UMH Properties, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This filing reports annual results; it does not provide standalone fourth-quarter results in the supplied text.
Business context
UMH is a self-managed REIT focused on owning and operating manufactured-home communities, leasing homes, and selling and financing manufactured homes through its taxable subsidiary. At year-end, it owned and operated 135 communities with approximately 25,800 developed sites across 11 states. It also held a 40% interest in a Nuveen joint venture that owns two Florida communities and is developing a Pennsylvania community. Approximately 10,000 homes were in UMH’s rental-home portfolio.
Financial and operating results
| Metric | 2023 | 2022 |
|---|---|---|
| Rental and related income | $189.7 million | $170.4 million |
| Total income | $220.9 million | $195.8 million |
| Community NOI | $108.4 million | $94.8 million |
| Net income (loss) | $7.9 million | $(5.0) million |
| Net income (loss) attributable to common shareholders | $(8.7) million; $(0.15) per share | $(36.3) million; $(0.67) per share |
| Normalized FFO attributable to common shareholders | $54.5 million | $46.8 million |
| Net cash from operating activities | $120.1 million | $(7.2) million |
Rental and related income rose 11%, while total income rose 13%. Community NOI increased 14%; the annual community operating-expense ratio improved to 42.9% from 44.4%. Same-property occupancy increased to 88.5% from 86.2%, and same-property NOI rose 13%. Overall occupancy was 86.7%, up from 84.6%; the filing notes that recent acquisitions had average occupancy of about 60% when acquired.
Manufactured-home sales increased 23% to $31.2 million, with 341 homes sold versus 301. Gross profit margin on home sales was 32%, compared with 31%. Interest expense rose 23% to $32.5 million, reflecting higher average debt, interest rates, and costs on the Series A Bonds. Dividend income fell 20% to $2.3 million. The REIT securities portfolio had $39.7 million of net unrealized losses at year-end.
Balance sheet, debt and liquidity
At December 31, 2023, total assets were $1.43 billion, total liabilities $720.8 million, cash and cash equivalents $57.3 million, and marketable securities $34.5 million. Debt carrying values included $496.5 million of mortgages, $93.5 million of loans, and $100.1 million of Series A Bonds. Mortgage debt was fixed-rate, with a weighted average rate of about 4.2% and weighted average term of 5.3 years. The company reported approximately $70 million of variable-rate loans; a 1 percentage-point rate change would change annual interest expense by approximately $700,000.
Management reported $110 million of availability on its unsecured credit facility, plus a potential $400 million accordion subject to conditions; $143.5 million available on revolving lines for home-sale and inventory financing; and $55 million available on rental-home-secured lines. The company had 48 unencumbered communities. Net debt to total market capitalization declined to approximately 31% from 38%.
Operating cash flow improved sharply, but management attributed much of the 2023 increase to a $55.5 million reduction in manufactured-home inventory. Investing cash outflow was $165.6 million, including property, equipment and land-development spending. Financing cash flow was $69.1 million; the company raised net proceeds of $145.8 million from common-stock ATM sales and $55.7 million from Series D preferred-stock ATM sales, while paying $73.8 million of net principal on mortgages and loans. Common dividends were $0.82 per share for 2023, up from $0.80.
Changes, outlook and risks
Growth included the acquisition of Mighty Oak, a 118-site Georgia community, for approximately $3.7 million through the opportunity zone fund, and formation of a Nuveen joint venture to develop a 113-site Pennsylvania community. UMH expanded its unsecured facility from $100 million to $180 million and added or expanded financing secured by rental homes and notes receivable. Common shares outstanding increased from 57.6 million to 68.0 million during 2023, principally reflecting equity issuance.
Management cited continuing demand for affordable housing and rental homes, and plans to pursue acquisitions, expansions and occupancy improvements. For 2024, it expects to order 800–900 rental homes at an estimated invoice cost of $60–$65 million and budget $20–$30 million for community capital improvements, excluding expansions and rental-home purchases. It also anticipates approximately $20–$30 million of renovation spending. These are plans, not guarantees. A proposed purchase of two Maryland communities for approximately $12.5 million remained pending as of February 28, 2024. After year-end, UMH paid down approximately $20 million on its unsecured credit line.
Key risks include higher interest rates and refinancing costs, external-capital dependence and share dilution, rent-control restrictions in New York and three New Jersey communities, acquisition and development execution, low occupancy at certain properties, home-loan defaults and repossession obligations, and exposure to weather, environmental and insurance events. The company also disclosed related-party interests in its office landlord and opportunity zone fund. Management reported no material litigation exposure, no required real-estate impairment charges, effective disclosure controls and internal control over financial reporting, and an unqualified audit opinion.
Important facts for investors to verify
- Review the full statements and notes for debt maturities, facility covenants, variable-rate exposure and refinancing requirements, particularly the mortgage maturities in 2025.
- Assess the quality and repeatability of 2023 operating cash flow, given the material inventory-related working-capital benefit.
- Track occupancy, rent growth, same-property NOI and the progress and costs of lease-up at recently acquired or under-occupied communities.
- Evaluate common and preferred equity issuance, resulting dilution, dividend coverage and the sustainability of distributions.
- Examine the REIT securities portfolio’s unrealized losses, home-loan credit performance and the pending Maryland acquisition.