UMH Properties, Inc. 2026 Q2 Earnings Call

Thank you very much, operator. In addition to the 10-Q that we filed with the SEC yesterday, we have filed an unaudited second quarter supplemental information presentation. This supplemental information presentation, along with our 10-Q, are available on the company's website at umh.reit. We would like to remind everyone that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved.

The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the company's second quarter 2026 earnings release and filings with the Securities and Exchange Commission. The company disclaims any obligation to update its forward-looking statements. In addition, during today's call, we will be discussing non-GAAP financial metrics. Reconciliations of these non-GAAP financial metrics to the comparable GAAP financial metrics, as well as the explanatory and cautioning language, are included in our earnings release, our supplemental information, and our historical SEC filings. Having said that, I would like to introduce management with us today. Eugene Landy, Founder and Chairman. Samuel Landy, President and Chief Executive Officer. Kevin Miller, Executive Vice President and Chief Financial Officer. Brett Taft, Executive Vice President and Chief Operating Officer. Jim Lykins, Vice President of Capital Markets, and Daniel Landy, Executive Vice President.

It is now my pleasure to turn the call over to UMH's President and Chief Executive Officer, Samuel Landy.

Thank you, Craig, and good morning, everyone. We are pleased to report another strong quarter that was highlighted by operational performance and growing Normalized FFO per share. Normalized FFO per share for the second quarter of 2026 was $0.25 per share as compared to $0.23 per share last year, representing an increase of 9%. Our performance is a testament to the foundation we have laid over the past few years. Investments that we have made in value-add acquisitions and expansions are starting to positively impact the bottom line. We anticipate continued earnings growth throughout the remainder of the year. We are maintaining our Normalized FFO guidance range at $0.98 to $1.04 per share, keeping our midpoint at $1.01 per share. I want to begin by telling you that since at least 1987, there have been three things we have always worked on.

Number one, managing inventory of vacant lots so we could grow sales income and rental income. We do this by, A, acquiring old homes in our communities and replacing them with new homes. B, obtaining approvals to build additional lots on vacant land. C, acquiring communities with vacancies and filling the sites with rentals or homes for sale. The stock market values UMH based primarily on our FFO, and I believe doing so fails to value something we have spent almost 40 years building, which is our pipeline of vacant and fully approved lots. This is a significant part of UMH that cannot be valued based on current income. Two, the financing of homes for our retail customers. This reached a nadir in 2009, which required us to pivot to a rental home model in order to continue to grow revenue and occupancy.

The Road to Housing Act dramatically improves the potential for financing sales for our customers' homes, which should dramatically increase home sales. Three, improvements in the product. The Road to Housing Act will result in major improvements to manufactured homes, including the removal of the chassis, which will allow the construction of two-story HUD code homes that UMH, along with one of our home suppliers, Champion Homes, will have on display at the Innovative Housing Showcase at the National Mall in Washington, D.C. on September 22nd to September 24th. We invite you all to attend and tour these homes in person so you can experience how beautiful these homes are. I want shareholders to fully understand these three points that don't show up anywhere in a financial statement but are of great value. Some people correctly recognize that our stock price does not reflect our asset value.

From a stock price viewpoint, it's an easy true statement to make that the parts are worth more than the stock price. I unequivocally believe that everything we have done for the past 58 years is for the purpose of creating a whole whose value greatly exceeds the value of its parts, and we understand our obligation to not only say that, but to prove it as well. We believe that this quarter's results are a strong step forward, but only a modest step in proving it. Bigger steps are expected. Yes, the value of the parts exceeds the stock price, but more importantly is that even though the current stock price does not reflect it, the value of the whole greatly exceeds the value of the parts.

As we continue to fill rental homes and generate increased sales profits, our earnings should continue to increase in the quarters and years to come. UMH continues to experience strong demand throughout our portfolio of quality manufactured housing communities. This demand is being translated into increased occupancy rates and improved community operating results. During the quarter, rental and related income grew to $61.1 million, representing a 9% increase over last year. Same property NOI grew by 9%, and home sales revenue broke another quarterly record. Overall, occupancy improved by 97 units to 89%. For the first half of the year, overall occupancy increased by 268 units and increased 631 units since June 30th of last year. Additionally, sales of manufactured homes broke another quarterly record and increased by 10% to $11.5 million for the quarter.

This increase in sales includes the sales at Honey Ridge, which is owned through our joint venture with Nuveen. We continue to execute our long-term strategy of driving organic growth across our high-quality manufactured home communities. This organic growth translates to increased property values and increased earnings. Our same property results continue to demonstrate the effectiveness of our long-term business plan. In the second quarter of 2026, we delivered same property revenue growth of 8%, or $4.5 million, and same property NOI growth of 9%, or $3 million. This growth in same property revenue and same property NOI was driven by site rent increases of 5% and the increase in occupancy of 437 units over last year. This increase in community NOI substantially increases the value of our communities and our portfolio. Our occupancy gains continue to be driven by the successful implementation of our rental home program.

During the quarter, we added and rented 193 new homes across our portfolio, including those in our joint venture communities, bringing our total rental home inventory to approximately 11,200 units with a 95.3% occupancy rate. Our home rental program continues to operate efficiently with an annual turnover rate of approximately 20%. Our expenses per unit per year are approximately $400. Our capitalized turnover costs vary, but we are generally able to increase rents to earn 10% on any additional investment in rental homes. We are well-positioned to fill 800 or more new rental homes this year. We currently have 150 homes on-site and ready for occupancy, 300 homes being set up, and 330 homes on order. Our development pace is set by our success in selling and renting homes on newly developed lots. Over the past four years, we have developed an average of approximately 200 sites per year.

We currently have approximately 500 vacant expansion sites that have been developed over the past few years. These sites have been paid for, so each site we occupy will increase revenue with limited additional investments. Operating expenses, including interest expense related to those unoccupied completed sites, are already being expensed. Therefore, filling those sites with revenue-generating homes will substantially improve our earnings. Expansions greatly increase the value of our existing communities. A larger asset generally operates with better margins as a result of economies of scale. These sites will allow us to grow home sales revenue and community operating income. Additionally, these expansion sites are well-located and have the potential to greatly increase our sales and sales profits. As we fill our recently developed sites, our earnings can grow substantially.

We can increase the number of lots we develop each year as the Road to Housing Act enables us to improve our fill rate. UMH is well-positioned to continue to grow earnings and increase the value of our manufactured housing portfolio through our capital improvements, investment in rental homes, growth in sales, and expansion of our existing communities. We believe we can continue to grow short-term earnings while generating long-term value, while simultaneously continuing to build a best-in-class portfolio of manufactured housing communities. We aim to provide the highest quality affordable housing at the best price point in the markets we serve. We accomplish this goal while being fair to our tenants and satisfying the needs of our shareholders. We have an important social mission that should position UMH and the industry for future growth as the federal government works to tackle our nation's housing challenges.

Our communities are well-positioned, our balance sheet is solid, our team continues to perform at a high level. Finally, I want to take this opportunity to acknowledge and thank our former Chief Financial Officer, Anna Chew, who after 35 years of service, has retired from her role as CFO on June 1st. I'm incredibly grateful to Anna for her many contributions to UMH during her more than three-decade career with us, including her integral part in growing UMH. Anna will remain as an employee in an advisory role to support a smooth transition of the CFO responsibilities, and she will also remain a member of our board of directors. Kevin Miller has been named by our board as Anna's successor as CFO. Kevin has been serving as the CFO of our OZ fund since October 2022.