• Normalized FFO Per Share: Increased to $0.22 in Q1 2024 from $0.20 in Q1 2023, a 10% rise.

• Occupancy Rate: Rose by 220 basis points to 87.1%.

• Rental and Related Income: Grew by 11% to $50.3 million.

• Community Net Operating Income: Increased by 16%.

• Community Expense Ratio: Improved to 41.9% from 44.3%.

• Dividend: Increased by $0.01 per quarter, totaling an annualized $0.86.

• Rental Home Portfolio: Over 10,000 units with 95.1% occupancy.

• Same-Property NOI: Grew by 16% or $16 million annualized.

• Gross Home Sales: Amounted to $7.4 million, a 1% increase.

• Total Market Capitalization: Rose to approximately $2.1 billion, up 12% from last year.

• Warning! GuruFocus has detected 6 Warning Signs with UMH.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Normalized FFO per share increased by 10% year-over-year, from $0.22 in Q1 2023 to $0.24 in Q1 2024.

• Overall occupancy increased by 220 basis points year-over-year, from 84.9% to 87.1%, representing an increase of 598 units sequentially.

• Rental and related income grew by 11% year-over-year, and community net operating income increased by 16%.

• UMH Properties Inc successfully raised its common stock dividend for the fourth consecutive year, increasing it by $0.01 per quarter or $0.04 per year.

• The company's investment in new rental homes yielded approximately 10% on invested funds, which is accretive to earnings and substantially improves community aesthetics and financials.

Negative Points

• Community operating expenses increased by 5% during the quarter, primarily due to increases in payroll costs, rental home expenses, real estate taxes, and snow removal.

• The weighted average interest rate on mortgage debt increased from 3.91% at the end of last year to 4.17% this quarter.

• Some expansions and investments in new sites are not yet fully accretive to earnings, presenting a delayed return on investment.

• Despite overall strong performance, certain geographic areas like Western New York and Michigan are not as strong as others, showing uneven growth across different markets.

• The company faces challenges in managing land home sales, which are not part of their core business, leading to the closure of one sales center.

Q & A Highlights

Q: Can you talk a little bit about the acquisition pipeline today? A: Brett Taft, EVP and COO, mentioned that UMH is in due diligence for two properties in Maryland, with some issues being resolved with the seller. He did not provide a tentative closing date but suggested it might happen later in the year. UMH continues to look for both stabilized and value-add deals that meet their acquisition criteria.

Q: What are you seeing in terms of the seasonality in rental velocity? A: Samuel Landy, President and CEO, explained that while there may be some seasonality, the primary challenge in the past two years was the supply chain issues due to COVID. Currently, UMH is filling homes as quickly as they are installed, with managers requesting more homes.

Q: Where's the best source of debt capital today, and how meaningful are the rate differentials? A: Anna Chew, CFO, stated that the best source remains the GSEs, noting a recent GSE loan closed at under 6%. She highlighted that UMH has no debt maturities in 2024, with about $118 million due in 2025, and they anticipate no issues in securing GSE financing for these.

Q: How do you feel about the length of stay for tenants, and would you prefer it to be shorter to mark rents to market or longer for reduced risk? A: Samuel Landy expressed satisfaction with the current average length of stay, emphasizing that stability reduces turnover costs and fosters community referrals, which drives additional sales and rentals.

Q: Can you provide more color on why you closed one sales center and rented that facility to Clayton Homes? A: Samuel Landy explained that the location was not profitable for UMH's business model but was ideal for Clayton Homes. This move also aligns with UMH's strategy to fill community vacancies faster, enhancing FFO per share.

Q: Are there any concerns about the ability to drive continued occupancy gains? A: Brett Taft assured that UMH is confident in maintaining high occupancy levels and achieving their rental targets. He also noted strong demand across most geographic areas, with some variability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.