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 included elsewhere herein and in our annual report on Form 10-K for the year ended December 31, 2008.

The Company is a real estate investment trust (REIT). The Company's primary business is the ownership and operation of manufactured home communities - leasing manufactured home spaces on a month-to-month 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.
The Company owns twenty-eight communities containing approximately 6,800 sites. These communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee.

The Company also holds a portfolio of securities of other REITs and home manufacturers with a balance of $19,577,745 at March 31, 2009. The Company invests in these securities on margin from time to time when the Company can achieve an adequate yield spread and when suitable acquisitions of real property cannot be found. At March 31, 2009, the Company's portfolio consisted of 14% preferred stocks, 61% common stocks and 25% debentures. The securities portfolio provides the Company with liquidity and additional income until suitable acquisitions of real property are found.

The Company's revenue primarily consists of rental and related income from the operation of its manufactured home communities. Revenues also include sales of manufactured homes, interest and dividend income and gain (loss) on securities transactions, net. Total revenues decreased by approximately 23% from $8,315,540 for the quarter ended March 31, 2008 to $6,405,865 for the quarter ended March 31, 2009. This was primarily due to an increase in the loss on securities transactions, net from $650,560 for the quarter ended March 31, 2008 to $2,280,585 for the quarter ended March 31, 2009 and a decrease in sales of manufactured homes of $698,243, partially offset by an increase in rental and related income and interest and dividend income. Sales of manufactured homes decreased by approximately 39% for the quarter ended March 31, 2009 as compared to the quarter ended March 31, 2008. Over the past several years, the availability of liberal lending terms for conventional housing created a difficult competitive market for sales of manufactured homes. This resulted in a loss of occupancy from approximately 86% in 2005 to approximately 80% currently. Although the conventional home lending environment has returned to more disciplined lending practices, the return to affordability and the recovery of manufactured home communities have been slow. We believe that the general economic issues, rising unemployment rate, the decline in consumer confidence, the inability of our customers to sell their current homes, and the turmoil in the credit and financial markets have negatively impacted our home sales. Loss on securities transactions, net increased by $1,630,025, or approximately 251% for the quarter ended March 31, 2009 as compared to the quarter ended March 31, 2008, primarily due to the $1,723,834 write-down of

securities which were considered other than temporarily impaired. The Company had unrealized losses of approximately $4,990,000 in its securities portfolio as of March 31, 2009. Subsequent to March 31, 2009, the REIT market has improved and as a result, our losses have been reduced. Historically, REIT share prices were not volatile. Today, they are highly volatile with price swings of 5% or more recurring frequently. REIT securities have always represented less than 10% of the market value of our total assets. The dividends received from our securities investments continue to meet our expectations and we anticipate realizing satisfactory returns. It is our intent to hold these securities long-term. As the credit markets begin to normalize, more efficient pricing should return to the securities markets.

Total expenses decreased by approximately 13% from $8,616,325 for the quarter ended March 31, 2008 to $7,493,198 for the quarter ended March 31, 2009. This was primarily due to a decrease in cost of sales of manufactured homes of $482,726, a decrease in interest expense of $405,397, and a decrease in general and administrative expenses of $204,249. The decrease in interest expense was primarily due to the change in fair value of the Company's interest rate swaps.

Net loss increased by approximately 260% for the quarter ended March 31, 2009.
This increase was due primarily to the $1,723,834 write-down of securities which were considered other than temporarily impaired and the decrease in sales of manufactured homes.

See PART I, Item 1 - Business in the Company's 2008 annual report on Form 10-K for a more complete discussion of the economic and industry-wide factors relevant to the Company and the opportunities and challenges, and risks on which the Company is focused.

Changes In Results Of Operations

Rental and related income increased 5% from $6,254,570 for the quarter ended March 31, 2008 to $6,556,499 for the quarter ended March 31, 2009. This was primarily due to rental increases to residents and an increase in home rental income. The Company has been raising rental rates by approximately 3% to 6% annually. Occupancy remained relatively stable at approximately 80% at both December 31, 2008 and March 31, 2009. The Company has faced many challenges in filling vacant homesites.

Interest and dividend income increased 16% from $891,429 for the quarter ended March 31, 2008 to $1,035,262 for the quarter ended March 31, 2009. This was primarily as a result of an increase in dividend income due to a higher weighted-average yield on securities available for sale during 2009. The weighted average yield on these securities at March 31, 2009 and 2008 was approximately 11.5% and 8.4%, respectively.

Loss on securities transactions, net for the three months ended March 31, 2009 and 2008 consisted of the following:

                                               2009           2008

Loss on sale of securities, net              ($ 556,751)         $ -0-
Impairment loss                              (1,723,834)           -0-
Loss on open and settled futures contracts           -0-     (650,560)
Loss on securities transactions, net       ($ 2,280,585)   ($ 650,560)

Loss on securities transactions, net increased 251% from $650,560 for the quarter ended March 31, 2008 to $2,280,585 for the quarter ended March 31, 2009.
This was due primarily to the write-down of the carrying value of securities which were considered other than temporarily impaired. The Company had unrealized losses of $4,989,976 in its securities portfolio as of March 31, 2009. Subsequent to March 31, 2009, the REIT market has improved and as a result, our losses have been reduced. Historically, REIT share prices were not volatile. Today, they are highly volatile with price swings of 5% or more recurring frequently. REIT securities have always represented less than 10% of the total market value of our assets. The dividends received from our securities investments continue to meet our expectations. It is our intent to hold these securities long-term and we anticipate realizing satisfactory returns. As the credit markets begin to normalize, more efficient pricing should return to the securities markets. During 2008, the Company also recognized a loss on open and settled futures contracts of $650,560. The Company invested in futures contracts of ten-year treasury notes with the objective of reducing the risks of rolling over its fixed-rate mortgages at higher interest rates and reducing the exposure of the preferred equity and debt securities portfolio to interest rate fluctuations. As of May 15, 2008, we settled our position and no longer invest in these contracts.

Community operating expenses remained relatively stable for the quarter ended March 31, 2009 as compared to the quarter ended March 31, 2008. General and administrative expenses decreased 21% from $985,887 for the quarter ended March 31, 2008 to $781,638 for the quarter ended March 31, 2009. The Company has been focusing on reducing costs, including operating expenses, salaries, professional fees and travel. Interest expense decreased 27% from $1,500,658 for the quarter ended March 31, 2008 to $1,095,261 for the quarter ended March 31, 2009. This was primarily due to the change in fair value of the Company's interest rate swaps. The change in fair value of the Company's interest rate swaps decreased interest expense by approximately $77,000 in 2009 but increased interest expense by approximately $349,000 in 2008. Cash paid for interest during the three months ended March 31, 2009 and 2008 amounted to $1,177,999 and $1,358,251, respectively. Depreciation expense and amortization expense remained relatively stable for the quarter ended March 31, 2009 as compared to the quarter ended March 31, 2008.

Sales of manufactured homes amounted to $1,085,800 and $1,784,043 for the quarters ended March 31, 2009 and 2008, respectively. Cost of sales of manufactured homes amounted to $1,002,239 and $1,484,965 for the quarters ended March 31, 2009 and 2008, respectively. Selling expenses amounted to $323,630 and $408,445 for the quarters ended March 31, 2009 and 2008,

respectively. These decreases are directly attributable to the decrease in sales. Loss from the sales operations (defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) amounted to $240,069 or 22% of total sales, and $109,367 or 6% of total sales for the quarters ended March 31, 2009 and 2008, respectively. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of the communities.

Income from community operations (defined as rental and related income less community operating expenses) increased 9% from $3,072,394 for the quarter ended March 31, 2008 to $3,345,813 for the quarter ended March 31, 2009.

Liquidity And Capital Resources

The Company's principal liquidity demands have historically been, and are expected to continue to be, distributions to the Company's stockholders, acquisitions, capital improvements, development and expansions of properties, debt service, purchases of manufactured home inventory, investment in debt and equity securities of other REITs 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 DRIP, and access to the capital markets.

As of March 31, 2009, the Company owned securities available for sale of $19,577,745, subject to margin loans of $4,826,276. These marketable securities provide the Company with additional liquidity. The REIT securities market has been driven to inordinately low prices and high yields. This has resulted in substantial unrealized losses in our holdings. We believe this to be the result of indiscriminate selling and not the result or normal pricing considerations.
Subsequent to March 31, 2009, the REIT market has improved and as a result our losses have been reduced. The dividends received from our securities investments continue to meet our expectations. It is our intent to hold these securities long-term and anticipate realizing satisfactory returns.

Net cash provided by operating activities increased 59% from $1,909,309 for the quarter ended March 31, 2008 to $3,029,409 for the quarter ended March 31, 2009.
This was primarily due to the add-back of the non-cash impairment charge for securities which were considered other than temporarily impaired. The Company received, including dividends reinvested of $275,255, new capital of $705,266 through its Dividend Reinvestment and Stock Purchase Plan (DRIP). Mortgages and loans payable decreased by approximately $887,000. The Company extended its mortgage on Sandy Valley Estates to April 30, 2009. Subsequently, the Company received a commitment from Bank of America to further extend this mortgage to May 1, 2010.

The Company believes that funds generated from operations together with the financing and refinancing of its properties will be sufficient to meet its needs over the next several years.

Funds From Operations

Funds from Operations (FFO) is defined as net income excluding gains (or losses) from sales of depreciable assets, plus depreciation. FFO should be considered as a supplemental measure of operating performance used by real estate investment trust (REITs). FFO excludes historical cost depreciation as an expense and may facilitate the comparison of REITs which have different cost bases. The items excluded from FFO are significant components in understanding and assessing the Company's financial performance. FFO (1) does not represent cash flow from operations as defined by generally accepted accounting principles; (2) 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 (3) is not an alternative to cash flow as a measure of liquidity. FFO, as calculated by the Company, may not be comparable to similarly entitled measures reported by other REITs.

The Company's FFO for the quarter ended March 31, 2009 and 2008 is calculated as follows:

                           2009          2008

  Net Loss             ($1,098,836)   ($ 305,040)
  Loss on Sales of           11,503         4,255
    Depreciable Assets
  Depreciation Expense    1,030,874     1,014,750

  FFO                     ($56,459)      $713,965

The following are the cash flows provided (used) by operating, investing and financing activities for the three months ended March 31, 2009 and 2008:

                             2009       2008

  Operating Activities  $3,029,409    $1,909,309
  Investing Activities   (692,906)   (2,979,403)

Safe Harbor Statement

Statements contained in this Form 10-Q, including the documents that are incorporated by reference, 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"). Also, when we use any of the words "anticipate," "assume," "believe," "estimate," "expect," "intend," or similar expressions, we are making forward-looking statements. These forward-looking statements are not guaranteed. They reflect the Company's current views with respect to future events and financial performance, but are based upon current assumptions regarding the Company's operations, future results and prospects, and are subject to many uncertainties and factors, some of which are beyond our control, relating to the Company's operations and business environment which could cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements.

Such factors include, but are not limited to, the following: changes in the real estate market and general economic climate; increased competition in the geographic areas in which the Company owns and operates manufactured housing communities; changes in government laws and regulations affecting manufactured housing communities; the ability of the Company to continue to identify, negotiate and acquire manufactured housing communities and/or vacant land which may be developed into manufactured housing communities on terms favorable to the Company; the ability to maintain rental rates and occupancy levels; competitive market forces; changes in market rates of interest; our ability to repay debt financing obligations; our ability to comply with certain debt covenants; continued ability to access the debt or equity markets; the availability of other debt and equity financing alternatives; the loss of any member of our management team; our ability to maintain internal controls and processes to ensure all transactions are accounted for properly, all relevant disclosures and filings are timely made in accordance with all rules and regulations, and any potential fraud or embezzlement is thwarted or detected; changes in federal or state tax rules or regulations that could have adverse tax consequences; our ability to qualify as a real estate investment trust for federal income tax purposes; the ability of manufactured home buyers to obtain financing; the level of repossessions by manufactured home lenders; and those risks and uncertainties referenced under the heading "Risk Factors" contained in the Company's Form 10-K and other filings with the Securities and Exchange Commission. 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-Q 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.