UMH Properties, Inc.

Good morning and welcome to the UMH Properties first quarter 2023 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. 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, Mr. Craig Koster, Executive Vice President and General Counsel. Thank you. Mr. Koster, 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. This supplemental information presentation, along with our 10-Q, are available on the company's website at umh.re. We 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 first quarter 2023 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 the 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, founder and chairman, Samuel Landy, president and chief executive officer, Anna Chu, Executive Vice President and Chief Financial Officer, Brett Taft, Executive Vice President and Chief Operating Officer, Jim Likens, Vice President of Capital Markets, and Daniel Landy, Executive 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, Craig. I would like to thank all of our loyal shareholders for their dedication to the company. We are pleased to have raised our annual dividend 2 cents per share, or 2.5% in January. Over the past three years, we have increased the dividend by 14%. We look forward to additional increases in the future as we achieve increased earnings per share through the implementation of our long-term business plan. Normalized FFO was 20 cents for the quarter as compared to 19 cents last year, representing an increase of 5.3%. As we fill our vacant inventory, improve our operating margin, and grow our sales profitability, we believe we will earn well in excess of our dividend with a target payout ratio of 80%. During the quarter, same property occupancy increased by 100 basis points, or 258 units, to 87%. Growth sales improved by 70% to $7.3 million, which is a first quarter record. Most of the increase in occupancy was generated in March. Therefore, the revenue growth from this occupancy gain should be reflected in our second quarter results. Additionally, we are coming into our peak selling and renting season. which should result in further growth in occupancy and sales profitability. One year ago, our results were impacted by a lack of inventory to sell and rent homes, which resulted in limited revenue growth for most of the last year. The COVID-related supply chain issues that had existed, combined with strong consumer demand for homes, resulted in manufacturer backlogs of eight to 18 months, depending on the factory. In our efforts to solve that problem, we ordered over 1,000 homes. We are on track to fill approximately 100 homes per month over the next six months. Carrying 1,000 homes is 500 homes above our normal inventory and means we have taken on a higher debt load, increased interest expense, and increased carrying costs. Each month, as we reduce inventory, we should see increased income and reduced floor plan interest expense and carrying costs. The norm of manufactured housing is that we can order homes at the right price and have them ready for occupancy in four to six months from the order date. A return to this norm should allow us to carry less inventory, thereby reducing expenses and further improving earnings. During the first quarter, which is typically one of our slowest quarters, we converted 230 of our inventory homes to rental homes and sold 39 new homes. The increase in occupancy in conjunction with rent increases implemented in the first quarter generated an increase in monthly rental charges of approximately $550,000 as of April 1, 2023, compared to January 1, 2023. Demand remains strong throughout the portfolio, and we should be able to drive similar occupancy and revenue gains over the next few quarters. Our same property results are in line with our expectations and continue to trend in the right direction. During the quarter, same property occupancy increased by 258 units or 100 basis points. Our same property rental home occupancy rate increased from 93.5% at year end to 93.9% at the end of the first quarter. Our same property monthly rent per site increased 4.5% and our same property monthly rent per home increased 6.3% year over year. These improved operating metrics resulted in same property income growth of 6.1% with expense growth of 6.8% resulting in same property NOI growth of 5.6% or $1.4 million over the first quarter of last year. Our expense ratio decreased sequentially from 42.6% in the fourth quarter to 42.1% in the first quarter of 2023. The occupancy of our inventory should result in accelerated revenue growth this year. That revenue growth, assuming similar expense growth experienced in the first quarter, should result in high single-digit NOI growth this year. Gross sales for the quarter increased 70% to $7.3 million as compared to $4.3 million last year. Our gross sales margin improved to 32% from 30% last year. Net income from sales was $236,000 as compared to $103,000 last year. As we return to normal inventory levels, the profitability of our sales division should increase further. Included in net income are higher interest expenses and elevated inventory carrying costs. During the quarter, we sold 83 total homes, of which 39 were new homes. Our average new home sales price was $136,000, and our average used home sales price was $45,000. We are financing approximately 76% of our home sales. We have a total of $68 million in home loans on our balance sheet that earns us an average interest rate of 6.7%. On the acquisition front, we acquired one newly developed community in Georgia containing 118 sites for a total purchase price of $3.7 million. This community was acquired through our Opportunity Zone Fund. We anticipate strong demand for rental housing in this market. We continue to seek opportunistic accretive acquisitions that meet our growth criteria, but there are limited opportunities that fit our criteria. Last year, we acquired seven communities containing 1,500 sites and an additional community containing 144 sites through our JV with Nuveen real estate. We are making progress implementing our business plan at our recent acquisitions and anticipate an improvement in operating results at those locations this year. We also continue to make progress filling our joint venture communities with Nuveen and hope to grow that venture in the future. On the expansion front, we are under construction of four communities to develop 216 lots. These expansions are located in Maryland, Pennsylvania, Tennessee, and Indiana. All in all, we are very satisfied with our quarterly results, but we want our shareholders to understand our success is based on our willingness to invest in and work on projects that typically take three to five years to be accretive. Our industry and the entire business world are extremely competitive in looking for investments that will be immediately accretive. Therefore, there is a scarcity of such investment opportunities. On the other hand, when you invest time and money in projects with a three to five year time horizon, you have limited competition and a much higher chance of success. UMH has utilized this long-term business model to grow into one of the largest community owners in the country. We own 135 communities containing 25,700 home sites that are approximately 85% occupied. We also own two communities containing 363 sites in Florida through our joint venture with Nuveen Real Estate. Additionally, we own 9,300 rental homes and will own over 10,000 rental homes as we fill our inventory. We have 2,100 acres of vacant land that can be developed into 8,400 sites. This vacant land and our existing 4,000 vacant sites provide us with a long runway to grow earnings organically for the foreseeable future. We have the proven ability to acquire and improve communities, develop new communities and expansions, operate self-storage facilities adjoining our communities, profitably sell and finance homes, and lease oil and gas rates in our energy rich locations. We are also exploring the possibility of solar energy to further increase affordability for our residents while having a positive environmental impact. UMH is well positioned to grow income and per share earnings through the successful implementation of our proven business plan. And now, Anna will provide you with greater detail on our results for the quarter and for the year.