UMH Properties, Inc.

Good morning and welcome to UMH Properties' first quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, you may press star zero to the Simulink Conference Specialist. 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, Mr. Craig Koster, Executive Vice President and General Counsel. Mr. Koster, you may begin.

Thank you very much, Operator. In addition to the 10-Q 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.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 first quarter 2025 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. First, we are devastated by the passing of our director, Casey Conway. Casey was an exceptional friend, father, director, economist, and so much more. He positively impacted every organization he was involved in, and he will be greatly missed by all. UMH is pleased to report another solid quarter of operating and financial results. Our communities continue to experience strong demand, which is resulting in increased occupancy and improved community operating results. Normalized FFO for the first quarter of 2025 was 23 cents per diluted share as compared to 22 cents per diluted share last year, representing an increase of 5%. Our strong financial and operating results have given management and the Board of Directors the confidence to increase our common stock dividend by 4 cents per share annually to 90 cents per share. This represents a 4.7% increase over last year. We have now increased our dividend for five consecutive years for a cumulative annual increase of 18 cents, or 25%. Our business plan has been proven to provide investors with enduring long-term value. The acquisitions and investments we have made in our communities have improved the overall quality of housing we provide, which has allowed us to increase occupancy through the successful implementation of our rental home and sales programs. We are optimistic that we will continue to increase earnings and value through the occupancy of our 3,400 vacant sites, development of our 2,400 acres of vacant land, the increased profitability of our sales division, and through the acquisition of existing communities and development of new communities. Given the housing shortage and our position in the industry, we believe we have positioned the company for success for many years to come. Our same property results continue to meet our expectations. Rental and related revenue increased by 8%, expenses increased by 8%, and community NOI increased by 8%. Our expenses in the first quarter were elevated as a result of the difficult winter throughout our entire portfolio. That being said, we are pleased with the performance of our communities in this environment. Same property occupancy increased by 113 units year to date and 227 units over the first quarter of last year. The demand we are seeing at the community level should result in further occupancy gains throughout the remainder of the year. Gross home sales for the quarter were $6.7 million as compared to $7.4 million last year, representing a decrease of approximately 9.5%. Included in last year's sales was the liquidation and sales of inventory at a sales center that was leased to a third-party operator. Excluding these homes liquidated or sold in the sales center, sales of manufactured homes for the quarter ended March 31st, 2024 amounted to $6.4 million, or 88 homes, and cost of sales amounted to $4.2 million. Our gross sales profit for the quarter was $2.3 million, and our net profit from sales was approximately $618,000. During the quarter, we sold 71 homes, of which 26 were new, averaging $151,000 per sale, and 45 were used, averaging $60,000 per sale. Our sales results should continue to improve throughout the year as we enter our peak selling season and generate increased sales at our recently opened expansions. We continue to make progress obtaining approvals for expansion sites on our vacant land. We anticipate the development of over 150 sites this year. These sites are well located in markets where existing communities experience high occupancy levels, rental rates, and sales profits. Our vacant land and these expansion sites give us a long runway to deliver organic growth for the foreseeable future. Expansions improve the community operating results as many of the community expenses are fixed. These expansions greatly increase the value of our communities while generating sales profits and improving our community operating results. We have over $45 million invested in expansions that are not yet generating our expected yield on cost. As we sell homes and fill these sites, our occupancy rates, income, and NOI should rise accordingly. resulting in our 2,400 acres of vacant land becoming valuable. We will continue to work on expanding our existing communities in addition to exploring selling our vacant land to single-family home builders or for other higher and better uses. Our rental home program continues to perform as expected. We have strong demand throughout our portfolio and in many cases have waiting lists. Our rental home occupancy rate increased from 94% at year end to 94.6% at the end of the first quarter. During the first quarter, we converted 109 new homes from inventory to revenue generating rental homes. We anticipate adding 800 new rental homes to our portfolio this year. Our turnover rates remain low between 20 to 30%. Our rental home repair and maintenance remains at approximately $400 per home per year. On the acquisition front, we closed on the acquisition of two communities located in Mantua, New Jersey, for a total purchase price of $24.6 million, or $92,500 per site. These two communities contain 266 sites, of which 100% are owner-occupied. They are five-star age-restricted communities that we are proud to add to our portfolio. Our current acquisition pipeline contains two communities in Maryland that we hope to close in the second quarter, consisting of 191 sites that are approximately 76% occupied. The purchase price for these communities is $14.6 million, or $76,600 per site. We continue to evaluate future acquisitions and hope to grow our acquisition pipeline in the near future. We are still assessing the impact of tariffs on our business, but early indications are they will have a minimal impact on our business. We currently have over 650 homes on order with more than 500 homes delivered to our communities. The 500 homes are paid for and we don't anticipate large price increases on the balance. These homes should allow us to rapidly increase occupancy at our communities. Additionally, our rent collections remain strong and in line with our historical collection rates, application volume is up and sales demand is strong. We will continue to monitor the impact of tariffs and geopolitical issues on our business, but at the moment, all appears to be business as usual. Over the past 1, 5, and 10 years, ending December 31, 2024, UMH has been the top manufactured housing REIT. Our total shareholder return in 2024 was approximately 30% for one year, 51% over five years, and 234% over 10 years. We have a proven track record of executing our business plan. Since 2020, UMH has increased its dividend by 25%. Our business plan has positioned us with 3,400 vacant sites and 2,400 acres of vacant land to continue our organic growth. This organic growth should allow us to generate similar earnings growth and operating results for years to come. Additionally, with our strong balance sheet, we are prepared to execute on compelling acquisitions as they become available. The fundamentals of manufactured housing are strong, and UMH is well positioned to continue to grow through our established long-term business plan. And now, Anna will provide you with greater detail on our results for the quarter.

Thank you, Sam. Normalized FFO, which excludes amortization and non-recurring items, was $18.8 million, or 23 cents per diluted share, for the first quarter of 2025, compared to $15 million, or 22 cents per diluted share, for 2024, resulting in a 25% cumulative increase and a 5% per diluted share increase. Rental and related income for the quarter was $54.6 million compared to $50.3 million a year ago, representing an increase of 8%. This increase was primarily due to an increase in same property occupancy, the addition of rental homes, and an increase in rental rates. Community operating expenses increased 9% during the quarter. This increase was mainly due to an increase in payroll costs, real estate taxes, snow removal, and water and sewer expenses. Our same property results continue to meet our expectations. Same property income increased by 8% for the quarter, and despite the 8% increase in community operating expenses, community NOI increased by 8% for the quarter from $30 million in 2024 to $32.5 million in 2025. As we turn to our capital structure, at quarter end, we had approximately $606 million in debt, of which $476 million was community-level mortgage debt, $29 million was loans payable, and $101 million was our 4.72% Series A bonds. Total debt was 99% fixed rate at quarter end, with a weighted average interest rate of 4.39%. The weighted average interest rate on our mortgage debt was 4.18% at quarter end compared to 4.17% at quarter end last year. The weighted average maturity on our mortgage debt was 4.2 years at quarter end and 5.1 years at quarter end last year. In this volatile interest rate environment, the weighted average interest rate on our short-term borrowings was 29 basis points lower at 6.5% at the current quarter end as compared to 6.79% at quarter end last year. In total, the weighted average interest rate on our total debt was 17 basis points lower at 4.39% at the current quarter end compared to 4.56% at quarter end last year. At quarter end, UMH had a total of $322 million in perpetual preferred equity. Our preferred stock combined with an equity market capitalization of over $1.5 billion and our $606 million in debt results in a total market capitalization of approximately $2.5 billion at quarter end as compared to $2.1 billion last year. representing an increase of 18%. During the quarter, we issued and sold 515,000 shares of common stock under the 2024 September Common ATM Program at a weighted average price of $18.21 per share, generating gross proceeds of $9.4 million and net proceeds of $9.2 million after offering expenses. The company also receives $2.6 million, including dividends reinvested through the DRIP. During the quarter, we issued and sold 49,000 shares of Series D preferred stock under the 2023 Preferred ATM Program at a weighted average price of $23.03 per share, which generated growth and net proceeds after offering costs of $1.1 million. On March 5, 2025, the company terminated the use of the 2023 preferred ATM program and entered into the 2025 preferred ATM program, under which we may offer and sell shares of the company's Series D preferred stock, having an aggregate sales price of up to $100 million. At the time of such termination, approximately $16.5 million of Series D preferred stock remained unsold under the 2023 Preferred ATM Program. As of March 31, 2025, the company has not issued or sold any shares under the 2025 Preferred ATM Program. Subsequent to quarter end, we issued and sold an additional 1.2 million shares of our common stock under the 2024 September Common ATM Program at a weighted average price of $17.89 per share. generating net proceeds after offering costs of $21.5 million. As of April 30th, 2025, $58.5 million of common stock remained eligible for sale under the 2024 September Common ATM Program. From a credit standpoint, we ended the quarter with net debt to total market capitalization of 23.1%, net debt less securities to total market capitalization of 21.8%, net debt to adjusted EBITDA of 4.9 times, and net debt less securities to adjusted EBITDA of 4.6 times. Interest coverage was 4.1 times, and fixed charge coverage was 2.4 times. In the beginning of 2025, we had 23 mortgages totaling $115 million due within the next 12 months, of which 10 mortgages totaling approximately $46 million were due in the first and second quarters of 2025. During the quarter, we paid off one mortgage totaling $6.4 million with cash on hand. Subsequent to quarter end, we paid off nine mortgages totaling $39.3 million and drew down $40 million on our unsecured revolving credit facility. We are in the process of refinancing these mortgages with Fannie Mae. These mortgages are expected to close in the coming weeks. We believe that proceeds from these refinancings will significantly exceed the $45.7 million in mortgages that were paid off. From a liquidity standpoint, we ended the quarter with $35.2 million in cash and cash equivalents and $260 million available on our unsecured revolving credit facility with a potential total availability of up to $500 million pursuant to an accordion feature. We also had $192 million available on our other lines of credit for the financing of home sales and the purchase of inventory and rental homes. Additionally, we had $30.3 million in our REIT securities portfolio, all of which is unencumbered. This portfolio represents only approximately 1.5% of our undepreciated assets. We are committed to not increasing our investments in our REIT securities portfolio and have, in fact, continued to sell certain positions. Our guidance for full year 2025 remains unchanged. We expect normalized FFO in the range of $0.96 to $1.04 per diluted share, a 7.5% growth at the midpoint compared to 2024's $0.93 per share. We are well positioned to continue to grow the company internally and externally. And now let me turn it over to Gene before we open it up for questions.

Thank you, Anna. UMH is off to a solid start in 2025. Our communities continue to deliver stable and growing returns. We have access to equity and debt capital to invest in our long-term business plan and may be able to rapidly grow the company if compelling opportunities become available. Demand for affordable housing in our markets and across the country remains incredibly strong. Our communities continue to fill sites with homes for rent and sale. Our long-term business plan has favorably positioned the company with 3,400 vacant sites to fill and 2,400 acres of land to develop. These vacant sites and vacant acres are increasingly valuable as the affordable housing crisis continues to intensify. These vacant sites and vacant acres are the key to driving organic growth for the next five years. Within the next five years, we believe our community should be full, and there will be limited lots available for additional expansion sites on which to place homes. The housing crisis and the inability for conventional builders to deliver housing at an affordable price point highlight the tailwinds between UMH and our industry. UMH should achieve nearly 100% occupancy and make continued progress developing our expansion land. All of these items could translate to substantial earnings improvement, a stable income stream, and an attractive valuation. UMH is a leader in the manufactured housing industry. We have worked with MHI and our manufacturers to improve our product and provide housing solutions in both rural and urban settings. We have championed the duplex manufactured home, which allows us to increase density and provide affordable housing in more expensive markets. We've also worked with GAF to pilot a solar home where solar shingles, unlike solar panels, are installed at the factory and do not require drilling holes for mounting hardware as panels do. In addition, installing shingles at the factory greatly reduced the cost. Our country is 4 million homes short, and last year we only built 1.3 million homes. Therefore, we need an affordable housing solution. We are working diligently to do more to help provide this housing and position manufactured housing as the preferred solution to the problem. We are proud of the progress we have made, but we must do more to combat the affordable housing crisis.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And your first question comes from Gaurav Mehta with Alliance Global Partners. Please go ahead.

Thank you. Good morning. I wanted to ask you on your rent growth expectations. Are you guys still expecting to see 5% rent growth that you've talked about in the past this year?

Yes, at this moment, yes. We, you know, the 5% rent increase notices get sent.

Yeah, and we've had no issue year to date sending out the notices, achieving our 5% increases. As we go throughout the year, our plan is still to push out a 5% increase. We're seeing strong demand at our properties. Rental demand is strong. Our sales pipeline is growing, and we don't think the 5% is going to be an issue.

Okay. Second question, I think you talked about tariffs, and it seems like you guys have pre-ordered 650 homes. But I was wondering, if you were to order new homes today, are the prices up versus the prices that you guys ordered for pre-order?

The prices are up a little bit, but not substantially yet. We've seen 3% to 5% price increases for manufacturers, but I think over the next month or two is where we'll really start to see the impact of the tariffs. As we always point out, we've done okay with higher prices, even though we prefer prices to be lower and it increases our return expectations, et cetera. Our bigger concern here is supply chain disruptions and the inability to get the homes. You know, we're renting homes for $1,000, $1,200, $1,400 a month. We're earning over 10% on our rental investments, which is clearly accretive. If prices went up a little bit, we'd still have an accretive use, but, you know, we'd carefully look at the locations we're putting rentals in and make sure that we're selecting the right products, the right lot, and the right market.

Okay. And then lastly, the rates for refinancing the mortgage. I think you talked about looking to refinance the mortgage at 20 May.

this quarter what kind of rates are you guys seeing now well the 10-year true our rates are based on the 10-year treasury because we anticipate doing a 10-year loan and those rates have stabilized a little bit it's come down as a matter of fact a little um and because of that we believe that the rates will be around the five and a half to maybe five point five and three quarters but in that range, but we should know within the next few weeks because we will hopefully be closing within the next few weeks.

Okay, thank you. That's all I had.

And your next question comes from Rob Stevenson with Jani. Please go ahead.

Good morning, guys. Brett, just to follow up on the same-store revenue question, on the expense growth on the same-store portfolio, are you seeing any notable upward pressure on real estate taxes or any other place on the expense side at this point in the year?

There's definitely been an increase in real estate taxes, a small increase, but an increase alone. There's some other properties we're looking at potentially appealing to hopefully reduce that number, but we're working on that currently. TAB, Mark McIntyre, You know just to go over the same property numbers for a minute we're pretty pleased with our 8.1% growth, we think that, as we continue to go through the year and occupy that inventory that we previously discussed. TAB, Mark McIntyre, rental and related income should grow in excess of 8% the Community operating expenses were 7.8% increase over last year, and you know, this was a very tough winter, I know, Sam mentioned it during his portion of the call but snow removal expenses alone we're up over $250,000. Add to that, you have overtime-related expenses, repairs and maintenance increase a little bit as well. So snow removal really drove this number from what I expected to be in the 6% range up to 7.8%. Going forward throughout the rest of the year, we do expect that number to come down a little bit, with the one caveat that we're assessing the impact of tariffs on the business.

Okay. The snow removal is going to be my next question. And then I guess the question – you guys talked about duplexes and smaller units as well as solar shingle homes. Have you guys put any considerable numbers of those in the portfolio today, and how is it being – if so, how are they being received by prospective tenants or buyers if they're going to be ones for sale rather than rent?

Yeah, so on the solar shingles, we had our first 20 homes delivered to Friendly Village in Perrysburg, Ohio earlier this year. They have the first 10 just completed being set up and I believe seven of them are occupied. We've got deposits on the other three. So, you know, the product looks great. There is demand for it. We'll assess the impact of the energy savings and, you know, how our tenants ultimately do as time progresses and we get some real data there. the other 10 should be ready for occupancy soon. And in that location, we shouldn't have any issue filling them. We've got approximately five duplexes that are fully set up at some of our Pennsylvania properties. They are mostly occupied. We're finalizing setup on one of them, but we haven't had any issues filling that. And we're working on some duplex orders for a location in Indiana and potentially that Friendly Village location.

If I can add, Manufacturing homes in a factory is much better than building in the field. When we work with GAF, they put things on in the field where they're dealing with individual homeowners. When you deal with the factory and you build in the factory, the cost is cut in half and the time is 45 minutes to put on an entire roof with solar shingles. It's the most efficient way to do it, and it makes a lot of sense, and we've done it as a test, and so far the test is going well.

At this point, what are you looking at as a potential premium for the solar shingle homes over normal shingle homes, and then what's the potential discount or lower pricing of duplexes versus duplexes? the single wides in your portfolio?

It's not so much that we're looking for the return on the solar, but, you know, our residents earn between, you know, predominantly $40,000 and $80,000. And so, you know, what they can afford.

Pardon me, ladies and gentlemen. It looks like we have lost connection to our speaker line. Please stand by while we reconnect. Thank you for your patience.