SECURITIES AVAILABLE FOR SALE AT FAIR VALUE

6 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

SECURITIES AVAILABLE FOR SALE AT FAIR VALUE

NOTE 4 – SECURITIES AVAILABLE FOR SALE AT FAIR VALUE

Our Securities Available for Sale at Fair Value consists primarily of marketable common and preferred stock of other REITs with a fair value of $131.7 million as of March 31, 2021. We limit the size of this portfolio to no more than approximately 5% of our undepreciated assets, which we define as total assets excluding accumulated depreciation. Total assets excluding accumulated depreciation were $2.4 billion as of March 31, 2021. Our REIT securities portfolio provides us with diversification, income, a source of potential liquidity when needed and also serves as a proxy for real estate when more favorable risk adjusted returns are not available in the private real estate markets. Our $131.7 million investment in marketable REIT securities as of March 31, 2021 represented 5.4% of our undepreciated assets. We normally hold REIT securities long-term and intend to hold these securities to recovery.

We recognized dividend income on our investments in securities of $1.6 million and $3.2 million for the three and six months ended March 31, 2021. There have been no open market purchases of securities during the six months ended March 31, 2021. We owned a total of 1.4 million common shares in UMH Properties, Inc. (UMH), a related REIT, as of March 31, 2021, at a total cost of $14.4 million and a fair value of $26.0 million, representing an 81% unrealized gain. Dividends received from our UMH common shares are reinvested through UMH’s Dividend Reinvestment and Stock Purchase Plan. During the six months ended March 31, 2021, UMH redeemed all of its outstanding 8.00% Series B Cumulative Redeemable Preferred Stock at a cash redemption price of $25.00 per share, plus all accrued and unpaid dividends, of which we owned 100,000 shares at a total cost of $2.5 million.

In addition to the $2.5 million of UMH 8.00% Series B Cumulative Redeemable Preferred Stock that was redeemed during the six months ended March 31, 2021, we also sold marketable REIT securities for gross proceeds totaling $16.3 million with an original cost basis of $14.1 million, resulting in a realized gain of $2.2 million.

As of March 31, 2021, we had total net unrealized holding losses on our securities portfolio of $87.9 million. As a result of the adoption of ASU 2016-01, we recognized Unrealized Holding Gains (Losses) Arising During the Periods in the accompanying Consolidated Statements of Income for the three and six months ended March 31, 2021 of $19.2 million and $38.9 million, respectively. The components of the Unrealized Holding Gains (Losses) Arising During the Periods included in the accompanying Consolidated Statements of Income are as follows:

	Three Months Ended						Six Months Ended
	3/31/2021			3/31/2020			3/31/2021			3/31/2020
Unrealized Holding Gains (Losses)	$	21,434		$	(83,075	)	$	41,154		$	(86,710	)
Reclassification Adjustment for Net Gains Realized in Income		(2,248	)		0			(2,248	)		0
Unrealized Holding Gains (Losses) Arising During the Period	$	19,186		$	(83,075	)	$	38,906		$	(86,710	)