Q1 2020 Earnings Call
[music].
Good day.
Welcome to the your major properties first quarter 2020 earnings conference call. All participants will be they listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions to ask your question. You May Press Star then one on a touchtone so.
To withdraw your question. Please press Star then too.
Please note. This event is being recorded it is now my pleasure to introduce your host Ms. now he met in director of Investor Relations. Thank you Ben maybe.
Thank you very much separate there in addition to the thank you. That's besides it is just see yesterday.
Files, and then we'll get that first quarter supplemental information presentation.
The supplement automation presentation, along as did our 10th you are available in the company's website accumulates debt free.
I would like to remind everyone that certain statements made during this conference call, which are lucky circles back maybe deemed forward looking statements. The depending of the private Securities Litigation Reform Act overnight you might decide.
Forward looking statement that you make when the school are based in Africa and show in Bulgaria, She feels good.
Although the company believes expectations reflected in these forward looking statements are based on that it works I'm sure that company can sell by no assurance that they should feel good chip.
The risks and uncertainties that could cause actual results could differ materially from expectations are you felt in the Companys. That's worth poignant <unk> earnings release, inspiring the securities and exchange connection.
The company disclaims any obligation to update forward looking statement.
In addition, during todays call it feels like it's got to not get financial metrics.
The consolidation of this non-GAAP financial metrics to the comparable disconnect your metrics as well as explanatory enforceable and rich.
Included in our looks really our supplemental information in our historical it's just deciding.
Having said that I would like to introduce management, that's today, you're generally chairman.
And your lazy, President and Chief Executive Officer.
I don't know true Vice President and Chief Financial Officer.
With that Vice President and Chief operating Officer.
And I guess, vice president of capital markets.
And then really the vice president.
It is now my pleasure to turn the call over to your latest President and Chief Executive Officer Centurylink.
Thank you very much.
We're pleased to report on results for the first quarter ended March 31st 2020, and provide an update in the state of our operations given the cope at 19 pandemic.
Well all of our communities are under stay at home orders of some sort of community personnel are continuing to maintain our community deliberate central services to Iraq.
In most states, where we operate we are not committed to conduct in person sales on leasing. However, we have been able to selling recall with remotely by providing online. Please go to work at the home and completing all required paperwork using our online application and feel a little signature software.
Well, let's say also allows for the online payment of right.
We are pleased with the state of our operations remarkably March and April sales are holding a 2019 levels and occupancy is increasing.
Many of our residents have been impacted financially by these stay at home.
A large portion of our residents continued to remain employed throughout the crisis and many on fixed income.
Keeping all of this in mine already collections have been strong.
We collected 94% up our April site in home rental charge.
As of May fit we've collected 64% of our may 2nd home charges as compared to 53% at this point may of 2019.
We expect it any to liquid tenants will be able to pay the rent when and if they are able to resume book well received their stimulus checks are unemployment checks.
Our employees have worked incredibly hard to further the goes up you on me.
These are truly challenging times, a difficult work environments and we are proud of our team, which has stepped up to the challenge.
You want me to continues to maintain a solid balance sheet.
During the first quarter, we utilize our preferred ATM to raised net proceeds of approximately $63 million of our series D preferred stock.
Although this preferred issuance has had a negative impact on first quarter earnings.
Capital ensures the financial strength of your mate.
This will also allow you what makes to continue to invest in new rental home expansions and capital improvements.
We're also pleased to announce that we have a signed term sheets in place with a lender to obtain $100 million.
Great mortgage debt on a portfolio we include community and interest rate below 3%.
We are positioning the company to be able to redeem our 95 million dollar 8% to be perpetual preferred stock in October with proceeds from this fixed rate mortgage debt.
Assuming no unforeseen issues related to closing on this transaction, we anticipate an increase in its IPO of approximately $5 million or 11 cents per share annually as a direct result of this preferred redemption.
You will nature is also working with the G.S. east the pioneered the recognition of rental manufactured homes and communities as rental housing that should be entitled to the same financing its traditional apart.
Further success in obtaining that recognition will allow us to finance, our $310 billion of rental homes that were purchase with preferred stock reducing our cost of capital.
I am pleased to report that rental them related income for the quarter increased 12% year over year.
Our community net operating income for the quarter increased 22% year over year. These outstanding operating results are a testament to our value add business plan.
The rental home program continues to perform very well at quarter end, we owned 7543 rentals, which it's an increase of 878 over the first quarter 2019.
Our rental home occupancy rate was 94%.
Although our rental home orders were delayed by the crisis, we anticipate adding an additional 750 to 800 rental homes to our portfolio. This year.
The rental home program is a key component of our business plan. It allows us to quickly and efficiently increase occupancy, resulting in improved community operation.
Our same property portfolio generated exceptional results to begin the yeah.
Same property NOI grew 14%.
This is the second quarter in a row that we have delivered double digit same store and a lycra.
As we complete turnaround work in a recent acquisitions, we have seen increased demand for rentals and sale.
This paired with the reduction in operating expenses should result in significant and alike growth and ultimately strong value creation.
This value can be realized when we financed or refinance our communities.
Our same property occupancy rate improved 180 basis points to 84.6% from the same quarter last year.
100 basis points from the your own this translates to an increase of 416 revenue producing sites year over year and 215 cents year to date.
We remain encouraged by our sales operation and believe that this area up our business has the potential deliver meaningful profit.
Sales for the quarter were $3.2 million, representing a decrease of 12% over that same period last year.
We are pleased to report that are April sales were $1.9 million, marking a slight improvement over April of 2019.
As a result of obtaining a lower cost capital, we're reducing our rate on retail financing to 5.99% from 6.75%, which should increase sales and occupancy.
Our sales for the quarter was negatively impacted by the stay at home orders issued in March.
We believe that its business, which ones to normal throughout the year our results will improve.
We have several expansions coming online and good sales markets that should drive improved sales results.
We are proud to announce it the manufactured housing its two recently named do you want me to 70 acres sales center in Somerset, Pennsylvania, The 2020 retail sales center of the here.
This award is a testament to your major his dedication to providing quality affordable housing and enhancement of the buying experience for its customers.
Most of our expansions continued to move forward. Despite the lasik pandemic has caused.
Notably the development of our Tennessee expansions continues to progress.
We have started ordering homes for two locations and should have them set up and ready for open houses at the beginning of this summer.
As a result of the delays close by the pandemic, we now expect to obtain approvals for 408 sites into completed development up 200 sites.
Initially we had planned done obtaining approvals for 750 sites.
We now expect to obtain the remaining approvals in the first half of 2021.
These newly developed sites will allow us to continue our sales from rental growth.
Communities have consistently produced excellent results.
We have two communities under contract. These communities are located in Pennsylvania, and New York and contains 315 sites, which are 63% occupied.
They were in close proximity to communities that we already own.
The purchase price for these communities is approximately $8 million, representing a cost per site of $25000. These communities are valuate community center in relatively good condition.
They will benefit greatly from our rental home and marketing programs the acquisition market for high quality properties remains competitive we're looking at several other opportunities and anticipate continued growth of our pipeline.
Looking forward to the remainder of 2020.
While there is uncertainty stemming from the cobot 19 pandemic, we still believe that we are well positioned to execute our growth strategy deliberate improved property level operating results and increased FFO per share.
Although this crisis has delayed or rental home purchases in some rent increases we believed that we are still on track to older 750 to 800 home and obtained the majority of our annual rent increases we have already declared a dividend for the second quarter and given the current strength up you'll make just financial position, we do not anticipate any changes to it.
Current dividend policy.
You want me to the laying the groundwork to substantially increased FFO per share.
The plan is to improve our community level operating results and reduce our cost of capital by taking advantage of historically low interest rates, we're succeeding in both the capital raise from issuing preferred stock results in near term pressure on AFFO per share.
We believe shareholders should recognize that you'll matches, a 52 year history of successfully deploying capital.
Although the new capital was not immediately accretive it will be as we are able to invested capital into our portfolio and future acquisitions.
Our substantial improvement in operating results. In addition to a meaningful breakthrough and not gaining a lower cost debt should translate in the near future to increased FFO per share.
I would like to take this opportunity to thank our dedicated you'll make scheme for all their hard work.
We are proud of the results achieved despite the adversity that we have faced during the first quarter.
And now and it will provide you with greater detail on our results for the quarter and for the year.
Thank you Sam normalized AFFO, which excludes realized gains on the sales of security and other nonrecurring items was $6.1 million was 15 cents per diluted share for the first quarter of twentytwenty compared to $6.5 million what's 17th.
Cents per diluted share for the prior year period.
This decrease was primarily attributable to the impact of raising capital through our preferred ATM.
This capital well allow us to continue outgrowth in a period of economic uncertainty June which tapping the capital markets, it's more difficult.
Rental and related income for the quarter was $34.4 million compared to $30.6 million a year ago, representing an increase of 12%.
Community NOI increased by 22% for the quarter.
Teams point $5 million in 2000 $19 million to $18.9 million in 2020.
These increases are attributable to our acquisitions rent increases and the success of our rental home program.
Oh monthly site rent increased by 3% to $453 over the same period last year.
Our monthly home rent increased by 3.5% to $775 over the same period last year.
Same property income for the first quarter increased 7.6% over the same period last year, while expenses remained relatively stable, resulting in same property NOI growth of 14%.
Sales of manufactured homes decreased 12% for the quarter.
$3.6 million in 2000 $19 million to $3.2 million in 2020.
We sold a total of 62 homes of which 20, when new home sales and 42, well used home sales.
We anticipate that sales will improve as the impact of the virus is we do this and stay at home orders on lifted.
As we turn to our capital structure at quarter end, we had approximately $416 million in depth of which $372 million, what's community level mortgage debt and $44 million was loans payable.
90% of how total debt it's fixed rate.
The weighted average interest rate on our mortgage debt was 4.14% at quarter end compared to 4.29% in the prior year.
The weighted average maturity on now mortgage debt was 5.7 years at quarter end compared to six years a year ago.
You'll make further increased our liquidity by utilizing our preferred ATM program.
During the quarter, we sold 2.6 million shares about 6.375% C., we see cumulative redeemable preferred stock at a weighted average price of 25006 cents per share.
Generating net proceeds of approximately $63.1 million.
We plan to use these proceeds for general corporate purposes, which includes the purchase of manufactured homes for sale lease to customers.
Expansion of our existing communities.
Acquisitions of additional properties and paying down our lines of credit on a temporary basis.
At quarter end, you may try to total of $469 million in perpetual preferred equity.
Our preferred stock combined with an equity market capitalization of $447 million and out $416 million in debt, resulting in a total market capitalization of approximately $1.3 billion at quarter end, representing an increase of 4% over the prior year period.
From a credit standpoint, how net debt to total market capitalization was 30% how net debt securities to total market capitalization was 24% how net debt to adjusted EBITDA was 5.4 times, how net debt securities to adjusted EBITDA.
Was 4.3 times, our interest coverage was 3.9 times at a fixed charge coverage was 1.5 times.
From a liquidity standpoint, we ended the quarter with $14.6 million in cash and cash equivalents.
$60 million available on our unsecured credit facility with an additional $50 million potentially available pursuant to an accordion feature.
$34 million available on our revolving lines of credit for the financing a home sales and the purchase of inventory.
We also had $78 million now lead security portfolio encumbered by $18.5 million in March and Bob.
This portfolio represents approximately 6% about undepreciated assets.
We limit that portfolio to no more than 15% of that Undepreciated assets.
With the exception of reinvesting our dividends in Monmouth real estate.
We are committed to not increasing our investments in the meat securities portfolio.
We continue to work on providing the company with additional financial flexibility.
As Sam mentioned, we have a signed term sheet in place with the lender to finance the portfolio, a free and clear communities with fixed rate mortgage debt at rates below 3% generating proceeds of approximately $100 million.
We also in discussions with several lenders to create a credit facility utilizing our rental homes as collateral with favorable pricing.
We plan to use these sources of capital to redeem up 8% Canvys deep perpetual preferred stock generating approximately $5 million of additional AFFO, well 11 cents per share annually.
These sources of capital will also allow us to continue to invest in our rental home program capital improvements expansions and additional acquisitions further improving our operating results and the quality of our portfolio.
Without strong financial position and access to the capital markets, we are well positioned to continue our growth initiatives.
And now let me turn it over to gene before we open it up for questions.
Thank you and I'm at year end, we were experiencing historically low unemployment rates rising wages wrong GDP growth.
Off market highs, an endless possibilities for the economy.
Over the past few weeks more people a viable unemployment than ever before.
D P from 4.8%, we'll be variance the biggest contraction since the financial crisis.
And there was concern about how long it will take the we opened the economy.
And whether or not there will be long lasting consequences.
Fortunately, we have always position you I'm age for Black Swan event.
As solid balance sheet has put us in a position to excel doing a time when money is trying to stay in business.
The oil and gas and this is also been hit hard during this crisis.
Well, both stockpiles of fall in the simply not enough demand to support the oil prices, we have become accustomed to.
That being said the investments that we have made in the Marcellus and Utica shale areas should continue to do well.
The community. So we have acquired have a stable residency base that is not overly concentrated in the oil and gas business at the pulling out community managers in the Marcellus and Utica shale regions, we believe that less than 10% about residents that they'll directly employed in the oil and gas industry.
The upside to the mob portfolio will be realized was strong oil gas and ancillary businesses.
We remain optimistic about this region.
The disrupt set up the supply chain. During this crisis demonstrate the need to bring manufacturing back to the United States, which go didn't turn drive incremental demand for workforce housing.
Low cost energy increases the ability about manufacturers to compete in the global market.
The plants are being built to turn natural gas into and let's just do the.
I feel plants are being developed a natural gas by products in the plastic pipelines are being built to deliver the ascendancy all but nonetheless the.
As these multibillion dollar developments and investments continue to progress we will see the continued transformation up this region and growth in our overall occupancy and operating results.
You are made says the mission to provide affordable housing for the nation.
Responses apparent that my crisis was does increase risk and uncertainty is the continue on this mission.
You are made says the financial resources and the experience they have to build by and bad manufactured housing communities.
The need is now.
In the future Atlanta construction cost might be much higher due to accommodate could have been lay shouldn't have demand exceeding supply.
Over the decades, we've created a platform that enhances the quality value instability about portfolio properties. We endeavor to also generate increased value per share, whereas shareholders. As we were able to execute on our business plan. These increases in value will be reflected that stuff, but.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
Our first question say they'll come from rugs Stevenson with Janney. Please go ahead.
Hi, good morning, guys.
Gee, Thanks for the sort of commentary can you guys talk about what you're seeing in terms of.
The ability to absorb the rental rate increases and occupancy levels across some of your assets in the.
Marcellus and Utica Shale region. I mean has that started to basically you know impact your ability to drive the 4% rental rate bumps there at all we've been talking to our managers on regional managers and it's impressive how strong pent up demand is tennessee's.
Almost back open for business and there.
You know busy in Tennessee, each state we talk to.
I'm very optimistic about the.
Demand for our product in their ability to fill site.
We've we've deferred or rent increases during the crisis. So that they're not incurring you know April may and potentially June but they will increase thereafter, and you know our consistent experience.
Is because we you know upgrade and take care of our properties passing through 4% rent increases its not a problem and Brad if you want to be more specific on various items yeah sure. So a on the occupancy front I do just want to point out that in the first quarter. The majority of our occupancy increase did come from Ohio, which has a strong.
Utica shale region that was 149 sites of our total occupancy gains. So we're definitely continuing to see strong demand in that region. If we could look into a may we did continue to improve our occupancy rates. A we added 91 overall units from April to me and that's during this pandemic. So we really haven't.
Seen a decrease in demand all of our communities are still reporting very strong demand and given the circumstances were very pleased with what we've been able to accomplish.
Do you guys have any idea at present, what percentage of the tenants in your rental units are now unemployed.
It is to the extent we know you know we've only ask people, what's going on <unk> and I think we believe as many as 30% yeah. It's a tough question to answer and we're looking forward to everybody getting back to work in the coming weeks, but what we understand is it's a 30% across the board when we look into our rest.
I didn't see base approximately 23% of our residents are 65 and older on fixed income and about 39% of our residents or 55 and older. So.
Well employments important and we do want everybody to get back on line. We do think that those two items are one of the reason for collection rates are as strong as they are and just that 30%.
Well, that's temporary unemployed and they do collect unemployment benefits and thing you know the rent collections at finish strong as we already mentioned.
Those those are age cohorts is that that for either the entire portfolio or for the for just the site rentals mean, the rental units have got to be a lower age demographic, though right that's across the entire portfolio correct or we can look into that and get back to you break it out between rental I know and with that.
Would be the entire portfolio.
Okay and to what extent to you guys impacted by some of the eviction bands that are that you see in the apartment spaces, where they've taken fannie or Freddie or wherever there's individual states are local governments sort of put conviction bands and.
So prior to the governors, creating these eviction bad than we made the decision that we were not filing convictions anyhow that.
It's people couldn't pay April rent may read what we would do they were a resident include scanning is defer that rent so that when they're back at work they'll pay.
The first month or back a work so say June 1st and if they didn't pay may they pay that 25% per month for the following month, and we believe by giving them.
Affordable deferral payment they will in fact pay because they know that we're providing the highest quality housing there is at the price and if they don't pay us they're going to wind up living somewhere else, it's not as good for a higher price and they are proving that out by the percentage paying the rent.
We've entered into its only 80 payment agreements at this point and that includes April and May. So we're we're you know we're very satisfied with how our products working we've had an incredible marketing program for about three years and part of our marketing program is not just to bring new residents in.
But to let the existing residents know what a great choice. They made by choosing you want make communities for rental housing in our communities and never awareness and you know.
As long as it at all possible, we believe they will pay the rent.
Okay, but I mean, that's that's a decision that you guys made.
In your portfolio I mean to what extent, though you know or or any of these local places that you're operating in subject to government eviction bands like I know you don't operate in New York City or in Seattle, but those just in Seattle, just extend it to the to the end of the year and New York extended further into the fall just curious.
Yes, I mean your ability to you know extend that you're on your own is gonna be limited I mean is that and so eventually you'll have to get back to doing stuff what needs to be done just curious as to where you are today legally not able to you know com end of summer if you choose to.
Yes.
It's an issue across the portfolio, there's no doubt about it. It's you know and I don't haven't broken down state by state, but you look at Pennsylvania, Governor Wolf, just announced yesterday pausing all eviction proceedings et cetera. We also do have I believe it's 43 G.S. The loan so were not able to pursue evictions George late fees et cetera until I believe.
It's a middle of July at this point, so right now it'll be seen what happens in the rest of the year and what happens when everything opens up but certainly for the foreseeable future pursuing evictions will be an issue. Okay that that was what I was looking for thank you that was very helpful. And then last one for me and out what capital source or do you play.
Turning to use today.
Deemed the series B I mean, obviously it would be great. If the common stock price were 20 bucks or something but assuming that you know that that that that's not in the card. You know is that debt is that additional preferred you know do you use some of the securities portfolio. How are you thinking about taking.
Now that's a roughly $100 million I think of series B.
Well, we have a term sheet right now, which will give us approximately $100 million at I'm just meet sense.
And so that is one of the losses that we would be using to call the preferred.
Okay, that's secured debt money.
[noise] that will be secured debt and money is fungible, but we have other sources to.
Okay perfect Yeah.
No no problem alright, thanks, guys.
Our next question will come from Barry, Oxford with D.A. Davidson. Please go ahead.
Great. Thanks, guys.
You are looking at that debt in that range. That's a good rate and you've seen the rate come down but have the spreads kind of come out a little bit to have you noticed that or the spreads kind of staying where you have normally seen them.
Well the spreads have increased a little bit but.
Because the 10 year has gone down so tremendously the rate itself has gone down so that was important to get to know so it will be under 8% rate, which we think would be fantastic. This would be for 10 year alone.
Great right absolutely great. Thanks.
And Sam could you discuss a little bit about the week portfolio in the valuation.
Well Eugene Landy, Sears I'll, let him talk about the big portfolio.
Perfect. Thanks Jane.
The meat portfolio.
About 80 million now and Oh, we have a 23000 sites with over $1 billion.
The the midpoint was a small percentage.
We've been very disappointed in it but it's been very volatile.
It's about 80 million now in a few weeks ago months ago time goes, but it was 124 million and the fluctuations every day.
It depends on how fast we don't forget the U.S. economy up in a rising we have a great deal is sympathy for many of the other fleets they were well on.
They were well capitalized so they lost the topline and if you lose your topline that I've no income.
Makes it very difficult to run of lead Fortunately you amazed.
The top line as a.
Strong the affordable housing crisis is real.
Product is into man and I've tenant seem to have the ability to continue to pay rent. So we're not quite in their position, but that's a.
That's the lead portfolio.
Some and we're going to see how they go I, we when we file Oh.
Ah portfolio stocks closely and we've been hoping to get the portfolio up over 100 million, which case was good but 50 million from a bag at 1% so.
But to date, we is the as we reported.
After my exceeds the market.
And so we took a substantial reduction the school in it.
Right perfect. Thanks for the color.
Nick and our next question will come from Craig Kuchera with B. Riley FBR. Please go ahead.
Hey, good morning, guys I just wanted to circle back I know, it's not a big part of your portfolio right now with the with the tenants that are paying but are you basically saying that if someone misses a month, you're going to charge them sort of 25% once they go back to work.
Of incremental rent so basically if they miss a month or two you recover all of that rent by by year end or how should we think about that.
Exactly exactly so you know ER.
Right to to make their cash flow easiest on them.
The month, there back employed though that month, Rick full and whatever they didn't pay earlier.
They'll pay 25% per month.
<unk>.
You have to realize the.
Many of our tenants, who gotta got unemployment insurance a grants from the government.
Actually it getting checks that give them more income right now than they had before the end them, but Ah Ah crisis. So ER.
We only had how many people 80 people are 80 people out of how many residents 18019, though nitric acid. So yes, it does a small either and.
Found out kinda type of pretty good ability to continue to pay that even though this crisis and I'll just point out you know.
Well what manufactured housing is proven over decades is that there's no more stable stream of income than residents owned homes in the community and that's about 11000 over homes and that's so stable because the resident has equity in the house. So if a resident was not able to pay for substantial screwed up.
Hi.
Is that equity in the house, which you know could become a ours if things were bad enough, but the other 7000 rental homes. We've always anticipate would perform at least as well so apartments and they are in fact, performing as well or better than apartment. So.
And then you add the you know.
Affected demand greatly six exceed supply so that if someone wasn't able to pay and again it became vacant there's an immediate tenant to take their place.
Got it.
Circling back to the acquisitions I know you mentioned that there were a couple of properties for about $8 million I think.
A few months ago, you guys were talking about maybe looking at doing $25 million an acquisition for the year was is the 8 million a component of that or is that on top of that 25 million or have you basically put that 25 million on hold.
Yeah. So right now it's a tough question to answer looking at the 25 million that 8 million I would say at this point would be included in the 25 million. We are continuing to look at deals. This pandemic has you know basically paused things for a moment, but there are some deals out there pricing is similar to where it was so were.
For a waiting to see what happens as this a evolves and as the economy begins to reopen I mean interest rates are as low as they've been so sellers things are entitled to the same pricing, we will see where it goes but at the moment, we've got that $8 million. We're looking at some other properties, but at this point, we don't have anything to report as being added to the plate.
Yeah, I'm not going to repeat what was what I, what I said that my prepared remarks.
Well I'm looking forward to do increase acquisitions and do expansions and continue to provide affordable housing and live thing we're prepared to be very aggressive.
The continued as well the company, we think there's going to be inflation.
This is going to be cost going up and we think that the a housing shortage is very very real and the man.
So madness.
I always point out to people they couldn't do their own survey. They can go on the internet and see without products Housefull three bedrooms too bad Leds for $800 a mile and then go on a a service like Zillow and see whats available in the area is 800 miles.
And that we exceed in value properties that are event for 1100 12 above we provide three bedroom two bath.
You get three bedrooms and one bathroom.
For the 12 month of we to I'd say that ended up month, so with a competitive and there's a reason there for why are you having the accident results.
And Oh programs despite the pandemic.
Right right Great. Sam you mentioned that you thought you were you were going to 750. The 800 rentals. This year just to double check is that what you hope the cumulative amounts for the year or is that incremental to the 150 you did in the first quarter.
Oh that cumulative for the year, we expect.
We were hoping to do better we got slowed down for probably four to six weeks, but we still think we'll do 750 to 800 rental units for the year.
Okay great.
And certainly to your same store results, which we were obviously very very strong again very limited operating expenses as we saw last quarter, which I believe was you know after some treatment. We will costs had been removed just as a reminder, where those tree removal expenses fairly ratable throughout the first three quarters of the year or were they incurred.
Primarily in the first half.
Well I'll, let David answer that but yes, they work.
Sorry, they weren't part in the first half that 375000 was in the first quarter.
Well, what I wanted to point Blossom thought.
But I want to point out at this time, because it's a good time to pointed out.
No.
You've been following our story all these years.
We've we've known that we have to hit 80% occupancy for communities to become efficient after you hit that 80%.
Communities with and separately metered water and sewer will operate at a 50% expense ratio and if it separately metered and the residents are paying the water and sewer they'll perform at a 30% expense ratio. We're now up to 84.6% occupancy. So that this is working and as we go to nine.
The 4% occupancy that next 10%.
Our efficiencies.
Our really there so that.
Higher percentages just like you just saw this quarter, but it's going to happen throughout the future higher percentages of the gross we'll go to net because we've gotten over that 80% occupancy and we've pointed out last year on the call that approximately $3 million in last year's operating.
<unk> expenses were related to the turnaround of properties that we had purchased during the past three years. So that those properties had the additional tree removal additional repairs and maintenance.
Looking forward the next thing that will increase.
<unk> expenses.
It's relatively minor it's the expansions opening so as you open expansion.
You have upfront costs before you get adequate sales in occupancy is to pay for him, but when I look at the number of lots and how many sites. There are I don't think it's gonna be you know I don't think it's going to stop our progress I think our I think that this was the first real taste, we gave everybody.
How well our plan is working we knew it would work, but now we can show you what work and I think that will continue as we go forward. It has to do with the installation of separate metered. It has to do with our website all the efficiencies coming into place as we hit the 80% occupancy and everything we've been working on for.
Seven years, plus coming together and just to add some numbers to what Sam is saying there are 2015 group of acquisitions during the quarter grew income by 12% and analyzed by 27% that's basically a guy it from the time of acquisition. It was 64% now at 72016 six.
He was 17% income growth, 37% and Hawaii growth, 74% occupancy at the time of acquisition, 92% occupancy now 2017, a acquisitions were 13% income growth, 27% and alike growth.
They were 65% occupied at the time of acquisition and 80% now and a 2018 to acquisitions at 11% income grew up 16% in Hawaii growth and we're still working on the occupancy there, but they've gone from 79% to 81%. So these numbers just really demonstrate the strength of evaluate business plan.
Right now that that's good color and one more for me and as you mentioned that you guys were looking at a credit facility with rental homes as collateral.
It is the pricing that's in discussion right now reasonably comparable to a two to what you're seeing on your other unsecured line of credit or other floated floating rate debt.
Well before I answer that I did want to clarify the 375000 that within the first quarter that was for a utility billing dispute that when I went over 10 years. So we we settled at 375000 in the fourth quarter of last year, what some additional team.
Well pull that out.
The rest of the yet, but as we said.
Salmon and Brad said these what primarily for the newer acquisition now regarding the line of credit what we're working on is the rate will be.
I'm going to say a little bit a higher than what our B mall line of credit is now, but it's a pretty much in line with the rate that we are obtaining on L. notes receivable line of credit so its prime plus a it's a little over time I'll say.
We are in discussion with a few banks on this and they seem very receptive this will be a real break through because in the past the loans on our.
On our rental if we wanted to obtain them. We're at six 7% than we did not obtained those loans. Instead, we had issued preferred stock to purchase that rental units.
Okay, great. Thank you.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Samuel Landy for any closing remarks.
Thank you operator, I would like to thank the participants on this call for their continued support and interest in our company has always gene Anna Brett and I are available for any follow up question.
We will be participating and narrates week in June which will be a virtual event. This year and hope you'll be able to join US. We look forward to reporting back to you in August with our second quarter 2020 results. Thank you and stay safe.
The conference has now concluded thank you for attending today's presentation.
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