UMH Properties, Inc.

Good morning and welcome to UMH Properties' fourth quarter and year-end 2023 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 2. 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 10K that we filed with the SEC yesterday, we have filed an unaudited fourth quarter and year-end supplemental information presentation. This supplemental information presentation, along with our 10-K, are available on the company's website at umh.reit. 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 fourth quarter and year-end 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. At this time in 2022, we were running out of homes to sell or rent, and we were hoping that our manufacturers could shorten the backlog so that we could meet our occupancy and sales goals. At this time in 2023, we suddenly had 1,300 new homes in inventory and had to set up those homes before they could be sold or rented. Now we are proud to report we rented or sold those homes, and obtaining homes for sale or rent has normalized so we can again carry just-in-time inventory of approximately 400 homes. Our results for 2022 and the first half of 2023 were negatively impacted by our inventory issues. With those problems behind us, we are back in a position to generate growth in revenue from new rental homes, home sales, and rent increases. We made considerable progress executing our long-term business plan, which resulted in improved operating and financial results. We filled over 1,000 new rental homes and had a net increase in occupancy of 704 units or 210 basis points. This is the equivalent of building a 1,000 unit apartment complex in one year. Additionally, sales increased by 23%. These newly occupied rental and sales units resulted in a 9% same property income growth and 13% same property NOI growth. The improved operating results are generating a meaningful increase in community value, which is being realized through our financing and refinancing efforts. We are pleased to report another quarter of normalized FFO growth. Normalized FFO per share was 23 cents in the fourth quarter of 2023, as compared to 20 cents in the fourth quarter of 2022, representing an increase of 15%. This is the third consecutive quarter of sequential FFO growth. We believe that the company is well positioned for additional FFO growth as we continue to improve our operating results. Additionally, normalized FFO for the year was 86 cents as compared to 85 cents in the prior year. Our past work generates our current income and FFO does not fully reflect the tremendous effort we are putting into our future results. Our 2,100 acres of vacant land, 3,400 vacant lots, and 400 homes in inventory are all part of our efforts to generate future income. Investing in value-add communities, expansions, and greenfield development requires patient capital as these investments take three years or more to produce accretive returns. With the right time horizon, These investments significantly outperform the acquisition of stabilized assets. UMH is carefully balancing the investment in new projects with earnings accretion so that we can generate long-term shareholder value while increasing short-term core share earnings. We have invested to date approximately $27 million with our partner Nuveen in developed and undeveloped lots that will not reach full occupancy for approximately three years. We have approximately $40 million invested in 500 vacant expansion lots that will not be fully occupied for three years. We are working on seven turnaround properties purchased in the last two years that will become accretive within the next two years. At any given time, UMH has $100 million or more invested that is not yet producing accretive returns. Our results are strong, but we continue to work to achieve even better results. Our team did an exceptional job installing, renting, and selling over 1,200 new homes this year. 1,040 of these homes are new rental homes and 164 were new home sales. Net rental homes increased by 871 units with the difference being rental home sales and home removals at recent acquisitions. Our successful sales and rental programs generate a net increase in occupancy of 704 units, an increase of 210 basis points over last year. As we have discussed throughout the year, our financial results were impacted by the carrying costs associated with our unusually high inventory levels during the first half of the year. Moving forward, we anticipate our inventory being between 300 and 500 units as compared to 1,300 at the beginning of 2023. Manufactured backlogs have been reduced to four to eight weeks, so we believe we will be able to achieve similar, if not better, occupancy gains with just-in-time inventory. Our same property operating results demonstrate the success of our value-added business plan. We generally acquire well-located communities in need of repair with existing vacancies. As we improve the communities and make them desirable places to live, demand for sales and rentals increases. In the fourth quarter, same property income increased by 11%, and same property NOI increased by 19%. Same property income for the year increased by 9%, and same property NOI increased by 13%, or $12.2 million. These increases were driven by an increase in occupancy of 632 units or 310 basis points and our rent increases. Our occupancy gains occurred throughout the year, but predominantly in the second and third quarters. Therefore, the annualized run rate effect of the revenue generated by these occupancy gains is not fully reflected in our financial results. Our same property revenue reported for the year was $182.9 million and $47.3 million for the fourth quarter, which annualizes to $189.2 million. Therefore, our annualized fourth quarter revenue is $6.3 million higher than our actual results for the year, meaning if we had received these homes in early 2022, our year-end revenue would have been $6.3 million higher. The gains made on the occupancy and revenue fronts position us for an even stronger 2024. Our sales operation continues to profitably sell and finance homes. Gross home sales were $31.2 million as compared to $25.3 million last year, representing an increase of 23%. We sold 341 homes, of which 164 were new home sales, averaging $138,000 per home sale, and 177 were used home sales, averaging $48,000 per home sale. We were able to achieve a 32% gross profit as compared to a 31% last year. We are proud to announce that with our $31.2 million in sales this year, we broke our previous all-time sales record of $28.1 million and exceeded our sales goal of $30 million. We anticipate further improvements in our sales division as the demand for affordable housing continues and the carrying costs of our inventory decrease. Our rental home portfolio continues to perform exceptionally well. We now own 10,000 rental units of which 94% are occupied. We continue to experience 30% or less turnover per year and our expenses are only approximately $400 per unit per year. We anticipate adding another 800 to 900 homes next year. Backlogs from our manufacturers have returned to normal levels of four to eight weeks, allowing us to no longer have to carry large amounts of inventory. This should help to reduce our interest expense and carrying costs while allowing us to generate similar overall occupancy and revenue gains next year. COVID caused manufacturing backlogs that increased the cost of each home, increased the amount of inventory we carried, and increased many costs associated with carrying high inventory. But that is all behind us now. We completed the construction of 216 expansion sites. These expansions are located in good markets in Maryland, Pennsylvania, Tennessee, and Indiana, and should generate profitable sales. Next year, we anticipate approvals to develop 800 sites and plan on developing approximately 300 or more sites. 2023 was a quiet year on the acquisition front. We acquired one newly developed community in Georgia through our Opportunity Zone Fund. The spread between buyers and sellers resulted in a relatively muted transaction year in the MH space. We anticipate that a prolonged high interest rate environment may result in communities being available at more reasonable prices in the past few years. We are well positioned to execute on these opportunities when they arise. We have two communities in Maryland under contract and anticipate closing on both in 2024. We are also evaluating several other acquisition opportunities and hope to grow our acquisition pipeline. UMH owns a portfolio of 25,800 developed home sites situated in 135 manufactured home communities across 11 states. Additionally, we are a 40% partner with Nuveen Real Estate, which owns two communities containing 363 sites in Florida and one community that is under construction in Pennsylvania. We have over 3,400 vacant sites to fill plus 2,100 vacant acres of land that can potentially be developed into an additional 8,500 homes. We can project that our $190 million rental revenue will grow 5% due to our rent increases. That amounts to $9.5 million in new revenue. Additionally, we plan on installing and renting 800 homes in 2024, resulting in an increase in revenue of approximately $10 million. Also, every 100 new homes sold should generate $10 million in additional gross revenue and $2 million in additional net income. We expect that in 2024, rental and sales revenue should be approximately $20 million higher than 2023. Our accomplishments in 2023 and previous years laid the groundwork to make this possible. And now, Anna will provide you with greater detail on our results for the quarter.