UMH Properties, Inc.

Good morning and welcome to the UMH Property Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal the 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. 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. Nellie Madden, Vice President of Investor Relations. Ms. Madden, you may begin.

Thank you very much, operator. In addition to the TEN-Q that we filed with the SEC yesterday, we have filed an unaudited second quarter supplemental information presentation. The supplemental information presentation along with our TEN-Q 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 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 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. Brad 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. UMH continues to execute on our long-term business plan, which has resulted in meaningful value creation, a growing dividend, and much-needed quality affordable housing in our markets. We have acquired value-added communities in strong geographic locations and made the required improvements to provide the high-quality affordable housing that our residents desire and deserve. Our improvements result in increased occupancy, revenue, and ultimately property value. As the community operating results improve and the property values increase, we are able to refinance at lower rates, effectively reducing our cost of capital. The success of this business plan is apparent through the recent recapitalization of our Series C preferred stock. We expect this recapitalization to increase FFO by approximately 12 cents per share on an annual basis. Our second quarter normalized FFO was 16 cents per share as compared to 22 cents per share last year. The decreased FFO per share is the direct result of the capital raised to fund the preferred redemption. Adding back the $4.2 million quarterly preferred dividend to normalized FFO results in FFO of approximately 23 cents per share or 92 cents per share on an annual basis. We look forward to the second half of the year when the effect of the recapitalization will be apparent in our quarterly results. We are pleased that our hard work over the past few years has resulted in a well-covered growing dividend. Post redemption, our payout ratio is approximately 87%. We have increased our dividend two consecutive years and we remain on track for additional dividend increases in the future. Moving on to operations, our properties continue to perform well. Our communities are reporting excellent demand for both sales and rentals. Same property rental and related income increased 6.2% and expenses increased 8.3%, resulting in NOI growth of 4.8%. Our community operating results are consistent with what we experienced during the first quarter. Last year's backlogs are still impacting our operations as we depleted our rental and sales inventory and are in the process of installing new homes for rent and for sale. We have over 500 new homes in our communities in various stages of setup. we have several hundred additional homes that should be delivered over the next few months. As we are able to set up and fill these units, we anticipate occupancy and revenue growth throughout the remainder of the year. During the quarter, we added 99 new rental homes to our portfolio as compared to 134 last year. Year to date, we have added 151 homes to our portfolio as compared to 352 last year. Our rental home occupancy rates remain strong at 94.6 percent. The rental home program has been and will continue to be a critical component of our success. Generally, we would expect to add 800 rental homes per year. Year over year, we added 253 rental homes to our portfolio. The difference of 547 homes would generate an additional $1.5 million of income for the quarter and drive income growth of 10 percent and NOI growth of 11% with the same expense increase. We can achieve high single or low double digit same property NOI growth through the infill of our vacant sites. It is for this reason that our policy is to not aggressively raise rents on our existing customers. However, as we release units, we do achieve higher rent increases. For the quarter, we have achieved 7% average increases on released units. Sales for the quarter were down 27%. This is also related to the lack of available inventory. As we are able to obtain additional inventory from our manufacturers, we anticipate our sales to grow in line with last year's results. While gross sales volume was down, our gross sales profit increased to 31% from 27% last year. During the quarter, we generated sales income of $943,000. The average sales price for the quarter was $81,000 as compared to $80,000 last year. We financed 63% of our home sales. We have a strong pipeline of pending sales and anticipate continued sales profit growth throughout the remainder of the year and into next year. Our expansions are progressing as expected. We have approximately 400 sites under construction at eight communities. These are generally strong sales locations and should help us to drive additional sales and income growth in the future. We remain on track to deliver approximately 400 sites annually for the next several years. Year to date, including our $21 million acquisition in July, we have closed on four communities containing 718 sites for a total purchase price of $38 million. These are value-added communities that will benefit as we implement our proven business plan. Two of the communities are located in western Pennsylvania. One is in Michigan, and the other is in Alabama. We continue to seek additional acquisition opportunities that meet our growth criteria. Interest rates have increased, but cap rates for manufactured housing communities remain aggressive and, in many cases, have negative in-place spreads. UMH is proud to announce that we have invested a portion of our gain from the Monmouth Real Estate Investment Transaction into the UMH Qualified Opportunity Zone Fund, or QOZF. The QOZF is designed to acquire value-added communities in opportunity zones that are not accretive to earnings in the short term. In order for an investment to qualify, it must be located in an opportunity zone, and 90% of the value of the existing buildings and improvements must be invested in the property. The goals of the QOZF are for UMH to earn management fees, asset management fees, and have the first right to purchase the communities upon a sale. It is similar to our joint venture with Nuveen Real Estate and should result in reasonable fee income and a future pipeline of accretive investment opportunities. We anticipate the QOZF closing on its first acquisition in the very near future. The QOZF has two development deals under contract for a total of $25.9 million. UMH has proposed an amendment to the Tax Cut and Jobs Act of 2017 that could potentially increase the supply of affordable housing in Opportunity Zones through manufactured housing. We have made substantial progress implementing our business plan at Sebring Square, the first community acquired through our joint venture. We have strong traffic for sales and rentals, and the prices are exceeding our expectations. We are selling new homes for over $170,000 and renting homes for over $1,700 per month. We are encouraged by our progress and look forward to opening additional communities soon. We have also made considerable progress building a pipeline of development deals for our joint venture with Nuveen. We currently have two communities to be developed under contract containing 585 sites for a total purchase price of approximately $68.5 million. These communities are both located in Florida and will be delivered fully constructed and ready for homes. Construction of one of the communities has commenced and we are anticipating a quarter one 2023 closing. Construction of the other community is expected to begin later this year and will likely close in the second half of 2023. Additionally, we have three land deals under contract that will be delivered and titled for 423 sites in Florida, Georgia, and Pennsylvania. We will acquire these communities entitled but unimproved and manage the development process. The aggregate purchase price for the land and entitlements is $16.5 million. Construction at these communities is expected to be approximately $16 million. The joint venture structure will result in a lower basis and higher overall returns. In total, the joint venture has a pipeline of 1,008 sites for a total investment in land and improvements of $101 million. We are pleased to have been able to generate this pipeline in a relatively short period of time. In June, UMH attended and sponsored the MHI Homes on the Hill event, which was part of the Innovative Housing Showcase. We set up a home on the National Mall to showcase the high quality affordable housing that we provide to our residents through manufactured housing. The event was well attended by the public and government officials. I would like to thank our wonderful staff for all of their efforts in making this event a success. We have a great team of qualified professionals that work every day to advance the interests of UMH and our industry. The story for UMH remains the same. Our basic business of operating manufactured housing communities remains fundamentally sound. The recapitalization of our 6.75% Series C preferred stock should result in a significant increase in normalized FFO. If market conditions allow, we can also redeem our $215 million 6.375% Series D perpetual preferred stock. Additionally, we have 3,600 vacant sites within our existing portfolio and 1,900 vacant acres that can be developed into approximately 7,600 home sites that will allow us to drive organic earnings growth as demand dictates. We have external growth opportunities through the acquisition of existing communities, their investment in our QOZF, and the investment in our joint venture with Nuveen. As always, UMH remains a conservative steward of capital. We look forward to generating additional value and income for our shareholders. And now Anna will provide you with greater detail on our results for the quarter.