UMH Properties, Inc.

Good morning and welcome to the UMH Properties second quarter 2021 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 your touchtone phone. And 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. Nelly Madden, Vice President 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. This supplemental information presentation, along with our 10Q, are available on the company's website at umh.org. 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 Clarification Reform Act of 1995. 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 a company's second quarter 2021 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 cautioning 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 Chu, Vice President and Chief Financial Officer Brett Taft, Vice President and Chief Operating Officer, Jim Likens, Vice President of Capital Markets, and Daniel Lange, Vice President. It is now my pleasure to turn the call over to UMH's President and Chief Executive Officer, Samuel Lange.

Thank you very much, Nellie. We are pleased to report that we continue to make progress on all aspects of our business plan. Our strong revenue, occupancy, and sales growth is translating to the bottom line. This growth resulted in Quarter 2 normalized FFO of 22 cents per share as compared to 17 cents per share last year. This represents an increase of approximately 29 percent over the same quarter last year. Sequentially, normalized FFO increased by 2 cents or 10 percent over the first quarter of 2021. For the first six months of the year, normalized FFO was 42 cents which is an increase of 31% over last year. This performance is the result of years of hard work acquiring underperforming communities and implementing our value-add business plan. Our hard work and the value created by our platform have started to be reflected in our stock price, and we are now significantly benefiting our shareholders and the company. During the quarter, our shares traded at new highs, which resulted in an equity market capitalization of greater than $1 billion. A reduced cost of capital opens the door for acquisitions and development opportunities that were previously not available to us. Moving on to operations, total income for the quarter increased 22% to approximately $49 million. This increase was the result of a 12% increase in rental and related income and a 91% increase in sales of manufactured homes. Our operating expense ratio improved to 43.3% from 44% last year. Our same property results remain strong. For the quarter, same property occupancy was up 280 basis points, or 658 units, over last year. Sequentially, same property occupancy increased by 186 units, Same property NOI increased 13%, or $2.7 million, as compared to the second quarter of 2020. Year-to-date, same property NOI increased 14.5%, or $5.8 million, as compared to last year. This is the seventh quarter in a row that we have achieved double-digit same property NOI growth. The improved operating results substantially increase the value of our portfolio. During the quarter, we added 134 homes to our rental portfolio, bringing our total portfolio to approximately 8,600 rental homes. At quarter end, our rental home occupancy rate was 95.9 percent. The rental home business has continued to meet our expectations. Demand for rental units throughout our portfolio remains robust. The availability and price of inventory remains our biggest concern. We have been aggressively ordering homes and believe that we will achieve similar occupancy and revenue gains throughout the rest of the year. Home prices are up approximately 40% from pre-COVID levels. We believe that at some point the supply chain will return to previous norms with prices and delivery times eventually easing. Gross sales for the second quarter were $9.6 million, representing an increase of 91% over last year. It's important to note that even with the impact of COVID, last year's sales were strong as compared to our historic results. This was a quarterly sales record. We sold a total of 120 homes, of which 73 were new home sales and 47 were used home sales. Our average sales price was $80,000 as compared to $61,000 in the prior year period. We financed 63% of our home sales, and our portfolio now has a principal balance of $49.2 million at a weighted average interest rate of 7.1%. Our communities are reporting strong sales demand, and we anticipate continued sales growth for the remainder of the year. Our sales operations' biggest concern is also the availability and pricing of our inventories. We have expansion sites coming online in markets that are experiencing strong sales demand. We anticipate completing the development of approximately 330 sites in 2021. These expansion sites are anticipated to generate meaningful sales increase in the future. During the quarter, we acquired one community in Ohio for a total purchase price of $10.3 million. The community contains 206 sites, of which 86% are currently occupied. The community is well located within our existing footprint in Ohio. The community is in relatively good condition but will require some paving, office and clubhouse renovation, and the removal and replacement of old homes. We continue to seek acquisitions that meet our growth criteria. There is strong demand for stabilized and value-add manufactured home communities. This has resulted in increased prices and limited opportunities that fit our growth criteria. High-quality communities are trading at or above replacement value. As a result of this elevated pricing, we have decided that now is the time to build or buy new communities from developers. We have entered into a contract to purchase one all-age community in Florida that is currently being developed. We also have an executed letter of intent and are working towards contract on another development deal in Florida. These communities will contain a total of 366 developed sites for a total purchase price of approximately $38.4 million. The communities will be highly amenitized with clubhouses, pools, bocce ball, pickleball, splash pools, dog parks, and more. To fund these acquisitions, we are considering all options including potential joint ventures with institutional investors. UMH can generate similar earnings growth for the foreseeable future by filling our 3,400 vacant sites, obtaining our 4% rent increases, increasing the volume and profitability of our home sales, expanding our communities, and growing our finance business. The continued improvement in our operating results will drive significant earnings growth, but the reduction of our cost of capital will be equally, if not more, beneficial. We plan to call our $247 million 6.75% Series C preferred stock in July of 2022. Reducing our cost of capital from 6.75% to 4% would generate additional FFO of $6.8 million, or 16 cents per share. Further, in January of 2023, we plan on calling our $215 million 6.375% Series D preferred stock. And now, Anna will provide you with greater detail on our results for the quarter.