UMH Properties, Inc.

Good day, and welcome to the UMH Properties first quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. It is now my pleasure to introduce your host, Ms. Nelli Madden, Director of Investor Relations. Thank you. Ms. Madden, you may begin.

Thank you very much, Operator. In addition to the 10Q that we filed with the SEC yesterday, we have filed an unaudited first quarter supplemental information presentation. The supplemental information presentation, along with our 10Q, are available on the company's website at umh.read. I would like to remind everyone that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Verification Reform Act of 1995. The forward-looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions. The company can provide no assurance that its expectations will be achieved. The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the company's first Quora 2020 earnings release and filings with the Securities and Exchange Commission. The company disclaims any obligation to update its forward-looking statements. In addition, during today's call, we will be discussing non-GAAP financial metrics. Reconciliations of these non-GAAP financial metrics to the comparable GAAP financial metrics, as well as explanatory and cautionary language, are included in our earnings release, our supplemental information, and our historical SEC filings. Having said that, I would like to introduce management with us today. Eugene Landy, Chairman, Samuel Landy, President and Chief Executive Officer, Anna Chew, Vice President and Chief Financial Officer, Brett Taft, Vice President and Chief Operating Officer, Jim Likens, Vice President of Capital Markets, and Daniel Landy, Vice President. It is now my pleasure to turn the call over to UMH's President and Chief Executive Officer, Samuel Landy.

Thank you very much, Nelli. We are pleased to report our results for the first quarter ended March 31, 2020 and provide an update on the state of our operations given the COVID-19 pandemic. While all of our communities are under stay-at-home orders of some sort, our community personnel are continuing to maintain our communities and deliver essential services to our residents. In most states where we operate, we are not permitted to conduct in-person sales and leasing. However, we have been able to sell and rent homes remotely by providing online visual tours of the homes and completing all required paperwork using our online application and digital signature software. Our website also allows for the online payment of rent. We are pleased with the state of our operations. Remarkably, March and April sales are holding at 2019 levels and occupancy is increasing. Many of our residents have been impacted financially by these stay-at-home orders. A large portion of our residents continue to remain employed throughout the crisis and many are on fixed income. Keeping all of this in mind, our rent collections have been strong. We collected 94% of our April site and home rental charges. As of May 5th, we have collected 64% of our May site and home charges as compared to 53% at this point in May of 2019. We expect that any delinquent tenants will be able to pay their rent when and if they are able to resume work or receive their stimulus checks or unemployment checks. Our employees have worked incredibly hard to further the goals of UMH. These are truly challenging times and difficult work environments, and we are proud of our team, which has stepped up to the challenge. UMH continues to maintain a solid balance sheet. During the first quarter, we utilized our preferred ATM to raise net proceeds of approximately $63 million of our Series D preferred stock. Although this preferred issuance has had a negative impact on first quarter earnings, this capital ensures the financial strength of UMH. This will also allow UMH to continue to invest in new rental homes, expansions, and capital improvements. We are also pleased to announce that we have a signed term sheet in place with a lender to obtain $100 million of fixed-rate mortgage debt on a portfolio of free and clear communities and an interest rate below 3%. We are positioning the company to be able to redeem our $95 million 8% Series B perpetual preferred stock in October with proceeds from this fixed-rate mortgage debt. Assuming no unforeseen issues related to closing on this transaction, we anticipate an increase in FFO of approximately $5 million were 11 cents per share annually as a direct result of this preferred redemption. UMH is also working with the GSEs to pioneer the recognition of rental manufactured homes in communities as rental housing that should be entitled to the same financing as traditional apartments. Further success in obtaining that recognition will allow us to finance our $310 million of rental homes that were purchased with preferred stock, reducing our cost of capital. I am pleased to report that rental and related income for the quarter increased 12% year over year. Our community net operating income for the quarter increased 22% year over year. These outstanding operating results are a testament to our value-add business plan. The rental home program continues to perform very well. At quarter end, we owned 7,543 rentals, which is an increase of 878 over the first quarter of 2019. Our rental home occupancy rate was 94%. Although our rental home orders were delayed by the crisis, we anticipate adding an additional 750 to 800 rental homes to our portfolio this year. The rental home program is a key component of our business plan. It allows us to quickly and efficiently increase occupancy resulting in improved community operations. Our same property portfolio generated exceptional results to begin the year. Same property NOI grew 14%. This is the second quarter in a row that we have delivered double-digit same-store NOI growth. As we complete turnaround work at our recent acquisitions, we are seeing increased demand for rentals and sales. This, paired with the reduction in operating expenses, should result in significant NOI growth and ultimately strong value creation. This value can be realized when we finance or refinance our communities. Our same property occupancy rate improved 180 basis points to 84.6% from the same quarter last year and 100 basis points from the year end. This translates to an increase of 416 revenue-producing sites year-over-year and 215 sites year-to-date. We remain encouraged by our sales operation and believe that this area of our business has the potential to deliver meaningful profits. Gross sales for the quarter were $3.2 million, representing a decrease of 12% over the same period last year. We are pleased to report that our April sales were $1.9 million, marking a slight improvement over April of 2019. As a result of obtaining lower cost capital, we are reducing our rate on retail financing to 5.99% from 6.75%, which should increase sales and occupancy. Our sales for the quarter were negatively impacted by the stay-at-home orders issued in March. We believe that if business returns to normal throughout the year, our results will improve. We have several expansions coming online in good sales markets that should drive improved sales results. We are proud to announce that the Manufactured Housing Institute recently named UMH's Sunny Acres Sales Center in Somerset, Pennsylvania the 2020 Retail Sales Center of the Year. This award is a testament to UMH's dedication to providing quality, affordable housing and enhancement of the buying experience for its customers. Most of our expansions continue to move forward despite the delays that the pandemic has caused. Notably, the development of our Tennessee expansions continues to progress. We have started ordering homes for two locations and should have them set up and ready for open houses at the beginning of the summer. As a result of the delays caused by the pandemic, we now expect to obtain approvals for 408 sites and to complete the development of 200 sites. Initially, we had planned on obtaining approvals for 750 sites. We now expect to obtain the remaining approvals in the first half of 2021. These newly developed sites will allow us to continue our sales and rental growth at communities that have consistently produced excellent results. We have two communities under contract. These communities are located in Pennsylvania and New York and contain 315 sites, which are 63% occupied. They are in close proximity to communities that we already own. The purchase price for these communities is approximately $8 million, representing a cost per site of $25,000. These communities are evaluated communities and in relatively good condition. They will benefit greatly from our rental home and marketing programs. The acquisition market for high-quality properties remains competitive. We are looking at several other opportunities and anticipate continued growth of our pipeline. Looking forward to the remainder of 2020, While there is uncertainty stemming from the COVID-19 pandemic, we still believe that we are well-possessioned to execute our growth strategy, deliver improved property-level operating results, and increase FFO per share. Although this crisis has delayed our rental home purchases and some rent increases, we believe that we are still on track to order 750 to 800 homes and obtain the majority of our annual rent increases. We have already declared our dividend for the second quarter and given the current strength of UMH's financial position, we do not anticipate any changes to our current dividend policy. UMH has been laying the groundwork to substantially increase FFO per share. The plan is to improve our community level operating results and reduce our cost of capital by taking advantage of historically low interest rates. We are succeeding in both. The capital raised from issuing preferred stock results in near term pressure on FFO per share. We believe shareholders should recognize that UMH has a 52-year history of successfully deploying capital. Although the new capital was not immediately accretive, it will be as we are able to invest the capital into our portfolio and future acquisitions. Our substantial improvement in operating results, in addition to a meaningful breakthrough in obtaining lower cost debt, should translate in the near future to increased FFO per share. I would like to take this opportunity to thank our dedicated UMH team for all their hard work. We are proud of the results achieved despite the adversity that we have faced during the first quarter. And now Anna will provide you with greater detail on our results for the quarter and for the year.