UMH Properties, Inc.

Good morning and welcome to UMH Properties' second quarter 2020 earnings conference call. All participants will be in 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 second quarter supplemental information presentation. The supplemental information presentation, along with our T&Q, are available on the company's website at umh.rit. 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 Litigation 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 second quarter 2020 earnings release and filing 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 Lykins, 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 second quarter ended June 30, 2020, and discuss the impact that the COVID-19 pandemic has had on our operations. Although the pandemic has had a negative impact on many businesses and industries throughout the nation, We are pleased to report it has not materially impacted UMH's rent collections and occupancy. Our rent collections are in line with pre-pandemic levels. Site and home rent for the quarter is now 98% collected. Rent collections remained consistent to pre-pandemic figures at 95% collections for the month of July this year and last. The coming expiration of the unemployment benefits will be indicative of the true strength of our collections. Less than 100 residents have elected to enter into a payment agreement with us. Our residents recognize that we provide the highest quality affordable housing in any market that we operate in. Our communities are reporting strong demand. In fact, the migration of the population away from cities and out of apartments is further increasing demand at our locations. As a result, our occupancy rates continue to rise at a rapid pace. Same store occupancy is now 85.8% and we have filled 550 sites year over year. Despite delays caused by the pandemic, we are on track to fill 750 to 800 rentals this year. We continue to complete capital improvements and expansions at our communities. Moving on to our results for the second quarter, Normalized FFO was $0.17 per diluted share as compared to $0.14 in the prior year period and $0.15 in the first quarter of 2020. This represents an increase of 21% and 13% respectively. Rental and related income for the quarter increased 12% over last year. Our operating expense ratio decreased from 47.7% in the second quarter of last year to 44% currently. Our strong income growth paired with a reduction in our operating expense ratio resulted in NOI growth of 19% quarter over quarter. Our long-term business plan continues to drive earnings growth while generating increased property values. Our same property portfolio continues to perform exceptionally well. Our same property occupancy rate improved 250 basis points to 85.8% from the same quarter last year. This translates to an increase of 550 revenue producing sites year over year. Same property NOI increased 14% for both the second quarter and year to date. This is the third quarter in a row that we have delivered double digit same store NOI growth. These strong results are directly correlated to the success we have had at our value added communities. Our team has done an incredible job finding communities that were underperforming Identifying the problems and implementing a plan that creates improved community operating results. The results of this business plan are now being recognized in our financial statements and increased property values will be realized by financing our free and clear communities and refinancing our encumbered properties. The rental home program continues to perform very well. At quarter end, we owned approximately 7,800 rentals. Year to date, we have added 367 rentals as compared to 336 last year. We remain on track to add 750 to 800 rental homes to our portfolio this year. At quarter end, our rental home occupancy was 95.2%. Rental homes are the most efficient way to fill the vacant sites acquired through our turnaround acquisitions. Generally, we find that rental home tenants are reliable tenants that pay the rent on time, and take good care of the home. Our team has done a great job installing and renting 800 new homes a year and turning over homes in a timely fashion. Rental homes in manufactured housing communities are the future of affordable housing. Gross sales for the quarter were $5 million, representing a decrease of 14% over the same period last year. Our sales for the quarter were negatively impacted by the stay-at-home orders issued in March and the inability to show homes in person. Given the difficult circumstances, we are satisfied with the performance of our sales operation. We believe that as business returns to normal throughout the remainder of the year, our results will improve. We have several expansions coming online in good sales markets that should drive improved sales results. Our sales centers are also reporting increased traffic and demand. The development of our expansions continues to progress. We expect to complete the development of 191 sites this year. In addition, in the next 12 months, we expect to obtain approvals on approximately 900 sites. We should develop about 450 of these approved sites in the next 18 months. These newly developed sites will allow us to continue our sales and rental growth at communities that have consistently produced excellent results. Subsequent to quarter end, we closed on the acquisition of a 147 site community in Pennsylvania for a total purchase price of $3.3 million or $23,000 per site. This community was approximately 56% occupied at closing. It is in good condition and should perform well with the implementation of our sales and rental program. We have one community in our pipeline which is expected to close during the third quarter. This community is located in New York and contains 163 sites, of which 69% are occupied. The purchase price is $4.5 million or $28,000 per site. The acquisition market remains extremely competitive. The pandemic has proven the resiliency of the manufactured housing asset class. As a result, more investors continue to chase the same properties, further compressing cap rates. Several properties and portfolios in our markets have closed and commanded going-in cap rates of 4% or less and prices of $50,000 a site or more. UMH excels at turnaround communities. We continue to seek properties that will enable us to implement our business plan and drive meaningful value creation. We continue to make progress financing a portfolio of some of our free and clear communities with approximately $100 million of approximately This would allow us to redeem $95 million of our 8% Series B preferred stock, generating additional FFO for common shareholders of approximately $0.11 per share annually. 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 would allow us to finance approximately $310 million of rental homes that were purchased with preferred stock, reducing our cost of capital. We are also working with the bank to obtain a line of credit on our rental homes that would allow us to tap into the rental equity on our balance sheet at rates close to prime. As we refinance our capital stack and continue to improve our operating results, We have the potential to drive significant earnings growth throughout the rest of this year and into 2021. By executing on these items, we expect to make significant progress in reducing our payout ratio, which we anticipate will be below 100% in 2021. I would like to take this opportunity to thank our dedicated UMH team for all their hard work. We have been laying the foundation for great results for many years, That foundation is so strong we are able to report these excellent results despite the terrible tragedy of COVID. And now, Anna will provide you with greater detail on our results for the quarter and for the year.