Q4 2020 UMH Properties Inc Earnings Call
Good morning, and welcome to you on each properties fourth quarter and full year 2020 conference call.
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It is now my pleasure to introduce your host MS. Nelli Madden Vice President of Investor Relations. Thank you Ms. Madden you may begin.
Thank you very much operator in addition to the 10-K that we filed with the FCC yesterday, we have filed and I know you did annual and fourth quarter supplemental information presentation.
Supplemental information presentation, along with our 10-K are available on the company's website at UMH that's weak.
I 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 you 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.
There are certainties that could cause actual results to differ materially from expectations are detailed in the company's annual 24 net earnings release and filings with the Securities and Exchange Commission.
The company disclaims any obligation to update its forward looking statements.
Additionally, 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 expense story and cautionary 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 yesterday.
Eugene Landy chairman.
Samuel Landy, President and Chief Executive Officer.
And I Chew, Vice President and Chief Financial Officer.
But death, Vice President and Chief operating Officer.
Jim Viking's, Vice President of capital markets, and Daniel Landy Vice President.
It is now my pleasure to turn the call over to your image as President and Chief Executive Officer Samuel Landy.
Thank you very much nelli over the past year. The world has been thrust into a spiral of uncertainty that has yet to stabilize the persisting pandemic, both domestically and globally is still testing the resolve of families and companies alike. Our hearts go out to those who have been affected both directly and indirectly.
We would also like to thank those on the front lines for combating the virus, but 2020 was a challenging year UMH was able to deliver outstanding results on all fronts.
Amid extreme uncertainty unprecedented unemployment levels and a shrinking G. D. P. We were able to collect over 98% of our rent improve our same property occupancy by 320 basis points maintain rental home occupancy above 94% improve our same property NOI.
15%.
Increased sales revenue, 13% Roe.
Recapitalized $95 million of 8% preferred stock with 262% mortgage debt.
And ultimately improve normalized <unk> per share by 11%.
We are particularly pleased that we were able to increase our dividend by five 5% to 76 per share for 2021.
The positive operating performance achieved during such a difficult economic environment highlights the strength of our long term business plan.
I am pleased to report that normalized <unk> for the fourth quarter was <unk> 20 per share representing an increase of approximately 18% year over year and 11% sequentially.
Normalized <unk> for the year was <unk> 70 per share representing an increase of 11%.
Our <unk> continues to trend upwards and has covered our dividend two quarters in a row the positive impact of <unk> from the refinancing of our 8% series B preferred stock has not yet from a fully recognized as the preferred was redeemed on October 20th.
UMH continues to make progress on the financing front.
During the year, we financed a portfolio of 28 unencumbered communities generating proceeds of $106 million at 2.62%.
It is important to note that our investment in these communities totals approximately $116 million.
These communities appraised for approximately $145 million, which represents a 25% increase.
Most of the communities from this 83% occupied portfolio our acquisitions from the past eight years and we have already demonstrated the value we have generated by implementing and executing our business plan.
As we infill the remaining sites, we can increase our borrowing under the credit facility to capture the additional increase in value as.
I have already mentioned the capital generated by this financing was utilized to redeem $95 million of the 8% series B preferred stock, which will generate additional F. F O of over $5 million or <unk> 11 per share annually. This transaction effectively demonstrates the earnings accretive nature of our.
Our business plan of acquiring communities below replacement costs, completing deferred maintenance and capital improvements filling sites with homes for sale and rent and then financing the communities to capture the value created.
The capital that is generated from financing reduces our overall cost of capital, resulting in improved earnings for shareholders.
We're also working to obtain low cost financing for our rental homes.
In October we entered into a $20 million line of credit expandable to $30 million with first bank utilizing our rental homes and their income as the collateral.
The rate on this line is prime plus 25 basis points we.
We anticipate growing this line in the future.
We're also working with the G S ease and our lending partners to include the rental homes as collateral within our typical mortgages. Once achieved this will generate a substantial source of long term financing at low rates.
Moving on to operations total income for the year increased 12% to approximately $164 million.
This increase was the result of an 11% increase in rental and related income and a 13% increase in sales of manufactured homes rental and related income for the year was $143 million.
Our operating expense ratio improved to 44, 1% from 48% in 2019, which resulted in community NOI of approximately $80 million or an increase of 20% over last year.
This is the 10th consecutive year that we have delivered over 10% rental and related income growth and the fifth consecutive year that we have delivered sales growth of over 10%.
Our ability to maintain double digit growth in revenue and sales year. After year continues to validate our business plan.
Our same property results for the year were very strong same property NOI increased 15% or approximately $11 million over 2019. This is the fifth quarter in a row that we have achieved double digit same property NOI growth.
Flying a market cap rate of 5% to this increase in NOI results and value creation of $160 million. After deducting the investment in our rental home program. This increase in NOI was the result of increased occupancy of 320 basis points or 718 occupied sites and rent.
Increases of approximately three 3%.
Our rental home program had another successful year during the year, we added 858 homes to our portfolio, bringing our total portfolio to 8300 rental homes.
We continue to maintain occupancy rates above 94% and our monthly rent per home increased three 3% to $790 per month.
We are experiencing lower turnover than usual and increased demand for our product, we expect to be able to add another 800 to 900 homes in our portfolio. This year.
We are closely monitoring our inventory and ordering homes to adequately meet our strong demand.
Manufacturers are reporting longer backlogs and increasing their prices.
Every rental and our portfolio is more valuable because of this increase in price.
We have long been of the opinion of rentals would perform well during a difficult economy, one of the bright spots to come out of this pandemic was to confirm our belief of how well rentals would perform in a challenging environment across our footprint. The rental market remains so strong that at times. The biggest issue is being able to meet demand.
Moreover, there is not much of this type of product coming online merchant developers do not build affordable multifamily apartment complexes, but rather a highly monetized assets, where the intent is to have a best in class assets, whereby the owner has the ability to aggressively push rents. These properties caused several million dollars to build whereas we.
Spend about $85000 for the lot purchase and set up of a brand new home, giving our residents and affordable product, which they are unlikely to find elsewhere, our future growth in our past success are based on our ability to provide rental housing in the right locations at the right prices.
We do this by building or renovating lots from manufactured homes. Each line is approximately 5000 square feet and has 8000 square foot energy efficient three bedroom two bath room home delivered from the factory rental manufactured homes are in attractive housing product at a very reasonable price and our product is recognized by our residents.
As the best housing alternative for them.
Gross sales for 2020 were $20 million, representing an increase of 13% over 2019, we sold a total of 323 homes of which 140 were new home sales and 183 were used home sales sales profits improved substantially from a loss of 200.
$19000 in 2019 to a profit of $768000 from 2020.
Our average sales price was $63000 as compared to 60000 in the prior year period, a gross mark up percentage in 2020 was 29% as compared to 28% in 2019.
We have several community expansions and strong sales markets coming online that should drive additional sales growth.
We believe that we are well positioned to continue to grow our sales profitability in 2021.
Our expansion program is progressing as expected we are working to obtain approvals for 700 lots in 2021, we have 378 sites that are currently under construction and they anticipate obtaining approval and completing the development of several hundred more are 1800 vacant acres can be developed.
Opt into 7300 sites, giving us a meaningful runway to continue to grow the company organically for years to come.
The acquisition market remains competitive, but we have been able to opportunistically acquire communities. In 2020, we acquired two communities containing 310 sites of which 64% of occupied for a total purchase price of approximately $7 $8 million. These.
These two communities are well located within our existing footprint and we will implement our value added strategy subsequent to year end, we acquired one community in Alabama, and one community in South Carolina.
These communities were acquired for $8 million and contain 337 sites of which only 42% are currently occupied they are in areas with strong demand for affordable housing and we expect to generate significant property value appreciation over the next five years. These are new markets for UMH and we look forward to scaling our.
Leo and the surrounding states.
I would like to thank all of our dedicated employees, who executed on their roles and responsibilities admirably. During these trying times.
As the global pandemic began our employees worked hard to find ways that we could continue to operate our business efficiently. Our team developed new ways to do business, including virtual home showings online rent collection virtual closings and more are excellent performance is the direct result of everyone's hard work and dedication to UMH properties.
We have a very strong long term plan to increase per share earnings and funds from operations for decades to come.
We plan on generating similar results in 2021 by obtaining our 4% annual rent increases investing in an additional 800 to 900 rental homes.
<unk> to create efficiencies in our platform opportunistically acquiring communities and further improving our sales operations.
<unk>, Inc. Fields fertilizing, the soil and planting the seed cost money waiting for the harvest takes patience and having the right weather requires a bit of luck in 2020, our annual harvest per share increased nicely.
We believe we are well positioned for continued future per share earnings growth. Thanks to decades of hard work.
And now Anna will provide you with greater detail on our results for the quarter and for the year.
Thank you Sam funds from operations or <unk> was $8 $5 million or 20 cents per diluted share for the fourth quarter of 2020 compared to $7 million or 17 cents per diluted share for the prior year period.
Normalized <unk>, which excludes realized gains on the sale of securities and other nonrecurring items was $8 $5 million or 20 cents per diluted share for the fourth quarter of 2020 compared to $7 $1 million or 17 cents per diluted share for the prior year.
And seven $4 million or <unk> 18 cents per diluted share sequentially.
For the full year, 2000, 20-F F L, which included $2 $9 million of costs associated with the redemption of our series B preferred stock was $26 $3 million or <unk> 63 cents per diluted share compared to $24 $6 million.
Or 61 cents per diluted share for 2019.
Normalized <unk> was $29 $2 million or 70 cents per diluted share for 2020 compared to $25 $2 million or 63 cents per diluted share for 2019.
Rental and related income for the quarter was $37 $6 million compared to $33 $6 million a year ago, representing an increase of 12%.
For the full year rental and related income increased from $128 $6 million in 2019 too.
Two $143 $3 million in 2020, an increase of 11%.
These increases were primarily due to community acquisitions. The addition of rental homes and the growth in occupancy.
Immunity NOI increased by 21% for the quarter from $17 $8 million in 2019 to $21 $6 million in 2020.
For the full year community NOI increased from $66 $9 million in 2000 $19 million to $82 million in 2020, an increase of 20%.
This is the 10th consecutive year that we have achieved double digit year over year NOI growth.
Sales of manufactured homes increased 28% for the quarter.
From $4 $1 million in 2019 to $5 $3 million in 2020.
For the full year sales increased 13% from $18 million in 2000 $19 million to $23 million in 2020.
Despite the COVID-19 pandemic, we set a new sales record selling a total of 323 homes of which 141, new home sales and 183 were used home sales.
The gross profit percentage was 29% for 2020 compared to 28% a year ago.
Sales have returned to profitability generating $768000 in net profits in 2020 compared to a loss of $290000 a year ago.
As Sam mentioned 2020 with productive year on the financing front.
In August we completed the financing of 28 unencumbered communities with Fannie Mae for proceeds of approximately $106 million with a 10 year maturity and a 30 year amortization at a fixed rate of 262%.
The properties within this portfolio previously did not qualify for GSE financing because of the relatively low occupancy rates and a high percentage of rental homes.
A successful financing of these communities is the culmination of years of hard work lobbying for reasonable financing on rental homes. So we can't pass these savings to our residents.
Fannie Mae issued waivers to allow us to fill up to 60% of the total home sites with rental homes.
The acceptance of rental homes in communities is step one.
Step two is to obtain financing and include the rental homes as collateral we're working towards this goal.
In the interim we entered into a 20 million dollar line of credit expandable to $30 million with first bank debt is secured by rental homes and the income derived from them at certain communities. We intend to grow this line in the future.
The proceeds from our Fannie Mae financing were utilized to redeem all three 8 million shares of our 8% series B perpetual preferred stock on October 20th.
This transaction will generate net savings of over $5 million per year.
As we turn to our capital structure at yearend, we had approximately $556 million in debt of which $469 million with community level mortgage debt and $87 million with loans payable.
85% of our total debt is fixed rate.
The weighted average interest rate on our mortgage debt was $3 eight 1% at year end 2020 compared to 4.14% in the prior year.
The weighted average maturity on our mortgage debt was six years at both year end 2020 and 2019.
During the year, we utilized our common and preferred Atms, we sold 134000 shares of series C preferred stock at a weighted average price of 24096 cents per share and $3 8 million shares of our series D preferred stock at a weighted.
The average price of $24.98 per share generating total gross proceeds of $97 $8 million and total net proceeds of $96 $1 million after offering expenses.
We also sold approximately 135000 shares of common stock at a weighted average price of $14 60 per share generating gross proceeds of $2 million and net proceeds of $1 $7 million after offering expenses.
Subsequent to year end, we sold 768000 shares of series D preferred stock at a weighted average price of 24080 cents per share generating gross proceeds of $19 $1 million and net proceeds of $18 $8 million after offering expenses we will.
I'll be using these proceeds for general corporate purposes, which includes the purchase of manufactured homes for sale or lease to customers.
Passion of our existing communities paying down variable rate debt and acquisitions of additional properties.
At year end UMH had a total of $408 million in perpetual preferred equity alpha.
Our preferred stock combined with an equity market capitalization of $621 million and $556 million in debt results in a total market capitalization of approximately $1 $6 billion at year end, representing an increase of 5% over the prior year.
Period.
From a credit standpoint, our net debt to total market capitalization was 34%.
Our net debt less securities to total market capitalization was 28%.
Our net debt to adjusted EBITDA was six eight times, our net debt securities to adjusted EBITDA was five five times, our interest coverage was four one times and our fixed charge coverage was one five times.
From a liquidity standpoint, we ended the year with $15 million in cash and cash equivalents and $30 million available on our credit facility with an additional $50 million potentially available pursuant to an accordion feature.
We also had $29 million available on our revolving lines of credit for the financing of home sales and the purchase of inventory and $15 million available on our new line of credit secured by rental homes and rental home leases.
Additionally, we had $103 million in our REIT securities portfolio encumbered by $18 million in margin loans.
This portfolio represents approximately 8% of our underappreciated assets, we limit our portfolio to no more than 15% of our unappreciated assets.
With the exception of reinvesting our dividends in Barrick, we are committed to not increasing our investments in the REIT securities portfolio.
With our strong financial position and access to the capital markets. We are well positioned to continue our gross initiatives and now let me turn it over to gene before we open it up for questions.
UMH has a 53 year history of providing quality affordable housing for our nation's workforce.
We thought that we had experienced every economic cycle. During these 53 years, but COVID-19 has proven otherwise.
Fortunately UMH has always been positioned to withstand a black Swan event.
Raising of $63 million of preferred stock.
ATM program in January could not have been better timed.
This capital allowed us to not only survive but to prosper.
This capital was utilized to fund our rental home program expansion program acquired communities and ultimately continue to execute on our long term business plan.
The results for this fab.
As planned this year were exceptional.
And we believe that this business plan provides a runway for future growth.
UMH has 3500 vacant sites within our existing communities.
We have 18 average so it can be developed into additional sites.
We have sales centers across the portfolio that are starting to generate significant profits.
Most importantly, we could recapitalize $408 million of preferred stock at a blended rate of six 6% over the next three years.
Refinancing these preferreds at 4% and resulted in an increase in per share earnings of 24 cents a.
And our share price can increase by $5 using a 20 times multiple.
So redemption dates approach, we will analyze low offer available sources of capital to determine which method, we will utilize to deliver reliable earnings growth and generate shareholder value.
As positions in our securities portfolio continue to recover from the lows of the pandemic, we will analyze each company to determine when and if it would be advantageous to make sales among our holdings.
We will sell positions that the other investment opportunities in our core business become available.
'twenty 'twenty was a transformative year for UMH.
Because the wind at its back manufactured housing communities have never been in higher demand our portfolio of communities has never been more valuable.
<unk> is positioned for meaningful growth with multiple levers that could help drive the stock price higher.
We have laid out in this call we continue to achieve industry, leading operating results.
We have now had three sequential quarters with positive per share F. F O increases and we have laid out a plan to continue this performance moving forward, we hope that our recent dividend hike, maybe an annual accounts going forward and we want to reward those debt invest in UMH, we're evaluating our securities portfolio.
And we will continue to reduce it as a percentage of underappreciated assets. There's clearly a lot to be excited about and with that operator, we'd be happy to take any questions.
Thank you we will now begin the question and answer session.
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.
To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Karl with Baird. Please go ahead.
Hey, guys. Thanks for taking the questions. So I guess to kick things off how should we think about your sources of capital going forward.
Can you walk us through the rationale behind issuing more series D preferreds and your thoughts on equity at your current price.
Sure Sam Landy here with.
All of the sources of capital are open to US we have unused credit lines, we have the REIT securities portfolio.
Can issue preferred stock, we could issue common through the ATM and the cost of all of those sources of capital are going down.
Additionally, we continue to work on direct financing of the rental homes through the <unk>. So we are always evaluating every day, what is the lowest source of capital and which which of those options. We should take advantage of.
To meet the capital needs the capital needs remain.
The same we hope to add 800 to 900 rental units 40 million to $50 million.
Build or expansions of approximately $20 million.
The financing of home sales is growing that's approximately.
Last year was $17 million in newspaper this year, maybe it'll be $20 million of newspaper.
And we're building. Additionally, we're building a building the expansions all of these things acquisitions.
We'll generate capital needs, but we evaluated all of the time.
If you look at our past.
We created this platform.
Over $1 billion in manufactured home communities.
Right.
You know we own the 8000 rent.
Rental homes, where it's about $400 million or more and so as that $1 billion of real estate goes up in value 4%.
That's that's $40 million there's.
40 million shares outstanding So that's a little more than 40 million shares outstanding, but it's about a dollar a share appreciation plus the <unk> and we continue to monitor that to generate the best returns possible for per share for shareholders.
And it's starting to show today.
Understood. Thanks for that and then how should we think about same store growth in 2021 is it kind of fair to think mid single digit.
Just given your typical 4% rent increase on 80% occupied communities and then kind of a continued uptick in occupancy.
Well the rental revenue, yes, so Patrick Yeah same store 2021, we feel very good about our prospects.
By putting in eight to 900 rental homes and achieving our 4% rent increases we think that we can grow revenue Similarly, which was eight 4% in 2020 now expenses will increase a little bit this year as things return to normal there will be some travel expenses from legal expenses, but.
Generally we should be able to keep that under or at 5%, which should result in low double digit same store NOI growth.
Got it that's it from me thanks, guys.
Your next question comes from Rob Stevenson with Janney.
Hi, good morning, guys.
Where are you being told the chicken price preferred stock today. If you guys went out with a new issue rather than keep issuing off of the existing Uh huh.
We've been told it's about the same as what the existing stack is and so we have not gone to a new issue. We as we need capital. We look at both as Sam said, we both look at everything that we have available, including the eight common ATM as well as the preferred.
Or an ATM as well as our lines of credits that we have available.
Okay. So the earnings accretion from refinancing the preferred stock over the next few years at 4%. The gene spoke about assumes did you replace the bulk of the preferred with debt and maybe some equity in there.
It could be a combination it depends on at the time, what the interest rates are and what our capital needs are.
Okay, because I was just trying to understand that's not a like for like that's not picking out your existing preferred with a with a new stack of preferred because the pricing GAAP isn't that big to create that level of accretion right.
Debt or something else right you are correct because as we took out the preferred b, we took it out with debt when it comes to our preferred C. N D. We will see at the time what are what's the best course of action will be but we have many avenues available to us.
Okay, and then Sam you talked about so you've got 3500 vacant sites, where you ended the year roughly that amount you got another call. It 100 vacant sites from the acquisitions that you guys have completed here in the first quarter. So if I'm thinking about sort of 3600 vacant sites and then you're probably going to add some sites in 12.
'twenty one from your land bank.
How did you guys come up with the sort of eight to 900 rental homes. In 2021, you guys did $8 58 in 2020, why isn't that eight to 900 rental homes in 2021.
1200 is there some limiting capacity here or is it the availability the homes your ability to lease them up in a reasonable period of time.
Get them set up help me understand why you know sort of the rental home guidance for 2021 is pretty much flattish with 2020, rather than increasing here.
Yeah. This year at this moment there are supply constraints we have.
Our orders that were previously placed but certain factories have a very long backlogs you know you're talking about I've heard times latest December to get homes, but mostly we expect to get the homes in a reasonable time, but it does.
Create issues in.
And you know.
Rejecting that we're gonna grow rentals more than 800 or 900 homes. This year.
We're building the expansion logic will have 400 lots complete where we can have new home sales.
Have the vacant sites, where things are going well to add the 800 to 900 homes I know of a factory that told me. The whole problem is just lack of.
Employees and so if.
They're able to hire workers they can speed up production so.
We're dependent on the factories and right now it's difficult to say they can deliver more than 800 to 900 homes, but that is the only thing slowing us down to coming up with higher numbers.
And then when you're thinking about it for 2021, I mean, what's the so eight to 900 rental homes youre going to sell.
Some number of homes, presumably it'll be something in the neighborhood of what you sold last year, plus or minus some some level as to what you think the sort of organic sort of other move ins might wind up being as it is basically the occupancy gain basically at this point coming.
90% from the rental homes and 10% from.
From people, just leasing a pad and putting their own home on it do you see that changing to any extent, especially given.
Any type of.
The supply issues on the on the home side on the home side.
That you are alluding to.
So UMH has discovered.
Why the apartment business has always been successful there are always people, who need affordable rental housing and.
In UMH has found that existing manufactured home communities in good location.
Adding rental units is the best way to provide the most affordable housing there is and we're adding about 800 rentals for about every 100, new homes, we sell there's still customers for new home sales are 55 and older people, who are staying long term and those opportunities for <unk>.
<unk> are growing because incomes are rising.
The baby Boomers aging and so we expect sales to increase we expect the owners of homes and communities to increase but we see ourselves right now.
Like a franchise home depot, Walmart Mcdonalds Burger King.
We have a formula that works and so now our our issue in front of us.
Is how do we go out and open as many new stores as possible profitably and it's far more difficult to get approvals and build greenfield new rental home manufactured home communities, that's far more difficult than buying existing communities, who have deferred maintenance and did not.
Shifting over to the rental home model so.
As good as our internal growth would be I think it's time to become even more excited about our external growth opportunities because we've gained significant confidence in that business plan, we've moved to new states.
In the past year, and we're going to continue to move to new states in the future. So it's all very exciting time for you on H.
Okay. Thanks, guys appreciate it.
Again, thank you have a question please press star.
The next question is from like two channel with B Riley FBR. Please go ahead.
Hey, good morning, guys.
You mentioned some inflation in manufactured housing costs, how meaningful has that been over the last quarter or so.
Well, it's the past year, and I think we're seeing 10% price increases Brentwood, Tennessee and in the past quarter, its probably about 10% from prior to the pandemic were up 20% to 30% depending on the location, which we are able to get and brands. So our numbers are still coming in strong. We're also seeing an increase in prices on.
<unk> related to home set and everything like that in the 10% range. So certainly prices are increasing which goes to the store at it do rental homes depreciate in windows.
To replace them as going up that much they're not depreciating, they're increasing in value.
Got it and does that change the calculus of putting in a rental home or are you able to pass through those or do you anticipate being able to push pass through those rising costs to your renters, Andrew or buyers.
<unk> as conventional home prices go up as apartment rents go up our ability to increase the price of our product and still be lower than any comparable housing it's.
It's actually getting stronger because.
Apartment rents home prices and other costs are rising.
So fast and as you know.
A lower percentage of a higher number.
Is greater than the higher percentage of our small number.
Got it I think last quarter. You mentioned you had a couple of stabilized communities under contract in the northeast I think from maybe around $13 million or are you still likely to move forward with those maybe in the first half of this year.
It's a good question and I was waiting for somebody to ask it. So that those two properties are in a state that has a the residents have the first right of refusal and there are companies that work with those tenants to try to put together groups to purchase the properties. So they are attempting to buy it.
You should have an update here in the next week or two on that I know that they were trying to obtain the financing necessary to acquire the property. If they do then they will own it if they don't it will come back to us and that will be added to our acquisition pipeline.
Got it and just given the improvement in your cost of capital are you starting to maybe consider some stabilized assets that you know, perhaps a year or so ago. You would have passed on because they just didn't pencil out or are you still primarily looking for you know more year deep value communities, where you've got 40 50 60.
Between occupancy and clean them up.
And make your money that way.
We're interested in all properties based on.
How much we can grow earnings from them, but.
The simplest way to grow earnings are the lowest risk way is the turnaround properties. We're buying sites you know $30000 per site I just saw a community in Colorado older community 200 sites sold for $90000 per site.
If we can buy you know 40000 or below there is almost no risk.
Turn it around and increase the value per site revenue the profitability.
When youre buying those 95% occupied communities.
Got it.
There's much less room for increased income and so to me that means they're higher risk.
Got it.
And you touched on your operating expenses expectations for this year and I know they were.
Down year over year, this quarter and flat for the year, but I'd be curious are there still opportunities on the sub metering front to reduce your utility costs are those more or less behind you.
I'll, let Daniel Landy answer that go ahead.
There are there.
There are still around eight communities.
I have not been submitted that our own public water. So we still have opportunities there.
Yes.
<unk> 'twenty, our water and sewer expenses were flat and obviously occupancy went up so.
We've been way more efficient with water and sewer usage and we think going forward, we can still be more efficient.
Okay, great. That's it from me thanks.
This concludes our question and answer session I would like to turn the conference.
He for any closing.
Thank you operator, I would like to thank the participants on this call for their continued support and interest in our company as always gene Anna Brett and I are available for any follow up questions. We look forward to reporting back to you in may with our first quarter 2020 were result, thank you.
It has now concluded.
That's all from me today.
From the teleconference replay will be available in approximately one hour.
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Or international at 11123 loans Sandy Yeah, yeah.
The conference I'd number is one day or 1517.
Thank you.
Your line.