UMH Properties, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; the figures below are full-year results, not fourth-quarter-only results.
Business context
UMH is a REIT focused on owning and operating manufactured-home communities, leasing homes, and selling and financing manufactured homes. At year-end it operated 134 communities with 25,568 developed sites across 10 states; it also held a 40% interest in a joint venture that owned two Florida communities. Its portfolio included approximately 9,100 rental homes.
Financial and operating performance
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Total income | $195.8 million | $186.1 million |
| Rental and related income | $170.4 million | $159.0 million |
| Community NOI | $94.8 million | $91.0 million |
| Net income (loss) attributable to common shareholders | $(36.3) million; $(0.67) per share | $21.2 million; $0.46 per share |
| FFO attributable to common shareholders | $28.5 million | $39.1 million |
| Normalized FFO attributable to common shareholders | $46.8 million | $41.1 million |
| Net cash from operating activities | $(8.0) million | $65.2 million |
| Cash and cash equivalents at year-end | $29.8 million | $116.2 million |
| Total assets / total liabilities | $1.345 billion / $793.4 million | $1.271 billion / $528.7 million |
Rental income increased 7%, while community operating expenses rose 11% to $75.7 million. Community NOI increased 4%; the community operating-expense ratio widened to 44.4% from 42.8%. Overall site occupancy was 84.6%, down from 86.0%; same-property occupancy was 86.6%, versus 86.8%. Rental-home occupancy was 93.3%.
Manufactured-home sales fell 6% to $25.3 million, with 301 homes sold versus 370. Average selling price rose to approximately $84,000 from $73,000, and reported gross profit percentage increased to 31% from 26%.
Debt, liquidity, and capital
- At year-end, reported debt included $508.9 million of mortgages, $153.5 million of loans payable, and $99.2 million of Series A Bonds, net of issuance costs. Mortgage rates were fixed; approximately $154.2 million of loans payable were variable-rate. A 1% rate change was estimated to change annual interest expense by approximately $1.5 million.
- Cash was $29.8 million and marketable securities were $42.2 million. UMH reported $25 million available under its unsecured credit facility, plus $19.4 million available on home-sales/inventory lines and $14.9 million available on its rental-home line. The unsecured facility was expanded after year-end from $100 million to $180 million.
- Net debt to total market capitalization rose to approximately 38% from 16%. Operating cash flow turned negative, mainly because manufactured-home inventory increased by $64.8 million.
- UMH issued 5.0 million common shares for net proceeds of $100.8 million, issued Series D preferred shares for net proceeds of $9.1 million, and issued $102.7 million of 4.72% Series A Bonds. It redeemed all Series C preferred shares; the filing reports a $247.1 million redemption in its accomplishments and cash-flow discussion and a total payment of $249.6 million including accrued dividends in the equity note.
- Common dividends were $0.20 per share quarterly in 2022. In January 2023, the Board raised the quarterly dividend to $0.205 per share, an annualized $0.82.
Changes, outlook, and notable items
- Seven communities totaling 1,486 sites were acquired for approximately $86.2 million in 2022. The company also acquired land approved for a future 113-site community. After year-end, its opportunity zone fund acquired a 118-site Georgia community for approximately $3.7 million.
- Net loss reflected a $21.8 million decrease in fair value of marketable securities, higher interest expense ($26.4 million versus $19.2 million), and preferred-stock redemption charges. The securities portfolio had $36.1 million of net unrealized losses at year-end. UMH recorded a $6.4 million net gain on securities sales, including proceeds from the MREIC merger.
- Management planned approximately $15–$20 million of 2023 renovation expenditures, approximately $16 million of capital improvements excluding expansions and rental-home purchases, and 700–800 new rental homes at an estimated total cost of approximately $60 million including setup. The filing provides no specific earnings or FFO guidance.
- Management cited continued demand for affordable housing and rental homes, and stated that rent increases and operating results supported growth. It also noted that new acquisitions often require above-normal initial maintenance and that expansion requires infrastructure investment before sites generate income.
- Key risks include higher interest rates and refinancing needs, operating-cost inflation, lower occupancy or rent growth, rent-control limits in New York and three New Jersey communities, acquisition and development execution, geographic concentration, and exposure to market values of REIT securities. UMH stated COVID-19 had not materially affected results to date and that collections were consistent with pre-pandemic levels.
- The auditor issued an unqualified opinion on the financial statements and internal controls. The audit identified acquisition purchase-price allocation and fair-value estimates as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- Reconcile GAAP net loss with FFO and normalized FFO, including the company’s adjustments for preferred-stock redemption, amortization, and non-recurring expenses.
- Assess the sustainability of operating cash flow given the large inventory build, acquisitions, distributions, and planned rental-home purchases.
- Review debt maturities, variable-rate exposure, facility availability, covenants, and the impact of the post-year-end mortgage payoff and credit-line expansion.
- Track same-property occupancy and rent growth separately from recently acquired communities, whose occupancy was lower on acquisition.
- Evaluate the assumptions and execution risks behind planned development, community expansions, and the opportunity zone fund’s tax benefits.
- Consider dilution from equity issuance, the Series C redemption’s cash cost, and the Board’s capacity to maintain dividends amid capital needs.