIP and capital market, the funds available on the lines of credit, together with the ability to finance and refinance its properties will provide sufficient funds to adequately meet its obligations over the next several years.

The Company’s focus is on real estate investments. The Company has historically financed purchases of real estate primarily through mortgages.  During 2014, total investment property increased 23% or $82,340,047. The Company made acquisitions of fourteen manufactured home communities totaling approximately 1,612 developed sites at an aggregate purchase price of $42,550,000. These acquisitions were funded through the assumption of $26,670,449 of mortgages and the use of our unsecured credit facility. The Company plans to continue to acquire

additional properties.  The funds for these acquisitions may come from bank borrowings, proceeds from the DRIP, and private placements or public offerings of common or preferred stock.  To the extent that funds or appropriate properties are not available, fewer acquisitions will be made.  

The Company also invests in rental homes and owns approximately 2,600 rental homes as of December 31, 2014. During 2014, rental homes increased by $29,916,900. The Company added approximately 800 net rental homes to selected communities to fill demand, including approximately 100 acquired with fiscal 2014 community acquisitions. The Company actively markets these rental homes for sale to existing residents. The Company estimates that in 2015 it will purchase approximately 500 manufactured homes to use as rental units for a total cost of approximately $20,000,000. Management believes that these manufactured homes will each generate approximately $300 per month in rental income in addition to lot rent.

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 securities portfolio increased 7% or $4,301,019 primarily due to purchases of $9,707,038, partially offset by sales of securities with a cost of $9,369,202 and an increase in the unrealized gain of $3,963,183. The Company from time to time may purchase these securities on margin when there is an adequate yield spread. At December 31, 2014, $19,392,382 was outstanding on the margin loan at a 2.0% interest rate.

Net cash provided by operating activities amounted to $24,326,461, $11,238,088 and $9,087,749 for the years ended December 31, 2014, 2013 and 2012, respectively. These increases were primarily due to the increase in income from operations generated from the acquisitions and the increased rental homes.

Net cash used by investing activities amounted to $56,033,767, $110,365,339 and $66,985,675 for the years ended December 31, 2014, 2013 and 2012, respectively.  Cash flows used by investing activities in 2014 decreased as compared to 2013 primarily due to purchasing fewer manufactured home communities and securities available for sale in 2014 as compared to 2013.  Cash flows used by investing activities in 2013 increased as compared to 2012 primarily due to the purchases of manufactured home communities and rental homes.

Net cash provided by financing activities amounted to $32,174,955, $95,706,570 and $60,135,727 for the years ended December 31, 2014, 2013 and 2012, respectively.  Cash flows provided by financing activities in 2014 decreased as compared to 2013 primarily due to new mortgages in 2013 for the purchase of manufactured home communities.  Cash flows provided by financing activities in 2013 increased as compared to 2012 primarily due to proceeds from the issuance of preferred and common stock, new mortgages and proceeds from short-term borrowings, offset by principal payments of mortgages and loans and payment of preferred and common dividends.

Cash flow was primarily used for purchases of manufactured home communities, capital improvements, payment of dividends, purchases of securities available for sale, purchase of inventory and rental homes, loans to customers for the sales of manufactured homes, and expansion of existing communities. The Company meets maturing mortgage obligations by using a combination of cash flow and refinancing. The dividend payments were primarily made from cash flow from operations.

Capital improvements include amounts needed to meet environmental and regulatory requirements in connection with the manufactured home communities that provide water or sewer service. Excluding expansions and rental home purchases, the Company is budgeting approximately $7 million in capital improvements for 2015.

The Company’s significant commitments and contractual obligations relate to its mortgages payable, retirement benefits, purchases of property, and the lease on its corporate offices as described in Note 8 to the Consolidated Financial Statements.

The Company has entered into definitive agreements to purchase four manufactured home communities with a total of approximately 623 developed home sites located in Pennsylvania for a purchase price of approximately $12.9 million.  One acquisition of 141 home sites, with a purchase price of $3,800,000 was completed in January 2015.

The Company has approximately 1,142 acres of undeveloped land which it could develop over the next several years. The Company continues to analyze the highest and best use of its vacant land.

As of December 31, 2014, the Company had total assets of $478,268,976 and total liabilities of $269,441,871. The Company believes that it has the ability to meet its obligations and to generate funds for new investments.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. ASU No. 2014-08 changes the definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results. ASU No. 2014-08 is effective prospectively for fiscal years beginning after December 15, 2014, with earlier adoption permitted. The Company has decided to early adopt this standard effective with the interim period beginning January 1, 2014, and it did not have a material impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” as a new Topic, Accounting Standards Codification ("ASC") Topic 606. The objective of ASU 2014-09 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 the new standard, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. This ASU is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 and shall be applied using either a full retrospective or modified retrospective approach. Early adoption is not permitted. The Company is currently evaluating the impact this standard may have on the consolidated financial statements and the method of adoption.

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.

Item 7A – Quantitative and Qualitative Disclosures about Market Risk

The Company's principal market risk exposure is interest rate risk. The Company mitigates this risk by maintaining prudent amounts of leverage, minimizing capital costs and interest expense while continuously evaluating all available debt and equity resources and following established risk management policies and procedures, which include the periodic use of derivatives. 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 following table sets forth information as of December 31, 2014, concerning the Company’s long-term debt obligations, including principal cash flow by scheduled maturity, weighted average interest rates and estimated fair value.

The Company’s variable rate long-term debt consists of four mortgage loans with a total balance of $30,457,168 as of December 31, 2014. Interest rates on these mortgages range from prime plus 1.0% to LIBOR plus 2.25%. To minimize the variability that changes in interest rates could have on its future cash flows, the Company has entered into two separate interest rate swap agreements. These interest rate swap agreements have the effect of fixing the interest rates relative to specific mortgage loans totaling approximately $22.7 million. The unrealized loss in fair value of the interest rate swap agreement amounted to $39,685 for the year ended December 31, 2014. The effective fixed interest rates on these two loans are 3.89% and 4.39%.

The Company's remaining variable rate mortgages totals approximately $7.8 million as of December 31, 2014. Interest rates on these mortgages range from prime plus 1% to LIBOR plus 2.25%. If prime or LIBOR increased or decreased by 1.0%, the Company believes its interest expense would have increased or decreased by approximately $78,000, based on the balance of the variable rate long-term debt outstanding at December 31, 2014.

On March 29, 2013, the Company entered into a $35 million Unsecured Revolving Credit Facility with Bank of Montreal (“Credit Facility”). The Company has the ability to increase the borrowing capacity by an amount not to exceed $15 million, representing a maximum aggregate borrowing capacity of $50 million, subject to various conditions, as defined in the agreement. The maturity date of the Credit Facility is March 29, 2016 with a one year extension available at the Company’s option. Borrowings under the Credit Facility can be used for, among other things, acquisitions, working capital, capital expenditures, and repayment of other indebtedness. Borrowings bear interest at the Company’s option of LIBOR plus 2.00% to 2.75% or BMO’s prime lending rate plus 1.00% to 1.75%, based on the Company’s overall leverage. The Company incurs a fee on the unused commitment amount of up to 0.35% per annum. The Credit Facility replaced the Company’s previous $5.0 million unsecured line of credit. As of December 31, 2014, the balance outstanding on the Credit Facility was $35,000,000. Based on the current leverage ratio, interest on this borrowing is at LIBOR plus 2.75% for an interest rate of 2.91% as of December 31, 2014.

The Company also has approximately $18,300,000 in variable rate debt. This debt primarily consists of approximately $8.3 million outstanding on our inventory financing lines with interest rates ranging from prime with a minimum of 6% to prime plus 2% with a minimum of 8% after 18 months (weighted average interest rate of 6.62% as of December 31, 2014) and $10 million outstanding on our revolving line of credit to finance home sales with an interest rate of prime plus 50 basis points (interest rate of 3.75% as of December 31, 2014). The carrying value of the Company’s variable rate debt approximates fair value at December 31, 2014. In addition, the Company has approximately $724,000 loan outstanding for the financing of rental homes with an interest rate of 6.99% at December 31, 2014 and $4,000,000 outstanding on its commercial term loan with an interest rate of 4.625% at December 31, 2014.

The Company invests in equity securities of other REITs and is primarily exposed to market price risk from adverse changes in market rates and conditions. The Company generally limits its marketable securities investments to no more than approximately 15% of its undepreciated assets.  All securities are classified as available for sale and are carried at fair value. The Company obtains margin loans secured by its marketable securities. The interest rate on the margin account is the bank’s margin rate and was 2.0% at December 31, 2014 and 2013. There was $19,392,382 outstanding on the margin loans as of December 31, 2014. As of December 31, 2014, the value of marketable securities was $63,555,961. In general, the Company may borrow up to 50% of the value of the marketable securities.

Item 8 – Financial Statements and Supplementary Data

The financial statements and supplementary data listed in Part IV, Item 15(a)(1) are incorporated herein by reference and filed as part of this report.

The following is the Unaudited Selected Quarterly Financial Data:

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

THREE MONTHS ENDED

Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in, or any disagreements with, the Company’s independent registered public accounting firm on accounting principles and practices or financial disclosure during the years ended December 31, 2014 and 2013.

Item 9A – Controls and Procedures

Disclosure Controls and Procedures

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures  (as defined in Securities Exchange Act of 1934 Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder as of December 31, 2014.

Internal Control over Financial Reporting

(a) Management’s Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control system was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements.   Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that we will detect or uncover failures to disclose material information otherwise required to be set forth in our periodic reports.

Management assessed the Company’s internal control over financial reporting as of December 31, 2014.  This assessment was based on criteria for effective internal control over financial reporting established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013 framework).  Based on this assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2014.

PKF O’Connor Davies, A Division of O’Connor Davies, LLP (“PKF O’Connor Davies”), the Company’s independent registered public accounting firm, has issued their report on their audit of the Company’s internal control over financial reporting, a copy of which is included herein.

(b) Attestation Report of the Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

UMH Properties, Inc.

We have audited UMH Properties, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013 framework). UMH Properties, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting included in the accompanying Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, based upon the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, (3) receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (4) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, UMH Properties, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014 based on criteria established in Internal Control-Integrated Framework issued by COSO (2013 framework).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of UMH Properties, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2014 and our report dated March 10, 2015 expressed an unqualified opinion thereon.

March 10, 2015

(c) Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting during the Company’s fourth quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

Item 9B – Other Information

None.

PART III

Item 10 – Directors, Executive Officers and Corporate Governance

The Company will file its definitive Proxy Statement for its 2015 Annual Meeting of Stockholders within the period required under the applicable rules of the Securities and Exchange Commission.  Additional information required by this Item is included under the captions "ELECTION OF DIRECTORS" and “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS” of such Proxy Statement and is incorporated herein by reference.

The following are the Directors and Executive Officers of the Company as of December 31, 2014: