UMH Properties, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; compared with the three months ended March 31, 2023. UMH is a REIT focused on manufactured-home communities, with additional home rental, sales and financing activities. At quarter-end it owned and operated 136 communities with approximately 25,800 developed homesites.
Financial results and key metrics
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Rental and related income | $50.3 million | $45.3 million |
| Total income | $57.7 million | $52.6 million |
| Community NOI (non-GAAP) | $29.2 million | $25.2 million |
| Net loss | $1.6 million | $1.5 million |
| Net loss attributable to common shareholders | $6.3 million; $0.09 per share | $5.3 million; $0.09 per share |
| FFO attributable to common shareholders (non-GAAP) | $14.0 million | $10.6 million |
| Normalized FFO attributable to common shareholders (non-GAAP) | $15.0 million | $11.7 million |
| Cash provided by operating activities | $19.0 million | $13.3 million |
Community NOI increased 16%; the community operating expense ratio improved to 41.9% from 44.3%. Home sales were $7.4 million versus $7.3 million, involving 95 homes versus 83. Cash, cash equivalents and restricted cash totaled $49.2 million at quarter-end, including $39.9 million of unrestricted cash and cash equivalents.
At March 31, total assets were $1.416 billion and total liabilities were $699.3 million. Reported debt included $493.8 million of mortgages, $77.5 million of loans (net of issuance costs) and $100.3 million of Series A bonds. Marketable securities were $29.1 million. Net cash used in investing was $25.4 million; net cash used in financing was $8.8 million. Cash and cash equivalents declined $17.5 million from year-end.
Material changes versus prior period
- Rental income rose 11%, supported by higher rents, occupancy and rental-home additions. Same-property occupancy increased to 87.5% from 85.5%; management cited a 4.7% rental-rate increase.
- Management reported approximately 10,000 rental homes, equal to 38.9% of total sites; rental-home occupancy was 95.1% at quarter-end. Occupied rental homes increased year over year.
- Community operating expenses increased 5%, while depreciation increased 10%, primarily reflecting a larger rental-home portfolio. General and administrative expenses rose 8%, primarily due to payroll costs.
- Interest expense fell 10% to $7.5 million, reflecting lower average mortgage and loan balances and reduced floorplan financing. Interest income rose 38% to $1.6 million as average notes receivable increased.
- The $5.4 million decrease in fair value of marketable securities was greater than the $2.4 million decrease in Q1 2023 and was a significant contributor to the GAAP net loss. The portfolio had $45.1 million of total net unrealized losses at quarter-end.
- Operating cash flow increased, while investing outflows declined to $25.4 million from $40.5 million. Financing cash flow shifted to an $8.8 million outflow from a $29.4 million inflow in Q1 2023.
Outlook, commentary, risks and unusual items
- Management expects to add approximately 800 rental homes in 2024 and plans to continue pursuing acquisitions, property improvements and development. It expressed optimism about affordable-housing demand but gave no earnings or revenue guidance.
- On April 1, the company announced a 4.9% increase in the quarterly common dividend, from $0.205 to $0.215 per share. This was a post-quarter announcement.
- On April 2, the unsecured revolving-credit borrowing capacity was increased from $180 million to $260 million. At March 31, the company reported $130 million available on the facility; it also cited an additional $400 million potentially available under an accordion feature and approximately $139 million available on home-sales and inventory lines.
- During Q1, UMH raised $20.4 million net through common-stock ATM offerings and $4.4 million net through its preferred-stock ATM program. These offerings provide capital but increase share counts and may dilute existing holders. Common shares outstanding rose to 70.2 million from 68.0 million at year-end.
- UMH closed one sales center and sold its remaining inventory there to Clayton Homes. Excluding that inventory liquidation, manufactured-home sales operations reported a 34% gross profit percentage and $531,000 gain before inventory-financing interest; the reported sales-operation gain including the liquidation was $149,000.
- A potential joint venture to develop approximately 131 acres in southern New Jersey remains at a preliminary discussion stage, subject to definitive agreements and approvals. The Honey Brook, Pennsylvania joint venture development is expected to have 113 homesites.
- Risks highlighted include real-estate and economic conditions, competition, occupancy and rent levels, inflation and operating costs, interest rates, debt refinancing and covenant compliance, capital-market access, homebuyer financing and securities-portfolio values. UMH reported one mortgage of $6.6 million due within 12 months and 18 mortgages totaling $85.7 million due within 18 months.
- The filing reports ordinary-course claims and litigation that management does not expect to have a material adverse effect. It also discloses remaining home-loan repurchase obligations tied to 21st Mortgage: approximately $2.4 million of loan balances under one program and $644,000 related to acquired communities. Management reported no off-balance-sheet arrangements and no material changes to risk factors.
Important facts for investors to verify
- Whether occupancy and rent growth, including the reported 87.5% same-property occupancy, continue to support NOI growth.
- How the marketable-securities portfolio’s $45.1 million unrealized loss and further valuation changes affect reported earnings and liquidity.
- Debt maturities, borrowing availability, covenant headroom and refinancing costs, especially as mortgages approach maturity.
- The pace and economics of the 2024 rental-home additions, acquisitions and development plans, including the expected 800 rental homes.
- Future ATM issuance, dilution, dividend coverage and the distinction between GAAP losses, FFO and cash available for distributions.
- Progress and funding requirements for the Nuveen and proposed New Jersey joint ventures, plus any claims arising from the disclosed home-loan repurchase commitments.