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, 2011.

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 - 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 forty-one communities containing approximately 9,000 developed homesites. These communities are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee and Indiana. The Company also invests in securities of other REITs.

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.

Although current economic indicators show the US economy to be improving, the rate of recovery has been much slower than anticipated. Conventional home ownership rates continue to fall. However, activity in our communities has recently increased. We have seen an increase in sales during the first quarter.
We are also seeing increased demand for rental units and since the first quarter of 2011, have added a net of approximately 140 rental units to selected communities. Occupied rental units represent approximately 14% of total occupied sites at quarter end. We hope to convert renters to new homeowners in the future.

The Company also holds a portfolio of securities of other REITs with a fair value of $47,660,935 at March 31, 2012, which earns dividend and interest income. The dividends received from our securities investments were at a weighted-average yield of approximately 6.7% as of March 31, 2012. During the quarter ended March 31, 2012, the Company recognized gains on sales of securities of $1,212,712. At March 31, 2012, the Company had net unrealized gains of $6,551,894 in its REIT securities portfolio. The Company invests in REIT securities on margin from time to time when the Company can achieve an adequate yield spread. The REIT securities portfolio provides the Company with liquidity and additional income and serves as a proxy for real property investments.

The Company intends to continue to increase its real estate investments. Over the past two years, we added twelve manufactured home communities, encompassing approximately 2,100 developed homesites, to our portfolio. We have been positioning ourselves for future growth and will continue to seek opportunistic investments. On January 12, 2012, we acquired Countryside Estates, a 90-site manufactured home community situated on approximately 64 acres, located in Muncie, Indiana, for a purchase price of $2,100,000. This community was originally licensed for over 200 sites and is being built in phases. Upon completion, it will ultimately be approximately 200-210 sites. In March, 2012, we entered into an agreement to acquire eleven manufactured home communities, ten located in Pennsylvania and one located in New York. These all-age communities total 966 developed homesites situated on 200 acres. The average occupancy for these communities is approximately 92%. The aggregate purchase price to be paid in this transaction is approximately $28.25 million. The transaction is expected to be completed during the third quarter of 2012. This acquisition is subject to due diligence and other customary closing conditions and therefore there can be no assurance that this acquisition will take place by the end of the third quarter 2012 or at all.

On April 10, 2012, the Company issued 1,075,000 shares of its 8.25% Series A Cumulative Redeemable Preferred Stock at an offering price of $25.292 per share in an underwritten public offering. The Company received net proceeds from the offering of approximately $26.1 million and intends to use the net proceeds to purchase additional properties, including its pending acquisition, and for other general corporate purposes.

See PART I, Item 1 - Business in the Company's 2011 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 10% from $7,930,210 for the quarter ended March 31, 2011 to $8,760,043 for the quarter ended March 31, 2012. This was primarily due to the acquisitions made during 2011 and the first quarter of 2012, and an increase in rental home income. Occupancy remained relatively stable at 77%.

Sales of manufactured homes amounted to $2,130,903 and $1,086,244 for the quarters ended March 31, 2012 and 2011, respectively. Cost of sales of manufactured homes amounted to $1,972,326 and $984,371 for the quarters ended March 31, 2012 and 2011, respectively. Selling expenses amounted to $431,063 and $385,096 for the quarters ended March 31, 2012 and 2011, respectively. These increases are directly attributable to the increase 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 $272,486 or 13% of total sales, and $283,223 or 26% of total sales for the quarters ended March 31, 2012 and 2011, respectively. The gross profit was 7% and 9% for the quarters ended March 31, 2012 and 2011, respectively. Activity in our communities has increased. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of the communities.

Community operating expenses increased 13% from $4,234,976 for the quarter ended

March 31, 2011 to $4,794,270 for the quarter ended March 31, 2012. This was primarily due to the acquisitions made during 2011 and the first quarter of 2012 and an increase in personnel and related costs. General and administrative expenses increased 30% from $966,053 for the quarter ended March 31, 2011 to $1,254,094 for the quarter ended March 31, 2012. This was primarily due to an increase in compensation and related costs. Acquisition costs relate to transaction and due diligence costs associated with the acquisitions of the communities. Depreciation expense increased 15% from $1,395,634 for the quarter ended March 31, 2011 to $1,609,291 for the quarter ended March 31, 2012. This was primarily due to the acquisitions made during 2011 and the first quarter of 2012. Amortization of financing costs remained relatively stable for the quarter ended March 31, 2012 as compared to the quarter ended March 31, 2011.

Interest and dividend income increased 20% from $1,043,215 for the quarter ended March 31, 2011 to $1,254,815 for the quarter ended March 31, 2012 primarily due to an increase in securities available for sale. The average balance of the securities portfolio was approximately $45,500,000 and $29,700,000 at March 31, 2012 and 2011, respectively.

Gain on securities transactions, net amounted to $1,212,712 and $1,541,856 for the quarter ended March 31, 2012 and 2011, respectively. The market for REIT securities has continued to improve. At March 31, 2012, the Company had net unrealized gains of $6,551,894 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 long-term.

Interest expense remained relatively stable for the quarter ended March 31, 2012 as compared to the quarter ended March 31, 2011.

Total investment property and equipment increased 2% or $4,429,500 during the quarter ended March 31, 2012. This increase was primarily due to the acquisition of Countryside Estates for a purchase price of $2,100,000. The Company also added approximately 140 rental units.

Securities available for sale increased 10% or $4,362,721 during the quarter ended March 31, 2012. The increase was primarily due to an increase in the unrealized gain of $4,090,589. During the quarter, the Company also purchased $3,483,571 of securities available for sale, which was offset by sales with an adjusted cost of $3,211,439.

Inventory of manufactured homes decreased 6% or $650,283 during the quarter ended March 31, 2012 primarily due to the increase in sales. Because conventional home ownership rates continue to decline, the Company is optimistic about future sales and rental prospects.

Mortgages payable increased 7% or $6,025,336 during the quarter ended March 31, 2012. This increase was due to a new $11,400,000 mortgage partially offset by principal repayments of $5,374,664, including the payoff of our mortgage on Port Royal Village in the amount of approximately $4,700,000.

Loans payable decreased 26% or $6,338,546 during the quarter ended March 31, 2012.

This decrease was primarily due to proceeds of the new mortgage being used to pay down the margin loan.

The Company raised $5,234,763 from the issuance of shares in the DRIP during the quarter ended March 31, 2012, which included dividend reinvestments of $341,218.
Dividends paid on the common stock for the quarter ended March 31, 2012 were $2,809,868 of which $341,218 was reinvested. On April 17, 2012, the Company declared a dividend of $.18 per share to be paid June 15, 2012 to common shareholders of record as of May 15, 2012.

Dividends paid on the preferred stock for the quarter ended March 31, 2012 were $690,319. On April 17, 2012, the Company declared a preferred dividend of $.515625 per share to be paid on June 15, 2012 to preferred shareholders of record as of May 15, 2012.

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 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.

Current economic indicators show the US economy to be slowly improving. The affordability of our homes should enable the Company to perform well despite the challenging economy. While the recent recession has proven difficult, the manufactured housing community property type has been more stable than other commercial property types.

Net cash provided by operating activities amounted to $2,755,502 and $2,375,966 for the quarter ended March 31, 2012 and 2011, respectively. As of March 31, 2012, the Company had cash of $8.8 million, securities available for sale of $47.7 million, subject to a margin loan of $9.7 million, $5 million available on its unsecured line of credit, and $7 million available on its revolving lines of credit for the financing of home sales and the purchase of inventory. The Company owns 41 properties, of which 22 are unencumbered. These marketable securities, non-mortgaged properties, and lines of credit provide the Company with additional liquidity. The Company has been raising capital through its DRIP and through public offerings of its preferred stock.

On April 10, 2012, the Company issued 1,075,000 shares of its preferred stock at an offering price of $25.292 per share in an underwritten public offering. The Company received net proceeds from the offering of approximately $26.1 million and intends to use the net proceeds to purchase additional properties, including its pending acquisition, and for other general corporate purposes.

The Company uses a variety of sources to fund its cash needs in addition to cash generated through operations. The Company may sell marketable securities, borrow on its lines of credit, finance and refinance its properties, or raise capital through the DRIP and capital markets. The Company believes that funds generated from these sources will provide sufficient funds to adequately meet its obligations over the next several years.

The Company has one mortgage with a balance of approximately $2,000,000 maturing in July 2012. We are anticipating repaying this mortgage.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

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 trusts (REITs). 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 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, 2012 and 2011 is calculated as follows:

                            2012           2011

  Net Income               $1,749,697   $2,124,864
  Preferred Dividend        (690,319)          -0-
  Depreciation Expense      1,609,291    1,395,634
  Gain on Sales of                         (8,564)
    Depreciable Assets       (13,132)

  FFO                      $2,655,537   $3,511,934

The following are the cash flows provided (used) by operating, investing and financing activities for the three months ended March 31, 2012 and 2011:

2012 2011

Operating Activities $2,755,502 $2,375,966 Investing Activities (3,911,795) (2,762,690) Financing Activities 1,186,846 5,273,080

Safe Harbor Statement

Statements contained in this Form 10-Q 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," "intends," "plans," "seeks," "could," "may," or similar expressions, we are making forward-looking statements. These forward-looking statements are not guaranteed and are based on our current intentions and on our current expectations and assumptions. These statements, intentions, expectations and assumptions involve risks and uncertainties, some of which are beyond our control, which could cause actual results or events to differ materially from those we anticipate or project. Such risks and uncertainties include, but are not limited to, the following:

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changes in the real estate market and general economic conditions;

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the inherent risks associated with owning real estate, including local real estate market conditions, governing laws and regulations affecting manufactured housing communities and illiquidity of real estate investments;

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increased competition in the geographic areas in which we own and operate manufactured housing communities;

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our ability 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 us;

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our ability to maintain rental rates and occupancy levels;

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changes in market rates of interest;

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our ability to repay debt financing obligations;

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our ability to refinance amounts outstanding under our credit facilities at maturity on terms favorable to us;

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our ability to comply with certain debt covenants;

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the availability of other debt and equity financing alternatives;

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continued ability to access the debt or equity markets;

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the loss of any member of our management team;

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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;

·

the ability of manufactured home buyers to obtain financing;

·

the level of repossessions by manufactured home lenders;

·

changes in federal or state tax rules or regulations that could have adverse tax consequences; and

·

our ability to qualify as a real estate investment trust for federal income tax purposes.

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.