UMH Properties, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; this filing reports full-year results, not standalone fourth-quarter results. UMH is a REIT focused on manufactured-home communities, with additional rental-home, home-sales and financing operations.
Business context
At year-end, UMH owned and operated 127 communities with approximately 24,025 developed sites across ten states. It also owned approximately 8,700 rental homes. A joint venture with Nuveen acquired a 219-site Florida community in December 2021; the joint venture is accounted for separately from UMH’s wholly owned portfolio.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Total income | $186.1 million | $163.6 million |
| Rental and related income | $159.0 million | $143.3 million |
| Community NOI (non-GAAP) | $91.0 million | $80.2 million |
| Community operating expense ratio | 42.8% | 44.1% |
| Net income | $51.1 million | $5.1 million |
| Net income (loss) attributable to common shareholders | $21.2 million | $(29.8) million |
| Normalized FFO attributable to common shareholders (non-GAAP) | $41.1 million | $29.2 million |
| Cash provided by operating activities | $65.2 million | $66.8 million |
- Rental and related income increased 11%; management attributed the growth to acquisitions, rent increases, higher same-property occupancy and more rental homes. Same-property occupancy rose from 85.4% to 87.1%; total portfolio occupancy was 86.0%, versus 85.0%.
- Community NOI increased 13%. The operating expense ratio improved by 130 basis points. Operating expenses nevertheless rose 8%, reflecting acquisitions and higher costs including utilities, taxes, payroll and weather-related work.
- Manufactured-home sales rose 34% to $27.1 million, with 370 homes sold versus 323. Gross profit percentage declined to 26% from 29%.
- GAAP net income benefited materially from a $25.1 million unrealized gain in marketable securities, compared with a $14.1 million unrealized loss in 2020. UMH reported net unrealized losses of $14.3 million in the securities portfolio at year-end.
- Normalized FFO increased 41% and Normalized FFO per share increased 24%, as stated by management. FFO and Normalized FFO are non-GAAP measures and are not substitutes for GAAP earnings or cash flow.
Balance sheet, debt and liquidity
- Total assets were $1.27 billion and total liabilities were $528.7 million at December 31, 2021. Cash and cash equivalents were $116.2 million; marketable securities were $113.7 million.
- Mortgages payable, net of issuance costs, were $452.6 million, down from $471.5 million. Loans payable, net, were $46.8 million, down from $87.0 million. Most mortgages bear fixed rates; approximately $46.9 million of loans payable were variable rate.
- Management reported net debt to total market capitalization of 16%, down from 34% in 2020. This is a company-defined measure; market capitalization affects the ratio.
- Operating cash flow was $65.2 million; investing activities used $94.4 million and financing activities provided $125.6 million. Financing included net proceeds of $179.1 million from common-stock ATM sales and $53.2 million from Series D preferred-stock sales. The company paid $35.0 million in common distributions and $29.8 million in preferred dividends.
- UMH reported $50 million available on its unsecured credit facility, with up to $50 million more potentially available under an accordion feature, plus availability on lines for home sales, inventory and rental homes. After year-end it issued $102.7 million of 4.72% Series A Bonds due 2027, receiving $98.7 million net of expenses. The bonds are denominated in Israeli shekels, with principal and interest linked to the U.S. dollar.
Changes, outlook and material items
- UMH acquired three wholly owned communities in 2021 for $18.3 million, adding 543 sites; average occupancy at acquisition was 59%. The Nuveen joint venture acquired Sebring Square for $22.2 million.
- Common shares issued through ATM programs totaled approximately 8.2 million in 2021; Series D preferred issuance totaled 2.2 million shares. These capital raises strengthened liquidity but increased share count and preferred dividend obligations.
- The 2021 common dividend was $0.19 per share quarterly. In January 2022, the board raised it to $0.20 quarterly, an annualized $0.80, beginning with the March 2022 payment.
- For 2022, management estimated $10–$15 million of renovation spending and approximately $15 million of capital improvements excluding expansions and rental-home purchases. It expected to order 700–800 rental homes at an estimated total cost, including setup, of about $56 million.
- Management described demand for affordable housing and rental homes as strong and planned further acquisitions, expansions and investment in rental homes, subject to available properties and financing. It reported collecting 94% of January 2022 site and home rent as of the filing’s stated date.
- Management said COVID-19 had not materially affected 2021 results and did not then expect a material adverse operating effect, while emphasizing uncertainty. Principal risks include interest rates and refinancing, access to external capital, rent regulation in New York and New Jersey, acquisitions and development, regional economic exposure, home-buyer financing, environmental and severe-weather exposure, and REIT qualification.
- No real-estate impairment charge was recorded for 2021. The auditor issued unqualified opinions on the financial statements and internal controls; management also concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Reconcile GAAP net income with the large securities fair-value gain and assess recurring property and rental-home performance separately.
- Review the definitions and reconciliations of Community NOI, FFO and Normalized FFO, including the effect of adjustments and per-share calculations.
- Assess dilution and future distribution obligations from common and preferred equity issuance, alongside the increased common dividend.
- Check debt maturities, credit-facility availability and covenants, and the currency-linkage and terms of the post-year-end Israeli-shekel-denominated bonds.
- Evaluate the occupancy and lease-up plans for lower-occupancy acquired communities, the planned rental-home investment, and the costs and timing of development and expansion.
- Review exposure to rent controls, regional concentration, variable-rate debt, weather events and the Nuveen joint venture’s decision rights and funding commitments.